The role of ADR in employment disputes : all you need to know

This article is written by Arya Senapati. The article tries to examine the legal principles related to the capacity of individuals necessary for entering into a valid and legal contract. It covers various propositions of law related to the competency of parties. It also focuses on landmark case laws, judgements, and illustrations to interpret the principles and provisions in a practical manner.

Table of Contents

Introduction

In most showrooms, movie theatres, or malls, one would not see children shopping for things for themselves on their own without the assistance of their parents. Similarly, you would not see a person with an unsound mind making purchases of high financial value on their own. This is primarily because, due to their immature minds or mental disorders, they are unable to understand the consequences of their actions, i.e., purchases, booking tickets, signing deals, etc. However, in modern times, children commonly shop for groceries, daily essentials, and stationery products on their own without any assistance from their parents. This peculiarity gives rise to the legal discussion around the capacity to contract and leads to the legal question: can all individuals be allowed to enter into a contract?

In the Indian legal system, the principles of contractual relationships are covered by the Indian Contract Act, 1872, which concerns itself with important aspects of contractual relations. The rudimentary provisions of the enactment discuss the validity of a contract, out of which the most significant are the legal aspects of an individual’s capacity to contract. By capacity, one understands the ability of an individual to enter into a contractual relationship which is deemed valid by law. Not everyone can be allowed by law to enter into contractual relationships, as many, due to their peculiar condition, limitations, or disabilities, are unable to understand the consequences of entering into a contract and thereby becoming unable to perform their end of the agreement effectively.

What is capacity to contract

Section 2(h) of the Indian Contract Act, 1872 (hereinafter mentioned as “ICA”) defines a contract as any agreement enforceable by law. Section 2(e) defines agreement as every promise and every set of promises forming consideration for each other. Promise simply means an assurance to do some act or omit from doing an act. So, when two people promise each other to either do or omit from doing any act, they are said to enter into an agreement. An agreement, when it can be enforced by law, i.e., has all valid legal essentials or abides by all legal provisions, becomes a contract. As per Section 10 of the ICA, the primary essential which attributes enforceability to a contract is the capacity or competence of an individual to enter into a contract.

Essentially, capacity means the legal ability of an individual to form the necessary legal intention to enter into a valid contract. An agreement that fulfils all the essential elements of a contract becomes a valid contract. Therefore, if one of the parties to a contract is not legally capable or competent to enter into a contract, then the agreement becomes unenforceable and the contract becomes void. The reasoning behind this legal proposition is that a valid contract requires the capability of the formation of legal intention between both parties. It is often referred to as consensus ad idem, or the meeting of minds. When both parties agree upon the same or similar terms of a contract, then only legal intention to enter into a valid contract can be established. Due to certain limitations, a few categories of individuals are not capable of forming that intention. Therefore, they are prohibited from entering into a contract.

The contracts lead to the creation of rights and obligations for both parties to a contract. Due to the restrictions, either physical or mental, people who are either minors or have any mental infirmity (unsound mind) are prevented from entering into valid contracts. Therefore, the law seeks to protect such individuals from situations of manipulation where a competent party can influence them unduly into entering into a contract and subsequently compel them to perform something which they are incapable of doing or claim damages for such a breach. That is why the law seeks to create a beneficial protection mechanism for such individuals.

On the contrary, the law also envisages certain exceptional circumstances where contracts with such people, who lack capacity, are considered valid owing to their benefits and necessities. By creating such a legal system, a balance of rights and obligations is created between contracting parties.

Section 11 of Indian Contract Act, 1872

Section 10 of the Indian Contract Act, 1872, simply states that all parties entering into a contract must be competent to contract. It does not go into the details of the competency. Section 11 defines competency by getting into the details of the legal capacity to contract. It deals with various categories of persons barred from entering into a contract due to specific reasons. The provision reads as:

“Section 11. Who is competent to contract: Every person is competent to contract who is of the age of majority according to law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”

Thus, the section declares the following persons to be incompetent to contract

Minors,
Persons of unsound mind, and
Persons disqualified by law to which they are subject

The operation of this section creates a clear disability/limitation for three sets of people, preventing them from entering into a contract. They are minors, persons of unsound mind, and persons disqualified by law.

Therefore, people who are capable of entering into a contractual relationship are:

Those who have attained the age of majority;
Those who have a sound mind; and
Those who are not disqualified by law specifically from entering into a contract

These criteria are used to judge whether a contract is valid or not based on the competence or capacity of a person to enter into a valid contractual relationship. If a person who is a party to a contract falls under one of the three disqualifications, then the contract is deemed to be void ab initio and unenforceable.

Contracts with a minor

As per Section 3 of the Indian Majority Act, 1875, every person living in India shall be considered to be a major once he completes 18 years of age. This is the general rule regarding age of majority that a person is considered to be a minor till he attains the age of 18 years. The provision, however, creates an exception by stating that, in a special case where the person or property or both belonging to someone below 18 years of age is entrusted in the custody of an appointed guardian or a court of wards, he is considered a major only after attaining 21 years of age. This is how the courts determine the age of majority by ascertaining the age to be either 18 in general cases or 21 in special cases. However, the current position of law removes any discrimination between minors and minors with court appointed guardians and prescribes the age of majority as 18 for everyone.

Earlier, the Act referred to minors as infants, but the current terminology is “minor”. Section 11 says that a minority depends on the law to which the party is a subject. Therefore, in the Indian context, the Indian Majority Act, 1875, is given due consideration while ascertaining the majority.

Illustration: Suresh, a 16-year-old boy, loses his parents due to an accident. The court appoints his paternal uncle, a respectable man, as guardian to that boy and the boy’s properties belonging to Suresh, which he inherits after his parent’s untimely death. In this case, Suresh can only enter into a valid contract after the age of 21. However, as per the current law, Suresh can be allowed to enter into a valid contract after attaining 18 years of age.

Reasons for considering minor agreements as void

The reasons why a minor’s agreement is considered void are given below.

The minors, due to their tender age, are incapable of understanding the consequences of their actions;
The minors cannot form an appropriate legal intention to enter into a contract, and
The minors can be exploited through fraudulent manipulation of others.

The law, therefore, seeks to protect a minor from the effects of his poor judgement.

Nature of minor’s agreement

Section 10 of the Indian Contract Act, 1872, provides for the proposition that every party entering into a contract must have the legal ability to do so, and Section 11 talks about the types of people who are prevented from entering into a contract. The complication arises when neither of the provisions mentions the effects of a minor’s agreement. The question as to whether the agreement in which a minor is a party becomes voidable or is void from the beginning is left unanswered by the said provisions. This lack of detail led to a controversy regarding the ambiguity presented by the legal questions pertaining to the nature of a minor’s agreement.

This conflict was resolved in the case of Mohori Bibee and Ors. vs. Dharmodas Ghose (1903), in which the Judicial Committee of the Privy Council stated that a bare reading of the text of Section 11 makes it clear that it intends to make it a mandate that all the contracting parties must be competent to contract. It also clearly mentions that a person who, by reason of minority, is incompetent to contract, cannot enter into a valid contract.

Therefore, the legal question of whether a contract is void or voidable cannot arise in such a situation where a minor is involved, as the question leads to a pre-supposition regarding the existence of a contract between the parties. Since a contract cannot exist when a minor is involved, the question regarding it being void or voidable cannot technically arise from the discussion. Just to simply understand the proposition of the court, it is fair to say that a minor’s contract is absolutely void in its nature.

In the above-discussed case, the facts were such that Dharmodas Ghose, the plaintiff, took a loan of Rs. 20,000 from Bhramo Dutta, a local moneylender, and the attorney of the money lender knew that Dharmodas was a minor. Dharmodas also executed a mortgage deed whereby he mortgaged his houses in favour of the defendant, Brahmo Dutta, to secure the said loan. Only a part of the loan, i.e., Rs. 8000, was advanced to the minor.

Upon attaining majority, Dharmodas filed a case against the money lender for cancellation of the mortgage deed on the ground that he could not execute the mortgage as Dharmodas was a minor during the period of the contract. The money lender contended that the law of estoppel would bind Dharmodas to pay the loan through mortgage as Dharmodas cannot go back on his own representation.

The Privy Council held that the contract was void ab initio (absolutely void from the beginning) and the law of estoppel would not operate on the plaintiff as the attorney of the money lender has knowledge of the fact that the plaintiff was a minor. Therefore, this decision became a landmark precedent which held two important principles:

A minor’s contract is absolutely void from the beginning; and
The law of estoppel cannot bind a minor if the other party has knowledge about the fact that the contracting party is a minor during the entering of the contract.

In a situation where an alternate decision would have been laid in the case, it would have led to a circumstance where the law would have been ambiguous. This is believed so, as it would have left the decision of validity or existence of the contract on the whims and fancies of a minor. Such liberty gives the minor excessive power to choose which contract he will abide by and which he will not. Such a situation creates an unfavourable circumstance for competent parties who may suffer a loss due to the denial of a minor from fulfilling their part of the contractual obligation. It also protects the minor, as the minor is assumed to lack the adequate mental ability to adjudge the consequences of entering into a contract while doing so.

A child’s poor judgement can make him vulnerable to the manipulations of adults and grant him lesser bargaining power while deciding the terms of a contract. Therefore, the general rule that every man is the best judge of his own interests and, whatever actions he takes, he does so for his own good is suspended for minors.

Judicial decisions on minor’s agreement

The decision laid down in the previous case has been followed and cited by Indian courts in many subsequent cases. The application presented a dichotomy where, in some cases, the application was an advantage to a minor and, in certain cases, it was not. The interests of justice were maintained by creating a fair playground for contracting parties.

Going forward with this proposition, in the case of Mir Sarwarjan vs. Fakharuddin Mahomed Chowdhury (1906), the Privy Council came across a situation where a purchase agreement was entered for certain immovable property by the guardian on behalf of a minor, and when the minor sued the other party of the contract for a decree of specific performance so as to recover the possession of his property, his suit was denied. The Privy Council stated that neither the manager of a minor’s estate nor the guardian of the minor possesses the power to bind a minor or a minor’s estate with contractual terms. Since there was no mutuality, the minor could not subsequently obtain specific performance of the contract.

Moving forward in the case of Sri Kakulam Subramanyam vs. Kurra Subba Rao (1948), the Privy Council overruled the previous precedents set by it and stated that the minor’s guardian do possess the power to enter into a contract of sale to discharge debts or for the benefit of the minor. In this case, the mother of the minor had sold his property on his behalf to discharge the debts of the minor’s father. The Privy Council held the sale valid as it was for the beneficial interests of the minor. This proposition gave power to the guardians of a minor or a minor’s estate to enter into a contract on behalf of the minor and bind the minor with contractual terms for his own benefit.

Following the above proposition, the Odisha High Court in the case of Sri Durga Thakurani Bije Nijigarh vs. Chintamoni Swain (1982) held that the endowment of property on behalf of minors for religious properties done by their guardians or parents was specifically enforceable and binding. This gave rise to the doctrine of mutuality, which states that a group of persons or associations can enter into transactions on behalf of each other for each other’s beneficial interests. Keeping that in mind, many different High Courts expressed their dissatisfaction against the ruling of the Odisha High Court by stating that the doctrine of mutuality has no place in such situations as the matter was already in the competence of the guardians to dispose of the property. The doctrine of mutuality has no scope under Section 20 of the Specific Relief Act, 1963. Simply put, all the courts agreed to one proposition, if a contract falls within the ambit of competence of a guardian and is for the benefit of the minor, then it can be specifically enforced.

In the present modern society, it is impossible to uphold the proposition that minors’ contracts are absolutely void because minors are being exposed more and more to public life through online shopping, e-commerce, public transport systems, tailoring, educational institutions, and movie theatres, amongst many other situations. In such a case, completely declaring the minor’s agreement as void would lead to a situation where the dependency of minors on their parents for smaller issues would increase manifold. Such a blind and strict proposition puts minors in a disadvantageous position. Therefore, the above proposition was developed in the case of Srikakulam Subramanyam vs. Kurra Subba Rao (1949), which created a valid balance between the rights and interests of the minor and the other contracting party.

Government employment agreements by minors

When it comes to a contract for government employment with minors, the Jharkhand High Court in the case of State of Jharkhand & Ors. vs. Arun Kumar Dhar (2017) stated that the agreement of a minor with the State Government is not void as per Section 11 unless a particular rule exists under the corresponding service laws preventing minors from entering into such contracts. This was held so because Article 24 of the Indian Constitution only prevents children below 14 years from being employed, but no such restriction is placed on children between 14-18 years of age. Therefore, minors between 14-18 years of age can enter into a contract of government employment if the relevant service laws do not prohibit such an agreement.

Effect of minor’s agreement

Ordinarily, since a minor’s contract is void, it cannot have any effect, as the existence of a contract cannot be presupposed in such a case. Therefore, to study the effects of a minor’s contract, it must be studied independently of any contract. Consequently, the court, through years of interpretation and various cases, drew the following consequences or effects of a minor’s agreement:

No estoppel against a minor

The law of estoppel states that if a party to a contract makes certain promises and the other party, based on such promises, performs certain actions, then the promising party is bound to fulfil his promises. In case of a minor’s agreement, one has to think of a situation where a minor, through misrepresentation or concealment of his age, makes the other party believe that he is a major and enters into a contract. Can he be bound by the law of estoppel, or will he be precluded from revealing his real age in a suit against him arising from such a contract? This question led to multiple conflicts of interpretation but was settled in the case of Jagar Nath Singh & Ors. vs. Lalta Prasad & Ors. (1910), wherein it was held by the Allahabad High Court that the law of estoppel is not binding on the minor. Even when the minor enters into a contract by misrepresenting his age, he still cannot be bound by it, and the contract will remain void.

Rationale behind non-application of estoppel

The clear rationale behind such a proposition was that, if the law allows the status of the agreement to change based on representations of minors, many individuals will enter into a contract with minors to exploit them through undue influence and manipulation. They will make minors self-declare and self-attest their ages, which in turn dilutes the essence of the law, which seeks to protect the interests of a minor as they are presumed to be incapable of understanding the consequences of their actions while entering into a contract. This proposition was further highlighted in the case of R. Leslie Ltd. vs. Sheill (1914), wherein Sheill, by claiming to be a major, borrowed a sum of money from Leslie and refused to pay it back when the money became due. She was sued in the English Court of Appeal, wherein it was held that the contract was void and Sheill cannot be bound by the terms of the contract based on the proposition that, even if she misrepresented her age, a minor cannot be bound by the law of estoppel.

The other reason as to why there can be no estoppel against a minor’s contract is that there can be no estoppel against a statute. Since the ICA declares a minor’s contract to be absolutely void through the statutory provision of Section 11, the principle of estoppel would not be applied for binding a minor on his promise.

Subsequently, in the Indian context, in the case of Kanhaiya Lal vs. Girdhari Lal (1912), wherein a suit was filed for recovery of money on a promissory note executed by the defendant, Kanhaiya Lal, in favour of the plaintiff, Girdhari Lal’s father. The suit was resisted on the contention that Kanhaiya Lal was a minor when he executed the promissory note. The Delhi High Court in this case held that a minor cannot be bound by a promissory note executed by him as the law on estoppel or promissory estoppel does not apply to minors.

In the case of Lakhwinder Singh vs. Paramjit Kaur (2003), the Punjab and Haryana High Court stated that it is the duty of the other party to make diligent enquiries about the age of the party they are entering into a contract with before making a contract. Such an inquiry must be diligent, reasonable, and vigilant.

No liability in contract or in tort arising out of contract

As has already been established, a minor’s contract is devoid of any effects in terms of legal propositions as a minor is incapable of providing informed consent; and, without consent, there could be no change in legal character. Therefore, the general rule that a minor’s contract is free from any legal effects persists in interpretation. There was no change in the status of parties as there is no space for a minor to consent legally to an agreement.

In England, in the case of Johnson vs. Pye (1665) 82 ER 1091, wherein a minor obtained a loan of a sum of money by misrepresenting his age and claiming to be a major, it was held that he cannot be forced to repay the amount as the contract was not binding on him. This proposition has already been established that estoppel cannot be binding on minors. The other proposition that arose in this case was that can a minor be held liable under the law of torts for the damage sustained by the other party due to the misrepresentations of the minor?

The English courts held that no minor can be made subject to a tortious claim for damage sustained by the other party in cases where the minor misrepresents his age and, as a consequence, the other party sustains damage. The rationale was that, if such an indirect way of recovery was allowed, it would dilute the protection that the law of contract affords to minors and it would make the position of minors extremely vulnerable. It would negate the effect of the proposition that the law of estoppel cannot bind minors. A contract cannot be transitioned to a tort simply to bring an action on a minor.

This proposition has also been upheld in Indian courts. The Calcutta High Court in the case of Harimohan vs. Dulu Miya (1934) held that a minor cannot be made liable in tort for money lent on bond if he was not liable in contract. The High Court also clarified that, if the tort is directly connected to the contract and is attempting to effect the terms of the contract or both the tort and the contract form part of the same transaction, then the minor cannot be made liable in tort as he is not liable in contract.

In cases where the tort is independent of the contract and a contract is simply involved in the transaction as a matter of fact, a minor can be held liable for his action in tort. This legal proposition was put forth in the decision of Burnard vs. Haggis (1863), wherein an infant had borrowed a horse from one of his friends for personal use. Later on, he lent the horse to another person who killed the horse. Therefore, the minor was made liable by the Court of Common Pleas and Exchequer Chamber for the damage sustained by the owner of the horse. Similarly, in Ballet vs. Mingay (1943), a minor was held liable by the Court of Appeal under the law of tort for the tortious action of detenue on the ground that he failed to return certain instruments which were borrowed by him from his friend as he had given them to someone else and lost them consequently. .

On the contrary, in Jennings vs. Rundall (1799), the defendant minor had hired a horse to ride till a particular point but rode it to a longer distance. He was not held liable as his actions fell under the scope of the contract. Since he was not liable under contract, he could not have been liable under torts. This case also reiterated the fact that a claim in contract cannot be converted into a claim of tort with the purpose of indirectly enforcing the contract upon a minor.

Doctrine of restitution

The doctrine of restitution is the basic principle in contract law which states that, whenever someone makes an unlawful gain by causing an unlawful or dishonest loss to another, then the person who has made such gain can be compelled by law to restore the gains and any other accrued profit to the rightful owner. This doctrine is based on the principle of equity that no one should gain something inevitably at the loss of another. The application of this doctrine in the discussion regarding the effect of a minor’s contract poses the question whether, in a situation where a minor falsely represents his age and gains certain property or goods, can he be compelled to restore them to the rightful owner. The answer is yes. A minor who gains property or goods by falsely stating his age or by concealing his age can be compelled to restore the same if the goods can be found in his possession or are traceable in his possession. This proposition is known as the “equitable doctrine of restitution”.

Exception to the doctrine of restitution

In situations where the infant has sold the goods or has converted them in any way, then he cannot be compelled to repay the value of the goods, as that would consequently have the effect of enforcing a void contract. Similarly, in situations where the minor has received money in place of goods or property, he cannot be compelled to return it, as the doctrine of restitution will not apply in such a situation. The doctrine of restitution simply aims to restore the one who has endured loss to be in a position in which he would have been had the misrepresentation not happened.

This principle was also upheld in the case of Leslie vs. Sheill (1914), wherein a minor received a sum of 400 pounds from a money lender by deceiving him by misrepresenting his age. The court did not allow the recovery of money as the defendant was a minor and the contract was void. Following which the plaintiff attempted to recover the sum by claiming it to be a quasi-contract. To this attempt, Lord Sumner stated that common law relieves a minor from any liability arising from a tort which is directly connected to a void contract and, therefore, it is not possible to enforce an unenforceable contract in a roundabout way. Common law equally forbids courts from enforcing a part of a contract by assuming the contract to be an implied contract or quasi-contract, as the contract is wholly void in its very nature.

Ultimately, the money lender bought in defence of the doctrine of restitution and contended that the minor should be compelled to restore the sum. The contention was rejected by Lord Sumner. He stated that the precedent till 1913 was that, whenever a minor gains a benefit by misrepresenting or concealing his age, equity could compel him to restore the unlawful gains or to relieve the other party of their obligations under the contract.

This decision also overruled the decision given in Stocks vs. Wilson (1913) in which a minor obtained certain furniture and other articles by misrepresenting his age and ultimately sold them. He was compelled to restore the value of the said furniture and articles. This decision was criticised in the case of Leslie vs. Sheill and it was held that a minor cannot be compelled to restore the value of the goods. .

Judicial recognition of the doctrine

This principle was upheld in the case of Jagar Nath Singh vs. Lalta Prasad (1910), wherein a minor had sold his property for a specific amount of money. He then sought to recover possession of his specific property with the contention that the contract was not valid as he was a minor. The Allahabad High Court held that he could claim recovery of possession only after restoring the amount of consideration that he received for the property. This principle was approved by the Privy Council in Mahomed Syedol Ariffin vs. Yeoh Ooi Gark (1916).

Similarly, in the case of Padinhare Veetil Madhavi vs. Pachikaran Veetil Balakrishnan (2009), the mother of the minor, sold a share of the minor’s property without the court’s permission. Later, the minor filed a suit to set aside the decision on the grounds that he was not competent to contract the same. The Kerala High Court in this case held that the sale of the property could be set aside only if the plaintiff restores the benefit he received through the contract. The plaintiff refused to return such consideration or benefits and, therefore, the court did not grant any relief to him.

Judicial decisions on restoration of benefits

The next landmark decision for this proposition was laid out in the case of Khan Gul & Anr. vs. Lakha Singh & Anr. (1928), in which the defendant, while he was still a minor, concealed his age and sold a property to the plaintiff for the amount of Rs 17,500 and, after receiving the amount, he denied the fulfilment of performing his part of the contractual obligation. The plaintiff sought a recovery of possession or the amount paid for consideration. There did not exist any possibility of specific performance, as the contract was absolutely void like any other minor’s agreement. The legal question which, therefore, arose was whether a minor having entered into a contract through misrepresentation has a right to refuse to perform his part of the contract and, at the same time, keep the benefit he received from the contract?

In this case, Section 41 of the Specific Relief Act, 1877, is of no use as it only becomes applicable when the minor himself seeks the aid of the court. Neither could the principles laid down in Leslie vs. Sheill be applied, as it did not extend to cover money in India. Therefore, in this case, the learned Chief Justice found valid grounds to extend the ambit of the decision and stated that there exists not much difference between restoring property and refunding money except for the fact that property is identifiable and traceable but money is not traceable. By referring to Sections 39 and 41 of the Specific Relief Act, 1877 (currently Sections 31 and 33 of the 1963 Act), his Lordship stated that the application of the doctrine of restitution is not just limited to the cases covered by these provisions. Therefore, the Chief Justice ordered a refund of the amount of consideration based on the stricter interpretation of the principle that a minor cannot be allowed to benefit from his own misrepresentation and falsehood.

However, the above proposition was not followed in the decision of Ajudhia Prasad vs. Chandan Lal (1937), which became another landmark decision for this concept. In this case, two minors borrowed a certain amount of money through a mortgage deed. They were above 18 years of age but below 21 years of age. They concealed the fact that they have court-appointed guardians. The legal issue which arose was whether the lender was entitled to a decree for the principal money or sale of the mortgaged property.

The Lahore High Court rejected the broad view of restitution as taken in the case of Khan Gul vs. Lakha Singh and stated that Indian courts must be bound and restricted by the propositions of restitution set forth in the case of Leslie vs. Sheill. Deviating from these principles would equate to moving away from a set preponderance of authorities governed in both England and India. Such a deviation would also remove the distinction of the position of a minor when he is suing as a plaintiff and is being sued as a defendant in a case.

Beneficial contracts for minor

The principle set forth by the Privy Council in the Mohori Bibee case that every minor’s agreement is absolutely void, has been typically followed in every case in India, but the application of the principle has largely stayed limited to cases where a minor is accused of not fulfilling his obligations and the other party wants to enforce those obligations as against the minor party.

Therefore, serious concerns were raised regarding the applications of the provision in cases where the contract is actually beneficial for the minor but there remain no contractual obligations on the minor. The principle that a minor’s contract is absolutely void simply means that no court can impose any contractual obligation on a minor. Therefore, it would not be wrong to say that a minor is allowed to enforce a contract which gives certain benefits to him, but he is under no obligation arising from the contract.

Judicial decisions

In the case of A.T. Raghava Chariar vs. O.M. Srinivasa Raghava Chariar (1916), the question which arose in front of the full bench of the Madras High Court was whether a mortgage which has been executed in favour of a minor who has advanced the whole of the mortgage money is enforceable by him or anyone on his behalf. The full bench of the High Court unanimously agreed to the fact that the mortgage can be enforced by the minor alone or on behalf of him by someone else. The Chief Justice of the Madras High Court noted that the law, which prevents minors or renders them incapable of being bound by contractual obligations, does so to protect them from unfavourable circumstances and exploitation but, by applying the same thing in cases where they are the beneficial end and are supposed to take consideration for the money paid by them, would defeat the entire purpose of the law and put minors at a disadvantaged position.

Similarly, in the case of The Great American Insurance Co. Ltd. vs. Madanlal Sonulal (1935), the defendant, a minor, had provided certain goods for insurance and had paid consideration for the same. The bank refused to insure the goods on the grounds that the defendant is a minor and is incompetent to contract due to being a minority. The Bombay High Court stated that the law declaring a minor’s contract absolutely void did so with an intention to protect minors from exploitation. On the contrary, in situations where the minor has fulfilled his obligations and the other party resists their obligations on the ground that the party is a minor, then it would be inequitable to declare the contract absolutely void. It would be wrong to relieve the major party of their obligations, as it would put the minor in a disadvantaged position. Therefore, the High Court ordered the insurance company to pay the insurance money to the minor in this case.

Similarly, in the case of Thakar Das vs. Putli (1924), it was held by the Lahore High Court that a minor is competent enough to purchase immovable property and he also has the right to sue for specific recovery of the possession of the property in cases where the seller resists the delivery of the property to him. An already executed transfer in favour of a minor cannot be impeached on grounds of his minority. However, leases are different from other types of transfers considering that ownership is not transferred and it is periodic. Therefore, in cases of a lease to a minor, they can be treated as absolutely void. In cases of promissory notes, a minor can execute one in his favour.

Nothing in contract law prevents a minor from assuming the capacity of a promisee (the one to whom a promise is made). The law does not prevent a minor from receiving any benefits from a contract. Therefore, in the case of K. Balakrishnan vs. K. Kamalan & Ors. (2004), wherein a mother had executed a gift deed in favour of her minor child was not allowed to revoke the gift as she was bound by the deed. The minor was also a beneficiary in this case and, therefore, the contract was valid and binding. The fact that the mother retained the possession of the property and enjoyment too did not destroy the validity of the gift in any manner.

Contracts of service

In the landmark decision of Raj Rani vs. Prem Adib (1948), a minor was given the character of a child actress in a movie which was being directed by the defendant, who was a producer of Hindi films. The party to the agreement was the father of the actress. Subsequently, the defendant gave the role to someone else and terminated the agreement made with the minor’s father. The Bombay High Court, in this case, decided that neither the minor nor her father possessed the right to sue on such a contract. If the contract was made with the actress, it would be nullified on the ground that the actress was a minor and, in a case where the contract was made with the father, it would be void as it was done so without any consideration.

Contracts for marriage

As per principles of law, a contract for the marriage of a minor is also a beneficial contract. It used to be customary for many Indian communities to arrange the marriages of their minors, and the law adapted itself based on such customs. Since then, the Bombay High Court, in the case of Abdul Razak vs. Mohd. Hussain ILR (1916) 42 Bom 499, held that a contract of marriage can be enforced against the other contracting party at the instance of the minor but not against the minor himself. The exception to this principle is that, in cases where the agreement of marriage of a minor leads to a violation of a statute like the Hindu Marriage Act, 1955, the agreement can be avoided. One example of such a situation is when the girl child is below 18 years of age and not eligible for legal marriage.

Marriage of a Muslim minor girl

This special situation was explored in the case of Kumari Shabnoor (Minor) D/O Mohammad vs. State of Uttar Pradesh (2007), wherein the parties to the contract of marriage of a minor Muslim girl were governed by the Shariat law. The medical report presented the fact that the girl was below the age of majority and, hence, had no free will to enter into a contract of marriage. Only her father or legal guardian could lawfully give her in marriage. The Kazi, who had performed the marriage, had knowledge of the minority status of the girl. Therefore, the Allahabad High Court declared the marriage invalid and reverted the custody of the minor Muslim girl to her father.

Contracts of apprenticeship .

In the common law system, contracts of service, including apprenticeship, and contracts for necessities have been kept at an equal level. In the landmark case of Roberts vs. Gray (1913 KB 520 CA), wherein the defendant, who was an infant, agreed to join the plaintiff for a world tour as the plaintiff was a reputed billiards player. The plaintiff spent a good sum and valuable time to make necessary accommodations and arrangements for the minor, but the minor ultimately repudiated the contract. The plaintiff was allowed to recover damages for breach of contract from the minor. The Court of Appeals decided that the said contract was a contract for necessities as it was for the instruction and training of the minor, which could help him earn a livelihood in the future.

Although, as per the Indian law, the Bombay High Court in the case of Raj Rani vs. Prem Adib (1948) held that, even though a minor, under English law, would be liable under a contract of service, the contract was made for the benefit of the minor, under Indian law, the minor’s contract would still be void, as per Section 11 of the ICA, and the minor would have no such liability.

Trade contracts

As per law, trade contracts are not considered beneficial contracts for minors. This proposition was laid down in the landmark case of Cowern vs. Nield [1912] 2 K.B., wherein the minor was conducting a business of hay and straws. The plaintiff provided a cheque to the minor for supplying clover and hay. The minor supplied clover, but they were rejected for being in an unsuitable condition, and the minor failed to deliver hay. The plaintiff then sued the minor for damages for the breach of contract and for recovering the cheque amount but could not sustain the action. It was held by the King’s Bench that the trading contracts do not come under the category of beneficial contracts and, therefore, they cannot be enforced as they do not provide any real benefit to the minor.

Option to rescind beneficial contract on majority

A minor has the option as per law to retire from a beneficial contract once he attains majority, provided that such an option was exercised within a reasonable amount of time deemed to be reasonable by a court of law. The minor can rescind the contract only within a reasonable time. The duration of reasonable time varies from case to case. In the case of Nazir Ahmed vs. Jiwan Das AIR 1938 Lah 159, where the minor, to marry a girl, settled his property, but the property which he received from his father’s will was also settled in the process, and then he tried to repudiate the contract five years after attaining majority, the House of Lords held that the period of five years is not a reasonable duration and, therefore, he cannot be allowed to retire from the beneficial arrangement of settlement of his properties.

Ratification of minor’s agreement

The general principle of law says that a person cannot ratify an agreement, which he entered into as a minor, upon attaining a majority. The rationale behind this principle is that ratification always relates back to the date on which a contract was made and, therefore, a person cannot go back to the date of making a contract, which was void ab initio, and make it valid through ratification. However, a minor is free to make a fresh contract with that party with a fresh consideration upon attaining majority.

In the case of Suraj Narain vs. Sukhu Ahir & Anr. (1928), the full bench of Allahabad High Court dealt with principles of ratification. In this case, a minor had borrowed a certain amount of money by executing a bond for the same and, once he attained majority, he executed a second bond with regards to the original loan along with the interest amount. The High Court held that a suit against the second bond cannot be maintained in law as the second bond was without any consideration and also did not fall under the ambit of Section 25 of the Indian Contract Act.

