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Liberal vs conservative : difference and comparison

By
Rachit Garg
-
0

This article is written by Rimsha Riyaz, a student of BA LLB (Hons.) at Jagran Lakecity University, School of Law, Bhopal. This article shall give an overview of the major differences between the notions of liberalism and conservatism.

It has been published by Rachit Garg.

Introduction

The broad differentiation of political and economic views or affiliations is done mainly into two notions, conservative and liberal. These two notions can be called opposites of one another. The meaning of both these terms differs with the context in which they are used, whether political, social, psychological, or economic. The difference between the two lies mostly in the level of acceptance, tolerance, individualism, and liberty. The term ‘liberal’, as the name itself suggests, connotes a higher level of liberty and openness both in society and in the government. The liberals are inclined toward the left-wing and support autonomy for federal states and seek to establish a welfare state for the providence of healthcare and employment opportunities for all citizens. The term ‘conservative’ means the opposite of liberal. A conservative is averse to change in the current society and supports the right-wing which is anti-federalist, supports limited governance and privatisation, and is less tolerant of differences.

What is meant by Liberal or liberalism

A person who espouses or is a firm believer in the ideology of liberalism is called a liberal. Liberalism as an ideology cannot be marked as a set of fixed values of liberty, equality, tolerance, human rights etc. But the philosophy has different connotations with the changes in time. The definition of liberalism differed from historical movements and had a different meaning in different contexts and periods. The liberal ideology in medieval times was associated with the bourgeoisie movements and was seen as a pro-revolutionary ideology. It was signified by the emancipation of the oppressed and was the driver of social change coupled with economic and political change. The core values of liberalism have remained equality and personal liberty throughout history.

Though liberalism at first enunciated the value of liberty in all aspects of human life, its stand on the economic liberty of individuals has changed. According to the classical theory of liberalism, an individual had the liberty to make economic decisions and was responsible for his welfare. This notion, however, changed due to various historical events, the most important of which was the Great Depression of the 1920s. This led to the emergence of the idea of a welfare state and the responsibility of the state to stabilise the economy through regulation of the market. At this time, the ideas of laissez-faire capitalism were condemned and disliked. The theory of social contract also signified the role of the state as a limiter of individual freedom for the welfare of the citizens. This new concept of liberalism was known as neoliberalism.

Modern liberals follow the idea of liberalism as a mixture of both types of liberalism, with their main focus on the core principles of the ideology. Liberals exist in almost all countries and also influence the policy-making of the state they live in. The liberals have different stands on different social, political and economic issues. For example, their stand on various issues like abortion, religious freedom, immigration, etc. upholds personal liberty over all else.

What is meant by Conservative or conservatism

A conservative is a person who is a firm believer in the ideology of conservatism. Conservatism as an ideology is popular in American and European politics and is marked by an aversion to change and a preference for stable societies and strong governments. It is deeply rooted in the idea of pragmatism, according to which change is desirable only when it is necessary. Thus, conservatives are right-wingers and have an anti-revolutionary stance. Traditional conservatives want the preservation of traditional values and institutions like the government and the church, which are not to be changed. They believe that the best response to natural changes in society is pragmatism. It is a type of decision-making best suited for a particular circumstance. Traditional conservatives do not see humans as individual beings but as a part of social groupings. They hence lack perfection and need to conduct regulating authority. Because of this, the conservatives support state intervention in the economy and market. 

Modern conservatives, however, have some differences in ideas as compared to traditional conservatives. Modern conservatives, known as the New Right, espouse a free market and capitalism and reject the idea of pragmatism. They have positive thinking of human nature and take them as rational beings who can make their own decisions without them being controlled by traditions or social institutions. Hence, they propound the idea of free markets and that humans deserve a great amount of freedom in the economic sphere.