In the case of Anant Rai & Anr. vs. Bhagwan Rai & Anr. (1940), a person has taken a loan during the minority and, upon attaining the majority, not only pays the debt which he incurred during the minority but also ratifies the contract. The Allahabad High Court held that, in such cases, he cannot recover the amount back, stating that minors are not allowed to ratify a contract upon majority because the loan agreement was merely void and not unlawful.

Minor as a partner

As per general principles, partnership agreements are treated as contracts and, therefore, minors are prohibited from being partners in a partnership firm due to the simple reason that agreements with incompetent persons like minors are absolutely void. The only exception to this principle is where the nature of the agreement is such that the minor is a beneficiary of the partnership firms. As per Section 30 of the Partnership Act, 1932, all the partners must provide their consent for the same. In such cases, the minor is capable of receiving a share of the profit from the partnership firm but is not liable for the acts of the firm like the other competent partners.

Minor as an agent

Similarly, a minor can create a contract of agency with a major principal, but the minor will have no liability for his own action. The principal is held liable for the actions of the minor agent. Section 183 of the Indian Contract Act, 1872 states that any person who has attained the age of majority and is of sound mind can be a principal by appointing an agent. Section 184 states that any person can become an agent but a person, who is a minor or is of unsound mind will not be responsible to his principal for his actions if such person is appointed as an agent by the competent principal.

Liability for necessaries

It is a quasi-contractual obligation of the minor which binds him for reimbursement from his estate for the supply of necessaries. The persons who have been declared incompetent to contract, are still very much a part of society and have certain requirements to fulfil their daily lives. Therefore, completely prohibiting them from entering into contracts would lead to hampering their life and living. Hence, one of the exceptions to a minor’s contract being void is the validity of the minor’s liability for supply of necessaries.

This concept is envisaged in Section 68 of the Indian Contract Act which states that, whenever a person is incapable of entering into a contract or someone who is dependent on such a person requires necessaries for sustenance of life, then any other person is allowed to provide such necessaries to the incapable person or any other person whom the incapable person is bound to provide for. In these cases, the supplier can claim reimbursement of the value of the necessaries from the property of such an incapable person.

The landmark case law, which deals with the liabilities for the supply of necessaries, is the case of Nash vs. Inman [1908] 2 KB 1, in which Inman, a minor, bought a number of coats from Nash. It was found out that Inman already had many clothes and, hence, the English Court held that the coats could not be treated as necessaries and, therefore, the property of the minor cannot be appropriated for the payment of Nash. Necessaries are largely basic essentials which a person needs to have a healthy lifestyle and human existence. Therefore, if a person already possesses a sufficient amount of a particular thing and is yet provided with more of it by a supplier, it would not be considered necessary.

What is a necessity

Necessities are largely goods which a person requires for daily subsistence and living. These can include groceries, clothes, sanitation and hygiene products, food, educational materials, stationary, etc. If a person already has enough of a particular thing, it won’t be considered as a necessity for him. Therefore, anything required for a healthy living that a person has an insufficient amount of is termed as a necessity.

Extent of a minor’s liability

A minor is liable for the delivery of necessaries to him i.e. he should compensate the supplier from his own estate if:

The necessaries are delivered to him; or
Anyone that depends on him; or
By the supplier

In such situations, the minor is liable to reimburse the amount of the necessaries to the supplier from his own estate.

Contracts with persons of unsound mind

Largely, the principles governing a contract with a minor remain similarly applicable on a contract with a person of unsound mind. Therefore, in the Indian context, contracts with persons of unsound mind are absolutely void. They cannot ratify a contract upon reaching a lucid state of mind. They are allowed to enter into beneficial contracts where they have no contractual obligations. The principles of estoppel do not apply to persons of unsound mind either.

What is an unsound mind

What one needs to understand is who is a person of unsound mind. According to Section 12 of the Indian Contract Act, “a person is said to be of sound mind for the purpose of making a contract if at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interests”.

In simpler terms, we can say that a person of an unsound mind is a person who:

Is not capable of understanding the consequences of entering into a contract or the terms which the contract imposes on him; and
Is not capable of comprehending the obligations arising from a contract and, therefore, cannot be expected to fulfil them.

Rationale behind Section 12

Meeting of minds (consensus ad idem) is a primary requirement for the formation of a valid contract. A meeting of minds connotes a legal intention for creating a contract, which gives rise to contractual obligations. A person of an unsound mind can never create the same intention as a person of a sound mind and, therefore, meeting of minds will never take place. Persons of unsound mind are prevented from entering into contracts so as to protect them from exploitation due to their special conditions.

Unsoundness of mind includes the below three special categories.

Idiot: a person who has an unsound mind or insane since his birth.
Lunatic: a person who has acquired a mental illness leading to an unsound mind after birth due to a disease or an injury.
Drunk: a person who is in an intoxicated state, which makes him incapable of understanding the consequences of his actions.

Burden of proof

The next legal issue that arises is how to prove whether someone is a person of unsound mind. The Supreme Court, in Chacko & Anr. vs. Mahadevan (2007), held that the burden of proof is on the person that challenges the validity of the contract. In situations where a person has periods of lucidity and periods of lunacy, the fact that the person was in a period of lucidity (clear mind) while entering into the contract, must be proven by the person who claims so. The burden of proof to prove that a person is of unsound mind is on the person who seeks to repudiate the contract on the ground of unsoundness of mind.

Example

Intoxication can also lead to an unsound mind. This aspect was conferred in the case of Asfaq Qureshi vs. Aysha Qureshi (2010). In this case, both the parties were Muslims and were married through Muslim rituals. In Muslim law, marriage is regarded as a contract. The wife claimed that she was involuntarily intoxicated during the marriage; therefore, she could not understand the consequences of what was going on due to the unsoundness of her mind. The Chhattisgarh High Court held that the marriage was void as the wife’s intoxication led to unsoundness of her mind and she was not capable of giving free consent to the marriage.

Contracts with persons disqualified by law

After minors and people of unsound mind who require protection from law, the category which is prevented from entering into a contract due to legal disabilities is known as a person disqualified by law. These disabilities arise either due to financial, social, or political positions that these people may belong to. Certain categories of individuals under this portion are given below:

Alien enemies

Aliens are basically people who are citizens of a foreign country. Alien friends are those belonging to a country which has a friendly relationship with the Republic of India, and alien enemies are those who share a hostile relationship or are in a conflict with India.

As per Section 83 of the Civil Procedure Code, 1908, alien friends and alien enemies with the permission of the Central Government can sue in Indian courts competent to try the suits, as if they were Indian citizens. However, alien enemies without the permission of the Central Government and those residing outside India cannot sue in Indian courts.

There are two categories of cases which emerge here:

Contracts during war or conflict: Such contracts, unless the Central Government issues a licence, are unenforceable.
Contracts before war or conflict: Such contracts are dissolved or suspended when they are against public policy or beneficial to the enemy nation.

The contracts made by alien friends in India are valid, but contracts by alien enemies are void due to concerns over national security and safety. In the case of O. Wuthrick vs. David (1916), a suit was filed at the Madras High Court to recover the rent. The plaintiff was the lessee, and the defendant was the lessor, who was a German citizen. Due to the subsistence of the world war, the defendant was declared to be an alien enemy. Therefore, the Madras High Court held that the covenant for lease was void and unenforceable due to the alien enemy status and incompetence of the defendant.

Foreign sovereigns and ambassadors

These categories of people usually enjoy certain privileges which are granted to them by law. They are also given diplomatic immunity against being sued in Indian courts. They can only be sued if they agree to admit themselves to the jurisdictions of Indian courts. Therefore, they are allowed to enforce contracts in Indian courts, but no contract can be enforced against them without their approval or the approval of the Central Government.

There are certain situations where the Central Government grants permission to sue them. Those are given below:

He himself has executed a suit in a court of law against the person seeking to sue him;
He himself or through an agent carries trade/ business within the court’s jurisdiction;
He is in possession of immovable property which falls under the court’s jurisdiction and the suit in relation to such immovable property; or
He has waived off the privilege granted to him, which prevents others from suing him, in an express manner.

Convicts

The convicts, who are serving a sentence/punishment for certain criminal offences, are disqualified from entering into a contract. Once their sentence ends, the disqualifications also end with the sentence, and they are free to enter into contracts again. They can also enter into contract during parole or when they are pardoned by courts. The convicts are not bound by the law of limitation to file suit. The limitation is kept in abeyance during the period of sentence.

Insolvent

All the estate or property of a person declared to be insolvent is vested in the hands of an official assignee who is appointed by a court. Hence, the insolvent person lacks the power or capacity to enter into a contract with regard to those properties, as he cannot sue and cannot be sued by anyone else. Once the insolvency comes to an end, he is free to enter into contracts.

In the case of the Official Assignee of Madras vs. A.R. Narayan Mudaliar (1951), the Madras High Court stated that whoever lends an amount to an undischarged insolvent has no method or legal route to recover the debt. This is done so that the undischarged insolvent has no borrowing power of his own. It was also stated that no court has the power to entertain any suit regarding an insolvency based on debt incurred by him while his insolvency continues. This is the reason why insolvent people are prevented from entering into a contract.

When a debtor is held to be an insolvent, the court vests his property in the powers of an official receiver or an official assignee. The official receiver or assignee can enter into contracts with respect to the insolvent property and sue/ be sued on his behalf. These disqualifications come to an end when the court passes an order of discharge removing the insolvency status from the individual.

Conclusion

Contracts are essential to sustain daily life and for the progress of human civilization, but certain members of society need the protection of the law to be prohibited from exploitation, and that is exactly why a limitation is imposed on certain categories of people from contracting. Even though the limitations exist, the law has also envisaged exceptional circumstances where such agreements with incompetent people are allowed to provide them with the benefits of entering into a contract. By creating such a balanced legal system of rights and obligations, the Indian legal system creates a wholesome approach towards the concept of capacity to contract. With changing global and social dynamics, the changes that these principles take are yet to be seen.

Frequently Asked Questions (FAQs)

Does the law of estoppel apply to contracts with minors?

No, the law of estoppel does not apply to void agreements with minors unless the minor is the one seeking equity, in which case he must do equity by restoring the benefits he received under the contract.

Can an unenforceable contract with a minor be enforced through a tortious action?

No, an indirect way of enforcing a void contract is prohibited in the law of contracts. In cases where the tort is independent of the contract, then the minor can be held liable for the same.

What are the exceptions to contracts with minors and people with unsound minds being void?

Usually, contracts that are beneficial to the category of people and do not impose any obligation on them are allowed. Even contracts for supply for necessaries are considered valid.

How is unsoundness of mind proved?

The unsoundness of mind can be proved through medical records, past history, subsequent conduct, and other circumstantial factors. The person who claims that the party was of unsound mind while entering the contract has the burden of proof on him.

What are the categories of individuals under persons disqualified by law to contract?

Usually, alien enemies, sovereigns and ambassadors of other nations, convicts, and insolvents are prohibited from entering into a contract with others.

References

https://egyankosh.ac.in/bitstream/123456789/56331/1/B-1U-3.pdf
https://deb.ugc.ac.in/Uploads/SelfLearning/HEI-Exempted-U-0748/HEI-Exempted-U-0748_SelfLearning_20231026135504.pdf
The book “Law of Contract and Specific Relief”, 13th Edition, 2022, EBC Publishers, authored by Avtar Singh

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:

Learn commercial contract drafting in 3 weeks,
just for Rs. 100 →

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

How to register a trade mark in India

By

Guest Post

-

October 31, 2024

This article is written by Haridya Iyengar and further updated by Shreya Patel. This article acts as a comprehensive guide on how to register a trade mark in India. The article also throws light on the advantages of registering a trade mark and the kinds of trade marks which can be registered.

Table of Contents

Introduction

One of my college mates came up with a brilliant name for her new business. It was trendy, catchy, and very unique in nature. The name represented the business perfectly. She has also designed a creative logo for her brand along with the website. Months after her business started, she received a cease and desist letter (a document which states the receipt party to stop an activity as it infringes the right of the sender) from a company.

The letter stated that she was using their logo and brand name without permission and infringing their rights. These kinds of trade mark issues occur more than you think on a daily basis. In the blink of an eye, the whole business can come to a halt. You can avoid this from happening by registering your trade mark from the start itself.

In this article, we have a detailed discussion on the entire procedure of registering a trade mark in India. We will discuss who can register a trade mark, what types of trade marks can be registered, along with some crucial points on what to do after the trade mark has been registered.

Before walking through the process of trade mark registration, let’s take a look at how the trade mark and its related laws and rules have evolved during these years.

What is trade mark and trade mark registration

A trade mark is a mark that is unique in nature and helps the consumers identify the goods or services of one entity from another in the market. The origin of the goods and services can be identified by looking at their trade mark. A trade mark can be a symbol, mark, logo, sign, etc. Section 2(1)(zb) of the trade marks Act, 1999 (hereinafter mentioned as the ‘Act’) defines a trade mark as a mark which can be graphically represented and is also capable of distinguishing the goods and services of one party from another.

The process of acquiring the legal right to use a mark, logo, or symbol in relation to a specific goods or services is called trade mark registration. With the trade mark registration, the owner can get the exclusive right to use a trade mark and can sue parties that use the registered mark without prior permission.

Advantages of registering a trade mark

Why is registering a trade mark given so much importance? Below are some of the key advantages which will make us understand as to why we should register our trade mark in India.

Trade marks make it easier for your customer base to find you.
Trade marks distinguish your services and products from those of your competitors.
A trade mark helps in identifying you as the source and indicates a consistent level of quality of your services and products.
Trade marks also increase brand awareness and goodwill.
Trade marks are economically efficient tools which create a face value in the market among competitors; they give your business a monopoly over the brand name.
When a trade mark is registered, it gives the owner an exclusive right to use the trade mark.
Trade mark registration acts as a low-cost protection. The trade mark registration has to be done only once. Then it only needs a renewal every 10 years.

We have understood the advantages of registering a trade mark in India. Now let’s move on to the next crucial step in trade mark registration, which is who all can register a trade mark in India?

Registration of trade mark in India

A trade mark is one of the significant intellectual properties for all kinds of business in India. In India, there are various types of trade marks which can be registered, such as word marks, device marks, service marks, collective marks, or certification marks. In order to register any type of trade mark, a registration procedure is laid down by the trade marks office in India.

We will now delve into how to register a trade mark in India. We will first start with who can register a trade mark in India, as before proceeding to the registration process, one should know whether they can register a trade mark in India or not.

Who can register a trade mark in India

Section 18(1) of the Act states that any person who asserts the ownership of the trade mark can file the trade mark in India.

A trade mark can be registered by the following:

Natural person
Association of persons
A body incorporate
Hindu Undivided Family
Trusts
Proprietorship firms
Societies
Joint owners of a company
Partnership firms
Limited Liability Company

Where to register a trade mark in India

Trade mark applications are handled by the Office of the Controller General of Patents, Designs, and trade marks. The office has its branches available in Mumbai, Kolkata, Ahmedabad, Delhi, and Chennai. The application must be filled as per territorial jurisdiction. The trade mark application can be filed online by visiting the official website of the Office of the Controller General of Patents, Designs, and Trade marks, or offline by visiting the trade mark office which comes under your jurisdiction. A trade mark cannot be registered anywhere else.

How to register trade marks in India

India is a ‘first to use’ country when it comes to trade mark registration, which means that the party that uses the trade mark first will get an upper hand. Hence, registering the trade mark before you start to use it is very vital. This way you can protect your trade mark and brand name and avoid any third party claiming that you are infringing their trade mark as they have been using it before you were. Therefore, it is important to apply for registration as soon as possible.

To register a trade mark in India, the following steps must be followed:

Select a trade mark agent in India

A trade mark application is allowed to be filed only if the place of business is in India. If this is not the case, the applicant must file a trade mark application through an agent or attorney. An individual can file a trade mark application on their own, but it is recommended to hire an agent or attorney for it. The agent or attorney usually takes care of the formalities such as searching, preparing, filing, and prosecution of the trade mark.

Choosing the mark and trade mark class

The next step in the trade mark registration is to choose and finalise the mark or symbol by taking into consideration all the requirements which are laid down in the Act and Rules. Sections 9, 11, 13, and 14 of the Act talk about grounds of refusal and other restrictions on the registration of the trade mark. Hence, it is very vital to choose a mark which does not violate any of the sections mentioned.

After a distinctive mark is chosen, an appropriate trade mark class is to be decided under which the trade mark will be registered. Having a trade mark class is important as it will be used throughout the registration process. For instance, a company manufacturing dolls wants to register their trade mark. Such a mark will be registered under class 28 of trade marks.

Finding the eligibility and availability of the trade mark

The agent usually starts the registration process by determining whether the trade mark is eligible for registration and conducting a public search to see if there is a similar mark in the Office of the Controller General. A public search shows all the trade marks which are registered or unregistered. A trade mark will only be applied for registration if it is distinctive in nature; if there are any other similar or identical marks already registered or are in the process of registration, then such an application will be rejected.

Conducting a prior trade mark search helps in saving the applicant’s time and money. If any similar or identical trade mark is already in use or proposed to be used, then the applicant can still make changes in his mark and then register it.

Filing the trade mark application

The next step, after conducting the trade mark search and deciding on the appropriate trade mark class, is that the trade mark application can be filed in the trade mark office under the appropriate jurisdiction. Section 18 of the Act talks about the application of the trade mark. The trade mark application is to be made in writing to the registrar. A single application can be filed for different trade mark classes for a trade mark.

The application can be accepted fully or with some amendments as per the discretion of the registrar. For filing an application for a trade mark, Form TM-A is to be filed by visiting the office or on an online portal. Along with the application form, there are other important documents which are to be attached, and a fee is to be paid for the same. The fees for both online and physical filing are different for different categories.

Online filing	Physical filing	Type of entity
₹ 4500	₹ 5000	Small enterprise/individual/startup
₹ 9000	₹ 10,000	Other entities

If the trade mark application is being filed through a trade mark agent or the attorney, then the power of attorney is to be filed through Form TM-48, and they can further file the application form on behalf of the real owner. The form will require details such as the name and address of the proprietor, a description of the goods and services associated with the mark, whether the mark is in use, and a copy of the mark.

Documents for trade mark registration

The applicant has to ensure that all documents are attached in order to avoid any delays in the registration process. All the documents are to be uploaded along with the trade mark online when the application is filed. The documents which are required along with the trade mark application are:

Aadhar card
Form TM-48 (if the trade mark agent or attorney is filing the application)
Affidavit (if the mark is already being used priorly by the applicant)
Other documents as per the requirement
Graphical representation of the mark
Proof of name and address in case of company, partnership, or LLP
Pan card
Company’s incorporation certificate
MSME certificate (if applicable)

Examination of trade mark application by registrar

The trade mark office reviews the application after it is filed. This review by the examiner is compulsory in nature. The review is done to see if the application is complete, all documents are submitted, and if the mark is in compliance with the Act and Rules. The examination report must include all the similar registered trade marks along with the ones which are currently in the registration process which the registrar finds identical/similar. All marks along with their vital details, are to be included in the examination report for the applicant to know. After this, they issue an examination report within a period of one month.

The applicant has to revert this report, answering all the objections with evidence and argument. At the time of examination of the application, an application number is allotted. If the trade mark is registered, this number becomes the registration number. At this stage the status of the trade mark registration will be shown as ‘Awaiting reply to examination report’ which will change after the reply to examination report is submitted within a month.

Reply to examination report

A reply to the examination report is to be given in writing within 30 days from the date on which such report was delivered. The report consists of all the objections raised, any clerical mistakes, similarity, or lack of distinctiveness in the trade mark. The reply consists of answering the objections raised by the examiner. A comprehensive and clear report is to be filed as a reply to the examination report, along with the addition of all the evidence which can back your arguments made in the reply. If the reply is not submitted on time, it may lead to the application being treated as abandoned.

Objection to trade mark

The trade mark register determines if the application is barred from registration either on absolute or relative grounds for refusal as prescribed in the Act. The examiner can object to the trade mark application under Sections 9 and 11 of the Act. Section 9 of the acts talks about absolute grounds of refusal. If a trade mark is not capable of distinguishing the goods and services of one entity from another, it can be refused to get registered under the absolute grounds of refusal. A trade mark will be refused by the registrar if the mark includes any specification related to the kind of the product/ services, the place of origin or any of the key characteristics of the goods/services in question.

There are also other relative grounds of refusal for a trade mark registration:

If the mark has some possibility of being misunderstood with other registered marks, then such a mark might get refused.
If a mark is very identical in nature, then it may get refused.
If the mark that is applied for registration is similar to a very famous or well known trade mark, then it will be refused.

The trade mark can be objected under any of the above mentioned absolute or relative grounds.

Depending on the examination report, the registrar of the trade mark determines whether the application must be accepted, rejected, or put up for ‘show cause’. During a ‘show cause hearing’ subject to the facts, an application might be rejected, accepted, or accepted with certain limitations. Rule 33 talks about the objection to acceptance, examination, and hearing of the trade mark application which is filed for registration.

Preliminary approval and publication of trade mark

Once the trade mark registration application is approved by the registrar, the next stage is advertisement of the trade mark and publication of the same in the Trade mark Journal. This publication is done for a period of 4 months. The manner of this advertisement is mentioned in Rule 39, which says that all the applications are to be advertised as per Section 20(1) and re-advertised as per Section 20(2) of the Act.

After the absolute or conditional acceptance of the trade mark, the same is published along with the conditions mentioned by the registrar as per Section 20(1). In certain cases, the trade mark is also advertised before acceptance if the registrar has reasons to believe that it is expedient in nature. If there are any changes or corrections made in the trade mark, then also the trade mark gets advertised again. For making changes in the trade mark application, one has to fill TM-M Form. Applicants, along with the other third parties, can view the trade marks Journal on the website; it gets published on every Monday.

Trade mark opposition

After the application for registering the trade mark is published in the journal, an aggrieved party can oppose such registration if they feel that it infringes their trade mark and its exclusive use. In order to file the notice of opposition, TM-O Form is to be filed by the party that is opposing the registration. The applicant then has to file a counter-reply statement replying to the notice of opposition. This reply consists of arguments and evidence which prove how the applicant is not trying to infringe the trade mark of the opposing party. A hearing also takes place where both the parties have to be present; if the opposing party gets satisfied with the reply, then the registration can move forward, or else further hearings take place.

As similar to trade mark applications, while opposing the registration or replying to it, certain fees are to be paid as well. The fees are prescribed below:

Online Filing	Physical Filing
₹ 2700	₹ 3000

Within the term of four months of publication in the Trade marks Journal, if not opposed by a third party, the trade mark will proceed for registration, and the trade mark authority will proceed to give a registration certificate. A trade mark usually takes 18-24 months to get registered, if the trade mark is not being opposed by a third party.

Trade mark registration

The last and the final stage towards the registration process is the trade mark registration. After conquering all the stages in the entire process, the trade mark is registered after objection and opposition. It is registered for 10 years.

Nature of trade mark registration

Territorial jurisdiction

If I want to file a trade mark application for my company, how will I know in which trade mark office to file the same? This is where the jurisdiction comes into play. Jurisdiction is basically the power of the court to determine or hear a case which is vested before it.

As per Section 134 of the Act, the registered proprietor can institute a case in the District Court within whose limits he carries on the business, is residing, voluntarily, or personally works for the gains. Jurisdictions are more important, especially in the case of trade marks, because they include the selling or buying of goods and services.

The trade mark registration is territorial in nature, which means the trade mark will be protected only in the jurisdiction it registered. If the trade mark is registered in India, then it will only be protected in India. Registration of trade marks in India does not entail that they are protected in other countries as well. All countries have their own established criteria for registering a trade mark. If the trade mark owner wants to protect the trade mark in other countries as well, then he will have to register the same in those countries as well.

In order to make this a little easier, the Madrid Protocol was adopted in the year 1989.

Madrid protocol

The Madrid Protocol helps the trade mark applicants in registering the trade mark in more than 120 countries using only a single application for trade mark registration. The Madrid Protocol is also referred to as international trade mark registration. This method of registration is a cost effective and time saving process for registering a trade mark.

For a detailed understanding of the Madrid Protocol and how to register an international trade mark, you can visit this link.

Timeline for trade mark registration

Stage	Particulars	TM forms	Time period
1	Trade mark search		There is no such specific time period to carry out the trade mark. As soon as the individual or the company decides that they want to use a specific word or symbol as their trade mark, they can conduct a trade mark search and see whether any mark similar to theirs is registered or not.
2	Trade mark application filing and filling	TM-A	This step should be conducted as fast as possible in order to avoid any other party registering the same mark as you. After the trade mark search is carried out and it is found that the mark that is intended to be registered is novel in nature, the company or individual can move ahead to filling the trade mark application. `
3	Trade mark application examination		After the application for registering the trade mark is filed, the registrar of trade marks conducts an examination to ensure that the mark is in compliance with all laws and rules of trade marks. The time period for this stage depends on the date of filing of the application.
4	Reply to the examination report		After a thorough examination by the trade mark office, an examination report is sent. The applicant has to reply to such an examination report within one month from the date on which it is received.
5	Trade mark publication		The trade mark application gets published in the trade mark journal for a period of 4 months.
6	Trade mark opposition	TM-O	Any third party is free to oppose the trade mark registration within 4 months from the date of advertisement in the trade mark journal if they feel it infringes their rights. If no opposition is done by any third parties, the trade mark is registered after the 4 months end.
7	Trade mark registration		The trade mark gets registered as per the decision taken in the hearing if the application is opposed. If there is no opposition, the trade mark gets published after the 4 months end.
8	Trade mark renewal		The trade mark registration has to be renewed every 10 years by the trade mark owner. Non renewal can lead to the trade mark being open to the public domain, which means everyone can use such a mark.

Symbols used during the trade mark registration process

™ symbol

The ™ symbol is used by the applicant when he has applied for the trade mark registration with the registrar. This symbol can be utilised as soon as the application for registering the trade mark is submitted to the registrar either in online or offline mode. The ™ symbol helps in making the other competitors in the market aware that this mark is already in the process of registration and its infringement in the future may lead to legal disputes.

This symbol can only be used when the trade mark application has been submitted. The symbol does not mean that the trade mark protection is already granted; it is just used as a warning to inform the other parties that this symbol is already in process, so they can register some other mark and not the one that is already in process of registration. The ™ symbol is used for product marks, while the SM symbol is used for services marks which are in the process of registration.

® symbol

® symbol can be used when the trade mark is registered. The symbol signifies that the mark is legally registered and protected under the Act and Rules laid down to protect registered trade marks. A company or an individual cannot use this symbol if their trade mark is not registered.

When any third party uses a trade mark with the ® symbol, they are infringing the rights of the owner, which is not allowed by the law, and they can be fined for the same. In case of a criminal proceeding, a fine or imprisonment which can be extended up to three years as mentioned in Section 107 of the Act. While in case of civil proceedings a permanent or temporary injunction can be ordered by the court, damages can be claimed, and the profits which were made with such a trade mark can be asked to be returned as well.

Steps to be taken after the trade mark is registered

It does not end with just registering the trade mark with the trade marks office. After the trade mark is registered, it has to be regularly renewed after 10 years. If the trade mark is not renewed, then it will go back in the public domain and any other party can register it, and the previous owner will lose the exclusive right to use the trade mark. To renew the trade mark, TM-R Form is to be filled and filed by the trade mark owner.

The next important step after the trade mark is registered is to monitor the trade mark. In order to check whether other parties are not registering any similar or identical trade mark, monitoring the registered mark is vital. If during the monitoring it is found that a mark that is similar in nature and can cause confusion in the eyes of the consumers of your goods or services then you can oppose such registration. The same can be opposed after it is advertised in the Trade marks Journal using TM-O Form.

Conclusion

Trade marks are a cost effective way of advertising your business, as a trade mark is helpful in brand recognition, which further helps in promoting the brand along with providing legal protection. It is important to register a trade mark as soon as possible. A registered trade mark acts as a vital intangible asset for the company, which helps them in protecting their goods or services if any third party infringes on their right. A registered trade mark can only be used by a third party if prior permission is taken from them. When a company/individual registers their trade mark, they increase the goodwill, net worth, and business value of the company. There are many other benefits which can be availed by companies/individuals who have registered a trade mark from the company.

Frequently Asked Questions (FAQs)

For how many years can a trade mark be registered?

The trade mark is registered for the period of ten years in India from the date on which the application was filed as per Section 25 of the Act.

Do I have to register the trade mark every ten years?

The trade mark has to be registered only once. After that, the trade mark owner has to simply keep on renewing the registration till he wants to use the mark for his business.

How long is the trade mark process in India?

The entire process of registering a trade mark takes approximately 18-24 months. The entire process of registration depends on various other relative factors, like trade mark opposition.

What is the first step in registering a trade mark in India?

The first and foremost step in registering a trade mark in India is conducting a trade mark search. This step ensures whether other similar or identical trade marks are already registered or proposed to be used by anyone.

When do I use the ™ symbol in the process of trade mark registration?

The ™ symbol can only be used when the application for registering a trade mark is filed in the office of trade marks Registry.

Can I make changes in the trade mark application after it is submitted?

The changes can be made in the application of the trade mark, which is submitted to the registrar for registration. But the changes should be minor in nature and should not change the main essence of the mark which is applied for registration.

Will my trade mark be protected in other countries if I register it in India?

The trade mark protection is territorial in nature. For instance, by registering a trade mark in India, you can get the trade mark protected only in India. If you want to use the same trade mark in America, you will have to register the same there as per their rules and laws. However, through the Madrid Protocol, you can protect your trade mark in several countries by only applying once.

Can a trade mark be used without registering?

Using a trade mark without registration can lead to infringement of the rights of the registered trade mark. Registering a trade mark is not mandatory, but it is always advised to register the trade mark to protect from third party infringement. trade mark registration establishes the legal right.

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:

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

Bailment: Meaning and Introduction

By

Diganth Raj Sehgal

-

October 31, 2024

contractors — Image source: https://bit.ly/39UvDE0

This article is written by Rachit Garg and further updated by Arya Senapati This is an exhaustive article, aiming to give a brief introduction to the concept of bailment as per the Indian Contract Act, 1872. It also delves into various key aspects of the contractual relationships created through bailment and attempts to analyse modern forms of bailments as well.

Table of Contents

Introduction

There are various instances of bailment in our daily lives that arise from various forms of transactions. One common example of the same is when people leave their electrical appliances at an electricians repair shop for repair and upkeep. Here, the purpose of the bailment is repair of goods, the bailed goods are the appliances; the bailor is the one who owns the electrical appliances and the bailee is the one who keeps it for repair. This is one example of how the relationship of bailment is created with an assumption that the goods shall be returned once the purpose of the bailment is fulfilled.

Bailment relationships are found everywhere around us in our daily lives. Starting from courier services, to hiring a bike for a trip, to borrowing a book from a library to safe deposit boxes in banks, bailment like relationships are very important for the economic development and commercial transactions that mankind goes through every day.

Let us understand the concept in detail.

Meaning

The term bailment finds its origin from a french word “bailler” which means “to deliver”. Herein, the possession of a particular good is delivered for a specific purpose with an understanding that the goods shall be returned to the real owner after the purpose is fulfilled. Section 148 of the Indian Contract Act, 1872 defines bailment as the delivery of goods from bailor to bailee for a specified purpose and an understanding that once the purpose of bailment is fulfilled, it shall be returned to the real owner.

Who are the parties to the contract of bailment

Ideally, every contract of bailment has two parties. One of the parties is called as the bailor who is the real owner of the bailed goods and the other party who keeps the bailed goods in his custody for a specific purpose is referred to as the bailee.

General rules relating to bailment are mentioned in Chapter IX (Section 148-181) of the Indian Contract Act, 1872. In a general sense, bailment is treated as a special contract which consists of all the characteristics of a valid contract which should be present between the parties to make the contract valid and enforceable but in certain situations, a bailment can arise without the existence of an agreement or a contract. For example, finder of lost goods, i.e., whenever a person finds a good belonging to someone else and takes it into his custody, he assumes the role of a bailee and must take reasonable care of the goods till they are returned to the real owner

What goods can be bailed

Ideally, only the bailment of movable properties and goods are considered to be valid. As per the current legal regime, money, currencies and legal tenders cannot be considered as bailment. Therefore, if a person deposits money somewhere, it doesn’t create a relationship of bailment.

Essentials of bailment

Delivery of possession

One of the primary features of bailment involves the delivery of possession of the bailed goods. The delivery is done by the bailor to the bailee. During delivery, the specific purpose for which bailment is created is mentioned. Delivery of possession means that the bailee gets exclusive control over the bailed goods for a specific period. He can exclude the control of strangers and third parties over the bailed goods.

Section 149 of the Indian Contract Act, 1872 talks about the same. The delivery of possession with regards to bailment can be done through actual delivery or constructive delivery of possession. Goods can either be given directly to the bailee by the bailor, or the bailor can do some specific act which would consequently provide control of the goods to the bailee. The first situation is the actual delivery of goods and the second situation is the constructive delivery of goods. As per the decision given in the case of Kavita Trehan vs. Balsara Hygiene Product Ltd. (1991), delivery is sine qua non to bailment. The relationship of bailment is not possible without delivery of possession. As per law, the one who holds the de facto control of a good is said to be in possession of it.

For example, A person has kept some rare artefacts in a deposit box. Considering that the deposit box is too heavy to be delivered, the person simply gives the keys of the box to another person and in this situation, the relationship of bailment is created through constructive delivery of possession.

It is important to note that mere custody of goods is not equivalent to the possession of goods. In Reaves vs. Capper (1838), the Court of Common Pleas stated that a servant shall not be treated as a bailee if he holds the goods of his master due to the nature of his employment. For example, if the servant is carrying the shopping bags of the master, he cannot be treated as bailee because he holds the goods due to the nature of his relationship with the master.

Delivery upon contract

In an ideal case, the creation of an agreement or an enforceable contract is necessary to establish the relationship of bailment. In the absence of a contract, bailment is not considered to be valid in any means.

Exception: One of the exceptions that the court envisages in such a case is the relationship established between finder of lost goods and the real owner of the lost goods. Here, even though no contract exists between them, the finder of lost goods is bound by all the duties of the bailee if he keeps the goods in his custody voluntarily.

Delivery must be for some purpose

The contract of bailment must specify the purpose for which a good is bailed by the bailor to the bailee. For eg: laundry of clothes, repair of appliances, hire for use etc. If the purpose is not mentioned and the contract doesn’t envisage the return of goods after the fulfilment of the purpose, a relationship of bailment is not created.

Return of goods

One of the most important clauses in a bailment agreement is regarding the return of goods after the purpose for which they were bailed is fulfilled. If there is no such clause, the agreement cannot be treated as a bailment. If the goods returned by the bailee are supposed to be similar to the goods bailed but not the exact goods bailed, then also the contract of bailment is considered invalid.

For example, a dry cleaner receives certain clothing items for laundry and dry cleaning. Once he has completed the process, he is under an obligation to return the clothes to the real owner.

Furthermore, if the bailor has given any specific mode of return or any instructions as to how the bailee must return the goods, he is obliged to adhere to them.

In Sheo Singh Rai And Anr. vs. The Secretary Of State For India(1880), a man, for the purpose of cancelling and consolidating nine government promissory notes into a single note of Rs. 48000, went to a Treasury Officer. Later, the notes were misappropriated by a servant at the treasury and the man filed a suit against the state to hold it responsible as a bailee. He failed to claim damages from the state as there existed no bailment between him and the state. The rationale behind this decision was that without delivery of goods and a promise to return the same, a bailment cannot be created. Therefore, the government was not bound to return the notes.

Classification of bailment

Largely, bailments are two types in their nature based on various grounds of classification:

On the basis of remuneration

Gratuitous bailment

Gratuitous bailment refers to a situation where a good is bailed by the bailor to the bailee without any consideration or without the expectation of receiving any benefit from the transaction.

For instance: when a friend borrows a book for reading from another, there is no money involved and therefore it is a gratuitous act.

Non-Gratuitous bailment

In situations where a consideration is involved, the bailment becomes non-gratuitous due to the existence of a benefit which is derived from the transaction.

For instance: When a person hires a bike from a bike hiring service and pays a certain amount of money for a specific period, it is considered as a non-gratuitous bailment.

On the basis of benefits to the parties

For the exclusive benefit of the bailor

In such situations, the bailor receives the benefit and the bailee has no benefit arising from the transaction in any manner.

For example, leaving your belongings with a neighbour for safekeeping when going out.

For the exclusive benefit of the bailee

In such situations, the bailee is the one who receives a benefit but the bailor gets no consideration for the same. For example, when a person lends their bike to a friend.

For the mutual benefit of both of them

In such a situation, both parties derive some benefits out of transaction and agreement. The bailor gets a service and the bailee gets consideration or vice versa. For example, if a person provides his clothes to a laundry service for cleaning, the person gets clean clothes as a service and the laundry company gets payment as consideration.

Duties/rights of bailor and bailee

Duties of bailor

Disclose known faults

Irrespective of the fact that goods bailed were done gratuitously or with consideration, it is the duty of the bailor to disclose faults which are within his knowledge in the bailed goods. Failure to disclose makes the bailor liable for all the loss or damage incurred by the bailee which are linked to the undisclosed fault. The bailor must indemnify the bailee for all such losses. Especially in the case of non-gratuitous bailment, the bailor is liable for all the faults, be it known or unknown to him.

Examples:

Hari lends his bike to Shyam for a day trip. Hari was aware that his bike is faulty due to the brakes not working properly. Shyam met with an accident due to the fault brakes. Hari is liable for covering the medical costs and other damages incurred by Shyam.
Rahul provided his bike to Rakesh for a racing competition. The bike caught fire due to certain faults in it. Rakesh sustained multiple severe injuries and burns due to the accident. Rahul is responsible for the injury incurred by Rakesh.

Bear expenses of bailment

In case of non-gratuitous bailment

Bailor is expected to bear all the extraordinary expenses but the bailee is bound to bear all the ordinary and reasonable expenses of the bailment.

Example: A leaves his dog with B, a professional dog trainer, for a week as he is going out of town. B is being paid for the same so A is not required to bear the ordinary expenses. However, the dog suffered from high fever and B had to call a doctor. A has to repay all the medical expenses born by B.

In case of gratuitous bailment

In cases of gratuitous bailment, the bailor has a duty to pay for all the necessary expenses that are incurred by the bailee to upkeep of the bailed goods.

Example: A gives his pet dog to B to keep him safe as A is going out for a trip. Considering B is not getting any payment from A, A has to pay for all ordinary expenses like the food of the dog. In a situation where the dog gets sick and B incurs the medical costs for treatment, then A has to compensate B for the same.

Indemnify bailee

According to Section 159, in case of gratuitous bailment, the bailor can terminate bailment at any time even if the bailment was for a specific time or purpose. However, in cases of early termination of bailment, the bailor has to indemnify the bailee for any loss that he may face due to the abrupt termination of the transaction.

Example: Akash lends his car to his friend Rakesh for a family trip of 7 days. Rakesh fills petrol in the car for 7 days. After 3 days, Akash calls Rakesh and demands the return of his car. In such a situation, Akash is liable to compensate Rakesh for the 4 days of petrol that is left unused in the car.

Indemnify the bailee when he suffers due to the title of bailor to the goods being defective

According to Section 164, the bailor is liable to indemnify the bailee in case the bailor has a defective or imperfect title on the bailed goods which leads to injury or damages to the bailee.

Example: A hires a car from B. A pays 5000 Rs for 7 days. A goes for a family trip but on the fourth day, the police authorities seize the car from A. A later finds out that the car B gave him was a stolen car and B did not have any ownership over the same. B therefore is liable to indemnify A for the loss or damage sustained by B.

Receive back the goods

Once the term of the bailment expires or the purpose of the bailment is fulfilled, the bailor has a duty to get back the goods from the bailee. In case, the bailor refuses to take back the goods, he must pay certain compensations to the bailee for keeping the goods in his custody.

Example: Anish had given his dog to a professional dog kennel provider for two weeks as he was going out for a trip. He paid Rs. 200 per week to the service provider. His trip got extended to another week. In such a situation, he has to pay an extra Rs. 200 for the additional period for which the service provider had to keep the dog.

Duties of the bailee

Take reasonable care of the goods bailed

As per Section 151, it is irrelevant if the bailment is for consideration or not, the bailee is responsible to take reasonable due care of the bailed goods in the same manner in which he would take care of his own goods. He has the responsibility in the standard of what a man of ordinary prudence would do to protect his own goods. In case, there is a breach of duty, the bailee is responsible for compensating the bailor for any damage that he may sustain.

Example: A had given his dog to B, a service provider for safe keep. A had paid an amount of Rs. 100 per day for ten days. B had by mistake left his gates open. The dog was stolen from his property. It was proved that this happened due to the negligence of B. Therefore, B is liable to repay A for his loss.

No unauthorised use of goods

As per the Section 154, if due to the fact that the bailee uses the goods bailed in a manner inconsistent with the terms of the contract then he will be held liable in case there is any damage to the good, even if he was not negligent or the damage resulted from an unforeseeable accident.

Example: Ramesh lends a book to Suresh for exam preparation. Suresh gives the book to Susmita. Susmita’s negligence leads the book to be damaged. Suresh is liable to compensate Ramesh for the book as Ramesh had lent the book to him for his private preparation and not to lend to someone else.

Not mix bailed goods with his own goods

The bailee has a duty not to mix the bailed goods belonging to the bailor with his own goods. The bailee must keep the goods separately and prevent their admixture. Here are the details:

As per Section 155, if bailor consents to mixing of the good, both the bailor and the bailee shall derive proportionate interest in the mixture thus created.
As per Section 156, if the goods are mixed without the consent of the bailor, and the goods can be separated and divided, then the bailee has to bear the costs of the separation.
As per Section 157, if the mixture is done without the consent of the bailor and the goods cannot be separated then the bailee has a duty to compensate the bailor for the loss of the goods.

Return any accretion to the goods

Whenever the contract doesn’t clearly specify that any profit arising from the bailed goods will be possessed by the bailee, the general rule is that the bailee shall return the profit from the bailed goods arising during the tenure of the bailment, to the bailor.

Example: Ramesh bailed his cow to Suresh for a week. The cow gave birth to a calf during the time period. Ramesh has a right to get back the calf from Suresh after the termination of bailment. That is an established right of the bailor.

Return the goods

Once the period of bailment is over or the purpose for which the bailment was created is fulfilled, the bailee has a duty to return the bailed goods to the bailor.

Rights of the bailor

Enforcement of rights

Bailor has a right by law to file a suit for enforcing his rights provided as per statute.

Avoidance of contract

According to Section 153, if the bailee does anything which is inconsistent with the terms of bailment, then, the bailor can terminate the bailment.

Example: A bailed his car to B for his private trip. B lends the car to C for riding. The terms of the contract get broken. A can terminate the contract.

Return of goods lent gratuitously

In situations where the goods have been bailed or lent gratuitously, then in such a situation the bailor has a right to get back the goods after the purpose of the bailment has been fulfilled or the term expires. On the contrary, in a situation where the goods lead to an excess of loss as compared to profit, then the bailor has to indemnify the bailee.

Compensation from a wrong-doer

If the bailee is wrongfully deprived of the possession of the bailed goods either by stealing or by any act of a stranger to the contract or any third party, then both the bailor and the bailee have a right to file a suit for recovery of possession and compensation.

Rights of the bailee

Delivery of goods to bailor without title

According to Section 166, if bailor has no title over the bailed goods and the bailee gets to know that then the bailee can return the goods as per the direction of the bailor and in case delivery doesn’t happen, then the bailee is not liable.

Can apply to a court to stop delivery

According to Section 167, if a situation arises when the ownership of the bailed goods is claimed by a third party, then the bailee can stop the delivery of the goods to the bailor by applying to the court for deciding the actual title of the bailed goods and then make the delivery to the rightful owner.

Right against trespass

According to Section 180, in a situation where the bailee is deprived of the possession of the bailed goods through theft or any other means, the bailee has the right to file a suit for recovery of suit and for compensation.

Bailee’s lien

Right to lien means that in a situation where the bailor must pay a certain amount to the bailee as indemnification or any other matter, the bailee has the right to keep the bailed goods with him even after the expiration of bailment, till the time the bailor pays the certain amount.

In the case of Tilendra Nath Mahanta vs. United Bank Of India (2001), it was held that lien is largely of two types. General lien refers to the rights of bankers, factors, wharfingers, attorneys and policy-brokers to retain in form of security, any goods bailed to them, till the balance of their account is paid completely or to their satisfaction. Particular lien is a right to retain a particular asset as a security, till the debtor repays his entire debt. General lien applies to all the assets of the debtor.

Non-statutory bailment

Even though Section 148 of the Indian Contract Act deals with the statutory aspect of bailment as a contract made between two parties, it excludes any mention of the aspects of non-contractual bailments from its provisions. Bailment has been understood as a sui generis (of its own kind) concept which basically entails that an action against the bailee cannot be made through an action founded in contract or tort but it has to be an action on its own. Liabilities of a bailee arise from having possession of goods of others and taking reasonable care of them without being dependent upon the existence of a contract or not. The idea of bailment without the necessity of a contract is a daily new concept which constitutes all forms of bailment created by a voluntary or involuntary act of taking custody of other’s goods.

The earlier understanding of bailment was limited to a contractual relationship arising from an agreement to take custody of someone else’s goods and was dependent upon mutual consent of the parties to the contract. In simple terms, the present idea of non-contractual bailment arises from the act of one to take away someone else’s goods either voluntarily or involuntarily without having formed a contractual relationship. If a person takes custody of another’s belongings without creating a formal agreement, it also amounts to bailment.

This was held in the case of Ultzen vs. Nicholas (1894), wherein the above view was upheld by the Court of Common Pleas. In this matter, the plaintiff had visited a restaurant and the waiter of the restaurant took his coat and hung it on the hook. The plaintiff had not requested him to do so. After finishing his dinner, when the plaintiff started to leave, he found his coat missing. The plaintiff sued the establishment and argued that when the waiter took his coat from him without his request, he became the bailee of his coat and had the duty of taking reasonable care of the same. It was held that even though the waiter acted in courtesy to the customer, when he took the voluntary possession of someone else’s goods, he became obligated to return the same to the one he took it from. Therefore, there was a non-contractual bailment relationship between the customer and the waiter, who assumed physical control over the goods, assumed the duty to take reasonable care of it. Hence, the restaurant is liable for the loss of goods and must pay damages to the customer.

Involuntary bailment is the other form of non-contractual bailment. In cases of involuntary bailment, the connotation is simply of accident. In the traditional form of bailment, there is a voluntary delivery of possession but in involuntary bailment, possession comes to bailee through an accident. A bailment arising out of accidental circumstances is an involuntary bailment and in such a situation, the bailee doesn’t consent to possession of the good. Considering that this form of bailment lacks the pre-mediated consent, it is also known as non-contractual-consensus bailment.

Example: A went to a shop and due to her negligence, left her purse there. When the shopkeeper finds the purse, he is instantly obligated to take reasonable care of the same and then return it to A. This principle is also enshrined under Section 71 of the Indian Contract Act which deals with the concept of “finder of goods”.

Finder of goods as a bailee

While dealing with quasi-contracts or situations that resemble a contract like relationship without meeting all the relevant essentials of a contract, the Indian Contract Act deals with the concept of finder of goods which resemble a bailment relationship without having a contract in place. The provision states that a person who finds goods belonging to someone else and decides to take them into his custody will have the same responsibilities as that of a bailee. This provision forms an exception to the essential condition of delivery upon contract as mentioned under the provisions of bailment in the Indian Contract Act. The effect of this provision results in the retroactive imposition of contractual terms on both the actual owner and the finder of the goods without taking consent as a necessary implication for forming the contract. Even though it violates the very essentials of a contract, it is still relevant and holds legal significance as a quasi-contract.

Essentially, the quasi-contractual relationship formed between the owner and the finder of lost goods has been envisaged under Section 71 is such that the finder is a bailee and the owner is the bailor with pari passu responsibilities and duties. These responsibilities burden the finder even when he doesn’t consent to it.

Duties of finder of goods

Considering that the finder of goods is treated as a bailee, he has similar duties as that of a bailee.

Duty to take reasonable care

Section 152 of the Indian Contract Act specifies that when a special contract is formed mentioning the responsibilities of parties, a bailee is protected against legal suit to recover any loss that the bailor has suffered in relation to the goods in custody of the bailee. This arises only when the bailee proves that he has taken reasonable care of the goods in a manner that is expected from a man of ordinary prudence and reason. A standard level of reasonable care and act to prevent or mitigate risk is expected from the bailee or the finder of goods. It implies that a finder of goods is responsible for taking due care of the lost goods that he finds and takes into his custody similar to a bailee in a contractual bailment. Any loss that the owner of the goods suffers, he won’t be entitled to recover it from the finder if the finder proves that he has taken reasonable care of the lost goods after finding them.

Duty to not make any unauthorised use

In a contractual bailment, the bailor mentions specifically the ways in which the bailed goods can be used and the bailee has a duty to not use the bailed goods in any other manner. Use of bailed goods in a manner which is not authorised by the bailor leads to breach of duty. Considering that in an involuntary bailment, the finder of goods has no opportunity to get such authorisation from the bailor, he shall be responsible for using the lost goods carefully and avoid making any use at all unless absolutely necessary to protect the goods from any damage or peril. Therefore, it is extremely important to understand that this duty based on the facts and circumstances of the case after the judge use his/ her prudence on the matter

Duty to not mix

Admixture of bailed goods with goods belonging to the bailee is prohibited in contractual bailment. Similarly, the finder of lost goods has a duty to not mix anything to the goods he found. In case mixture happens, it is clear that there is no consent of the actual owner for doing so and therefore, the finder is responsible for bearing the consequences. When a mixture is created without consent, if the goods are separable, then they must be separated and the original proportion must be returned to the owner and the cost of separation is borne by the finder. If the goods cannot be separated then the finder of goods has the responsibility to compensate the owner for any damage or loss sustained by him from such breach of duty and the value of the good. A finder of goods faces similar liabilities as that of a bailee in such situations.

Duty to return goods

Just like a bailee has a strict duty to return the goods bailed to him, a finder of goods also has a duty to take all reasonable action to find the real owner of the lost goods and return the goods to him. The finder of goods has to conduct a reasonable search of the owner after taking possession of the goods. The time and manner of return will be specified by the owner if he is found. The finder of goods must also return any profits which arose from the goods while they are in his custody. So from the moment the finder found the lost goods, till the moment it was returned, any profits which must have accrued from the lost goods must be returned by the finder to the real owner. Eg: If a farmer finds a pregnant cow in his farmland and the cow delivers the calf while in custody of the farmer, then the farmer has to return both the cow and the calf to the real owner.

Rights of the finder of the goods

Considering the quasi-contractual relationship between the finder of lost goods and the real owner of the goods, he also has certain rights flowing from the transaction.

Right to sue for specific reward offered and to impose lien

As per Section 168 of the Indian Contract Act, the finder of lost goods is prevented from suing the owner of the goods to receive compensation for the time and finances spent by him to find and locate the real owner and return the said goods to him. The reason behind this is that law presumes that such an act is done by pure goodwill and voluntarily. In contrast, if the owner has specified a particular reward for return of the good, the finder can sue to claim that specific reward only and impose a lien till that amount is paid or the reward is received by him.

Right to sell the found goods in certain cases

As per Section 169 of the Indian Contract Act, a finder of lost goods which is commonly sold in the market can sell the same if the owner cannot be found after exercising reasonable diligence and care to find the owner or when the owner refuses to pay the specified reward to the finder of the goods. In such a situation, the finder may sell it on two conditions. First, the good is of perishable nature and is in danger of perishing and losing the greater part of its value or when the lawful charges specified by the owner to the founder with regard to the good found amounts to two third of the value of the found goods. Only when there is a situation where at least one of these criteria is fulfilled, the finder gains the right to sell the goods for benefit or compensation. This narrow limit is provided to sell the goods so as to ensure the practice of prevention of unjust enrichment in part of the finder of the goods. The unhindered freedom to make sale of a lost good by the finder would lead to a situation of “finders keepers” and prevent the real owner from benefiting from the goods that belonged to him and allow a situation of unjust benefit to the finder. Therefore it is necessary to create a balance by having such provisions in place which would prevent any unjust enrichment and balance the rights of the parties.

To sum it all up, it is evident through analysis that the relationship between the finder of the lost good and the owner of the good is that it resembles a contract and therefore is known as a quasi-contractual relationship. The duties and responsibilities are similar to that of a bailor and a bailee and therefore, rights and liabilities arise from the moment the finder takes the goods into his custody and exists till the moment the goods are returned to the real owner of the lost goods. Even without the existence of consent, non-contractual relationships can therefore exist.

Tabular comparison between bailor and bailee

There are various differences between the bailor and the bailee based on different criterias. Here’s a tabular comparison between the both.

Category	Bailor	Bailee
Definition	In a contract of bailment, the party that delivers the goods for a specific purpose is called the bailor. Usually, the bailor is the owner of the goods bailed.	In a contract of bailment, the party to whom possession of the goods is transferred or goods are delivered to for a specific purpose is called the bailee.
Rights	The bailor has the right to seek the return of the bailed goods from the bailee after the expiry of time period or fulfilment of the purpose of bailment.	The bailee has a right to retain possession of the good for the specific period till the purpose is fulfilled. The bailee also has the right to indemnity for all the loss arising from a situation where the bailor prematurely terminates the contract of bailment or for injury due to undisclosed material defects in the bailed goods.
Duty	The bailor has a duty to disclose all faults and material defects in the goods bailed to the bailee to prevent any injury.	The bailee has a duty to take reasonable care of the goods bailed and not mix them with his own goods.
Ownership	Usually, the bailee retains the ownerships of the bailed goods during bailment.	Only retains possession for a specific period. Ownership is not transferred.
Liable for	Damages or injury that the bailee might face due to undisclosed faults or material defects.	Loss of goods or damage to the bailed goods due to lack of exercising reasonable standard of care.

How is bailment different from the sale of the good

Bailment differs from sale of goods in the primary notion that sale involves a transfer of ownership of the goods between the vendor and the purchaser but in case of a bailment, ownership stays intact with the real owner and only possession of the goods is transferred for a specific purpose.

Category	Sales of Goods	Bailment
Definition	Sales of goods refers to transfer of ownership of a good for a price paid.	Bailment is the transfer of possession of bailed goods for a specific purpose
Ownership	Ownership is absolutely transferred to the buyer/ purchaser of the goods	Only possession is transferred for a specific purpose and ownership remains with bailer
Consideration	A consideration is paid for purchasing the goods	Can be with or without consideration
Need	The permanent transfer of ownership of a good	For specific purposes like safekeeping, repair, hire for personal use etc.
Return	Goods once sold cannot be returned to the buyer unless there’s a specific reason.	Goods are retired after the specific purpose is fulfilled.
Example	Sale of vehicles, groceries, jewelleries etc.	Giving a grinder for repair, a dog for safekeeping, hiring a car for a trip.

Difference between bailment and pledge

Category	Bailment	Pledge
Definition	Bailment is a transfer of goods for bailor to bailee for a specified purpose with an implied condition of return after the purpose is fulfilled.	A species of bailment where possession of goods is transferred to be kept as a security for a debt/ performance of a promise.
Parties	Bailor and Bailee	Pledger and Pledgee or Pawnor and Pawnee
Need	Various needs like safe keeping, repair of goods, hire for personal use etc.	Security
Ownership	Bailor retains the ownership of the goods bailed	Pledger retains ownership of the goods pledges
Selling of goods	Baile is not allowed to sell the goods bailed	Pledgee has a right to sell goods when the pledger fails at repaying the debt or fulfilling his obligation.
Return	Bailed goods are returned to the bailor after the purpose is fulfilled	Pledged goods are returned to the pledgee after the debt is repaid or the obligation is fulfilled.
Lien	Bailee’s lien only arises when he has incurred any extraordinary expenses or for indemnification.	Pledgee has a right to lien till debt is repaid or obligation fulfilled.

Safe deposits as bailments

In the Indian scenario, it is a general legal position that unless and until there exists a contract or agreement in place, the relationship of bailment cannot be recognised. The formal agreement must ascertain exclusive and actual possession of the bailed goods. The position of Indian courts differ in this aspect as per the above cases. In such a situation, safe deposit boxes are not recognised as creating a relationship of bailment.

The relationship shared between a customer and the service provider when it comes to safe deposit boxes is not that of a bailment unless there exists a contract which binds the service provider to take reasonable care of the bailed goods kept in the safe deposit boxes. While hiring a safe deposit box, the goods are generally presumed to be entrusted to the bank. The delivery of goods is done through vaults in the premises of the bank and it is not delivered to the bank directly.

The relationship between the customer of a safe deposit box and the service provider can be compared to the relationship between a tenant and a landlord. A landlord is not said to have any sort of control over the property which belongs to his tenant personally but simply tenders the tenant with a place to store the goods and keep those at his will and his control. In such a situation, even when the landlord has the duty to take reasonable care of the property and the premises belonging to him and leased out to the tenant but the same duty is not manifested upon the belongings of the tenant kept in the premises of the rented property belonging to the landlord.

In a similar manner, banks have a duty to take care of the premises of the bank and protect them at all costs but they cannot be said to have the duty to take reasonable care and due diligence of the property of the customers kept in the safe deposit boxes. Unless the bank has been given direct possession of the contents in the form of real and exclusive possession through the creation of an agreement of bailment existing between the two parties, it cannot be said to have a duty to take reasonable care of the contents of the safe deposit boxes assigned to the customers.

In the American context, there is a difference in terms of the legal position when it comes to the relationship shared between the customer and the provider of safe deposit boxes. There exists a presumption in favour of the customers in the American context. There exists a presupposed notion that there is a non contractual bailment or a quasi contractual relationship between the customer and the bank in terms of the contents kept in the safe deposit boxes. The general rule followed in the American context is that when there is any confusion relating to the liability of a bank in relation to the safekeeping of the bailed goods kept in safe deposit boxes, the decision will largely swing against the bank. The reason behind such a presumption is that there is a larger bargaining power in the hands of the bank as they are the ones responsible for drafting the terms of the agreement which leads to the creation of a bailment relationship between the customer and the provider of safe deposit boxes.

In the case of Goldbaum vs. Bank Leumi Trust Co (1982), it was decided that the bank cannot be permitted to exculpate its liability arising from a contract simply because of the fact that there exists no written agreement which defines their relationship in the nature of a bailment. It was contended that even though in the American legal system, a contract a bailment is presumed even in the absence of a written formal agreement, it is a necessary implication that the bank must practise a greater standard of care and cannot ignore the set standards at any costs. This standard of care was set to be higher in the case of Roberts vs. Stuyvesant Safe-Deposit Co (1890), wherein the safe deposit box service provider was held liable for negligence in exercise due care and standard of responsibility expected to be used by them. This was held when government officials were allowed to seize the contents of the safe deposit boxes. In this case, there existed no explicit agreement between the customer and service provider creating a bailment relationship but the presumption of a contractual relationship worked against the bank.

In the Indian context, the leading case is the case of Atul Mehra vs. Bank of Maharashtra (2002). In this case, the appellant had hired a safe deposit box and the service provider was the respondent bank. The appellant had stored certain gold ornaments and jewelleries in the safe deposit boxes of the bank. The bank was robbed and that led to all of the lockers being tampered and the goods being stolen away. It was observed that the bank did not meet the adequate standards of security procedures and guidelines which they were supposed to. The strong room is supposed to be made out of metallic elements and concrete but in this case it had a wooden body which was easier to break and steal. The appellant argued that considering there exists a relationship of bailment between him and the bank where the bank acts as a bailee, the bank should have taken reasonable care of the contents in the safe deposit box. Due to failure to adhere to a reasonable standard of care, the bank is liable to compensate the customer for the stolen goods. The bank, on the contrary, argued that there exists a tenant-landlord relationship between them and the customers and therefore, they have no liability towards protecting the goods without having exclusive possession or knowledge of the same.

The Apex Court held that the relationship of a bailment cannot commence without the bailee having knowledge and exclusive control over the goods. Since there was no written contract or agreement between the parties, it cannot be said that the bank was a bailee to the customer/ appellant. The bank, therefore, has no liability in such a situation.

Cases related to non-contractual bailment

Ram Gulam vs. Government of UP (1949)

Facts

In this case, the suit arose on the matter of recovery of certain ornaments or the price of the said ornaments from the Government of Uttar Pradesh. The appellant, whose property was stolen was subsequently recovered through search and seizure procedure by the police and after they were recovered, they were kept in the custody of the Collectorate. It was later stolen from the collectorate and left untraced.

The appellant sued the government for restoration of his property or for an equivalent value of the property. The appellant contented that since the agent of the government was unable to perform his duty as a bailee, the government has the liability to pay the value of the stolen property by application of the Doctrine of Respondeat Superior. This doctrine basically states that a master or a principal will be liable for actions of the servant or the agent done in the course of employment. As per the arguments of the appellant, by taking the stolen goods which belonged to him into custody, the government assumed the role of a bailee even if no agreement existed. It is the duty of a bailee to take reasonable care of the property in his custody that belongs to the bailor. In such a situation, the bailee is liable for any loss incurred to the bailor due to his negligence or breach of duty.

Issue

Two primary issues were framed in this case:

The first one being whether the government of Uttar Pradesh has any liability towards the appellant in the nature of a bailee and if so, has it failed to exercise reasonable care towards the things in its possession.
The second issue was whether or not the government should indemnify the appellants due to the principle of torts which states that a master is liable for the tortious acts of his servants (vicarious liability). These were the two primary issues framed by the court.

Held

As per Section 151 and 152 of the Indian Contract Act, the burden lies on a bailee to take reasonable care of the goods bailed to him. In all of the cases relating to bailment, a bailee is responsible to take as much care of goods bailed to him as any man of ordinary prudence will take under such circumstances. It is also the duty of a bailee to return the goods after the fulfilment of the purpose.

In this case, the Allahabad High Court overlooked the first issue regarding bailment but paid serious importance to the second issue of tortious liability. The High Court regarding the issue of bailment took the position that in the lack of a contractual agreement, there exists no relationship of bailment between the government and the appellant. The High Court strictly held that the government cannot be treated as a bailee of the appellant. Coming to the second issue, the High Court stated that as per the doctrine of Respondeat Superior, a master is liable for the tortious acts of the servant if it happens during the legitimate scope of employment. The High Court stated that the act of the police to keep the property in possession is the discharge of duty by law. The government is therefore not liable for the tort as well.

The Lasalgaon Merchants Co-Operative Bank vs. Prabhudas Hathibhai And Ors. (1965)

Facts

In this case a partnership firm had pledged certain goods to the bank who is the plaintiff. The pledged goods were kept in a godown which belonged to the partnership firm and the bank simply held the keys to the godown and kept it locked. The goods were seized by the Income Tax Department for non-payment of certain taxes liable to be paid by a certain partner of the firm. The goods were still in the same godown when the keys were given to the police. Due to heavy rainfall, there was a leakage in the roof of the godown and the goods stores were damaged.