Difference between liberalism or conservatism 

There are several differences between conservative and liberal ideologies. The two ideologies differ in the following aspects: 

Stability 

The earliest concepts of liberalism and conservatism differed based on stability. The ideology of conservatism prefers stability and is concerned about the order of society. Conservatives do not want change and hence want to maintain the status quo. The liberals, however, are open to change and reform and hence do not desire stability in society.

Morality

Due to the desire of conservatives to preserve their tradition and social institutions like religion, they do not bother about what is right or wrong as long as it is done by the authorities. Liberals are concerned about what is right or wrong and always question the decisions of the authorities.

Openness to differences

The conservatives are less open and are reluctant to accept differences because of their desire for stability and the preservation of traditions. Liberals are open to differences and are ready to accept them. They are inclusive and less concerned about preserving traditions.

Core values 

The ideology of liberals is based on the core values of liberty, equality, and human rights. These core values, for them, are above all traditions and state actions. The conservative ideology, on the other hand, is based on the preservation of tradition and pragmatism. All decisions of the state are obeyed by the conservatives, even if they go against the human rights of the citizens.

Free market 

The ideology of liberals, though supporting liberty, does not favour a free market system based on the flow of demand and supply without state intervention as it focuses on the responsibilities of the state to fulfil the basic needs of the citizens. This is not the case with conservatives. Conservatives who do not care about any other freedoms or rights of citizens promote a free market system free from state intervention wherein the individual is allowed to make his own economic decisions.

Social welfare

Liberals are of the view that the state is responsible for the overall welfare of the citizens and should act as a welfare state by providing basic amenities to all. Conservatives are of the view that the state is not responsible for the welfare of the citizens and that the citizens are independent to cater to their own needs in all aspects. 

Federalism 

The liberals are pro-federalists and support the decentralization of power to prevent the accumulation of power in a few hands. They are in favour of providing autonomy to the federal states in all aspects. The conservatives, on the other hand, do not support federalism. According to them, federal states should be granted less power than the centre. They support a strong national centre and a strong defence and foreign affairs strategy.

Table of comparison

PARAMETERSLIBERALCONSERVATIVE
StabilityDo not desire stabilityDesire stability
MoralityHave a sense of right and wrongNot concerned about right or wrong as long as the decision is made by state authorities
Openness to differencesOpen to differencesDo not desire change hence not open to differences
Core valuesLiberty, equality, human rights Preservation of traditions, pragmatism
Free MarketDo not support a free market system or laissez-faire capitalismSupport a free market system without the intervention of the state
Social WelfareSupports a welfare state Does not support a welfare state 
FederalismPro- federalistsAnti-federalists

Conservative liberalism

A variant of the amalgamation of the two ideologies of liberalism and conservatism is conservative liberalism. It is a less radical variant of classical liberalism and supports economic liberalism along with social and ethical traditions. It bridges the gap between the differences between liberalism and conservatism and is a combination of some features from both ideologies. Conservative liberals promote both liberal policies and religious moralism. 

Conservative liberalism emerged in 19th century France when conservative liberals were seen as the opposite of progressive liberalism. Progressive liberalism, also known as social liberalism, considers liberty and equality supreme. Conservative liberalism derived its core values not from classical liberalism but from ideas of virtue and the common good, the church and the state, thus having a conservative foundation. They were moderates who considered radicalism as opposed to the well-being of society.

Conclusion

Therefore, it is clear that the two most prevalent ideologies in American and European politics are opposite to each other. The ideologies are not just different in their core values but in all aspects of social, political and economic. These ideologies, however, are non-existent in their purest forms and, hence, in reality, the line that divides them is blurred. One such example of this grey area is conservative liberalism, which exists in American politics and contains the elements of both conservatism and liberalism. An instance of this ideology can be seen in the support of conservative liberals for personal liberty and religious moralism.

Frequently Asked Questions (FAQs)

How do conservatives and liberals differ on social issues?