Held

The Bombay High Court held that the present case would not fall under the protection of Force Majeure or Act of God as the damage was not due to any unexpected force out of the control of the respondent. The Bombay High Court held that by taking the goods into its custody or possession, the government stands in the position of a bailee. The court ordered the respondent to prove that they had exercised reasonable standard of care as the bailee is expected to do. The respondents were unable to prove the fact that they had taken reasonable care of the good and therefore the Court held the government liable as they had failed to discharge the statutory duties of a bailee. The court differed from the position taken in the Ram Gulam case and stated that a government is a bailee when it takes any goods into its possession irrespective of the existence of a contract or not. Therefore, this case is a landmark decision in the arena of non-contractual bailment relationship which places the government in the position of bailee and attaches the same liabilities to it as it prescribes for a bailee under a contractual setup.

State of Gujarat vs. Memon Mahomed (1967)

Facts

In this case, the trucks of the plaintiff were seized by the authorities of the customs department due to non-payment of import duties which were imposed on the vehicle of the plaintiff. The plaintiff sought to set aside the order by filing a suit in front of a tribunal. The Revenue Tribunal granted the prayer and ordered the seizure to be set aside, and also ordered that the vehicles must be re-delivered to the plaintiff. The plaintiff sought the vehicles to be delivered to him but came to know that they were disposed of as per the order of a magistrate. The aggrieved plaintiff claimed damages of Rs. 32,000 in exchange of the vehicle that he had lost. The claim of the plaintiff was denied and he appealed the decision in the Apex Court.

Held

The Apex Court, in this case, relied on the decision taken in the previous case and stated that non-contractual bailments are recognised in India. The moment the government confiscated the vehicle of the plaintiff, they put themselves in the position of a bailee and by assuming that role, they became responsible for taking reasonable care of the vehicle. By selling the vehicles even after the order of confiscation was set aside, the government authorities have failed to take reasonable care of the bailed goods and therefore are liable for paying the damages to the plaintiff due to the loss of goods.

The Apex Court also substantiated the judgement by addressing Section 71 of the Indian Contract Act which treats the finder of goods as bailee even without the existence of the contract. The Apex Court made it clear that even without consent to create an agreement, if a person/ authority, voluntarily takes possession of a good belonging to someone else, they assume the role of a bailee and have the same liabilities and rights as that of a bailee in a contractual bailment relationship as specified in the Indian Contract Act.

Recommendations of the 13th Indian law Commission

In the 13th Law Commission Report, the question that arose during discussion was whether there can be a bailment whenever a person takes goods belonging to another into his possession without the existence of a contract of bailment. Considering the provisions that the Indian Contract Act provides no mention regarding non-contractual bailment and the decisions given by courts vary in terms of interpretation, the Law Commission decided that it is important to address these issues to avoid any kind of confusion. The Law Commission report stated that it is important to understand quasi contractual relationships before addressing the issue of non-contractual bailment. Quasi contracts are obligations imposed on parties by the operation of law or process of law without the existence of a prior contract or an agreement between the parties. These contracts are considered valid even without having some of the necessary elements required to create a valid contract. The duty imposed on a finder of goods is an example of quasi contracts.

As per the 13th Law Commission Report, the present definition of bailment should not be changed but rather a separate section must be inserted to address the elements which are quasi-contractual in nature. It must state that the bailor and bailee under contract, express or implied, have the same rights and liabilities as they do under a contractual bailment relationship. Thus, this Report addressed the need for the acceptance of non-contractual bailment under the folds of the Indian Contract Act by enacting a separate provision for better application and avoiding any kinds of confusion when it comes to application and interpretation of the provisions. This acknowledged the validity of non-contractual bailment in the Indian legal regime.

Landmark cases related to bailment in India

Union of India vs. Udho Ram & Sons (1963)

Facts

In this case, specific goods were sent from Kolkata to Delhi through railway by the M/s Radha Ram Sohan Lal. Certain items of the storage were stolen during transit and did not reach the plaintiff. The plaintiff then sued for the compensation of the same. The Supreme Court inferred that the train left Howrah station at 1:30 AM and the carriages which carried the goods were properly secured and sealed but the doors of certain carriages which stored the goods were slammed when the train arrived and that opened one seal and a rivet in just two hours. This led to the theft. It was found out that the train did not conduct any due diligence and there was no surveillance of the wagons of the train.

Issues

Was there a breach of duty to take reasonable care on the part of the train authorities?

Decision

Due to all these factors, the defendants were held liable as they did not adhere to the reasonable standard of care that they were expected to take in such a situation. The defendant had a duty to prevent the theft from happening and by not exercising reasonable due diligence, it did not adhere to the reasonable expectations. Therefore, the defendant is liable.

Kolkata Credit Corporation Ltd. vs. Prince Peter of Greece (1963)

Facts

In this case, a car which was sent for repair was damaged due to fire. The garage where the car was kept was a brick and mortar building which was surrounded by wooden planks but the garage did not only store cars with gasoline but also other combustible materials like paint thinners etc. A part of the garage was used for cooking and the cooking area was separated from the garage using wood. The safety measures taken by the garage owner were found to be inadequate. The space where the car belonging to the plaintiff was stored could not be opened for a long time even after the fire broke because the keys to the room were not functional.

Issue

Whether the owner of the garage took reasonable care of the bailed car like a man of ordinary prudence would take care of his own goods?

Decision

It was held that the defendant garage owner had failed to exercise due diligence and could not exercise reasonable amount of care which he was supposed to as the bailee of the car. The defendant pleaded that he took care of the car just like he did of his own property in the same space which caught fire. He pleaded that his own belongings also burned down due to the accident and therefore he must be absolved of all liabilities. The Apex Court did not consider this as a valid defence and held that he was liable to exercise reasonable care of the belongings and his failure makes him liable to compensate the bailee for losses incurred.

Surya Pharmaceutical Limited vs. Air India Limited (2008)

Facts

In this case, the plaintiff was a pharmaceutical company who filed a suit on the airline company for losing the shipment. The plaintiff had sent a package of medicines and other drugs via the airlines to another location. During transit, the aircraft lost these goods. The plaintiff contended that the aircraft was in the position of bailee and should have exercised reasonable care of the goods. Considering that the bailee failed to exercise due care and diligence of the goods in transit, they should be held liable for compensating the plaintiff of any loss incurred by him due to the bailee’s negligence. The defendant airlines company argued that they had a separate agreement with the plaintiff which stated that the extent of liability would be 20$ for each 1 kg of goods lost.

Issues

Whether it is valid to have a separate agreement which limits the liability of the bailee?

Decision

The Apex Court held that the existence of a separate agreement which limits the liability of the carrier is not valid. It is against public policy and therefore is void as per law. The airline company failed to exercise due care and caution and therefore was held liable to compensate the pharmaceutical company for loss of goods in transit.

Mahesh Minz vs. State of Jharkhand (2009)

Facts

In this case, in this case, the complainant along with his wife, Smt. Kala Srivastava were joint lessees of lockers leased out to them by the Punjab National Bank, Ranchi. The complainant used the locker last on 22.02.2002 and stored certain gold items in the locker. On the day of the incident the complainant with his son and daughter in law went to open the locker and found the gold articles missing. He found out that the gold locker could be easily opened and reported the incident to the police.

Issue

Whether there exists a bailment contract between the bank and the complainant?

Held

The Jharkhand High Court held that by hiring a locker, a transaction similar to landlord and tenant is created but there must be a consideration of the fact that a banker can always open the locker by using the master key and the hirer of the locker cannot open the locker without the help of the bank. The hirer also has a time limitation but the banker has no such limitation. Therefore in such situations, if all the conditions of a bailment as per Section 148 of the Indian Contract Act is fulfilled, a relationship of bailment can be established between the banker and hirer.

Deficiencies in bailment law

The law of bailment under the Indian Contract Act leaves many loopholes unaddressed which leads to confusions in application and interpretation. It fails to address various types of situations or complicated positions. Some of them are as follows:

When the bailed goods are unfit for intended use

The Indian Contract Act stays silent on what shall be the recourse of the bailee when the goods bailed to him are unfit for the intended use. Intended use refers to the application or act for which the bailed goods were hired in the first place. For eg. If a bailee hires a printing press machine for printing a book but later realises that the machine can only be used for printing pamphlets of anything with less workload, what shall be the recourse in such a situation. Should the bailee get back the price paid by him for hiring the machine and return the machine to the bailor? Does the bailor have a duty to inform the bailee before hire that the goods can be used only for these specific purposes? Is it fair to assume that the bailor can think of all possible uses of specific nature and then inform them to the bailee? These questions are left unaddressed.

As per the general rule, every hired item comes with an implicit guarantee that they will serve the intended purpose for which they were hired in the first place. If this guarantee is violated, the hiring fee which was supposed to be paid is not due anymore. There should be broad regulations in place to address what shall be the recourse in such situations. Utmost caution must be exercised since implicit obligations and unsaid contractual requirements are important considerations when specific things are hired. A contract is violated when it is later found that the goods hired for a particular use are not suitable for that particular use.

Liability of the bailee for the carelessness of the servant

This is an interesting proposition which presents an intersection of torts and contract law. In the law of torts, the concept of vicarious liability states that a master shall be liable for the actions of the servant done in the natural course of employment. As per the Indian Contract Act, a bailee is liable for the damages caused by the negligent acts of his servant with regards to the bailed goods or property in custody of the bailee but such a liability does not extend to the damage caused by the acts of third parties which could not have been foreseen by the bailee. Even so, a bailee cannot be held liable for damages to the bailed goods caused by the acts of his servant beyond the course of employment. In the case of Taj Mahal Hotel vs United India Insurance Co.Ltd(2019) it was held that in a situation where valet parking services are given by a hotel, the hotel is only liable if a valet or staff takes possession of the car and removes it from the owner’s control without his consent. However, if a car is stolen by a stranger despite the due care exercised by the hotel, it will not be liable for the same as the theft was beyond their control. In such situations, a careful assessment of the bailee’s liabilities is necessary. Even though the law leaves certain ambiguities in interpretation regarding the extent of a bailee’s liability, it gets ascertained on a case to case basis so as to determine the liabilities in relation to the facts and circumstances around the case. Therefore, it is important to tread this area with absolute caution.

Quantum of damages

When it comes to measuring the amount of damages in cases of bailment and breach of duty, the measure is not solely dependent on the suit as they are fulfilled in various other means as well. In a circumstance where a contract has been breached and the terms are not fulfilled, the criteria of presumption is used to bring the complaining party as close as possible to the position he was before based on the principles of equity and good conscience. The market value of the bailed goods is an important criteria for determining the damages or the amount to be paid as compensation. While adjudging the extent of the bailor’s claim for the loss of the bailed goods, the market value at which the bailed goods is sold is considered.

The problem which arises in such a method is that when items similar or comparable to the bailed goods are not available in the market, the courts have no resort to determine the bailee’s claims on the monetary value of the compensation or the damages available. In such situations, largely the bailee’s offer is taken into consideration for determining the merits of the case. The pattern changes based on new rulings of the court which deal with such situations. It is important to have direct and clear provisions in place to ascertain the claims for damages and compensation made by the bailiff in such cases. This would avoid lengthy litigation and help in faster resolution of suits and disputes. Such clarity in matters also prevents dissatisfaction amongst bailiffs and helps courts meet the ends of justice.

Conclusion

Contracts of bailment are unique transactional relationships created by contracts and agreements between parties for fulfilling various purposes. Therefore, they are necessary for human civilisation to ensure that the transactions and the goods forming the subject matter of the transaction are well protected in every manner. They constitute all essential ingredients of a valid contract. While traditionally, bailment has been viewed as a relationship formed by the existence of a contract, its present understanding is changing quite a lot with non-contractual bailment relationships being recognised with quasi-contractual obligations. With the change of time and creation of various forms of services for making human lives easier, newer forms of bailments emerge and must be considered in the folds of contractual relationships for better implementation of the legal provisions.

Frequently Asked Questions (FAQ’s)

What are the essentials for creating a bailment?

Existence of the bailed goods, delivery of possession of the goods, mention of the purpose for which goods are bailed and condition for return of the goods are some of the essentials for creating a bailment.

What happens when the bailed goods in possession of the bailee gets stolen?

If the theft occurred due to the negligence of the bailee and it is proven that the bailee did not exercise reasonable standard of care, then the bailee must compensate the bailor for the loss of his goods.

When profit accrues from a bailed good, who gets to keep it?

Unless a contract to the contrary exists, any accretion or profit arising from the bailed goods belongs to the bailor and must be returned to him.

When should the bailed goods be returned to the bailor?

The bailed goods are usually returned after the purpose for which they were delivered gets fulfilled or the period of bailment expires.

Can a relationship of bailment be created without any agreement?

As a general rule, bailment requires the existence of a contract but in certain cases, the Courts have recognised bailment relationships without any agreement. For eg: when a person finds lost goods belonging to someone else and takes them into custody, he becomes the bailee for the goods.

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:

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

Role of manufacturing agreements : an overview

By

-

October 31, 2024

This article has been written by Ajay Singh pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution course from LawSikho.

This article has been edited by Shashwat Kaushik.

Table of Contents

Introduction

In the period of new business ventures and startups, many companies wish to manufacture their products in a more efficient and high-quality manner in order to compete in the market. Often delegate manufacturing to a third-party manufacturer, allowing the principal to focus on research, product development, and marketing. For this, businesses consider outsourcing the product manufacturing to a third-party provider. Outsourcing in itself is a complicated procedure but for the expansion of the business, it is very crucial for the businesses to adopt such methods. Involvement of the third party for the product manufacturing itself includes various elements to ponder upon before entering into such a deal. Therefore, in such cases, manufacturing agreements are critical to guaranteeing efficient production and risk mitigation.

This article dives into the framework of the manufacturing agreements and dealing with the clauses of the agreement and also includes insights into it. Moreover, it provides for the elements and purpose of the manufacturing agreement in meeting the demands of the industry.

What is manufacturing agreement

A manufacturing agreement is the contractual liability between the company and a contract manufacturer. It is the legal agreement between the party who is responsible for selling the product and the other manufacturer, who manufactures the product. It outlines the responsibilities of both parties to take care of their obligations and ensure the rights over trade secrets, intellectual property, and other information that is confidential.

Agreement enshrines the:

Rights and obligations of the principal.
Rights and obligations of the manufacturer.
Confidential information.

Furthermore, a manufacturer is granted the rights to manufacture certain products by the company. The agreement states the service that manufacture is to provide, fees for production, production unit, and liabilities associated with the nature of production or service decided upon.

Parties to the agreement:

Principal: the party that is the owner of the trade secrets, designs, intellectual property, and other information shared with the manufacturer.

Manufacturer: it is the party that has been granted the rights to manufacture certain products.

Elements

The terms and conditions under which a manufacturer commits to make items for a customer are outlined in a manufacturing agreement. This contract makes sure that everyone is aware of their roles, deadlines, and expectations for the standard of the output. In order to protect the interests of both parties, a manufacturing agreement should have certain fundamental clauses, which we will discuss in this article.

Manufacturing

The section deals with the scope of manufacturing details, the kind of product and other machines, and specifications required to manufacture. It states the clear understanding between the parties as to the manufacturing of the product decided upon.

Quality control

A clear standard of the product needs to be insured to ensure the quality. So, quality assurance is very crucial and agreement must outline the standard of the manufacturing and the inspection of the product. Also to mention the measures to be taken to ensure quality and remedies upon any compromise with the quality and standard of the product name. Quality control is very essential to differentiate the product from the other products available in the market and maintain brand integrity and consumer satisfaction.

Confidentiality

The confidentiality clause is the very crucial clause for any company to protect its trademark, design, manufacturing process, or any other information that is generally and reasonably supposed to be confidential and not disclosed to third parties.

Manufacturing agreements typically include a mutual confidentiality clause outlining that neither party can utilise or disclose another’s confidential information except as required by the agreement or law. It states that each party will not divulge any confidential information to third parties. Though in certain situations it shall only be shared with the employees and agents, there are some exceptions to the clause that must be outlined specifically in the agreement. It creates the binding upon both parties and secures from any disclosure without the prior written consent of the other party. Furthermore, it survives the termination of the clause, which needs to be determined by the parties in the clause. In conclusion, this clause prohibits the party and the manufacturer from using any sensitive information discussed during the course of the agreement.

Indemnification

An indemnity clause in a manufacturing agreement serves as a protective measure to safeguard one party, often referred to as the indemnitee, from financial losses incurred as a result of actions or omissions by the other party, known as the indemnitor. It plays a pivotal role in risk management by outlining the obligations and liabilities of both parties. This clause ensures that the indemnitee is compensated for any damages or expenses arising from the indemnitor’s acts or failures.

The indemnity clause is of paramount importance in manufacturing agreements, as it addresses potential deficiencies or defects in the manufactured product. It safeguards the principal, typically the party commissioning the manufacturing process, from any shortcomings resulting from the manufacturer’s actions or negligence. The clause clearly defines the responsibilities of the manufacturer to ensure that the product meets the agreed-upon specifications and quality standards.

In the event of any breach of contract or failure to meet the required standards, the indemnity clause provides a framework for determining liability and specifying the appropriate remedies. It outlines the procedures for resolving disputes and enforcing the terms of the agreement. This ensures that the principal is not held financially responsible for any losses or damages caused by the manufacturer’s actions or omissions.

Moreover, the indemnity clause serves as a deterrent against negligence or willful misconduct by the manufacturer. By holding the indemnitor accountable for any financial consequences arising from their actions, it encourages them to exercise due diligence and adhere to the agreed-upon terms. This promotes responsible manufacturing practices and protects the interests of both parties involved in the agreement.

Overall, an indemnity clause is a critical component of manufacturing agreements. It provides a legal framework for risk allocation, ensuring that the principal is protected from financial losses caused by the manufacturer’s actions or omissions. By clearly defining liabilities and remedies, the indemnity clause promotes accountability and responsible manufacturing practices, ultimately safeguarding the interests of both parties involved in the agreement.

Term and termination

A term and termination clause is an essential component of a manufacturing agreement that outlines the specific conditions and circumstances under which the agreement can be terminated. Its primary purpose is to provide a clear and mutually agreed-upon framework for the termination of the business relationship and contractual obligations between the parties.

Key elements of a term and termination clause:

Termination events: The clause should clearly define the specific events or actions that constitute a material breach of the agreement and serve as grounds for termination. These events may include, but are not limited to:
- Failure to meet production quotas or quality standards
- Violation of intellectual property rights
- Non-payment or late payment of invoices
- Material changes in business operations without prior consent
- Insolvency or bankruptcy of either party
Notice of termination: The clause should stipulate the procedure for providing notice of termination. This typically involves a written notice delivered to the other party, specifying the effective date of termination and the reason(s) for such action. The notice period may vary depending on the terms of the agreement and applicable laws.
Consequences of termination: The clause should outline the consequences of termination, including the immediate cessation of all manufacturing activities, the handling of unfinished goods and inventory, and the return of any confidential information or proprietary materials. It should also address the allocation of liabilities and responsibilities upon termination.
Mitigation of damages: To minimise the financial impact of termination, the clause may include provisions for mitigation of damages. This may involve requiring the non-terminating party to seek alternative manufacturing arrangements or allowing the terminating party to sell or transfer the manufacturing assets to a third party.
Dispute resolution: The clause should specify the process for resolving disputes related to the termination, such as through negotiation, mediation, or arbitration. It should also clarify the governing law and jurisdiction for any legal proceedings arising from the termination.

By incorporating a well-drafted term and termination clause into the manufacturing agreement, the parties can establish a clear roadmap for the potential termination of their business relationship. This clause helps protect the rights and interests of both parties, ensuring an orderly and fair resolution of the contractual obligations upon termination.

Purpose

Why is there a need for drafting such an agreement for the manufacturing on a contract basis? Herein, it is very crucial to understand the necessary points at which a manufacturing agreement takes care of a contractual relationship between the principal and the manufacturer.

The responsibility for providing the necessary aspects for manufacturing must be clearly defined between the parties.
The product details—amount, type, supply, etc.—must be outlined specifically in the agreement.
The manufacturer’s liability and duty regarding the delivery of the product to the specified location or consumer shall be indicated and in accordance with it, the implications will also be mentioned thereupon.

Risk oversight and management

Manufacturing agreements are a very vital instrument so as to determine the rights and liabilities of the parties beforehand so that any violation of any party can be sought for in the process. It creates an environment for risk management and a hassle free business process. As the ultimate objective of the parties is to business and market the product and not to get into scuffles for dispute arises.

Legal safeguards

A documented agreement provides for robust legal protection as it outlines conditions and covenants for both parties. It turns out to be very simple at its outset whenever there is any breach of any condition agreed thereupon.

Efficiency in operations

Outlining clear intentions, objectives, conditions, and other necessary information ultimately makes the business relationship very smooth, and thereupon automatically the efficiency of the manufacturing and product is attained. As the principal can focus upon the research and product development without inspecting repeatedly.

Securing brand reputation

Brand reputation and the integrity of the product value are two of the most vital ingredients of any business. A manufacturing agreement ensures product quality by outlining the manufacturing process, confidentiality, quality standards, timely production, and other details as agreed upon. The systematic, strategically effective, and efficient production is directly proportional to the satisfaction of the consumer. But in order to ensure the effective outcome, the negotiations and the intentions of the parties shall be outlined clearly and firmly to ensure smooth functioning without any ambiguity in the operation of the agreement.

Developments in the field

An agreement presents a very efficient way to business, production, and cost-cutting to get reasonable and hassle-free work. Contract manufacturing is the demand of the new society, where many companies prefer the manufacturer for the manufacturing of the product through the third-party expert in the specific production. It enables advancement and empowers faster adaptability and consumer demand; it also aids in optimising the assets of the company.

Moreover, it supports the operational system and gives aid to expand the worldwide market. As contract manufacturing offers a dynamic approach, providing a better opportunity to the competitive market and guaranteeing better and best quality in the product and brand making.

India

The contract manufacturing market in India is booming, with a current valuation of USD 19.6 billion in 2023. This figure is projected to more than double, reaching USD 38.9 billion by 2028, representing a significant growth opportunity for businesses operating in this sector.

A key factor driving this growth is the increasing demand for specialised manufacturing services from various industries, including pharmaceuticals, automotive, electronics, and consumer goods. Companies are increasingly outsourcing their manufacturing operations to contract manufacturers to take advantage of specialised expertise, reduce costs, and improve efficiency.

The strong application of manufacturing agreements in India’s markets is a testament to the importance and effectiveness of these legal instruments in facilitating and protecting business relationships between manufacturers and their clients. Manufacturing agreements provide a clear framework for the terms and conditions of the manufacturing process, including specifications, quality standards, delivery timelines, and payment terms.

In developing economies, manufacturing agreements play a crucial role in fostering economic growth and development. They enable businesses to focus on their core competencies and innovations rather than getting bogged down in legal disputes. By clearly defining the rights and responsibilities of both parties, manufacturing agreements create a conducive environment for collaboration and mutual success.

Looking beyond the immediate growth projections, the future of contract manufacturing in India appears even more promising. With the government’s emphasis on promoting manufacturing and attracting foreign investment, the industry is poised for further expansion. The country’s large and skilled workforce, combined with competitive costs and a supportive regulatory framework, makes it an attractive destination for global manufacturers.

Conclusion

Manufacturing agreements are the most useful instrument in the modern business world. It provides for a structured and systematic framework for the relationship between the principal and the manufacturer, governing the production process with ensured quality, confidentiality, and legal protection. It includes the wider scope comprising the elements: product quality and quantity, confidential information, pricing, supply, dispute resolution, and other necessary ingredients as the parties decide. It plays a vital role in risk mitigation and ultimately enhancing efficiency and building the brand name and strong business relations.

References

Understanding AI-driven decision support systems for business growth

By

-

October 30, 2024

Proliferation, Regulation and Implications

This article has been written by Maleena pursuing a Training program on Using AI for Business Growth course from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Table of Contents

Introduction

AI is a powerful tool in the present era that has proven significant results if used wisely in any field. Many businesses are using AI to bring good output and development into the business. The decision support system, which was made using AI tools in activities like operation, management, and planning, proved to be more profitable and gave better results than without AI’s support system.

Now let us understand how an artificial intelligence-driven decision support system is doing its job to get outstanding results:

Data analysis

Forecasting customer behaviours and analysing their demand is important for any business to predict market trends and customer choices so that any business can optimise its stock levels and meet the customer’s demands by supplying them with what they prefer and AI tools and strategies are doing this task in no time, making it easier for businesses and bringing growth.
Demand and supply patterns can be improved through AI tools to identify the unrevealed patterns of customer segments, trends, and inter-related factors.
Market analysis and studies of demand and supply, that is, cross-selling strategies and product supply, can be identified and made easier using AI’s Decision Support System.

Customers data

Customer feedback and satisfaction are crucial for any business to prosper, and AI is doing this very effectively through feedback forms, surveys, and reviews. After getting this vital information, a business can work on customer’s needs, resulting in gaining customer satisfaction and loyalty.
Creating and designing the product according to the market trends makes it easier for the business production process to manufacture and supply the product without any mistake or delay, meeting the demand on time and saving human time and effort, which leads to cost control and more profits.
AI features such as voice recognition, predictive analytics, and recommendation engines not only make the products more user-friendly but also add significant value, setting the product apart from the crowd and making the user more indulgent, resulting in customer satisfaction.

Market and sales

Improving conversion rates using AI tools and Decision Support System, extracting information on customer interaction, behaviour, demographics, and history, and helping the sales team to improve and focus on sales leads. Through this process, the sales team will recognise priority leads, customise the desire, and allocate the resources, which results in high sales and less time spent, which again gets profits for the business.
AI focuses on CLTV (customer lifetime value), which will be beneficial for any business to prioritise high-value customers and market strategies through personalised loyalty programs and target campaigns that lead to customer retention and satisfaction. This will again lead to an increase in growth and revenue for the business.
AI not only helps in sales leads and conversion but also predicts market trends and their performance and helps businesses manage and control inventory levels.

Customer experience

AI provides the best customer experience through automated recommendations and offers after identifying customer’s behaviours.
It takes feedback from customers and promotes improvement, best services, and customer interactions.
AI chatbots and virtual assistance play a vital role in offering 24/7 customer service and satisfying customers by solving their queries effectively. The continuous availability and real-time support not only enhance customer satisfaction but also reduce costs to the business.

Operational efficiency

By analysing a varied amount of data related to the supply chain, such as logistics, inventory management, procurement processes, supply, demand, and transport routes, AI identifies errors and suggests improvements; this leads to smooth operations and drives better business performance, which leads to customer satisfaction and business growth.
By using Machine Learning Algorithms and Predictive Analysis, AI can detect fraudulent activities and unusual patterns and flag suspicious ones, enhancing security by learning data that can prevent monetary losses and minimise reputational loss, which promotes trust among customers and partners.
As AI is effectively helping businesses in planning, managing operations, reducing manpower, cost of production, inventory, and supply measures, it will bring prosperity and growth into the business, and this will again support the business sustainability process.
AI helps do automated repetitive tasks such as data entry, customer enquiries, and scheduling in a more efficient way that leads to human power saving and cost control, which again leads to minimising errors and enhancing overall productivity.

AI strategies

AI identifies and works on the SWOT analyses of the business, i.e.,

Strength: the existing asset technologies of business.
Weaknesses: the inefficiencies and lacking areas.
Opportunities: market trends, advancements, technologies, and customer needs.
Treats: identified external threats, cyber security risks, and uncertainties.

To take out maximum profits from minimum investments.

AI takes the initiative to identify the KPIs and align them with the business’s overall growth, like identifying the core objective or principle of business and working for its growth; it also identifies related metrics that serve as KPIs of business, such as customer satisfaction, operational efficiency, revenue growth, and product quality.
Set targets for each KPI for improvement, monitor its growth, conduct periodic reviews, and align with stakeholders like the project manager, executives, and team involved in implementing AI.
AI helps identify the pain points of business and works on them, like organising stakeholder meetings to gather information about the different challenges they face and uncover the inefficiencies. Analyse operational data like inventory, process cycle time, error rates, customer complaint frequencies, etc.

Map out business functions, delays, redundancies, predictive analytics, or decision support and highlight opportunities. AI compares industry benchmarks with an organisation’s performance to help the business close the gap.

AI use cases

Once business goals are set, AI prioritises and aligns them with projects based on their potential impact and feasibility.
Conducts assessments to know the data, available resources, and expertise needed.
AI focuses on ROI and strategies for overall business growth.

Roadmap

AI sets a clear roadmap to achieve the business goal using use cases like it sees the objective will be completed in a set timeline.
It sees the work will be completed with allocated resources, like a specified budget and personnel.
It tracks the dependencies between projects and milestones.
Assembling a team of experts in different fields like data scientists, domain experts, engineers, etc.
Defining roles and responsibilities and communication channels for AI initiatives for smooth execution.

Challenges while implementation

Even though AI can be successful for business, some challenges stop AI from working smoothly, like

Lack of data or low information for AI to perform well
Lack of AI-skilled, trained professionals who can develop, implement, and maintain the AI systems
Lack of system to deal with biased decisions, transparency, and fairness.

To overcome such challenges AI has some solutions

Robust data collection and management systems that ensure collecting data from partners and also organising systematically.
Hiring AI-trained professionals up skilling the existing professionals and also partnering for internships with software companies.
Setting up AI committees for transparency and fairness concerns by setting up regular audits.

Tracking ROI

Measures of tracking KPIs that align with business growth are the next step. To get a clear image of success, the business has to keep a record of financial metrics like revenue and cost. Operational metrics like efficiency, productivity, and cycle time. Customer-centric metrics like customer satisfaction, retention, and lifetime value. And AI’s metrics like positive/negative rates, model accuracy, and predictive accuracy.

AI’s performance

Monitoring AI’s working and growth using AI is very important, as after seeing its performance changes can be made if needed for the business’s betterment.

Data should be checked for accuracy, preciseness, and relevancy, as the data says AI works on that.
AI models should be checked regularly on all metrics.
Data that support bias and transparency should be assessed for betterment.
A/B testing should be done to improve AI’s performance for the growth and progress of business.

Calculating ROI

AI-Driven Support System aims to reduce the cost of investment and increase profits. Business should be assessed to see the progress in terms of revenue, costs, and risks.
Expenses incurred on the AI model for planning, maintaining, developing, and implementing should be analysed.
Net profit should be assessed using the ROI formula = net profit/total investment * 100 to check the returns a business gets after using the AI system.

Not only net profit but also customer reviews and satisfaction should also be checked, as customers play a vital role in any business’s success.

Declaring results

Results should be laid down correctly in front of stakeholders and investors to gain valued support from them in the form of visualisations, success stories, and the overall impact of AI’s performance in business.

Conclusion

Hence, the AI-driven support system is a tool that can reap benefits and welcome drastic changes in any business if follows clear core principles and strategies, lays down a clear roadmap, prepares for the challenges faced, and overcomes them with the help of AI for the growth and development of the business. The future of AI-driven support system business can be rewarding and lead to success in no time. Business leaders who adapt to change and encourage new ideas will be set to achieve significant success in the future.

References

Role of newspapers and magazines in new India : an overview

By

-

October 30, 2024

This article was written by Ummu Aimen, pursuing the Diploma in Content Marketing and Strategy Course from Skill Arbitrage, and edited by Koushik Chittella.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

Newspapers and magazines play an important role in addressing India’s urgent social issues by raising awareness, fostering public interest, and holding authorities accountable. They serve as a bridge between the government and the public, ensuring that critical issues such as poverty, education, health science, and corruption are brought to the forefront in the toughest times. When the world stood aside with the help of magazines and newspapers, it was always the media that played the most consistent and prominent role in shaping society. They highlight the injustice in broad daylight out of the darkness and become the voice for the voiceless. The network of online media and digital media is inspiring and spreading like wild air around the world. The progress in shaping and drafting the new scenario is remarkable, where justice and society remain in the hands of the law and the administration of the country.

History

Newspapers and magazines are written, edited, proofread, and finalised by intellectuals with constant interest and dedication. The only mantra that was revolving in their heads was just the truth and justice alone. It reflects the country’s socio-political evolution. The first newspaper in India, “Hicky’s Bengal Gazette,” was published in 1780 by James Augustus Hicky. This weekly newspaper faced censorship and was eventually shut down, but it laid the foundation for an enormous press culture in India. By the mid-19th century, newspapers like “The Times of India,” founded in 1838, and “The Hindu,” established in 1878, played crucial roles in shaping public opinion and supporting the independence movement.

Even magazines have a rich history in India, with some of the earliest being “The Indian Review,” launched in 1900, and “The Modern Review,” started by Ramananda Chatterjee in 1907. These publications provided a platform for intellectual and cultural discussions, significantly contributing to the nation’s literary and educational development. Now, post-independence, the magazine industry diversified, with periodicals covering various genres, from politics and business to fashion and entertainment, making them an integral part of India’s media landscape.

There was no flaw or falsified fabrication as per the social norms and livelihood. The press and media had a fantabulous nature of dignified policies that concentrated only on the reality of that time. The press cannot mislead the public and traumatise their hearts. Reading newspapers and magazines was considered a royal man’s work or the man like the readers was the bookish Man of Pride. The cost of printing and circulation was high with all the costs and demands of those days. But the clarity and consistency were remarkable. Radio and television became primary sources of news, information, and entertainment. Both the digital and print media in India date back to the late 18th century. India has over 500 satellite channels, including more than 80 news channels with radio broadcasting back then from 1927.

Modern Era

The value of being in the press as a journalist, editor, copywriter, author, distributor, or salesperson are both oxymoronic instances. The job in this industry is neither safe nor dangerous. Times have witnessed the effective hard work of the source on and off the field. To be precise, the journalists never worked for fame or celebrity banners. They cut the chase from Mud to Mountain, Sea to Sky, Dump to Desert, Filth to Flaw, Birth to Death, Starve to Food, Blood to Boon, Money to Poverty, War to Peace, and whatnot?!

Journalists or basic news-collecting informers are not welcome always, as assumed. Many cases have witnessed their last breath. The modern era has given the liberty to run to corners and ends to collect detailed reports of the journey. Technology overwhelmed by advances has a much better way of obtaining the news on time with authencity. Investigative journalists in India face various challenges and legal threats. They are also subject to harassment, abuse, insults, and censorship. Despite these obstacles, they continue to play a crucial role in maintaining transparency and accountability.

Major publishers

The Hindu, The Indian Express, Tehelka, The Wire, and The Reporters Collective have consistently produced high-quality investigative journalism, contributing to a more informed and engaged society. Their contributions have been outspoken for many decades, not only inside the country but also abroad. There are prominent magazines from before the Independence of India. The major Indian news agencies are profound in their service and have connections all around the world in every field. Apart from these difficulties, they stand still as legends. There exists outstanding dedication by all the publishers, including Frontline, India Today, Outlook, The Week, Tehelka, and also regional magazines, Nakeeran in Tamil, Karnataka Today in Kannada, Kerala Politics in Malayalam, Greater Kashmir, Rajasthan Weekly, The Week, and many Vernacular Times.

Media as a source of information

Using media for social change is powerful, but it comes with several challenges. The rumors that spread false information can undermine efforts to promote social change. Media has a bias that influences social issues. Government censorships in some regions are limiting the free report on some issues. Capturing and maintaining the public’s interest in social issues can be tough cases of an investigative nature. Deep reporting needs significant time and resources to produce evidence that is not available on time. Journalists reporting on sensitive issues may face threats, harassment abuse, humiliation, or violence that leads to the end of an investigation. Rural and unprivileged areas were out of access to digital media, and social awareness campaigns were not possible due to the negligence of equality. Media organisations often rely on advertising revenue, which has its cooked-up content, stories, assumptions, and priorities at the expense of social issues. Despite All these challenges, media remains a vital tool for driving social change.

Strategies with multi-face approach

The public must be educated on how to critically evaluate information sources via social media platforms, SMS, WhatsApp, Telegram, the internet, newspapers, pamphlets, posters, street plays, shorts, videos, etc. Schools, colleges, universities, community programs, and workplaces must take responsibility for teaching the public about the authenticity of the news prevailing in society. Supporting high-quality journalism, reputed organisations that consistently adhere to strict editorial standards are less likely to spread misinformation.

Tech companies can develop tools with the help of AI in current scenarios to check the information related to any affairs. Governments can introduce strict and supportive laws to protect the journalists, media, and newspaper community, which will live and lead the world till the end of time. Today’s affairs are tomorrow’s history. People must follow a variety of sources, get updated with resourceful pieces of information, and also identify fake and incorrect news by using their conscience.

Positive approach and changes on the row: Writing articles or creating content that advocates for policy changes or social reforms by voicing support for causes that matter to one’s community. Highlighting individuals and organisations that are making a positive impact. Encouraging discussions and debates on social issues. NGO’s and activists to amplify their efforts. Ensuring one’s report is accurate is very important. Providing a safe space for whistleblowers to share their stories, utilising various forms of media, inspiring podcasts, infographics, etc. can bring differences in the newspaper and magazine contributions in India.

Challenges and criticisms

Whistleblowers often face harassment and threats, and there have been calls for stronger protections. UAPA for Anti-Terrorism law allows the Government to detain individuals without trial for extended periods Journalists reporting on controversial topics such as separatist movements or insurgencies can be arrested under this Act. Issuing of GAG orders to prevent the publication of certain stories Journalists also face censorship, where their work is either edited or suppressed by media owners under political pressure. Journalists are the true warriors of all times who risk themselves to bring the truth of all cases and issues from time to time; they face cruciality both online and offline. Economic pressures and dematerialization of all favor and money to suppress a particular group or rights is inhumane. Few notable cases that are remembered all the time and travel like a warning to this world. Journalists and cameramen who covered the live sessions were brutally assaulted in uncountable broadcasts. Reporters uncovering government surveillance plans have faced sedition charges, legal threats, and intimidation. Here are major challenges faced by journalists and media personnel:

Economic pressures and job insecurity: Many journalists face job insecurity due to economic pressures, leading to self-censorship or reluctance to report on controversial topics that might jeopardise their employment. This economic vulnerability can be exploited by those wishing to suppress certain stories or viewpoints.
Digital surveillance and privacy concerns: With the rise of digital journalism, reporters and their sources are increasingly vulnerable to surveillance and hacking. This not only endangers their personal safety but also compromises the confidentiality of their sources, which is crucial for investigative journalism.
Legal and political intimidation: Beyond sedition charges, journalists often face a range of legal threats, including defamation lawsuits and politically motivated arrests. These tactics are used to intimidate and silence journalists, undermining their ability to report freely and accurately.
Social media harassment: Journalists, especially women and minorities, are often subjected to online harassment, including threats, abuse, and coordinated attacks aimed at silencing their voices. This digital harassment can have severe psychological impacts and deter journalists from pursuing certain stories.
Lack of diversity and representation: The media industry often lacks diversity, leading to a narrow range of perspectives being represented in news coverage. This can result in biased reporting and a failure to adequately cover issues affecting marginalised communities.

Conclusion

The persistent efforts of print media to highlight social justice and advocate for change have profoundly impacted society. Diverse stories, newspapers, and magazines inform or transfer, inspire action, and drive social progress. Their role is shaping public opinion and influencing policy decisions, which remains indispensable in the quest for a more equitable and justice-served society with patriotism and universal brotherhood.

References

History and evolution of Hindu Law

By

Ayush Verma

-

October 30, 2024

This article is written by Sangeet Kumar Khamari and further updated by Titas Biswas. The authors delve into the nuances of Hindu law in India by articulating its origin, sources, and nature. Further, the authors have elucidated legislative Acts and schools that constitute the governance under Hindu law. This article provides a tour of the realm of Hindu law in India, where it has solidified its presence even in the Constitution of India.

Table of Contents

Introduction

To begin with, it must be noted that Hindu law is a derivative of customs and usages, traditions, beliefs, and modern legislative structure. The prime study under Hindu law revolves around the concept of Dharmaśāstras. The concept of Dharma also eradicated the practice of monarchy and immunised law from the interference of the king. The Vedic period dates back around 4,000 to 1000 B.C., consequently making it 6,000 years old.

Recent research done by the students of Delhi University helped in discovering that the period is rather 8,000 years old. Hindu law is considered to be of the same age, given its correlation with the Vedas and their application in today’s date. The structure of Hindu law is well-entrenched in Hindu philosophy and religious beliefs, and the principles are also reflected in modern Hindu law and its branches. The population of this world is 8 billion, out of which 1.38 billion people live in India currently. India is a secular state where religious beliefs are diversified in nature. The Indian legal system pursues the following kinds of laws:

General law

Laws that pertain to its applicability universally without compelling any specific group of individuals are general laws. These laws govern every individual to comply with their provisions and are civil in nature. Such laws can either be statutory, procedural, or substantive laws.

Personal law

Personal laws may be referred to as the laws that elucidate the matters of marriage, inheritance, divorce, guardianship, wills, etc., of an individual. These laws may differ from one to another, as these laws are applicable precisely to a certain group of individuals, mostly in accordance with religion. Personal laws are mostly customary laws, as customs are one of their primary sources. In India, the Hindu Marriages Act, 1955, the Dissolution of Muslim Marriages Act, 1939, the Parsi Marriage and Divorce Act, 1936, and the Indian Christian Marriage Act, 1872 are prevalent and these are a few of many examples of personal law.

Origin of Hindu law

The Hindu law parades for one of the oldest civilised laws in the books of history. With its sources stemming from the primary origin of approximately 2500 years, Hindu law is considered to be the most ancient law. The primary sources were the texts written in Sanskrit composed between 500 BCE and 500 CE, known as Dharmasastras. These shastras were considered to be divine revelations, which also became a part of the Vedas. The Vedas are a compiled body of religious texts that are predominant in Hindu religious beliefs, entrenching fundamental principles as customary laws.

The Britishers in the year 1772 made efforts to implement Dharmasastras in the ambit of Hindu law for the Anglo-Indians. It was opinionated by them that imposing English laws on the Indian people would repel them from following such laws. This led to the implementation of Hindu philosophy in colonial laws as well as judicial precedents. Sir William Jones, who acted as a Judge of the Bengal Supreme Court around 1783-1794, was allured by the Hindu philosophy and learned Sanskrit in order to interpret texts from the digests and commentaries to implement them in his judgments. The creation of Anglo-Hindu law could be another example of how Hindu philosophy influenced the colonial rulers.

Gradually, around 1955-56, the lawmakers decided to incorporate religiously stimulated principles such as laws regarding marriage, succession, minority and guardianship, and adoptions and maintenance. These numerous legislative Acts reflect how diverse is the realm of Hindu law. The author, later in this article, discussed the most prevalent statutes in detail.

There are apparently two views regarding the origin of Hindu law, which are; Divine origin, supported by Hindus and their belief and; Customary laws, believed by the western jurists. Following are an elaboration of these views:

Divine origin theory

This classification concerning the origin of Hindu law is believed to be derived from divine origin, i.e., from the texts of vedas. Such texts are considered to be a revelation from the divinity and later reduced into written craft, which departed teachings of Hindu law. It is believed that the divine teachings are Apauruseya, which imply not belonging from a human origin. It is firmly perceived that the revelations from the texts of vedas and other religious scriptures bestowed certain teachings and philosophies which have been imbibed in the realm of Hindu law.

The teachings which are derived from the holy scriptures of vedas and smritis include moral and social conduct, legal principles and philosophies of life. These lessons are considered to be imparted into the Hindu legal jurisprudence, which was later substantiated through various commentaries and digests written by eminent scholars and researchers.

Customary origin theory

This classification of the sources of Hindu law has emerged from the western jurists and their opinions regarding the incorporation of customary usages into the practice of Hindu legal philosophy. The Western jurists were not a firm believer of sacred texts or divine revelation and depended upon the practices of usages and the prevalent customs. It is believed that at the time of the inception of the Aryans in India, they accepted certain usages as customs and followed it as norms, which were further modified by the Bhrahmins.

It was opinionated by the jurists of the Western culture that the practices prevalent among a certain group or community proves to be the fundamental of the principles of Hindu law. They considered the usages to be law, given the nature was customary which reflected the similarity with the Hindu legal jurisprudence.

However, this theory was disregarded by Henry Maine, who believed Hindu law to be one of the oldest pedigree of customary laws, which is governed through ancient scriptures and holy texts. He further demonstrated that personal laws concerning marriage and divorce, inheritance, minority and guardianship, family matters, adoption etc. are well established through various historical scriptures, which are bestowed through divine revelation.

Schools of Hindu law

The emergence of schools of Hindu law can be traced from the necessity for the interpretation of sacred scripture, and classifying various customs and usages practised in a particular territory or community. The theory of “schools” evolved from Mitakshara and Dayabhaga, which were perceived as a component of the British administration, resulting from an effort to outline Hindu legal tradition in order to codify the same.

Prior to the ruling of the Britishers, there was an exigency of a set of codified Hindu laws. Hindu law was purely practised upon customary laws and religious texts, subject to interpretation by the researchers. The term ‘schools’ was first labelled by H.T. Colebrooke, who was a British scholar and researcher. He, with his research discovered various interpretations, from across the Nation, which he called ‘schools’.

Mitakshara

The Mitakshara School of Hindu Law is one of the two significant legal traditions, fundamentally known for its commentary on the Yajnavalkya Smriti, which was authored by Vijñaneśvara, who was a 11th-century scholar. This school is widely implemented across India, except for the states of West Bengal and Assam. However, its practice diverges regionally because of its varied customary rules, resulting in various sub-schools and jurisdictional contrast.

Under the context of Mitakshara School, a property is held by the coparceners ie., through joint heirship, and the rights of a son are inherited by birth. The share of a coparcener in the joint family property keeps fluctuating due to the birth or death of other coparceners, which infers that it is not a fixed or absolute right. The Mitakshara system endorses agnate succession up to the fourteenth degree of descent. Mitakshara school of Hindu law is further subdivided into five sub-schools, which are briefly discussed as follows:

Benaras law school

The Benares School of Hindu Law, also called the Varanasi or Kashi School, is one of the significant sub-schools that is governed by the Mitakshara tradition. It is prevalent in states like Uttar Pradesh, Bihar, Madhya Pradesh, and parts of Orissa. This sub-school integrates teachings from some of the major commentaries penned by Viramitrodaya, Vivada, and Nirnyasindhu. The Benares School emphasises on concepts relating to coparcenary and joint family property, which concentrates on male descendants inheriting ancestral property by birth. The Benares School, if compared to sub-school closely adheres to Mitakshara principles, with a strong focus on inheritance by male heirs.

Mithila law school

The Mithila Law School is mostly prevalent in the regions of Tirhoot and North Bihar. This school focuses on the commentaries of Vivadaratnakar, Vivadachintamani, and Smritsara. The teachings and writings of the sages and old scholars were formalised during the medieval period. The Mithila School is acclaimed for its stringent adherence to the ancient texts and rituals, considering it to leave a significant emphasis on traditional ceremonies and customs in legal practices.

Maharashtra or Bombay Law School

This school of law holds its jurisdiction over areas like Gujarat, Karana, and other regions, particularly where Marathi is widely spoken. Texts by Vyavhara Mayukha and Viramitrodaya are one of its key authoritative texts. This school of Hindu Law acknowledges the distant relatives (female bandhus) as the legitimate heirs. The group of female bandhus or distant relatives comprises both agnates and cognates, which extends to relatives within five degrees of kinship from a common ancestor, further including individuals who are connected through female lineage.

Madras law school

This classification of Mitakshara school encompasses the entire southern region of India and falls under the principles acclaimed by Mitakshara law school. It derives heavily from authoritative texts like the Smriti Chandrika, Parasara Madhaviya, and Viramitrodaya. The Mitakshara being its primary source, the other works hold significance within the school.

The Madras School strictly conformed to the Vedic principle of generally excluding women from inheritance. It interpreted texts of the Sruti to suggest that no female ancestors, apart from the daughter, mother, and females who were explicitly granted inheritance were considered ineligible to inherit property. However, with time, additional female heirs, apart from those specifically recognised, were gradually granted inheritance rights.

Punjab law school

This classification of Mitakshara school is a branch of the school, which was primarily developed in East Punjab. Viramitrodaya is one of the pivotal commentaries that is associated with this school. Additionally, the local customs of the particular region influenced greatly in the formation of this sub-school.

Mayukha school

According to the principles of Mayukha school, the practice of succession is based on the principle of propinquity i.e., blood relationship, which contrasts with doctrines of the Dayabhaga School. The Bombay High court, in a case, noted that the Mitakshara faces a dilemma about the position of a uterine sister in the line of heirs. However, the Vyavahara Mayukha expressly places the sister immediately after the grandmother in the order of succession. The Bombay High court takes this stance into account while interpreting the absence of any regulation by Mitakshara school on the issue.

Dayabhaga

The Dayabhaga school of law was predominantly prevalent in the areas like Assam and West Bengal and is considered to be one of the most predominant schools of Hindu law. It derives its principles from various digests and prominent smritis, keeping its primary focus on inheritance, partition, and joint families. P.V. Kane, who was a scholar, historian, and former Rajya Sabha member, established that the Dayabhaga School originated between 1090-1130 A.D. This school of law was enunciated to eliminate the outdated and artificial inheritance practices.

The fundamental principles of this school addressed and rectified the inadequacies and restrictions of earlier principles. The School eventually expanded the list of heirs to include numerous cognates that were previously excluded under the Mitakshara School of Hindu Law. This school of law was derived from several key commentaries, which includes Dayatatya, Dayakram-sangrah, Virmitrodaya, and Dattaka Chandrika.

The Dayabhaga school of law recognises the concept of individual ownership, where a property is exclusively held by an individual throughout their life. Under the Dayabhaga system, a property is inherited by succession upon the death of the owner, rather than on the birth. This phenomena enables the heirs to then receive fixed and specific shares of the property. After the death of the property owner, an individual heir has the right to request a partition of the property under this system of Hindu law.

Concept of Dharma

According to Hindu jurisprudence, Dharma means the duties that one has to perform in his lifetime. The literal meaning of the Sanskrit word ‘Dharma’ is ‘the way of living’. Dharma is one of the four ultimate objectives under the principle of ‘Purushartha’, whose literal meaning is ‘the ultimate purpose of a person or soul’. The other three purposes are arth (economic prosperity), kama (pleasure), and moksha (spiritual liberation). Dharma is considered to be the preserver of this universe, the ultimate path of one’s life, and the controller of man’s conscious and subconscious mind.

Dharma is not bounded by any religion in particular but is a universal set of righteous rules and duties. It is said to be a set of legal duties of an individual. Dharma may be construed differently in different religions. According to Buddha’s teachings, Dharma represents cosmic law and order. Similarly, in Jainism, Dharma symbolises the teachings of Tirthankar, who depicts the purification of an individual.

While we deliberate on dharma in relation to law, it can be said that it is an Indian branch of natural law. The doctrine of natural law under the law of jurisprudence was incorporated into the Hindu philosophy in ancient times, which was strongly supported by eminent personalities like Max Muller.

Origin of Dharma

Dharma is said to have originated from various religious texts, Hindu scriptures, and Vedas. It has also often been cited in the Holy Book of Bhagavad Geeta, in spiritual guidance and teachings by the divinities. According to verse 2.1 of Manusmriti with the commentary of Medhatithi, Dharma has been defined as “Learn that Dharma, which has been ever followed by, and sanctioned by the heart of, the learned and the good, who are free from love and hate.” In the context of Dharmashastras, Vashishtha has defined Dharma as “Dharma is that which is enjoined in Śruti and Smṛti.’’

There are many other commentaries that portray teachings and texts concerning Dharma that originated from Sruti and Smriti. Both religious texts guide ethical and legal behaviour in the realm of Hindu law.

Nature of Dharma

Under Hindu jurisprudence, the emphasis lies greatly on duties rather than rights. The nature of Dharma is diversified and varies from person to person: a king must maintain law and order in his kingdom, a farmer’s duty is to cultivate crops, a doctor has been assigned the responsibility to heal human beings, whereas a lawyer’s duty is to fight against injustice. Being a highly religious concept in nature, Dharma is multi-faceted, encompassing a broad spectrum of laws and customs that are an indispensable part of Hindu law. For example, Manusmriti encompasses several areas, such as religion, administration, economics, civil and criminal law, marriage, succession, etc., which are the fundamental topics covered in our legal texts.

Sources of Hindu law

Hindu philosophy is derived from a lot of religious and spiritual texts from ancient times, and to trace back to the age-old sources, numerous commentaries and digests have been written and followed. However, modern sources have established their presence through legislation, authoritative precedents, and the principles of equity, justice, and good conscience. The existence of law is to cater to social needs and therefore, it is always optimal that the law should align with the changing needs of society. The law must progress with the society in conformity.

The exploration of the sources of Hindu law is a study of various stages of advancement, which enhanced it and added colours, for it to conform to the changing needs of society. Hence, Hindu law and its sources may be classified into two categories based on the period. Following is a detailed analysis:

Ancient sources of Hindu law

The sources, which are derivatives of customs, spiritual or divine texts, inscriptions of the holy books, digests, and commentaries of ancient texts, are ancient sources of Hindu law. They may be briefed as follows:

Shruti (Vedas)

The literal meaning of the Sanskrit ‘Shruti or Sruti’ is ‘that which was heard’. Srutis are regarded as the primary source of Hindu law. It was said that rishi munis (sages) meditated on the peaks of the Himalayan mountains and received divine revelation, who further preached those teachings to their disciples. Such wisdom was then further compiled and documented, which later came to be known as the Vedas. Srutis are regarded as the primary source of Hindu law.

Vedas are collectives of religious texts, classified into four categories: Rig Veda (deals with rituals, sacrifices, and mantras), Yajurva Veda, Sama Veda (which is a compilation of melodies and chants), and Atharva Veda (which deals with Vedic charms and spells for everyday life). These Vedas are a repository of knowledge and each of them comprises three parts: Samhita, which consists of spiritual hymns; Bhramanas, which encompass duties and obligations and the proper way to perform them; and Upanishads, which elucidate the essence of these duties.

Smritis and Dharmasastras

The literal meaning of the Sanskrit word ‘Smriti’ is ‘memory’ or ‘what is remembered’. The texts of Smriti demonstrate the notions that the sages recorded from their memories. These texts are considered lost textual scriptures of the Vedas, which were extracted from the divine revelations encountered by the sages.

The Smritis are thus inclusive of human intervention in the formulation of the law, comprising both the substantive and procedural aspects. Many of the distinguished sages have penned the divine revelations; Manusmriti is the most prevalent among them. Many other eminent sages, like Yajnavalkya, Narada, Parashara, and Brihaspati, have also inscribed their own smritis, contributing substantially to the Hindu legal thoughts and ethics. Smritis are further classified into Dharmasutras and Dharmashastras.

Dharmasutras were manuals that guided the sages’ ways of teaching to their students. These were written primarily between 800 and 200 BC; initially drafted in prose but later verses were included. These sutras are a blend of Vedas with local customs and usage and have their author’s name inscribed on them, so as to decipher which shakha they belong to. A few distinguished sages who authored Dharmasutras were Gautama, Baudhayana, Apastamba, Harita, Vashistha, and Vishnu.

Dharmashastras are texts that are deemed to be followed by all individuals. These texts are derived from the Puranas rather than from the Vedas, like in Dharmasutras. These were primarily constructed in metrical verses, which were derived from the Dharmasutras themselves. Nevertheless, the Dharmashastras were much more clear and systematic in nature. These texts covered Āchāra (religious practices), Vyavahāra (civil law), and Prāyaścitta (expiation).

Manusmriti

The Manusmriti, interchangeably called ‘the Laws of Manu’, is considered to be one of the most credible texts in the dimensions of Hindu law. It prescribes the civil code of conduct of an individual and the preservation of Dharma by them. The text also outlines the behavioural conduct of men and women according to the classes or varnas that it prescribes. Those are- Brahmin, Kshatriya, Vaishya, and Shudra. It further outlines laws that are civil in nature, such as contracts and business.

The Manusmriti recognise four sources of sacred law. They are- the Vedas, the virtuous behaviour of individuals, the conduct of holy men, and self-attainment. The texts claim that the social laws which it prescribes are in alignment with the teachings of the Vedas. It also provides for the concept of ‘Rajdharma’, which literally means ‘statecraft’. It offers the mannerism and craft of ruling a province.

The texts of Manusmriti reflect its focus on the preservation of social order, highlighting the caste hierarchy and the control of women. The Manusmriti outlines the prohibition of inter-caste marriage and has laid down certain norms regarding laws on marriages. The texts of Manusmriti often offer insights into politics, social conduct, religious customs, and related ethics, statecraft, and many more.

Commentaries and digests

Commentaries and digests are written and compiled texts, inspired by the divine revelations from eminent sages and munis. The work done to elaborate a specific smriti is known as commentary. These commentaries were constructed after 200 BC. Digests are also a framework of various written materials of srutis and smritis by legal authors and scholars in a summarised manner.

Many of such works deal with contradictions ensembled in smritis, which resulted in an eclectic interpretation of the law. Mitakshara and Dayabhaga, two significantly major schools of Hindu law, emerged from the branches of digests and commentaries by eminent scholars.

Customs

Custom may be perceived as a usage or practice followed by the people of an area, for a long period of time. Customs, in many areas, have much more weightage than legislative statutes. Basically, a usage that is antique in nature, not opposed to moral policy and law, reasonable, certain, and unambiguous, has been in practice perpetually is a valid custom. The term custom has been defined under Section 3(a) of the Hindu Marriage Act, 1995. There are several principles under Hindu law that have been derived from customs and ultimately took the form of law. The smritis have also outlined the importance of customs in its texts. The scriptures in the smritis reflect that customs are the paramount law, and such a belief has been pre-existing.

Essentials of a valid custom

Antiquity: For a custom to be valid, it has to be of time immemorial and belong to the ancient age. The notion of time immemorial was derived from the law of England, which was inspired by the Canon law. Time immemorial is also an approach by the civil law, who interpreted it as a period of time so remote that no living person would have a memory of it.

The Supreme Court in the case of Thakur Gokalchand vs. Parvin Kumari (1952) clarified the meaning to be inferred from ‘time-immemorial’, and held that “A custom may be proved by general evidence as to its existence by members of the tribe or family”. The court further stated that the English rule cannot be applied in the Indian legal system.

Reasonableness: A valid custom must be reasonable and not be morally opposed and unjustifiable. The nature of a custom can be traced by its existence and the acceptance of it by the people. To examine its reasonability, the court may go back to its inception to formulate whether the custom has proven to be advantageous to society or the community or otherwise.
Continuance: A custom has to be in continuity to be valid. A valid custom must be acknowledged by the community and people that follow such custom. Any ceasement of such custom since the time of its inception may vitiate the validity of it. The Madras High Court in the case of Muhammad Mahamood Hussain Faroki vs. Syed Abdul Huq (1942) emphasised on the continuity of a custom and how even a general rule can be abrogated if a custom has been in existence and practised for a long period of time. The court in this case established this essential condition based on the circumstances of the case. It highlighted the nonintervention of any kind of contest from family members, while declaring the successive owner of the office of Khatib in a Mosque in Nellore, to be an acceptance, and held that to be an uninterrupted and a valid custom.
Certainty: For a custom to be valid must not be vague and be certain. By certainty, it implies that a valid custom must be precise, solid, and unambiguous. A custom, if not certain, can be traced by its nature and purpose. The Madras High Court in the case of Rangaswami Goundan And Anr. vs. Arumugha Goundan (1936) observed that a custom allowing the branches of a tree to overhang upon the neighbour’s land is vague and uncertain. The court further held that the hanging of branches of a tree would rather constitute to be a nuisance, which could never form a customary right.
Aligned with the statutory provisions: A custom is not validated if it is in violation of any statutory provisions. Where customary law is considered to be at par with the legislation as regards the sources of law, it can however be declared obsolete as against the statutory provisions.

Unlike many countries, India stands in its position that a custom can never be in conflict with statute law. This was observed by the Supreme Court in the case of Mohammad Baqar And Ors. vs. Naim-Un-Nisa Bibi And Ors. (1955). The court further stated that a customary right cannot override a statutory principle unless such customary right is established substantially and has been in practice for a long period of time.

Obligatory in nature: A custom must be incorporated by people of a community as a practice of their rights. It must be identified as a right, and not a force of compulsion. For a custom to be legally binding, it must be recognised as an obligation that is naturally abided by, rather than something being compelled by an external force. However, such compliance must always be non-coercive in nature.
Peaceful enjoyment: A peaceful and unruffled practice of a custom validates such custom. There is an assumption that a custom is generated out of the consent of the participants of such custom, and such principle shall be vitiated if the custom is challenged in the court for a long period of time. Therefore, a custom must be out of any competition and must enjoy its existence without any challenges.

Customs may be categorised as follows

Local customs: Customs that are prevalent in a specific geographical area, may be known as local customs. Local customs may be perceived as a regular structural pattern followed by a group of people belonging to a specific geographical region. Local customs accompany people in case of migration. A change of territory would not affect the validity of a local custom. This makes local customs inclusive of both geographical local customs and personal local customs.

These customs are valid as long as they fulfil all the requisites which also includes being antique primarily. The Bombay High Court has held in the case of Musammat Subhani vs. Nawab (1940) that a custom derives its force from being in practice for a prolonged period, therefore, obtaining legal recognition.

Family customs: Customs that are prevalent in a family for a long period of time, can be held as family customs. Such family traditions, if proven to be in alignment with all the requirements of a valid custom, may be recognised as law under Hindu law. A landmark verdict was passed by the Patna High Court in the case of Bikal Chandra Gope And Anr. vs. Manjura Gowalin And Ors. (1972), which stated that customs implemented by a family for a prolonged interval may be considered as valid personal law. The Patna High Court also quoted that, “Hindu Law is not merely a local law but is the personal law and part of the status of every family which is governed by it.”
Caste and community customs: These customs are practised by a specific caste or community and are obligatory on the part of the members of such a community or caste. However, they must be in accord with the requirements of a valid custom. For example, in southern India, most in Tamil Nadu, some communities practise consanguineous marriages; uncle-niece marriages. This ritual is called ‘Maman Kalyanam’, and is based on the principle of returning a daughter into the family. However, in today’s era, due to several social and health issues, such customs are not highly regarded.

Modern sources of Hindu Law

Hindu law is deemed to be a blend of customary and legislative law. It is a branch of both forms of laws, structured into one body. The main modern sources of laws implemented under the ambit of Hindus are; judicial decisions, legislation, justice, equity, and good conscience. These three pillars shape the Hindu legal landscape, with codified laws. These include the Hindu Marriage Act of 1955, the Hindu Adoptions and Maintenance Act of 1956, The Hindu Succession Act of 1956 The Special Marriage Act, 1954, and several others. Similarly, judicial precedents play a key role in interpreting the existing laws and further dictating new binding laws. In the absence of any existing laws, justice, equity, and good conscience surfaces.

Judicial precedents

Article 141 of the Indian Constitution mandates for a verdict passed by the Supreme Court to be binding and considered as the law of the land. Accordingly, many judge-made laws have developed into pervasive and compulsory laws. The precedents, over time, have overridden commentaries, and are assumed to be of greater importance.

Before the inception of the Hindu Adoptions and Maintenance Act, 1956, several facets were modified by the Privy Council. These involved adoption laws, coparcener’s powers to alienate share, introduction to women’s rights, stridhan, and many more.

Judicial precedents may be further classified as follows

Original and declaratory: A verdict or judgement may be called as an original precedent when the ratio decidendi of such judgement has newly come to the surface. Original precedents are formally called as ‘judge-made laws’ which are later conceptualised in cases as references.