The conservatives and liberals have the opposite stands on most of the social issues that prevail. The most common issues in society which are also the most controversial are laws about immigration, abortion, LGBT rights, civilian gun ownership and the death penalty. While the liberals support personal liberty they oppose anti-immigration, anti-abortion and homophobic laws, and gun ownership and oppose the death penalty. The conservatives oppose abortion rights, gay marriage, and immigration and support civilian gun ownership and the death penalty.

Are liberals and libertarians the same?

While the liberals promote social welfare and desire a welfare state, libertarians are their actual opposite who want a limited role of the government in the economic sphere. Liberals do not favour a free market system and desire state intervention in maintaining stability in the market and the economy even if it hampers the economic freedom of the individual. The libertarians believe that the state is prone to corruption and hence limited governance is required in the flow of the market. They believe that resources are better allocated in the market by the private actors than the public sector. It is only in the economic sphere that the liberals and the libertarians differ. In all other spheres, they share the same stances.

What is meant by liberal conservatism?

One such doubt that comes to mind is whether conservative liberalism and liberal conservatism mean the same things. It is wrong to assume that they are the same. Conservative liberalism, as earlier discussed, is an ideology wherein both conservatism and liberalism coincide and takes some features of both ideologies. Neoliberalism can be said to be its twin. Liberal conservatism is, however, different from both. It is a form of conservatism that instead of preserving religion or traditions, seeks to preserve the liberal institutions so that liberalism is not overpowered by any other ism in its place due to its ever-changing nature. Therefore, conservative liberalism is a political stance that ironically preserves liberal institutions through conservatism.

References

  1. https://www.diffen.com/difference/Conservative_vs_Liberal 
  2. http://www.differencebetween.net/miscellaneous/difference-between-conservatives-and-liberals/ 
  3. https://askanydifference.com/difference-between-liberal-and-conservative/ 
  4. https://www.tutor2u.net/politics/reference/conservatism 
  5. https://blog-ipleaders-in.cdn.ampproject.org/v/s/blog.ipleaders.in/ideology-of-liberalism-all-you-need-to-know-about/?amp=1&amp_gsa=1&amp_js_v=a9&usqp=mq331AQKKAFQArABIIACAw%3D%3D#amp_tf=From%20%251%24s&aoh=16564402122718&referrer=https%3A%2F%2Fwww.google.com&ampshare=https%3A%2F%2Fblog.ipleaders.in%2Fideology-of-liberalism-all-you-need-to-know-about%2F 
  6. https://amp.theguardian.com/commentisfree/2011/aug/15/liberalism-political-economic-different-ideologies#amp_tf=From%20%251%24s&aoh=16565250032211&referrer=https%3A%2F%2Fwww.google.com 

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52nd Constitutional Amendment

By
Rachit Garg
-
0
Article 31B

This article is written by Parth Verma, a student of the School of Law, Christ University, Bengaluru. This article seeks to explain the features of 52nd Constitutional Amendment, its historical background, objectives, exceptions, current issues, and the ways to overcome them.

It has been published by Rachit Garg.

Introduction

There is a saying that ‘power corrupts, and absolute power corrupts absolutely.’ This quest to gain power is also reflected among the politicians especially the Members of Legislative Assemblies (MLAs). Till almost 40 years after independence, the MLAs used to hop or shift between the different parties that were in power to get a seat in Parliament or the State Legislative Assembly. This led to the dissolution of a lot of parties due to mass defections, thereby leading to political instability in the various states with the majority parties continuously changing. It was a political problem arising out of the vested interests of the ministers. In order to bring an end to such corrupt practices, the 52nd Constitutional Amendment was introduced in 1985, this amendment certainly brought about a huge change at that time in the political scenario as the defection to other political parties among the MLAs was now prohibited. However, it suffered from certain loopholes that are being exploited even to this date by various politicians. 

As a result, it becomes all the more important to bring about certain changes in the current defection laws in order to cover all the loopholes. This article aims to look into all these major gaps and address them. This would further help in resolving all the ambiguities that are still existing in the anti-defection laws of India. 