Whereas, declaratory precedents are those that apply existing and already established legal principles. Declaratory precedents do not constitute as a source of law, while an original precedent is said to be the core principle.

Authoritative or persuasive: Authoritative precedents are those that are passed down by the authoritative courts and which are binding upon the lower courts. These precedents are considered binding laws.

Persuasive precedents, on the other hand, are those that are compelling in nature but are not obligatory. A court may take inspiration from such precedents that are persuasive in nature and set great examples, establishing principles.

Legislation

Hindu law is said to be one of the most developed and advanced personal laws due to its codified nature. The contemporary Hindu law is a result of many legislative enactments and judicial precedents that paved the path for its evolution. Legislation has helped in reforming and even replacing certain traditional textual laws. Prior to the British period, Hindu law varied across different sects of Hindu due to its diverse commentaries and digests. With the commencement of statutory acts, there is uniformity in the laws as well as their applicability. Acts like the Caste Disabilities Removal Act, 1850, the Hindu Widow’s Remarriage Act, 1856, the Indian Majority Act, 1875, the Transfer of Property Act, 1882, the Guardian and Wards Act, 1890, the Child Marriage Restraint Act, 1929 (Sharda Act) have proven to be transformative tools in the modernisation of Hindu law.

These Acts are the products of the legislation that lays down provisions and guidelines for issues that are civil in nature. The legislation has helped to pave a path in shaping the Indian legal system in ways that accelerated in curbing social evils.

The Caste Disabilities Removal Act, 1850 was a notable step towards eliminating the rigid caste-based atrocities. This Act ensured non-discrimination of individuals on the basis of caste and race. It further permitted the acquiring of property and having access to legal remedies, irrespective of caste and race.

The Hindu Widow Remarriage Act ensured the legal and social status of women all over India. This Act rationalised the legal status of women, which is mostly lost in the patriarchal forest of the society. Prior to the commencement of this act, widows faced social ostracism and neglect in the society, were tortured, and avoided basic social status in the society.

The Indian Majority Act, established in the year 1875 was proved to be an important piece of legislation that served a codified structure related to the laws of age and majority. This statute provided for a uniform legal standardised code in order to identify the adulthood of a being.

The Transfer of Property Act has defined various dimensions of property related laws, including five kinds of transfer of a property, which are; sale, mortgage, lease, exchange, and gifts. This legislation ensured elaborative drafting of substantive as well procedural laws relating to the transfer of a property.

The Guardians and Wards Act, which commenced in the year 1890 governs the laws regarding children and their affairs. It is concerned with the children who are vulnerable and isolated. The appointment of guardians and wards involves proceedings of court after property scrutiny.

The Child Marriage Restraint Act of 1929, also known as the Sharda Act outlined certain guidelines, focusing on the protection of children (both girl and boy) by prohibiting marriages under the age of 14 (for girls) and 18 (for boys). This statute was proved to be a pioneer in eradicating one of the social evils of the society, which is child marriage. This Act mandated that a child be mature enough to understand the nature and consequences of such a huge responsibility as the institution of marriage.

Justice, equity, and good conscience

The application of justice, equity, and conscience is the very principle of the existence of law. Hence, its presence is more of an inevitable element in the making of Hindu laws. The inception of these concepts may be traced back to the time of modern English judges, when they felt the need to apply principles of justice and equity, especially in the absence of any applicable laws or during conflicting provisions.

The concept of justice, equity, and good conscience originated in England, in the year 1606, when the Court of Requests was established. The commissioner of the courts ordered the disposal of cases applying the principles of justice, equity, and good conscience. However, the application of such a principle in India was embarked on in the year 1780, during the presidency of Bengal.

Sir Elijah Imphey, who was the pioneer Chief Justice of the Supreme Court of Calcutta implemented significant guidelines that find their places even in today’s date. He laid down that, in circumstances where there is an absence of codified or explicit provisions regarding matters, the mofussil and sadar adalats were directed to operate applying the principles of justice, equity, and good conscience.

Such an implementation compelled the courts to address issues even in the absence of respective provisions, by the virtue of the principle of justice, equity, and good conscience. The courts applied this directive to ensure that there is no loophole left in the judicial system and that no individual suffered due to the absence of adequate legislation.

Justice V. R Krishna Iyer, once in a landmark judgement, dictated that there is a need to imbibe the principles of justice, equity, and good conscience into the societal and cultural norms of Indian legal society. He imparted this knowledge to distinguish the ideologies between the Britishers and Indians.

The principles of justice, equity, and good conscience are dimensional and multi-faced in nature and hold the ability to stretch its sphere beyond provisional laws. The Indian Constitution provides the Supreme Court with a huge ambit of power under Article 142. The many interpretations of the Supreme Court have widened the scope of interpreting statutes and the Constitution.

In the landmark case of M. Siddiq & Ors vs. Mahant Suresh Das & Ors, the Supreme Court interpreted that Article 142 is a straightforward interpretation of justice, equity, and good conscience. It further observed that, although there is no direct application of the principle or the court is not mandated to apply the provision in all of its cases, several constitutional provisions imbibe it through their interpretation, scope, or context. Articles 32, 136, and 226 incorporate the doctrine of justice, equity, and good conscience while offering an impactful way of achieving justice.

Who are Hindus

There has been no strict definition of ‘Hindu’ in the ancient books. However, the word ‘Hindu’ emerged from the onset of the Greeks who addressed the inhabitants of the Indus Valley as ‘indoi’ and gradually became renowned. Although, there is no strict definition, but, after the enactment of the Hindu Marriage Act, 1955, there is a sense of the application of the acts.

The Hindu Marriage Act, 1955 prescribes a provisional definition under Section 2(1)(a) and (b). According to Section 2(1)(a), a person is said to be a Hindu by religion who is a follower of Virashaiva, Lingayat, or a believer of Brahmo, Prarthana, or Arya Samaj, whereas Section 2(1)(b) includes persons who are Buddhists, Sikhs and Jains by religion within the purview of Hindus. The Section further outlines that a person who is not a Muslim, Parsi, Christian, or Jew is Hindu. Similarly structured definition as regards who is a Hindu has also been provided under Section 2(1) of the Hindu Succession Act, 1956, Section 3 of the Hindu Minority and Guardianship Act, 1956, and Section 2 of the Hindu Adoptions and Maintenance Act, 1956.

Furthermore, the Indian Constitution has provided a legal clause as regards who is Hindu, which is mentioned under Article 25 (2)(b), Explanation II. This definition of who is Hindu is as well similarly structured as provided under legislative statutes of Hindu law.

Any person who pursues the Hindu religion in any form, whether by practising or professing, is a Hindu. Hindu religion is multidimensional and hence, to interpret it strictly is a failed attempt. However, the Bombay High Court in the case of Sastri vs. Muldas Bhuradas (1959), made an intrepid effort to define ‘Hindu’ and interpreted that Hinduism does not revolve around a single divine entity and does not adhere to a single doctrine.

By conversion

In the case of Perumal vs. Ponnuswami (1970), an interpretation of the perspective of Hinduism was derived. The Supreme Court held that a marriage conducted between a Hindu and a Christian, according to the Hindu rites, where the woman converted to Hinduism before, is valid. The court further observed that a person may become a Hindu if they express their intention, expressly or by their actions. In such a situation, the intention of the conversion must be taken into consideration and the absence of ceremonial conversion or purification may not vitiate the conversion and that person may be called a Hindu. For conversion, the person should have a bonafide intention and also shouldn’t have any reason to be converted.

Section 2(1), explanation (c) of the Hindu Marriage Act substantiates that “any person who is a convert or re-convert to the Hindu, Buddhist, Jaina or Sikh religion” is a Hindu. Thus, a person who ceases to be a Hindu, becomes Hindu if he reconverts to either Hindu, Buddhist, Jaina or Sikh. On the account of reconversion to Hinduism from another religion, no particular ceremony is mandated to be performed, unless the caste to which the conversion happens, mandates to do so, as was held by the Supreme Court, in S. Anbalagan vs. B. Devarajan & Ors (1983).

By declaration

The Kerala High Court in the case of T. G. Mohandas vs. Cochin Devaswom Board (1975), went one step further from the notions set by the Supreme Court in the Perumal case. The Kerala High Court held that if a person declares himself to be a Hindu, without a mala fide intention or any underlying motive, is said to be a Hindu. Singer K. J Yesudas converted himself from being a Latin Catholic Christian to a Hindu by declaring that he follows Hinduism. Such a declaration of conversion is a valid affiliation.

By birth

Under the modern Hindu law, a person will be a Hindu under the two conditions;

(i) If both his parents are Hindus

A child born to both Hindu parents is a Hindu. In a situation where one of the parents is Hindu and the other one is Sikh or Jain or Buddhist, the child will be a Hindu. What is material is the religious identities of the parents at the time of the child’s birth. If one of the parents converts from Hinduism to another religion, and the child is brought up as per such religion, he may cease to be a Hindu. Section 2(1), explanation (a) of the Hindu Marriage Act, 1955 states that “any child, legitimate or illegitimate, both of whose parents are Hindus, Buddhists, Jainas or Sikhs by religion;”

(ii) If one of his parents is Hindu and has been brought up as a Hindu.

Section 2 (1) explanation (b) substantiates that any child, who might be a legitimate or illegitimate, may be called a Hindu if either of his parents is a Hindu, Buddhist, Jaina or Sikh by religion and has been brought up as a member of such community or tribe, that follows the traditions and culture of one of these religion.

It must be so that such an individual has been raised in an environment where cultural ethics and traditions of any of such religions were prevalent and in practice. This provision of Hindu customary law highlights the importance of upbringing, parentage and the social culture of an individual in determining the religious identity of such an individual.

The rules of being a Hindu by birth remain the same as above; at the time of a person’s birth, one of his parents was Hindu and he is raised as a member of the tribe to which the Hindu parent is associated, at the time of his birth. This was held by the Madras High Court, in the case of Myna Boyee vs. Ootaram (1861), where the court also observed that illegitimate children should be recognised as Hindus, and their rights must be governed by Hindu law. This case illustrates the nature of Hindu law in circumstances where the children are born even outside of the wedlock, i.e., Hindu law gives the status of being a Hindu if such an individual has been brought up in an environment where Hindu rituals and traditions prevail.

To whom Hindu Law does not apply

Section 2(1)(c) of the Hindu Marriage Act, 1955 substantiates that, any person who is domiciled within the territories and does not follow the religion of Muslim, Christian, Parsi, or Jew, is a Hindu. It also provided under a provision that, if a person does not follow any above-mentioned four religions, they shall be governed by this act, unless it can be proven that prior to the commencement of this Act, the person would not have been subject to Hindu law.

According to the explanation (b) of Section 2(1) of the Act, Hindu law does not apply to a child, either legitimate or illegitimate, whose father is a Hindu and mother is Christian and the child is brought up in the Christian community, as per their beliefs and traditions. Or also, a child of a Hindu father and a Mohammedan mother, because children arising out of such a wedlock are not Hindus either by birth or by religion. Hindu law also does not extend to the persons who convert themselves to Muslims, Christians, Parsi, or Jews, and to the Hindus who don’t follow the principles of Sastra.

Enactments through which Hindu Law is applied

Hindu Marriage Act, 1955

Marriage, deemed to be a sacrament entity, implies that it is sacred and inviolable. Under Hinduism, a marriage is complete only with the ceremonial rites and rituals. According to Manu, the tie between a husband and his wife is immortal and cannot be broken even after the death of either. In many religious scriptures and Samhitas, the wife is considered to be half of her man ie., ardhangini. According to Satpatha Bhramana, “The wife is severely the half of the husband.”

The Hindu Marriage Act, 1955 came into force to secure the rights of marriage for the wife and husband. This Act provides a diverse range of provisions and exceptions and has the capacity to accommodate the various communities, families, and sects of people. The intention of the Act is to preserve, protect, and reconcile the interests of the litigating parties, rather than compel them. It even accommodates voidable and void marriages, specifying specific provisions and exceptions to them. Earlier, the Parliament aimed to formulate the Hindu Code, and compile the four statutes; the Hindu Succession Act, 1956, the Hindu Minority and Guardianship Act, 1956, and the Hindu Adoption and Maintenance Act, 1956.

The formation of the Hindu Marriage Act has seen quite a conflicting opinion amongst the lawmakers and the strict followers of the Hindu religion. They feared that the sanctity might be compromised while codifying the Hindu religious texts into laws. The Parliament ensured the inclusion of all the crucial elements in the Hindu code, which emphasised the integration of customs, texts from smritis and srutis, and commentaries. The Parliament, while incorporating the laws, also asserted that the Hindu law is multi-faceted and needs to evolve with the changing times.

With the remarkable part played by the eminent commentators, Vijneshwara stands out prominently. One of the major transformations was brought by the introduction of two schools under Hindu law, which are, Mitakshara and Dayabhaga. Both the schools were a branch of smritis and srutis, however, the interpretations varied. Mitakshara was further divided into four sub-schools, which are, Benaras, Mithila, Maharashtra, and Dravida. This school of Hindu law is based on the principle of Janmasvatvada (ancestral ownership or ownership since birth). Dayabhaga, on the other hand, is prevalent in Bengal, Orissa, and also some parts of Bihar. This school is based on the principle of Upramasvatvada (hereditary rights or ownership arising after death).

Important components of the Hindu Marriage Act, 1955

Interpretation Clause

Section 3 of the Hindu Marriage Act deals with definitions and interpretations of terms observed in Hindu law. This provision defines ‘customs’ and ‘usages,’ which play a crucial role in being one of the sources. This provision makes an effort to accommodate clauses that are indispensable in the area of Hindu law. Section 3(c) defines ‘half-blood’ and ‘full-blood’. Two persons are said to be related by half-blood when they share a common ancestor but have different parents (mothers). Whereas, ‘full-blood’ denotes a relationship between two persons through a common ancestor and the same parent (mother). Similarly, Section 3(d) defines ‘Uterine-blood’, which denotes a relationship between two persons through common ancestress and different parents (fathers).

Other significant definitions under this clause include the ‘sapinda relationship’. This refers to the kinship that extends to three generations towards the maternal lineage and five generations towards the paternal lineage. Therefore, one is said to be sapinda of the other if one is the lineal ascendant of the other within these parameters. This has been provided under section 3(f) of this Act.

Conditions for a valid Hindu marriage

The validity of a Hindu marriage is concluded by considering certain parameters which are mentioned under Section 5 of this Act. There are six provisions under this act which substantially underline conditions to constitute a proper Hindu marriage.

For a Hindu marriage to be valid, neither of the parties to the marriage should have an already existing spouse. This is provided under Section 5(i) of the Act. If a person enters into a second marriage, without divorcing his first wife, the second marriage shall stand to be invalid. Even the consent of the first wife would not validate the second marriage solemnised by her husband. This was also held by the Punjab Haryana High Court in the case of Rattan Chand vs. Shanti Devi And Ors. (1998)
Section 5(ii) of this Act provides for the competency of a person to be a party to a valid Hindu marriage. It is provisioned under Section 5(ii)(a), that for a Hindu marriage to be valid, neither party to the marriage should be incapable of giving consent to the marriage due to unsoundness of mind. A person is not capable of marrying even if such a person is able to give valid consent but has been suffering from a psychological disorder to an extent that appears to be unfit for the procreation of children, as provided under Section 5(ii)(b). Section 5(ii)(c) states that a person who suffers from recurrent attacks of insanity, shall not be competent for a valid marriage.
Both parties to a marriage must attain the age of majority. However, in the case of a bridegroom, the minimum age is twenty-one years. This is provided under Section 5(iii) of the Act.
According to Section 5(iv) of the Act, parties to the marriage must not fall within the purview of prohibited relationships, unless the parties belong to a particular community or caste where such practices are recognised as customs.

Section 3(g) specifies the relationships that are sapindas and fall under prohibited relationships. Persons under prohibited relationship are as follows-

If one person is the lineal descendant of the other,
If one person is the husband or wife of the lineal descendant or ascendant of the other.
If one person is the wife of the other person’s brother, father or mother’s brother or grandfather’s or grandmother’s brother.
If one person is the brother or sister, uncle or niece, aunt or nephew of the other person. It further states that one person is sapinda of another if two persons are children of a brother and sister, or two brothers or two sisters.

Section 5(v) of the Act states that two persons who are sapindas of each other, cannot enter into a marriage. However, such marriage is valid if it is permitted and practised as a custom that governs them.

The validity of marriage in the case of live-in relationships is now judicially substantiated. However, the continuous cohabitation and reputation as a couple need to be established. This was also held by the Madras High Court in the case of Manikyam vs. Atchamma (1953) 1 Mad LJ 34. In another case of Kanchan Malhotra vs. Yashwir Singh (1986), the Madhya Pradesh High Court held that the presumption of a valid Hindu marriage is not solely based on cohabitation but should also involve ‘habit’ and ‘repute’, as provided under Section 50 of the Indian Evidence Act, 1872 and Section 44 of The Bharatiya Sakshya Adhiniyam, 2023. Such marriage may be proven by the conduct of individuals, who, as family members, friends, or relatives, have specific knowledge of the relationship.

Void and voidable marriage

A void marriage is so, that was never solemnised as a valid marriage in the first place, ie., void ab initio. Section 11 of this Act lays down a provision for a void marriage. This section is prospective in nature and is applicable only after the commencement of this Act. A marriage may be void if either of the parties to a marriage violates Section 5 (i), (iv), (v).

Therefore, a marriage is spontaneously void if solemnised upon the existence of a prior spouse and parties to the marriage fall under the prohibited degree of relationship or are sapindas of each other.

A marriage that may be declared void by decree of a court, if either party to a marriage seeks such a decree, is considered a voidable marriage. Section 12 of the Act provides grounds, exceptions, and provisions on this aspect. This provision is retrospective in nature and applicable in marriage before the commencement of this Act. The grounds provided regarding voidable marriages are as follows.-

A marriage may be annulled by either of the parties to a marriage if the marriage is not consummated owing to the impotence of the other party. This is mentioned under Section 12(1)(a).
Either party to a marriage may approach the court to annul their marriage, in case there has been a contravention of Section 5(ii) by the other party. This states that if a party to a marriage is psychologically challenged and incapable of giving valid consent, his spouse has the option to annul the marriage. This is provided under Section 12(1)(b).
Where the consent of the petitioner or his/her guardian is obtained by fraud, the marriage is voidable and may be annulled at the option of the petitioner, as mentioned under Section 12(1)(c).
In a marriage, if the wife was already impregnated by someone else other than her husband, such marriage may be annulled at the option of the husband. This is provided under Section 12(1)(d). However, there is proviso in regard to this, mentioned under Section 12(2)(b), that the husband must be unaware of his wife’s pregnancy, the proceeding in the light of this context must begin within a year from the commencement of this Act (if such marriage took place before the commencement of this Act), or within a year from the date of marriage (if such marriage took place after the commencement of the Act) and, marital intercourse took place after the discovery of pregnancy by the husband.

Registration of marriage

Registration of marriages is done via Section 8 of this Act. According to this Act, the state government has the authority to create rules that facilitate the recording of marriages in a Hindu marriage register. Such register shall be for this specific purpose and the recordings must be made according to the rules and conditions. Further, the state government may mandate the recording of marriages in specific parts, if deemed necessary and beneficial for that area. However, in general, an omission to make an entry of such a marriage would never validate the marriage.

Divorce

The word ‘divorce’ has emerged from the Latin word ‘divortium’, which means ‘diverging paths’. It denotes the separation of two spouses in a sacramental relationship. Since the inception of the 1955 Act, there have been two amendments; the Hindu Marriage (Amendment) Act, 1964, and the Marriage Laws (Amendment) Act, 1976. The recent amendment Act liberalised the ambit of the divorce laws by inserting a new ground for divorce by mutual consent. Section 13 of the act provides for nine grounds for divorce. Any party to the marriage may seek the court for a decree of dissolution of marriage under the grounds provided in this section. The grounds may be majorly classified into three categories- Fault-theory, breakdown theory, and grounds provided for the wife.

Sexual intercourse outside the marriage

This ground is mentioned under Section 13(1)(i), which provides for ‘adultery’. The word ‘adultery’ is nowhere defined in the statute. Thus, it may be denoted as ‘sexual intercourse with any person other than his or her spouse’. The Madhya Pradesh High Court in the case of Gitabai vs. Fattoo And Anr. (1966) interpreted ‘adultery’ as “an act of consensual sexual intercourse between a married person and another person of the opposite sex who is not his or her spouse during the subsistence of former marriage.”

In a landmark judgement of Joseph Shine vs. Union of India (2018), the Supreme Court decriminalised the act of adultery and dictated that while the criminal ground of adultery is abolished, consequences of civil nature still pertain to it. A wife may seek a decree of divorce from the court on the ground of an act of consensual sexual intercourse by her husband with another woman, who is unmarried.

Cruelty

Any party to a marriage may seek for a decree of divorce from the court on the ground of cruelty upon him/her, by the other party, which is mentioned under Section 13(1)(ia) of the Act. Cruelly may be both physical and mental. However, in a case of mental cruelty, there must be substantial evidence of prolonged circumstances and incidents. Cruelty has to be distinguished from the ordinary wear and tear of one’s life. This ground may include, apprehension of inflicting harm, apprehension of killing, physical abuse, physical or mental torture, torturing by captivating, and many more, depending upon the facts and circumstances of each case.

The Supreme Court of India in the case of V. Bhagat vs. D. Bhagat (1994) emphasised on the aspect of mental cruelty and held that mental cruelty must be of such a severity that would make the parties unbearable to each other and living together. He also stated that what may constitute cruelty in one case, may not be so in another.

Desertion by spouse

Any party to a marriage, if deserted by his or her spouse for a prolonged period of two years or more, may appeal from the court to grant him or her divorce on this ground. This ground is provided under Section 13(1)(ib).

Conversion of religion

Conversion of faith by one party in a marriage does not vitiate and dissolve the marriage automatically, the other party has to obtain a decree of divorce under this ground. However, it is at the option of the party to dissolve the marriage if one remains a Hindu. This is provided under Section 13(1)(ii).

Unsoundness of mind

A party may seek a decree of divorce from the court if their spouse suffers from incurable mental illness or a mental disorder that makes cohabitation impossible. Such mental disorders also include schizophrenia. This provision also states that in case of psychopathic disorder of one party, the other party may file a petition obtaining a decree of divorce. The psychopathic disorder would refer to abnormal and excessive aggression. This is mentioned under Section 13(1)(iii) of this Act.

Venereal disease

Any party to a marriage may appeal to the court to obtain a decree of divorce on the grounds of his or her spouse suffering from venereal disease. Such venereal disease must be communal and incurable. Venereal diseases like STDs and AIDs are life-threatening. Hence, the other party may opt to withdraw himself or herself from the marriage and have the liberty to live healthy and free of disease. This is mentioned under Section 13(1)(v).

Renunciation of the world

A spouse may seek a divorce from the court if their partner has renounced the world in order to join the religious realm. This ground is mentioned under Section 13(i)(vi) of the Act.

Presumption of death

A person is presumed to be dead if they had not been found for at least seven years. He shall be presumed dead when he has not been heard of or seen around by the people who would naturally see him. A spouse may remarry based on the assumption of death and may seek divorce from the court. This ground is mentioned under Section 13(1)(vii) of this Act.

Grounds for divorce a wife can avail

Bigamy

A wife is entitled to seek a divorce from her husband who has committed bigamy, as outlined in Section 13(2)(i) of the Act. However, the provision prescribes conditions to be fulfilled, they are- i) the marriage in question must occur after the Act was enforced, and ii) the husband involved must already have a living spouse while solemnising the second marriage. The Act also provides for a punishment section, which is mentioned under Section 17 of this Act.

Offence of rape, sodomy, and bestiality by the husband

If the husband is found guilty of committing offences of rape, sodomy, or bestiality, the wife has the right to seek divorce under Section 13(2)(ii) of the Act. The offence of rape is defined under Section 375 of the Indian Penal Code, 1860, and under Section 63 of The Bharatiya Nyaya Sanhita, 2023. Whereas, the offence of sodomy and bestiality is mentioned under Section 377 of the Indian Penal Code, 1860.

Failure to resume cohabitation subsequent to the issuance of a maintenance decree

The Amendment Act of 1976 inserted yet another significant ground for women to seek divorce. Section 13(2)(iii) of the Act provides that, if a decree or order of maintenance was issued against the husband under Section 18 of the Hindu Marriage Act, 1955, or Section 125 of the Code of Criminal Procedure, 1973 (now under Section 144 of the Bharatiya Nagarik Suraksha Sanhita, 2023), requiring him to provide maintenance to the wife, and meanwhile, the couple has not resumed cohabitation for a year or more subsequent to the decree or order, the wife is entitled to file for divorce.

Repudiation of Marriage

A wife has the right to seek the court for a decree of divorce under the ground of the right of repudiation of marriage upon attaining the age of eighteen years. However, she has to execute this right before attaining the age of majority.

Divorce by mutual consent

Parties to a marriage may file a petition together before the court for obtaining a decree of divorce, on mutual consent. However, both parties must have been staying separately for more than a year and have mutually agreed to dissolve their marriage.

Hindu Succession Act, 1956

Introduction

The succession and inheritance of property in India are governed by the Act of 1956. The Hindu Succession Act, 1956 comprises a testamentary succession of properties. Regarding the Hindu Succession Act of 1956, a pivotal amendment was made to the Hindu Women’s Right to Property Act, 1937. This development significantly solidified female property rights within a Hindu Undivided Family (HUF). The amended 1956 Act included the widow, mother, and daughter in the class 1 heirs. Consequently, in the event of a partition within a HUF, the widow, daughter, and mother would be first in line to inherit property.

Applications of the Act

Section 2 of the Act enumerates the applicability of this statute. It applies to persons who is Hindu by religion and belong to Virashaiva, a Lingayat, or a believer of the Brahmo, Prarthana, or Arya Samaj. This Act applies to persons who are Sikhs, Jains, and Buddhists. The Act further asserts that the provisions under this Statute may apply to people who are not Christians, Muslims, Jews, and Parsis. However, it must be proven that such people would be governed by Hindu law and customs, in the absence of this Act.

The interpretation of a person following Hinduism under this Act is provided under the explanation part of Section 2(1) of the Act, which is the same as provided under the Hindu Marriage Act.

This Act lays down an exception for the Schedule Tribes within the meaning of Article 366 of the Indian Constitution, stating that the statute is inapplicable to the persons of the tribe.

Important component of the Hindu Succession Act, 1956

Male intestate succession

Mainly the rule governing the intestate succession of Hindu males is mentioned in Section 8 to Section 13 of the Hindu Succession Act, 1956. This set of provisions prescribes the devolution of property in cases where a Hindu male dies without making a will.

According to Section 8 of the Act, the properties of a Hindu male shall devolve upon his heirs of Class I, and in its absence heirs of Class II. Furtherance to the absence of heirs of class II, the property shall be devolved upon the agnates of the deceased, and in the absence of agnates, it will ultimately flow to the cognates of the deceased.

Section 10 of the Act elaborates the distribution of the property of a male among heirs of class I, according to which the intestate property will pass on to the widow of the deceased, and then to the surviving son, daughter, and mother of the deceased. The provision further articulates in cases of pre-deceased sons and pre-deceased daughters, and the devolution of the property to their heirs. Whereas, Section 11 of the Act provides for apportionment of properties among heirs of class II.

Section 12 of the Act asserts the order of succession among agnates and cognates, which is determined by a specific rule of preference. An heir with fewer degrees of ascent will be preferred first. In case, the number of degrees of ascent is the same for two or more heirs, heirs with fewer degrees of descent shall be preferred. Whereas, the computation of degrees of the heirs is determined under Section 13 of the Act, where such degrees are computed inclusive of the intestate.

Female Hindu’s property

Section 14 of the Hindu Succession Act states that all the properties including the movable and the immovable property which belong to a Hindu who is female are held by her as only the owner of the properties, not as a limited owner of the properties. These properties include being gifted by someone, purchased, or while getting married. Thus, a Hindu woman has the supreme power to deal with her properties and she can dispose of her properties by her will, gifting someone, selling someone, and via other modes of transfer.

However, according to Section 14(2), certain restrictions are applied on the property of a woman. If a property owned by a woman is acquired through gift, will, any other legal instrument, a decree of a court, or an award, that involves conditions retraining to alienate, such conditions shall be valid.

Female intestate succession

The provisions governing the intestate succession of Hindu females are mentioned in Section 15 and Section 16 of the Hindu Succession Act, 1956. A Hindu female’s intestate is governed by Section 15 of this Act, that is when she dies without leaving a will. Before determining the shares of a Hindu female’s legal heirs, it’s crucial to understand the origin of the property to apply the correct succession provisions. If a Hindu female inherits the property and has surviving children or grandchildren, Section 15(1) of the Act shall apply. However, if there are no surviving children or grandchildren, Section 15(2) applies. For self-acquired property, property obtained through a will, gift, stridhan, or other mode, Section 15(1) is applicable.

Hindu Minority and Guardianship Act, 1956

Introduction

The Hindu Minority and Guardianship Act, 1956 consolidates the legal provisions concerning minority and guardianship, emphasising on children’s welfare. This Act was enacted on August 25, 1956, and was designed to standardise laws related to minorities and guardianship within the Hindu community, prioritising the prosperity of minors. This Act comprises 13 Sections that deal with not only the principles of minority and guardianship but also highlight the powers and types and, the qualifications required for a person to serve as a child’s guardian.

Application of the Act

Section 3 of the Act states the applicability of the statute. This section is applicable to the Hindus, who are interpreted as persons who follow the religion of Hinduism, or a believer of Virashaiva, Lingayat, Brahmo, Prarthana, or Arya Samaj. The Act further makes Buddhists, Sikhs, and Jains eligible for the applicability of the Act and is considered Hindu, as stated under Section 3(1)(b). The Act also specifies to whom it does not apply, including Muslims, Christians, Parsis, and Jews by religion, which is mentioned under Section 3 (1)(c).

This Act lays down an exception for the Schedule Tribes within the meaning of Article 366 of the Indian Constitution, stating that the statute is inapplicable to the persons of the tribe.

Natural guardians

Natural guardians of a Hindu minor are specified under Section 6 of the Act, where natural guardians of an unmarried girl, a boy, an illegitimate unmarried girl, or a boy are specified. It also mentions that a husband shall be a guardian of a married woman, under Section 6(c) of the act.

An adoptive father and an adoptive mother of an adopted minor child shall be his or her natural guardian, according to Section 7 of the Act.

Powers of the natural guardians are mentioned under Section 8, where it is specified that, even after being authorised to maintain minor children, the natural guardians are bestowed with certain rights, powers, and restrictions. A natural guardian acquires all the power to do acts that benefit the minor child, for his as well as his estate’s protection. The Act under Section 8(2) asserts that a natural guardian may not dispose of a minor’s property through any mode, without seeking prior permission from the court, and also restricts from leasing any property of minors under Section 8(2)(b).

The Guardians and Wards Act, 1890 shall apply in case of any prior permission by a natural guardian or an appeal from such persons. Further, Section 10 of the Act that a minor is incompetent to act as a guardian of a minor.

This Act also lays down the testamentary rights of the natural guardians under Section 9. The Section specifies that in case of the death of a father or mother acting as natural guardians, they are authorised to create a will, appointing a guardian in respect of the minor and his properties. It further specifies under Section 9(6), that the guardianship appointed shall be ceased on the account of marriage of the minor girl.

Hindu Adoptions and Maintenance Act, 1956

The Hindu Adoption and Maintenance Act, 1956, is one of the significant sets of legislation that focuses on the intricacies of adoption and maintenance within the Hindu community. This Act extends its applicability to Hindus, including those who follow the Brahmo, Prathana, or Arya Samaj traditions, as well as Buddhists, Sikhs, and Jains. It also encompasses individuals not governed by the laws of other major religions such as Islam, Christianity, Zoroastrianism, and Judaism. The Act outlines criteria for adoption, stipulating that the child must be under the age of 15, unmarried, and not previously adopted. Other various criteria, eligibility, and qualifications are mentioned in brief below.-

Applications of this Act

According to Section 2 of the Act, the provisions of this statute may apply to the people who follow Hinduism, or a person who is a believer of Virashaiva, a Lingayat, Brahmo, Prarthana, or Arya Samaj. This Act also extends to a person who is Buddhist, Jaina, or Sikh by religion, and not to a person who is a Muslim, Christian, Parsi, or Jew by religion.

Section 2(2) of this Act lays down an exception for the Schedule Tribes within the meaning of Article 366 of the Indian Constitution, stating that the statute is inapplicable to the persons of the tribe.

Who can be adopted?

Section 10 of the Act lays down the criteria of a person who is eligible to be adopted. It asserts that a person is eligible to be adopted under the provisions of this statute only if the person is Hindu by religion, has not been adopted earlier, is not married (unless a custom or usage permits to be adopted if married), has not attained the age of fifteen years (unless a custom or usage permits to be adopted at the attainment of fifteen years).

Valid Adoption

There are certain prerequisites for an adoption to be valid, which are laid down under Section 6 of the Act. This includes the capacity and the right of the person to adopt, the person to be adopted must have the capacity to be adopted, and the person giving for adoption must be the guardian or parents of the person given for adoption.

Certain other conditions of a valid adoption

The act has laid down certain essential conditions to be fulfilled in order for an adoption to be valid. Section 11 outlines such prerequisites, which are as follows.-

In the case of the adoption of a son, the person adopting must not have an existing Hindu son, grandson, or great-grandson, at the time of adoption, according to Section 11(i).
In the case of the adoption of a daughter, the person adopting must not have an existing Hindu daughter, great-granddaughter, or great-granddaughter, according to Section 11(ii).
Section 11(iii) states that if a male person is adopting a female child, he must be twenty one years older than the adopted son.
Section 11(iv) lays down that if a female person is adopting a male child, she must be twenty one years older than the adopted girl.
A person cannot be adopted simultaneously by two or more persons, as mentioned under Section 11(v).
Proper and formal procedures must be followed while giving a child adoption, by his or her parents or guardian, and the person being adopted must be received by his or her adoptive parents. This is mentioned under Section 11(vi).

Who can give a child up for adoption?

Section 9(1) lays down that only a mother or a father or guardian has the capacity to give a child for adoption. However, it is also mentioned that, both the mother and father shall have equal rights in giving their child for adoption, given that, they must be competent to do so.

The person adopting a child must meet all the requirements of a valid adoption, as provided under Section 6, Section 7, and Section 8.

Existence of Hindu law in the Indian Constitution

The inclusion of Hindu religion in the Indian Constitution is interlinked with key principles of equality and freedom enshrined in its articles. Article 15 of the Indian Constitution, which falls within the ambit of the Right to Equality, talks about the prohibition of discrimination on the grounds of religion, race, caste, sex, or place of birth. Hindu law is closely related to this because of the discrimination against the religion, giving liberty to Hinduism as well as other religions. Similarly, Article 25 says about the freedom of conscience and free profession, practice, and propagation of religion which comes under the right to freedom of religion. Article 26 states the freedom to manage religious affairs. Together, these constitutional provisions affirm the presence, recognition, and protection of Hindu religion within the broader framework of religious equality and freedom in India.

The Constitution of India, in its preamble, has delineated the concept of secularism and has mandated the people of India to adhere to the principle. The forty-second Constitutional Amendment Act, 1976 inserted the word ‘secularism’, which is regarded as one of the basic features of the Indian Constitution. This was established by the virtue of the verdict in the case of Keshavnanda Bharati vs. State of Kerala (1973). This landmark judgement has substantiated the usage, interpretation, and the practice of a religion, allowing an individual to profess their choice of religion and its practices.

The Indian Constitution enlarges the scope of the practices of traditions and customs of Hindu law while allowing its customary laws to be prevailed in most of the parts of India. The customary legal system of Hindu law envisages practices that may be territorial-centric or caste-centric. The Indian Constitution permits such practices with its emancipation of the principle of secularism as one of its basic features.

Role of Judiciary

The Indian Judiciary has played a pivotal role in shaping the structure of Indian customary laws, specifically Hindu law. Through its landmark judgements, the Indian Judiciary has strengthened the fundamental rights and duties of the individuals. It further has interpreted various constitutional aspects, addressing various legal issues pertaining to socio-legal matters. Following are the cases that drew attention and set firm legal precedents, affecting various dimensions of Hindu law.

Sarla Mudgal vs. Union of India (1995)

Facts

In this case, Sarla Mudgal, the petitioner, filed a petition claiming that her husband solemnised a second marriage. She claimed that her husband converted to Islam, and took advantage of the practice of polygamy. She contented that such marriage is void ab initio and that her husband committed the offence of bigamy. This case highlighted the need to address the misusing of religious conversion, in order to take advantage of its customary practices.

Judgement

The Supreme Court, quashing the appeal of the husband, held the second marriage to be illegal. It further stressed that a marriage solemnised under the Hindu law can only be dissolved by the decree of the court. Furthermore, the court upheld the decree of maintenance prayed by the wife for herself and their daughter.

Joseph Shine vs. Union Of India (2018)

Facts

In this case, a petition was filed under Article 32 of the Indian Constitution, that challenged the constitutionality of Section 497 of the Indian Penal Code (The Bharatiya Nyay Sanhita, 2023 does not include adultery as an offence as it was decriminalised by the virtue of this case). The petitioner contended that the provision is discriminatory in nature as it did not provide a woman the right to prosecute the woman with whom her husband committed adultery. The petitioner further contended that this provision is an infringement of gender equality and promotes stereotypes, undermining women’s dignity.

Judgement

The Supreme Court of India, with its majority, decriminalised ‘adultery’, which fell under Section 497 of the Indian Penal Code. The Bench had five judges, chaired by Justice Deepak Misra, who focused on the significance of constitutional principles concerning gender equality, the dignity of a woman in a marital relationship, and her dignity. The court held that the provision was unconstitutional, specifically the Articles 14, 15, and 21, based on gender-bias.

The court further held that the provision was illogical and feudal in nature and highlighted that it penalised persons outside of marriage and did not provide for an opportunity for the wife to file a suit against her husband.

Ramesh Chandra Rampratapji Daga vs. Rameshwari Ramesh Chandra Daga (2005)

Facts

In this case, the wife, while living in her second marriage, faced domestic violence from her second husband. Subsequently, the wife left her in-laws home with her daughter and started residing separately. However, the first marriage was not legally dissolved, but was done as per one of the customary rules followed by the Maheshwari people group, known as ‘chor chithi’.

She prayed for judicial separation and claimed maintenance for herself and her daughter. Her second husband, in order to escape from the claims, contended that the first marriage of his wife was not properly dissolved, hence making their existing marriage invalid under the Hindu law.

Judgement

The Supreme Court in this case observed that a Hindu marriage is dissolved only by the virtue of provisions prescribed under the Hindu Marriage Act, 1955. It further held that the Section 5 (i) of the Hindu Marriage Act was violated and customs like ‘chor chitthi’ were not recognized in the eyes of the law.

Regarding the appeal prayed by the wife for herself and her daughter, the court granted a permanent maintenance with regard to the Section 25 of the Hindu Marriage Act, 1955. It interpreted the provision broadly which included granting of maintenance, including decrees of nullity. The court emphasised on the facts and circumstances of the case and perceived that the wife must get the claimed maintenance for herself and her daughter, even though the first marriage never legally dissolved, nullifying her second marriage.

Sushil Kumari Dang vs. Prem Kumar Dang (1976)

Facts

In this case, the husband filed a petition for restitution of conjugal rights. He claimed that his wife abandoned him and his society without any reasonable cause. Further, the wife contended that she was physically and mentally abused and that she was a victim of cruelty where her husband attacked her physically after coming home drunk.

The trial court of Delhi District supported the claims of the husband and ordered a decree of restitution of conjugal rights. Subsequently, the husband prayed for judicial separation alleging an illicit relationship of his wife with another man, which was further appealed by his wife.

Judgement

The Delhi High Court did not uphold the Trial Court’s decision and overturned it. The court observed that the husband lacked sincere intention to reconcile with his wife, given that the husband immediately prayed for a judicial decree after obtaining a decree for restitution of conjugal rights. The court further observed that it was just to harass his wife, and that the husband filed both the suits simultaneously, which shall be bad in law if allowed.

Lata Singh vs. State of Uttar Pradesh (2006)

Facts

In this case, a girl named Lata resided with her brother, from where she ran away in order to marry Bhrama Nand Gupta, who did not belong to the same caste as hers. On not being found for a long time, her brother registered a missing complaint, which led to the discovery of the boy’s parents. On the discovery, the brother started to threaten and attack the family of his sister’s husband, showing contempt for them being married even after belonging to different castes.

Judgement

The Supreme Court, highlighting the Article 21, stated that a person has the freedom to marry outside of their caste. It further opined that if their respective parents oppose such marriage, they may sever social contact with their children rather than threatening, coercing, or committing honour killing. The court further directed that the encouraged atrocities towards inter-caste couples must stop and mandated the police to keep a check.

Seema vs. Ashwani Kumar (2006)

Facts

The petitioner, Seema filed a case against her husband Ashwani Kumar regarding an ongoing dispute between them. The case got into appeal and was elevated to the Supreme Court, which observed a broader issue concerning unregistered marriages. The Supreme Court issued notices to many states in order to obtain their opinions on the compulsory registration of marriage.

Judgement

The Supreme Court mandated the registration of marriages in order to protect social and civil rights of individuals. It also observed that such records might be a helping hand in times of disputes in marriages and issues related to it. The court further focused on mandating the registration of marriages within three months and the appointing officers. It also mandated the enforcement of proper authorities and the implementation of penalties for non-compliance.

Smt. Prafulla Bala Mukherjee vs. Satish Chandra Mukherjee And Ors. (1997)

Facts

In this case, the plaintiff-appellant filed a suit seeking a declaration, claiming to establish ownership of a two-storeyed house. They also prayed for a permanent injunction against the defendants. The house belongs to Gopal Mukherjee, who is the brother of the plaintiff and father of the defendants. The plaintiff however, claimed ownership of that house by asserting that she and her husband adopted Ganesh Chandra Mukherjee, who was one of the sons of Gopal Mukherjee. After the death of Ganesh Chandra Mukherjee, the plaintiff claimed the ownership of the two-storeyed house, which the defendants denied, contending that the adoption was not valid.

Judgement

The Calcutta High Court held the adoption to be invalid and dismissed all the claims of the plaintiff. The documentary and oral evidence show that Ganesh Chandra Mukherjee has continued to consider his biological parents to be his parents and maintained ties with them, therefore refuting the claim of the plaintiff to be his adoptive mother. Furthermore, the court observed that the required ceremonies concerning adoption were not fulfilled, and no formalities were executed.

N G Dastane vs. S Dastane (1975)

Facts

In this case, the husband filed a suit against his wife alleging cruelty to him. In her defence, the respondent-wife contended that such claims were fabricated and the marriage deteriorated due to the actions of her husband and his sheer neglect. The husband allegedly compelled the wife to consult a psychiatrist but failed due to her denial. The wife further stated that there had been no action of cruelty from her side and that the claims and contentions of her husband were just to harass her and dissolve the marriage.

Judgement

The Supreme Court in this case observed that the Trial Court failed to assess through the nuances of the allegation of cruelty and neglected the factual interpretation asserted from the evidence provided. The Supreme Court, after further consideration of the evidence, outlined that there has been conduct on the part of the respondent that amounts to cruelty. However, it was concluded by the court that it was not possible to substantiate the claims of cruelty and desertion by the appellant as the earlier actions of the respondent were condoned by the appellant.

Jijabai vs. Pathankhan (1970)

Facts

This case concerns the concept of natural guardianship and who is a natural guardian. This issue came to the surface when a minor, after attaining the age of majority, filed a suit in order to terminate the lease of the tenant, who is also the respondent in this case. The piece of land was gifted to the appellant by her father. During the tenancy, the appellant was a minor and the lease was maintained by her mother, due to the absence of the appellant’s father. The validity of the lease was questioned, as it was managed by the appellant’s mother, rather than her father. It was contended that, according to the Hindu Minority and Guardianship Act, a father is the natural guardian of a child and not the mother.

Judgement

The Supreme Court, in this case, upheld the validity of the lease which was executed by the mother of the appellant, while she was a minor. While the validity of the lease was in dispute, given the execution made by the mother, who is not the natural guardian according to the Hindu Minority and Guardianship Act, the court affirmed the validity and observed that in a situation where the father is inactive, neglectful or absence in the affairs of his minor child, the mother is the natural guardian of the child.

The need for such reforms

Hindu law, as has been in existence since the 1950s lacked certain rational ideologies and social progress. The reforms in Hindu law were crucial to addressing certain inconsistencies and inadequacies hidden in the prolonged provisions of Hindu customary law, which were later exposed through landmark judicial precedents. Through such landmark decisions, various contemporary issues were addressed, such as constraint on a second marriage while the former spouse is still in existence, decriminalising the practise of adultery which veiled the dignity of women, and respecting their rights and choices.

Many laws under Hindu law have exceeded their timeframe, further creating chaos in the modern times. Thus, to embark on a fresh and an equitable approach, it is indispensable to consider these changes, either through legislation or through judicial precedents. The judiciary addresses issues concerning social disruptions and dilemmas, relating to marriages, adoptions, guardianship, and succession. The judiciary also has emancipated the Indian legal system by interpreting Hindu customary laws, with its sheer knowledge and commitment to perceive an equitable and justiciable approach.

Conclusion

Hindu law has many colours to it and is wide in nature. The extensive sphere of Hindu law comprises several acts, out of which few are discussed in the article in brief. With the inception of statutes governing personal law like Hindu law, the functioning of personal laws within the walls of traditional courts has been easier. The codification of a personal law is indeed achieving a milestone. It is not just creating and enacting laws but, incorporating religious sentiments, rituals, customs, and many more.

Thus, an introduction to Hindu law would not be less than a book as it comprises numerous statutes dealing with personal laws such as the Hindu Marriage Act, 1955, Hindu Succession Act, 1956, Hindu Minority and Guardianship Act, 1956, Hindu Adoption and Maintenance Act, 1956, The Transfer of Property, 1882, The Special Marriage Act, 1954, The Hindu Women’s Rights to Property Act, 1937 and many more. This article makes an effort to provide an idea of the enormously diversified Hindu law.

Frequently Asked Questions (FAQs)

Is stridhan of a woman protected under any statutory provision?

A woman’s entitlement to her stridhan is safeguarded under Section 14 of the Hindu Succession Act, read with Section 27 of the Hindu Marriage Act, 1955. It mentions that even if the property under stridhan is captivated by her husband or in-laws, they are merely trustees of such property and must return it to the owner of it, i.e., the wife. Further, Section 18(e) of The Protection of Women from Domestic Violence Act, 2005 recognises streedhan as one of the rights of a wife and states that a woman has the right to recover her assets, including jewellery, clothing, streedhan and other essential items, and the statute also addresses ‘economic abuse’ to protect her financial interests.

Can a Muslim person marry a Hindu person?

Yes, a Hindu and Muslim person can marry each other, under The Special Marriage Act, 1954. A marriage between them would be voidable under Hindu personal law and irregular (fasid) under Muslim personal law.

Does conversion of faith repudiate a marriage?

No, a marriage is not spontaneously dissolved upon the conversion of faith by either party to a marriage. However, on such conversion, the other party may file a petition before the court for divorce on this ground. This is one of the grounds mentioned under Section 13, to be specific, Section 13(1)(ii).

Can a single woman adopt a child?

Yes, an unmarried woman can adopt a child, whether a boy or a girl, provided that she has to be competent and comply with the provisions under Section 6 and Section 8 of the Hindu Adoption and Maintenance Act, 1956. However, adoptions are also regulated by the Central Adoption Resource Authority, which is a statutory body. The Regulation No. 5 of this enactment prescribes eligibility criteria for adoption. It makes an unmarried female eligible to adopt a girl or a boy, whereas, enables an unmarried male to adopt only a boy child.

References

Hindu Law and The Constitution, A.M Bhattacharjee, 2 ed. 1994.
Modern Hindu Law by Paras Diwan.
https://blog.ipleaders.in/hindu-law-custom/#:~:text=Customs%20are%20mainly%20of%20four,Customs%2C%20Class%20or%20Caste%20Custom.
https://blog.ipleaders.in/can-marriage-maternal-uncle-niece-valid-marriage-india/.
https://blog.ipleaders.in/hindu-law-notes/#Origin_of_Hindu_Law.
https://blog.ipleaders.in/overview-of-the-hindu-minority-and-guardianship-act-1956/#Introduction.
https://blog.ipleaders.in/the-hindu-succession-act-1956/.
https://www.britannica.com/topic/Dharma-shastra.

Understanding taxation principles in finance : an insight

By

-

October 29, 2024

This article was written by Shipra Agrawal, pursuing the Diploma in US Corporate Compliance Course from Skill Arbitrage, and edited by Koushik Chittella.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

Taxation is an essential component of any government system. It allows the government to generate the revenue required to maintain public services, infrastructure, and various other essential functions. Taxes play a critical role in funding social programs, healthcare, education, and defence. But how does the tax system work, and what are the guiding principles that make it effective? Understanding the basics of taxation helps us to manage our money and contribute to the community. Nowadays, governments have developed more sophisticated systems and processes for defining tax, who is taxed, how much is taxed, and which personal conditions of the taxpayers should be taken into account. Let’s explore the simple principles of taxation and how these impact our daily lives. In this article, we will explore the history of taxation, the reasons behind it, and its various forms before discussing the principles of taxation.

Brief history of taxation

Taxation has been a part of society for thousands of years, starting as far back as ancient Egypt and Mesopotamia, where taxes were collected in the form of crops, shares of agricultural production, and livestock for the ruling government. In the Roman Empire, taxes were more structured, and citizens were required to pay based on their income and property. However, taxes were collected in the form of crops and livestock also, and even in mediaeval Europe, where a similar taxation system became one source of financing.

Taxes used to be messy and unfair. Over a time, with the rise of democracies and structured economies, the tax system became more standardised, and laws were created to make taxes more fair and transparent. Now, modern tax systems help countries manage their money and resources in a way that’s fair for everyone.

Tax: meaning

Tax is the contribution from the public to a governing body to support the government for all public needs. In simple terms, when we pay taxes, we are helping to fund things like roads, schools, hospitals, defence, and other community services that everyone benefits from. Taxes can take various forms, such as income tax, property tax, corporate tax, Goods and Services tax, Capital gain tax, etc.

Need for Taxation

The economic resources available to society are limited, and so an increase in government expenditure normally means a reduction in private spending. Taxation is one method of transferring resources from the private to the public sector. Governments often use other methods of raising resources. Taxation is usually the most important source of government revenue. Most countries have a tax system that differs from that of other countries. Taxation is necessary for several reasons:

Revenue Generation: Governments need money to provide essential services like healthcare, education, defence, infrastructure, and social welfare. Without taxes, these services would not be possible.
Redistribution of Wealth: Reducing income inequality through progressive taxation. In simple terms, taxes help redistribute wealth in society by taxing higher earners at higher rates and using those funds for social welfare programs that support low-income individuals.
Economic Stability: When the economy is growing too quickly, governments can raise taxes to reduce excessive demand and control inflation. Conversely, during a recession, cutting taxes can encourage consumer spending and investment, helping to stimulate economic growth.
Encouraging or discouraging behaviours: Governments can impose higher taxes on harmful products like cigarettes or alcohol to discourage their use or provide tax breaks for environmentally friendly practices.

Principles of Taxation

We already discussed what is taxation; now what are the principles of taxation? Principles are nothing but a basic general law, rule, or idea. Adam Smith (1723-1790), known as the “Father of Modern Economics,” laid the foundation for modern taxation principles in his book “The Wealth of Nations” (1776). He introduced the “Canons of Taxation,” which include: a. equality, b. certainty, c. convenience, d. economy.

Adam Smith created important rules for taxation a long time ago. He believed taxes should be fair, clear, easy, and cost-effective, but as time passed, people realised that taxes are more complicated than that. So, new rules were added to help deal with modern economic problems.

So, here are all the principles categorised in 2 ways:

I. Classic Principles

II. Modern Principles

Classic Principles

Classic principles of Taxation include:

Equality: This principle is based on the idea that the tax burden should be distributed in a fair manner. It means tax should be levied on the taxpayers according to their ability to pay. Individuals with a higher income should contribute more tax, and individuals with a lower income should pay less tax.
Certainty/Clarity: This principle states that the tax system should be clear, transparent, and certain with no surprises to taxpayers. Taxpayers should know their tax obligation, when to pay, and how to pay.
Convenience: The method of payment of taxes should be convenient to the taxpayers. Tax collection methods should be easy, such as online or payroll deductions. There should be minimal compliance requirements and less paper work.
Economy: The cost of collecting taxes should be cost-effective and efficient. A well-designed tax system minimises its administrative cost and taxpayer burden. A simple tax return process with easy-to-understand regulations reduces administrative costs and compliance expenses.

Modern Principles

Productivity: The productivity principle says that a good tax system should help people and businesses work efficiently and effectively. It means that taxes should be designed in a way that encourages people to work hard, innovate, and invest in their businesses. This way, the economy can grow, and people can have better lives. The tax system should not be too complicated or too expensive so that people can focus on creating value and wealth rather than wasting time and money on taxes.
Elasticity/flexibility: This principle says that the tax system should be able to adjust to different situations and needs. It means that taxes should be designed to be flexible so that they can be easily changed or updated as circumstances change.
Simplicity: The tax system should be simple to understand and easy to follow for the taxpayers. There should be simple calculations and less paper work. A complicated tax system results in increased costs, errors, and opportunities for tax evasion. It means the whole tax system should be user-friendly and not complicated.
Diversity: This principle says that the tax system should be flexible in the context of the charging of tax. It means there should be different ways of charging tax as per different types of taxpayers. Like income level, family status, or business type. For instance, while taxing old people, there should be some deductions, a different tax rate, or relaxations.
Expediency: While creating rules, the government should consider the social and economic needs of various communities, like low-income families and small businesses. They should also think about their political goals, like helping the economy grow and reducing inequality. They should also think about what’s different about cities and rural areas.
Co-ordination: This principle says that there should be a balanced tax system and teamwork between the central and state governments. When the central government and state governments don’t work together on tax policies, it creates confusion and complexity. Tax laws and rules may overlap or conflict with each other, leading to double taxation (paying taxes twice on the same thing).

Impact of Taxation in our daily life

Taxation impacts our daily lives. The income tax system, for instance, imposes a direct cost on earners, thereby affecting their disposable income and spending power. This not only impacts individual financial planning but also dictates consumption patterns and saving behavior. Additionally, indirect taxes like the Goods and Services Tax (GST) influence the prices of goods and services, affecting the cost of living and the overall inflation rate. These taxes ensure the continuous flow of revenue necessary for the government to provide infrastructure, healthcare, education, and social welfare programs, ultimately contributing to the holistic development of society. Taxes reduce our disposable income, affecting spending and saving habits, while tax incentives shape investment choices, retirement planning, and homeownership decisions. Tax policies also impact job creation, entrepreneurship, and income inequality, ultimately affecting our standard of living.

Beyond the economic realm, taxation also affects societal dynamics and quality of life. The structure and efficiency of tax collection can impact perceptions of fairness and trust in governmental institutions. A transparent and equitable tax system can foster a sense of civic responsibility and social cohesion among citizens. On the flip side, complexities and inefficiencies in the tax system can lead to evasion, corruption, and a lack of trust in public administration.

Conclusion

In conclusion, understanding taxation principles is important because they show how taxes impact our lives and the economy. These principles, like fairness, simplicity, and flexibility, help create tax systems that are fair and easy to follow. They ensure that everyone pays their fair share, that the government can fund public services, and that taxes don’t cause too much stress or confusion. When tax systems are well-designed using these principles, they support a healthy economy, reduce inequality, and improve the overall well-being of society. Understanding taxation principles is essential for effective financial management, as taxes significantly impact individual and business finances. By knowing how taxes work, we can make smart decisions, save money, and achieve our financial goals. Staying up-to-date on tax laws helps us adapt to changes and secure a brighter financial future.

References

Section 11 of Arbitration and Conciliation Act, 1996

By

Rachit Garg

-

October 29, 2024

This article is written by Adhila Muhammed Arif and further updated by Shreya Patel. This article seeks to elucidate upon Section 11 of the Arbitration and Conciliation Act, 1996, the amendments throughout the years, the appointment of arbitrators, and the scope of judicial intervention in the matter of appointment of arbitrators.

Table of Contents

Introduction

The methods through which a dispute can be solved among the parties without moving to a court are alternative dispute resolution methods. The alternative dispute resolutions are negotiation, arbitration, mediation, lok adalat, and conciliation. The key motive behind using these multiple modes of alternative dispute resolution is to decrease the workload of the judiciary in India and help the parties resolve disputes faster. The concept of arbitration is not new in India. The practice of arbitration to resolve disputes between parties can be traced back to Brihadaranyaka Upanishad. As per the Hindu law, one of the oldest and first mentions of arbitration is in Brihadaranyaka Upanishad.

Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), deals with the provision of appointment of arbitrators in an arbitration settlement. The Act provides for different procedures through which the appointment of arbitrators can be done. Section 11 allows the parties to choose arbitrators by agreeing upon a procedure for appointment. In case the parties cannot appoint arbitrators by themselves, they can get arbitrators appointed through the procedures prescribed in Section 11. Over the years, the Section has gone through several changes via amendments in the years Arbitration and Conciliation (Amendment) Act, 2015, and Arbitration and Conciliation (Amendment) Act, 2019, substantially reducing the influence of the judiciary in arbitration.

In this article, we will discuss the provisions of Section 11 of the Act along with the landmark judgments passed in relation to the same. The article also discusses how many arbitrators are required to be appointed, what the fees for the appointed arbitrators are, what steps are to be taken in case the appointment of the arbitration is not done, how much can a court interfere in the matter of arbitration and its award along with other key information.

Meaning of arbitration

Arbitration is essentially one of the methods of alternative dispute resolution (ADR) whereby a dispute between two parties is heard and determined by a third party without involving the court. It allows parties to seek an expeditious settlement of disputes like that of litigation. However, unlike litigation, it takes place outside the court and the decision is final and cannot be challenged. It results in the declaration of an award similar to an order given by the court. Matters concerning arbitration are governed by the Act.

The World Intellectual Property Organization (WIPO) defines arbitration as –

“Arbitration is a process in which parties by an agreement submit the dispute to one or more arbitrators, who then make a decision binding to the parties on the dispute. Arbitration is a method of resolving disputes by way of private dispute resolution, instead of going to a court”.

Section 2(1)(a) states that arbitration means any arbitration administered or not administered by a permanent arbitral institution.

Parties choose an arbitration method to resolve their disputes, as it provides more flexibility and efficiency as compared to the litigation method. The process of arbitration begins with drafting an arbitration agreement between the parties. This arbitration agreement is referred to when any dispute arises between the parties. All the important terms and conditions are mentioned in this agreement. There can be cases wherein an agreement is not present and the parties decide to resolve a dispute by choosing the method of arbitration after the dispute has arisen. In such cases Section 11 of the Act lays down the provisions that are to be followed when it comes to appointing an arbitrator.

Let’s look into the different provisions mentioned under Section 11.

Provisions under Section 11 of the Arbitration and Conciliation Act

Sub-section 1

The arbitrator can be of any nationality unless something specific is agreed by the parties. There is no restriction on the arbitrator’s nationality if both the parties to the dispute agree to the same. The key point to keep in mind here is that an arbitrator is appointed only after there has been a mutual agreement between the parties to the dispute. This sub-section also mentions that the nationality of the arbitrator may also be priorly mentioned in the agreement, For example, in case of disputes between two companies that work in different countries, they can have a clause in the agreement that states that they shall appoint an arbitrator from a specific nationality in case of dispute. There is no strict rule that the arbitrator has to be a citizen of India if the arbitration is taking place in India.

Sub-section 2

The parties can freely decide the process for arbitrator or arbitrator’s appointment, subject to sub-section (6) of the Section. The parties themselves decide the procedure for arbitration and appointment of the arbitration. The parties are free to follow whichever method they want which is comfortable for both the parties and also ensures the resolution of the dispute.

The parties are free to decide the place of arbitration, the language in which the arbitration is to be carried out, how they want to appoint the arbitrator, what procedure they want to follow when the arbitration proceedings take place, etc. These details are also often added to the agreement itself. If some specific venue or process is mentioned in the agreement then that is to be followed. In the case of Bgs Sgs Soma Jv vs Nhpc Ltd. (2019) it was held that when a specific venue for the arbitration is specified in the agreement and there are no other clauses that act in contradiction to the same, then the seat for the arbitration has to be the venue which is specific.

Sub-section 3

In case of failure to reach an agreement on the procedure of appointment, sub-section (3) prescribes the following procedure for the appointment of three arbitrators:

Each party appoints an arbitrator.
The two arbitrators then jointly appoint the third arbitrator, who acts as the presiding arbitrator.

The main aim of this sub-section is to ensure that there is a balanced approach when it comes to appointing arbitrators. When the agreement between the parties states that three arbitrators shall be appointed then in that case each party shall appoint one arbitrator from their side, and the third arbitrator will be appointed as the presiding arbitrator by the other 2 appointed arbitrators.

In the case of Taleda Square Private Limited vs. Rail Land Development Authority (2023) the principle of impartiality and independence was pressed upon by the court. The resolution clause in this case stated that the parties have to choose and nominate the arbitrator from the list that is provided by the respondent. And for the appointment of the presiding officer, only the respondent will appoint the same. The approach used by the respondent was restrictive and also violated the approach of rights of the claimant. The court stated that this kind of clause violates the right of free choice and created partiality between the parties. Such a process of appointing the arbitrators is not valid.

Sub-section 3A

The power to designate an arbitral tribunal from time to time is vested in the Supreme Court and the High Court. These arbitral tribunals will be graded by council under the Section 43-I. Provided that if a graded arbitral tribunal is not present in the jurisdictions of any High Court, then the concerned High Court’s Chief Justice can maintain an arbitrator’s panel that discharges all the duties and functions of the arbitral institution.

When any reference is made to the arbitrators, it will be deemed that it is made to the arbitral tribunal. The arbitrators that are appointed under this Section are entitled to the fees which are prescribed in the Fourth Schedule. A review on a periodic basis is also conducted of the arbitral tribunal by the Chief Justice of the concerned High Court.

Sub-section 4

If the procedure of appointment in the sub-section (3) is applied –

Each party must appoint an arbitrator within thirty days of receiving the request from the other party to do so.
The two arbitrators must reach an agreement on appointing the third arbitrator within thirty days from the date of their appointment. Such appointment of an arbitrator will be made when the party makes an application for the same. In case of an international commercial matter, the Supreme Court will make the appointment of arbitrators, while in case of matters, other than international commercial matter, the High Courts will appoint.

When the parties fail to appoint the arbitrators the Supreme Court and High Court help the parties by appointing an arbitrator. The timelines are provided in order to make the process quick in order to resolve the dispute faster than the traditional courts. Both the parties are given the right to select an arbitrator in order to maintain partiality. The Supreme Court and High Court shall help the parties who have opted for arbitration when they are having problems with the appointment of the arbitrator.