Historical background of the 52nd Constitutional Amendment

The concept of Universal Adult Franchise was introduced in India by the British. Every individual above 18 years of age got the right to vote for choosing their representative giving them their assertive right. However, even before independence, political defections used to take place which used to undermine this right and the very principles of democracy. The politicians indulged in such practices in a bid to obtain a seat in the cabinet and to become a member of the ruling party. Such large-scale defections were leading to a fall of the majority parties in various states thereby leading to political instability.

The most prominent case of defection by a Member of the Legislative Assembly (MLA) was of Gaya Lal. This incident took place in 1967. He was a member of the Haryana State Assembly and subsequently changed the party three times within a single day. He had first defected from the Indian National Congress to join the Janata Party. Later on, he joined Congress, again. Then within nine hours of joining Congress, he went back to Janata Party. This was a completely unfair practice and it gave rise to the highly infamous expression of ‘Aaya Ram Gaya Ram’. This violated the rights of the people as the representative whom they elected continuously kept changing the parties in utter disregard for the citizens’ expectations.

From the 1960s till the late 1970s, the Indian National Congress was able to avail a huge advantage of such defections. It lost around 100 politicians through defections but at the same time, it gained about 400 more politicians. They were able to strengthen their control as the ruling party in the country. All those who defected from other parties but didn’t join Congress had the objective of forming coalitions together. As a result, there were huge defections that took place during the 1967 elections. 

In 1967, a committee was formed to submit a report for submitting an anti-defection bill in Parliament. However, no further developments took place till 1977. In 1977, the government led by Morarji Desai, which was the first Non-Congress government at the central level witnessed a defection of 76 members of Parliament. As a result, they lost their power and there was uncertainty with respect to the ruling party till 1979. Eventually, Congress gained a majority in 1979. In almost all the states, the regional parties were losing their power due to the large-scale defections taking place among the Non-Congress parliamentarians. All this was leading to increasing protests and scrutiny by the people.

Eventually, in 1984, Rajiv Gandhi put forth a new anti-defection Bill before the Parliament which was passed in 1985 after obtaining the approval of the Lok Sabha and the Rajya Sabha along with the President’s assent. This anti-defection law was the first major step towards curbing the unconstitutional practice of defection between the parties by the politicians. However, the law still has certain drawbacks owing to which the political parties and the citizens are suffering even till now.

Objectives of the 52nd Constitutional Amendment

The primary objective of this Amendment was to curb the increasing cases of political defections which were directly undermining the Constitutional principles and the democratic values of the country.  The following objectives could be laid down which this Amendment seeks to achieve:

  1. The objective was to curb political corruption taking place through defections. This would, in turn, play a vital role in making all the other commercial and political activities corruption-free.
  2. The Amendment also aims to strengthen the existing democratic system by ensuring political stability. This is so because the party which has the majority would be able to rule without any insecurity through any form of defection. 
  3. The anti-defection law proposed in this Amendment would help in keeping the politicians accountable to a great extent to their party. They would at the same time also become loyal and responsible to their own party.
  4. Another major objective of this Amendment was to detect all the ministers who were involved in such defections and to take strict action against them. As a result, the defecting politicians would be straightaway disqualified from their position. This would have a good deterrent impact and would also protect citizens’ rights.
  5. This Amendment also aimed at protecting the interests of the political parties especially the regional parties as the defection was the highest among these parties. The politicians from these parties mostly used to defect to the majority national parties. 

These were the objectives that this Amendment by introducing the anti-defection law wanted to achieve.

Key features of the 52nd Constitutional Amendment

The Tenth Schedule

The anti-defection law introduced in 1985 was added as the Tenth Schedule of the Indian Constitution. The basic aim of this Act as stated earlier is to discourage political defections among the politician to ensure political stability on one hand and to protect citizens’ faith on the other. The Tenth Schedule was included in the Constitution through the 85th Amendment Act of 1985.

Disqualification of defecting ministers

The anti-defection law focuses on the disqualification of all the ministers who are involved in such heinous acts of defection. All the ministers who are affiliated with a party or even the individual candidates, after getting elected are not allowed to defect to any other party since this would mean eventually disregarding the public which showed faith in the minister. However, the members who have been disqualified under the law can still contest the elections from any given political party to get a seat even in the same house from which they had been removed.

Powers with the chairperson

The chairman or the speaker of the concerned house has the power to disqualify any minister on the grounds of defection. However, their decisions are also subject to ‘judicial review’ by the courts. They are not completely immune from ‘judicial review’ and the judiciary will always keep a watch on their effective decision-making. 

At the same time, there is no set time frame within which such a decision regarding the defection of the minister is to be given by the chairperson. However, this power was considered to be discretionary in nature and various questions were raised regarding the unbiased nature of the speaker of the houses of Parliament.

Grounds for disqualification

An elected member can be disqualified if the chairperson or the speaker of the concerned house finds it appropriate according to the various criteria. The various criteria that are laid down are as follows:

  1. When the elected members give up their affiliation or the membership of the political party at their own will, they can certainly be disqualified on grounds of defection.
  2. If the elected member votes or abstains from voting which is in contradiction with any order or direction given by the political party or any other person on the party’s behalf, without obtaining their prior permission, the member could be disqualified. This is also known as a party whip. 

However, this is subject to the exception that the non-voting of the elected member should not be accepted by the political party within 15 days of such an event. 

  1. When a person initially contested the elections as an independent candidate but later joined any other party, he/she could be held liable for defection thereby leading to their disqualification from holding their position.
  2. When the member who had been nominated joins any other political party after the expiry of the term of six months, then they could be disqualified as this would clearly amount to defection.

These are the major grounds on the basis of which an elected member can be disqualified. All these would amount to defection and the evaluation for the same, as stated before lies with the speaker or the chairperson of the concerned house of Parliament.

Burden of proof

The burden of proving that there was no willingness to leave the party lies on the elected member who is alleged to have defected from the party and against whom such charges have been made. They are required to prove before the court that there was no ill intention on their part to defect in order to save themselves from any sanction.

In the case of Ravi S Naik v. Union of India (1994), it had been clearly stated by the Court that if any particular member has faced any disqualification and that member states that there has been a split in the party, then they should not be disqualified. 

Exceptions to the anti-defection law

The provisions under this Amendment aimed to prevent the shifting of the members of different political parties after the 1967 elections. However, these provisions also have certain exceptions. Though individual defection is not allowed, a group of MPs (Members of Parliament) or MLAs (Members of Legislative Assembly) are allowed to join or merge with other parties without attracting any penalties. In other words, mass defection i.e., defection by ‘one-third’ of the members of the different political parties was considered a ‘merger’. However, such mass defections in the name of mergers have proved to be detrimental to the political parties that have lost their power owing to the same factor. 

It was believed that mass defections were primarily for the good purpose of merging with the different parties. However, in most cases, even these were for fulfilling the profit motive and the quest for power of the ministers as a group. Realizing the same, this limit was increased to two-thirds in the 91st Constitutional Amendment Act, 2003. In other words, now at least 2/3rds of the members of the party had to defect to consider it a merger thereby making it valid under the laws in force. 

This is the general exception which is in contradiction to the concept of the anti-defection law. It is, to this date, considered an unfair practice.

Landmark judgements relating to the 52nd Constitutional Amendment

Keshavananda Bharati v. Union of India (1973)

This case covered a large number of aspects that were included later in the Indian Constitution. In this case, it has been stated that the ‘judicial review’ is a vital part of the basic structure of the Constitution and can’t be taken away from the courts under any circumstance. As a result, the decision of the speaker or the chairman