Sub-section 5

This sub-section states when in an arbitration with a sole arbitrator and the parties to the dispute cannot reach an agreement on the procedure of appointment, then in that case if the arbitrator is not appointed within thirty days from the day on which one party had requested the other party to agree, then such appointment shall be made by the High Court if the arbitration is a non international commercial arbitration, while in case of international commercial arbitration the appointment of arbitrator will be done by the institution designated by the Supreme Court.

Sub-section 6

This sub-section states that where an agreement on the appointment procedure has been made by the parties, if

A party fails to act as prescribed by the procedure, or
The parties or the appointed arbitrators fail to reach an agreement as prescribed by the procedure, or
The person or institution entrusted with any function by the procedure fails to perform it, then such appointment of an arbitrator will be made when the party makes an application for the same. In case of an international commercial matter, the Supreme Court will make the appointment of arbitrators, while in case of matters, other than international commercial matters, the High Courts will appoint in order to take measures that are necessary, unless there is some other means for securing appointment as per the agreement.

In the case of Brahmani River Pellets Limited vs. Kamachi Industries Limited (2019), the Supreme Court held that only the courts that satisfy the jurisdiction as per the contract will have the jurisdiction in relation to that matter. The parties to the dispute had already decided the venue for arbitration, which was Bhubaneswar. This proves that the parties intended to exclude other courts from having jurisdiction. The High Court of Madras had no jurisdiction under the Section 11(6) of the Act in relation to the appointment of the application for an arbitrator.

Sub-section 6A

This sub-section was omitted in the 2019 Amendment.

Sub-section 6B

When the Supreme Court or the High Court makes a designation of any person or institution under this Section, this will not entail the delegation of judicial powers of such High Court or Supreme Court.

Sub-section 7

This sub-section was omitted in the 2019 Amendment.

Sub-section 8

The Supreme Court, High Court, or the institution or person designated by the court before an arbitrator is appointed, must give in writing a disclosure from the prospective arbitrator in terms of Section 12(1) and make the decision taking in the following considerations

Qualifications required for an arbitrator as per the agreement of the parties,
Contents of disclosure and other considerations for appointing an independent and impartial arbitrator

Sub-section 9

In case of appointment for arbitrator is to be made in international commercial matters, and there is a need to appoint a sole arbitrator or a third arbitrator, the arbitral institution designated by the Supreme Court or a High Court may appoint an arbitrator of a nationality other than the nationalities of the parties.

This sub-section governs that in case of the international commercial arbitration, the party can approach the Supreme Court for the arbitrator appointment. In the case of international commercial arbitration, the person or the institution which is designated by the court or the Supreme Court may appoint a third arbitrator or a sole arbitrator. The arbitrator that is to be appointed must be of any other nationality than the parties’ nationality.

In the case of M/S Comed Chemicals Ltd. vs. CN Ramchand (2008) a petition was filed by the petitioner under Section 11. The petitioner has prayed to the Chief Justice of India to appoint a presiding arbitrator or a sole arbitrator. The preferred arbitrator was mentioned and the same was conveyed by sending a notice by the petitioner in 2005. The appointment of an arbitrator was rejected by the respondent. The respondent stated that as it is an international commercial matter it should be referred to the Chief Justice and not the High Court. The Supreme Court appointed a sole arbitrator as it was a case of International Commercial Arbitration.

Sub-section 10

This sub-section was omitted with the 2019 Amendment.

Sub-section 11

If there has been more than one request or application made to Chief Justices of different High Courts or designates during the application made under the sub-section (4), (5), (6), the High Court receiving the first request will be competent.

Sub-section 12

When the matters referred under sub-sections (4), (5), (6), and (8) in relation to international commercial arbitration or other arbitration, the arbitral institution is referred, is the arbitral institution which was designated under sub-section 3A.

Sub-section 13

An application or request for the appointment of arbitrators shall be disposed of expeditiously by the arbitral institution. It shall be disposed of within thirty days from the date of service of notice on the opposite party.

The main aim of opting for an arbitration rather than litigation is because arbitration provides a more speedy resolution of the dispute, hence the arbitration is a very time sensitive concept. The appointment of arbitration often takes up time in the first place. Having different timelines throughout the arbitration process helps in resolving the dispute expeditiously. With the 2019 amendment, the appointment of the arbitrator when the parties fail to do so, if now given to the arbitral institution and not to the Supreme Court and High Court, this step plays a major role in streamlining the appointment procedures of the arbitration.

Sub-section 14

The arbitral institution shall determine the fee and manner of its payment to the arbitral tribunal after considering the rates prescribed in the Fourth Schedule of the Act. However, the explanation of this subsection provides that in the case of international arbitration in non-commercial matters, the parties may agree to determine fees as per the rules prescribed by an arbitral tribunal.

The Supreme Court has clarified on the law of payment for the arbitrators in the case of Oil and Natural Gas Corporation Ltd. vs. Afcons Gunanusa JV (2022). The Supreme Court in this case clarified that the cap imposed at Rs. 30,00,000 on the fees payable is for individual arbitrators and not the whole tribunal under the fourth schedule of the Act. The court also stated that the fees of the arbitrators cannot be decided by them unilaterally, the agreement of the parties to the same also has to be considered. The court also advised that the arbitrator’s fees should be determined priorly in order to avoid any disputes related to the same.

Evolution of provisions in Section 11 of the Arbitration and Conciliation Act

Before the 2015 Amendment Act

In situations where the parties did not make the appointment, it was made by the Chief Justices of High Courts or their designates. In matters of international commercial arbitration, it was the Chief Justice of India who made the appointments.

Important changes brought by the 2015 Amendment Act

The amendment substituted the words “Chief Justice” with “Supreme Court or High Court”.
By inserting sub-section 6A and 6B, the role of judicial involvement was reduced at the pre-arbitration stage. As per the new sub-section 6A, the Chief Justice had to reduce their role to the examination of the existence of an arbitration agreement. Sub-section 6B clarifies that designation does not amount to delegation of judicial capacity.
Through the amendment of sub-section 7, it was added that it is not possible to appeal against the decision of the court or its designate in any form. The section had only stated that the decision is “final”, prior to this amendment. The amendment made the finality of the orders more rigid compared to the section prior to the amendment.
The amendment specifically expressed contents of disclosure as a requirement while appointing an arbitrator.
Two new sub-section were also added. Sub-section 13 provides for the expeditious settlement of the application within sixty days, and sub-section 14 provides that the concerned High Court has the power to determine the fees.

Changes brought by the 2019 Amendment Act

This amendment made a significant change when it shifted the power of appointment from the courts to the arbitral institutions designated by the courts, thus institutionalising arbitration in India.

The sub-section 3A was inserted with this amendment. The sub-section states that the power to designate the arbitral institution will be with the Supreme Court and High Court from time to time, which under Section 43-I are graded by the council.

Provided that if no arbitral institution (graded) is available in jurisdictions of High Courts, then in that case a panel of arbitrators can be maintained by the Chief Justice of such High Court who will discharge the duties and the functions of the arbitral institution. Provided that the panel of the arbitrator may be reviewed by the Chief Justice from time to time of the concerned High Court.

Any reference made to the arbitrator is deemed to be an arbitral institution and the arbitrator that is appointed by the parties will be subject to fees as mentioned in the Fourth Schedule.

Sub-sections 6A and 7 were removed. Sub-section 6A was concerned with the judicial examination of the existence of an arbitral agreement. Subsection 7 provided that the order of the court would be final and that there would be no appeal against it.

With the removal of sub-section 6A, it is clear that the arbitral institutions do not have to confine their examination to the existence of an arbitral agreement while appointing arbitrators. With the removal of sub-section 7, it can be interpreted that the order of appointment given by the arbitral institutions can be challenged.

Sub-section 10 was also removed under this amendment.

Appointment of an arbitrator

Arbitration is used for more flexible and speedy dispute resolution. The disputes related to commercial matters are often resolved using arbitration rather than litigation, as it saves time as well as is quick and efficient. The appointment of an arbitrator is one of the vital procedures in the arbitration process. Section 11 of the Act, 1996 deals with the appointment of arbitrators for the process of arbitration. The Section provides all the possible courses of action that the parties can take to choose the arbitrator for their arbitration proceeding. If the parties are not able to choose the arbitrators on their own, the provision also provides other ways through which the arbitrator can be assigned.

Principle of party autonomy in the appointment of an arbitrator

The principle of party autonomy is one of the fundamental notions in arbitration. This principle grants the parties control and freedom in the process of arbitration. This principle allows the parties to decide the different aspects of the proceeding of arbitration as per their needs, preferences, and mutual agreements. The principle of autonomy of parties is embodied in the legislature itself in India. The autonomy of the parties is reflected in the arbitration agreement which plays a key role in the arbitration proceeding.

The parties move to arbitration to resolve their dispute and not to court because of the arbitration agreement. The agreement decides the way through which the arbitration process will take place. The exercise of party autonomy can be seen at the time of organisation and appointment of the arbitral tribunal. The parties can choose their own arbitrators as per their expertise, impartiality, experience, and other factors that are relevant and help in decision making which aids in resolving the dispute between the parties with this principle. The freedom to choose arbitrators by the parties is one of the core aspects of the party autonomy principle.

The principle of autonomy is also seen when the parties agree to maintain the privacy, confidentiality, business secrets, and sensitive information and protect it from disclosure to the public. Parties choose arbitration as a dispute resolution method, as confidentiality is maintained as compared to the traditional litigation process. The parties in the arbitration proceeding also choose the place of arbitration. The parties select a place that has less interference. The courts in India cannot offer interim relief if the place of arbitration is outside India. The concept of party autonomy has certain restrictions as well. The Act envisages party autonomy, which is acknowledged by the Supreme Court in the case of Svg Molasses Co. B.V vs. Mysore Mercantile Co. Ltd. & Ors (2006).

The importance of party autonomy has been accorded in recent years, and Indian courts have taken pro-arbitration stands. In the case of State Trading Corporation Of India Ltd. vs. Jindal Steel And Power Limited (2020), the Apex Court of India had clarified that if the parties have consented to a specific mechanism to be followed to resolve their disputes, which also includes the process for the arbitrator appointment, then it will wrong for the courts to disregard the same and appoint an arbitrator using suo moto (on its own).

The party autonomy principle is also a recognized concept in international arbitration, which is one of the key reasons why parties choose arbitration to resolve disputes instead of traditional litigation, especially in commercial matters. The parties can define and modify the mechanism as per their needs and the requirements of the suits in arbitration. The mechanism that is adopted has to follow and be in compliance with public policy and rules of law. The courts will allow and honour the parties to proceed with the mechanism if it does not violate the rules of law and will also have the least interference in the matters as possible.

Number of arbitrators

The parties have the freedom to decide the number of arbitrators that they want to appoint in the arbitration process as per Section 10 of the Act, provided that the number of arbitrators in the arbitration procedure should not be an even number. For example, there can be three arbitrators appointed, where one party each appoints an arbitrator and then the two arbitrators appoint the third one who is known as the presiding arbitrator. The number of arbitrators cannot be two or four. When the parties are not able to appoint an odd number of arbitrators then the arbitral tribunal in that case will be constituted with a sole arbitrator. The court will appoint an arbitrator if the parties fail to appoint the same or in case of an agreement of three arbitrators, the two arbitrators cannot appoint the third arbitrator.

In the case of Ibi Consultancy India vs. Dsc Ltd (2018), the Supreme Court stated that the fundamental principle of the Act is that the parties are free to determine the number of arbitrators on the condition that it has to be an odd number along with the process of appointment as per the Act. When the parties with the mutual consent are not able to form an arbitral tribunal, any one party can route to the Section 11 of the Act for a remedy, where the details are provided for the appointment of an arbitrator with judicial intervention.

Sole arbitrator

The appointment of a sole arbitrator in arbitration is always an argumentative issue. Both the parties in the arbitration select the sole arbitrator with understanding and mutual consent. For the appointment of the sole arbitrator, any party can request the other party. When the other party agrees to the same appointment of a sole arbitrator is done.

If the party does not agree to the same and the parties do not agree to a sole arbitrator within thirty days from the day the request is made from the other party, the appointment of an arbitrator on the request of the party shall be made by the High Court or Supreme Court or any institution or person designated by such court. The principles of law within the scope of arbitration are that forbiddance of unilateral appointment of the arbitrator by one party.

The courts upheld this principle very firmly and ensured that fairness and integrity is maintained in the arbitration process. The main essence of arbitration is that it should be an unbiased and neutral method of resolving disputes. The Supreme Court in the case of Perkins Eastman Architects Dpc & Anr vs. Hscc India Limited (2022) states that “if one party has the right to appoint the sole arbitrator, then the choice made by the party will always have the factor of exclusivity when it comes to determining or when making a strategy to resolve the dispute.” The party that has an interest in the dispute should not have appointed the sole arbitrator. The party that has any interest in the outcome of the dispute should not be given the power to appoint the sole arbitrator to ensure fairness.

The Delhi High Court in the case of Sivanssh Infrastructure Development … vs. Army Welfare Housing Organization (2021) restated that no party that is part of an arbitration process can be allowed to appoint the arbitrator unilaterally, as it will subdue the main motive of unbiased adjudication between the parties of the dispute.

In the case New Eureka Travels Club vs. South Bengal State Transport Corporation (2022) the Calcutta High Court held that an interested party can neither be the arbitrator to a dispute nor appoint an arbitrator to a dispute under Section 11.

Failure of agreement while appointing an arbitrator

Both parties have to come to a mutual consent, at the time of appointing the arbitrator for the arbitration procedure. When the parties cannot reach a common page at the time of appointment of an arbitrator they can reach out to the court to seek assistance for the same. If the other party fails to appoint an arbitrator within thirty days of the request made for the same, then the Supreme Court or High Court or any institution or person designated by such court can appoint an arbitrator under Section 11 (4)(a). Similarly when the two arbitrators cannot mutually appoint a third arbitrator within thirty days from the date on which they are appointed, the same rule as mentioned above is followed.

Rejection of application

The application made by the parties to appoint an arbitrator to the courts can be rejected if the limitation period has ended. In the case of M/S. Uttarakhand Purv Sainik Kalyan Nigam Limited Versus Northern Coal Field Limited (2019), the main issue was whether the High Court could reject an application made for the appointment of the arbitrator stating that it barred the limitation period. After the 2015 amendment, the only role of the court under the Section 11 applications is to see whether there exists an arbitration agreement or not. All the other matters related to the dispute are to be decided by the arbitrator himself. The emphasis is put on the principle of Kompetenz-Kompeten. This doctrine under the Arbitrational laws in India gives the power of deciding their own jurisdiction to the arbitral tribunals. However, with the amendment made in the Act in 2019, this restrictive scope was removed.

The court can only reject an application made by the parties where the application is hopelessly time barred or ex-facie. The same was held in the case of M/S Arif Azim Co. Ltd. vs M/S Aptech Ltd (2024). It was also suggested by the court to take a legislative action in order to shorten the limitation period, as this will help in resolving the disputes quickly.

Intervention of the court in the appointment of the arbitrator

The option of ad hoc arbitration is often opted by the parties in India. This entails that all the important decisions related to the arbitration and its process will be determined by the parties themselves. There are no specific courts, boards, or institutions that appoint arbitrators. The right to appoint an arbitrator is the primary right vested in the parties to the dispute. When parties face any problem in appointing the arbitrators they can reach out to the High Court or Supreme Court under the Section 11 of the Act.

The only role of the courts is to offer assistance on a timely basis to the parties by appointing the arbitrators or designating an arbitral institution or person for the same. The scope of judicial intervention in India in regard to arbitration is aligned with the UNCITRAL Model Law on International Commercial Arbitration.

Fees payable to arbitrators

When an arbitrator conducts the arbitration process and an award is passed, in that case, the arbitrator is liable for fees. The fees for the arbitrators are to be paid by both the parties involved in the dispute resolution. The decision on the fees and their amount and mode of payment are all decided amongst the parties to dispute. All these details can be mentioned in the arbitration agreement itself or can be decided mutually by the parties at the time of appointing the arbitrator. All the information related to the fees that are payable to the arbitrators is referred to in the fourth schedule as per the sum of the amount that is in the dispute.

Disclosure by arbitrator

The rule of disclosure by the arbitrator is a very general rule. There is certain information that is to be disclosed by the arbitrators before they are appointed. The disclosure by the arbitrator is considered mandatory and is not discretionary. The arbitrator has to disclose in writing if there is any direct or indirect interest in the matter or the parties involved in the dispute, whether he has any past relations with either of the parties or someone related to the parties to dispute, whether he has any business, personal, or professional interest in the subject matter or not.

If there are any justifiable doubts against the arbitrator, the appointment of such arbitrator can be challenged. Hence it is advised to disclose everything in writing before the appointment. The main reason behind this disclosure is to ensure that there is no conflict in the interests, the decisions taken by the arbitrator are free from bias, there is no external or internal influence on the decision made, and the arbitrator can make fair, just, and unbiased decisions.

Grounds for challenging the appointment of the arbitrator

There are some grounds on which an appointment of the arbitrator can be challenged by the parties to the dispute. The method of arbitration is chosen to resolve disputes, as it is one of the speedy, fair, and efficient dispute resolution methods as compared to litigation. Some of the grounds on which the appointment of the arbitrator can be challenged are:

If either of the parties believes that the arbitrator does not possess the qualifications which are required.
The appointment can also be challenged if there are some circumstances that give rise to doubts about the impartiality of the arbitrator.
If the arbitrator has any kind of relationship with any one party to dispute, and the other party comes to know after the appointment, such an appointment can also be challenged.
If the arbitrator has any type of interest in the result of the dispute, which is concealed by him at the time of his appointment, then such appointment can be challenged by any party.

Limitation period for appointment of arbitrator

No limitation period is prescribed in the Act even after the 2015 and 2019 amendments in relation to filing for the appointment of the arbitrator. Addressing this gap, the Supreme Court in Bharat Sanchar Nigam Limited vs. M/S Nortel Networks India Pvt. Ltd. (2021) held that the limitation period for filling an application for appointing arbitrators under the Section 11 of the Act will be governed under Article 137 of the Limitation Act, 1963. When no limitation period is mentioned in any Act, then Article 137 is followed as a general rule in such cases. If no limitation period is prescribed for an application filing in relation to the appointment of arbitrators the time period considered is of three years from the date of receiving such request to file an application.

The court also stated that when the parties fail to appoint the arbitrator within the given time i.e. thirty days, only then limitation for filling the application for the same would arise. The Supreme Court also observed that the time period of three years limitation of an application under Section 11 is very long. The court observed that the primary reason for opting for an arbitration procedure is for expeditious resolution of the dispute and this limitation period defeats the primary aim. The Parliament needs to amend Section 11, where a specific limitation period for the parties to move to the court to make an application for the arbitration appointment is prescribed.

Scope of judicial intervention

Pre 2015 amendment

In the case of National Insurance Co. Ltd. vs. Boghara Polyfab (2008), the Supreme Court categorised issues pertaining to arbitration into what the court can interfere in and what the court may interfere in. The judgement also specified the third category of issues that can only be decided by the arbitral tribunal, which is essentially the sole arbitrator or panel of arbitrators appointed as per Section 11. The categories of issues are listed below:

First category

Issues that are to be decided by the Chief Justice or his designate:

Whether the High Court approached by the party is appropriate or not.
Whether an arbitration agreement exists and whether the party making the application is a party to the agreement.

Second category

Issues that the Chief Justice or his designate may decide or leave the decision of arbitral tribunal :

Whether the claim is a live claim or a dead claim.
Whether the parties have concluded the transaction by recording their satisfaction or receiving payment with no objection.

Third category

Issues to be decided solely by the arbitral tribunal:

Whether the claim comes under the scope of the arbitration clause.
Involvement of any merits or any claim in arbitration.

In the cases of Deepak Galvanising & Engineering.. vs. Government of India And Anr. (1997) and Continental Constructions Ltd vs. National Hydroelectric Power Corpn Ltd, (1998), it was held that once the parties failed to appoint arbitrators by themselves, it leads to the forfeiture of their right to appoint. This gives the right of appointment to the Chief Justice or his designate.

Post 2015 amendment

Judicial intervention was reduced by the insertion of 6A, whereby the courts had to confine their role to the examination of the existence of an arbitration agreement. The new section does not allow the court to conduct an examination of its validity. This provision helps to avoid delays in the proceedings.

In the case of M/S Duro Felguera S.A. vs. M/S Gangavaram Port Limited (2017), the literal interpretation of sub-section 6A was adopted, restricting the judicial examination to the existence of an agreement. Additionally, the judgement laid down the key to determining the existence, which is to examine whether the agreement contains a clause providing for arbitration in case of dispute on the agreement. Despite the restrictive nature of sub-section 6A, the courts seem to have ignored it in several judgements.

In Garware Wall Ropers Ltd. vs. Coastal Marine Constructions & Engineering. Ltd. (2019), the Supreme Court held that the agreement must be sufficiently stamped. In the case of Prime Market Reach Pvt. Ltd. vs. Supreme Advertising Pvt. Ltd. (2019), the Delhi High Court refused to refer the parties to arbitration after finding that the agreement was invalid as it did not abide by the requirements laid down in Section 7 of the Act.

Post-2019 amendment

This amendment brought in significant change by shifting the responsibility of appointment to arbitral institutions. This amendment significantly reduced judicial intervention and institutionalised the system of arbitration. The reduction in the time period given for disposing of the applications not only provides for expeditious settlement but also reduces the judicial involvement in such applications.

However, the drafting of this Amendment Act suffers a few deficiencies. There is a lack of clarity regarding the power of the courts to review the panel of arbitrators, and whether it extends to the ones maintained by the arbitral institutions.

Earlier, the order of appointment under Section 11 was considered as a judicial one and not administrative. It was also upheld as judicial in nature in the case of S.B.P. & Co. v. Patel Engineering Ltd, (2005). With the 2019 Amendment Act, the order of appointment of arbitrators has become an administrative one due to the institutionalisation of arbitration.

Other relevant judgements

Vishram Varu and Ors. vs. Union of India (2022)

Facts of the case

In this case, when the appellant was not satisfied with the decision made by the High Court of Calcutta, he approached the Apex Court. The application which was made under Section 11(6) was dismissed by the court. A work order was received by the appellant in the year 1982, which was completed in the year 1986. Claims were put forward by the appellant that he has worked in excess (beyond the quantity scheduled) and additional payment was owed to him for the same.

South Eastern Railway’s general manager did not respond to any of the correspondences made by the appellant from 2018 onwards. The appellant had requested for arbitration or payment. When no response was given from the other party, a petition for arbitration was filed by the appellant in 2019. The petition was dismissed as it was time barred. The appellant’s counsel contended that the limitation period was three years as per the Bharat Sanchar Nigam Limited vs. M/S Nortel Networks India Pvt. Ltd. (2021)’s decision for the right to apply.

Issues raised

Whether the petition for arbitration filed by the appellant was time barred or not?

Judgement

The Supreme Court held that an application made under sub-section 6 of Section 11 is barred by limitation. In this case, the arbitration clause was invoked nearly thirty-two years after the emergence of the dispute.

Overnite Express Limited vs. Delhi Metro Rail Corporation (2022)

Facts of the case

In this case, a petition was filed under Section 11 of the Act, for appointing an arbitrator between the petitioner and respondent for a dispute resolution. A contract was awarded to the petitioner for a space (commercial) at the New Delhi Metro Rail Corporation. The petitioner found many inconsistencies at the time of joint measurement relating to reduced areas and damages as compared to how it was pre-bid. Many requests were made to rectify the issues, but no action was taken, which forced the petitioner to move to the Delhi High Court and seek an interim relief.

The New Delhi Metro Rail Corporation only made partial rectifications and did not complete the whole work. The matter was decided to be resolved through arbitration. New Delhi Metro Rail Corporation presented a panel of 5 arbitrators to the petitioner to select one from them. The petitioner argued that this breached the principles and was impartial. It was against Section 11(6) of the Act.

Issues raised

Whether New Delhi Metro Rail Corporation can offer the option of five arbitrators to select from to the petitioner?
Is Section 11(6) of the Act violated in this case?

Judgement of the case

The Delhi High Court in this case, held that no party can give the other party a narrow panel of arbitrators to choose from, which in this case was of five arbitrators. The petitioner is given a very limited choice to select arbitrators, which is restrictive and violates Section 11(6) as well. The Delhi International Arbitration Center appointed a sole arbitrator to resolve the dispute in the end.

Always Remember Properties Private Limited vs. Reliance Home Finance Limited & Anr (2022)

Facts of the case

In this case, the applicant had filed an application under Section 11 of the Act. An interim order was passed by the High Court of Delhi, which states that CIRP (Corporate Insolvency Resolution Process) was initiated against the respondent. All the proceedings against the respondent will stop and the moratorium period will start. The applicant was not satisfied with this order and has approached for the review of the same.

Issues raised

Whether the power to review an order which is passed under Section 11 of the Act is with the court or not?

Judgement of the case

It was held by the Delhi High Court that the High Court exercises a judicial function and not an administrative function under section 11 of the Act. Hence, an order passed under Section 11 can be reviewed by the High Court if there is a factual error that is evident and is based on a statement that is incorrect and is made by the counsel.

Oriental Insurance Company Limited vs. M/S Narbheram Power and Steel Pvt Ltd (2018)

Facts of the case

In this case, M/S Narbheram Power and Steel Pvt Ltd (NPSL) had a factory in Odisha. The company had entered into a policy (Fire Industrial All Risk Policy) with the insurer (Oriental Insurance Company Limited). As per the policy, the insurer will indemnify for all the losses that take place in the Odisha factory. Due to a huge cyclone in October, huge damages were caused to the factory in Odisha as well. The company approximately suffered a loss of Rs. 39,336,224. The insurance company was informed about the damages and a surveyor was appointed to carry out the survey of the damages caused.

The insurer did not settle the claim hence NPSL requested arbitration in order to resolve this dispute. The request for arbitration was also turned down by the insurance company. An application was filed under Section 11(6) of the Act by NPSL. A retired judge was appointed as the arbitrator by the High Court.

The arbitration clause 13 provided the categorisation of the dispute resolution clause in 3 parts:

The mode of arbitration will be used to settle the disputes which are in relation to the quantum of the claim.
If the claimed responsibility is not denied by the insurance company, then there will be no arbitration.
In order to initiate a legal action under the right of action or right of suit against the insurer, an arbitration award must be obtained on the quantum of the claim.

Issues raised

Whether the appointment of the arbitrator allowed when the insurance company had repudiated the claim and had not accepted the liability?

Judgement of the case

The High Court stated that the clauses related to arbitration are very ambiguous in nature. The court separated the part 1 and 2 of the clause and decided that the matter can be referred to arbitration and appointed an arbitrator for the same. The Apex Court of India overturned the decision of the High Court and stated that the interpretation of the contract specifically in the case of insurance contracts, the interpretation is to be done exactly as expressed. The Supreme Court referring to the case of Vulcan Insurance Co. Ltd vs. Maharaj Singh & Another (1975) stated that the same point was made clear in this case. The Supreme Court supported the objection to arbitrator appointment. The clause 13 in this case clearly mentioned that no reference shall be made for arbitration, the insurer denies the liability. The court was of the opinion that NPSL would have to initiate a civil suit for the same.

With this case, the Supreme Court of India clearly distinguished between the cases where the amount claimed is disputed by the insurer and the cases where the responsibility is fully denied by the insurer.

United India Insurance Company Ltd. & ANR. vs. Hyundai Engineering and Construction Company Ltd. & Ors. (2018)

Facts of the case

In this case, a Contractor All Risk Insurance Policy was executed by the respondents who were Gammon India and Hyundai Engineering at Rs. 2,13,58,76,000. There was a clause in the policy that stated that when any dispute would arise in relation to the claim’s quantum, then those disputes shall be referred to arbitration. If the liability is denied by the company then in that case arbitration will not be invoked.

An accident took place, and the claimant had damages of Rs. 1,51,59,94,543. The claim for the said amount was made by the company. Two parties (the appellant and the Ministry of Road Transport and Highways) had conducted the survey and prepared reports on the same. It was concluded that the damage was caused by fault in the design and faulty workmanship. The company’s claim was rejected by the appellant under clause 7 taking the report into consideration.

Issues raised

Whether the clause present in the agreement should be strictly interpreted or not?

Judgement of the case

The decision made by the High Court of Madras was overturned by the Supreme Court. The High Court had ruled that the clause in the Contractor All Risk Insurance Policy is only set off when the dispute is related to the claim’s quantum and not of liability. The Apex Court also emphasised that the High Court should have inquired more to find out whether the appellant had denied the liability as a whole or had the effect of acceptance but was limited to the resolution of the dispute.

Conclusion

The appointment of arbitrators under Section 11 started with significant involvement from the judiciary. However, it has now become the responsibility of the arbitral institutions. It is evident that the 2019 Amendment Act has been a milestone in the evolution of Section 11, which institutionalised the system of arbitration and helped in truly achieving the objective of reducing judicial intervention. However, the drafting of the Act suffers from a few flaws. The amendments in 2015 and 2019 could be clearer in their wording, as the ambiguity leaves room for more judicial intervention.

The appointment of the arbitrators must be carried out using fairness and autonomy. The judicial intervention in the matters of arbitration is only allowed when the parties to the dispute face problems relating to arbitration appointment or any other reasons, the court ensures that the procedure is not biassed towards one party. The entire Act emphasises the completion of the arbitration process in a time bound manner. The party autonomy has certain limits which are not to be crossed by the parties. Despite having the power to appoint an arbitrator, there are certain basic guidelines that are supposed to be fulfilled at the time of appointment of the arbitrator.

Frequently Asked Questions (FAQs)

Is it possible to challenge an order of appointment under Section 11?

Section 11 does not have any impediment to the challenging of an appointment made under it due to the removal of sub-section 7. Hence, a party may initiate proceedings to challenge such an appointment in the court. Further, the grounds for challenging the appointment of an arbitrator are laid down in Section 12 of the Act.

Can a party to an arbitration agreement appoint a sole arbitrator on his own and impose it on the other party?

While it is possible for a party to a dispute to appoint a sole arbitrator, there must be an agreement between the parties to do so and the procedure prescribed by it must be followed. Thus, a party cannot appoint a sole arbitrator and impose the appointment on the other party if the agreed procedure is not followed.

What is the limitation period for the appointment of an arbitrator?

The appointment of arbitrators has a limitation period. The parties have a time period of 3 years to appoint an arbitrator. If they fail to appoint an arbitrator, the court then appoints the arbitrator on behalf of the parties.

Can an appointment of an arbitrator be challenged?

An appointment of an arbitrator can be challenged if the arbitrator seems partial, does not have the required qualifications or experience, has any indirect or direct connections with any party, etc.

After an application is filed under Section 11 of the Act, can a party still appoint an arbitrator?

When an application is filed under Section 11 (6) of the Act, for appointing an arbitrator before a High Court, the party’s right to appoint the arbitrator gets forfeited. The High Court has the sole jurisdiction to appoint the arbitrator by exercising the power under Section 11 (6). What is the effect of not appointing the arbitrator as per the arbitration agreement terms?

In the case of M/S Dakshin Shelters P.Ltd vs. Geeta S Johari (2012), the Supreme Court held that refusing to appoint the arbitrator as per the terms of the arbitrator agreement will amount to a failure to appoint the arbitrator. The right stands extinguished to appoint the arbitrator under the agreement. In this case, the respondent had failed to appoint the arbitrator as per the terms of the arbitration agreement. This means the right of the respondent has been extinguished.

The appointment of the arbitrator has to be ex facie valid or should satisfy the court having the jurisdiction under Section 11(6). The appointment is not accepted as fait accompli and will also not come under the exercise of jurisdiction.

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: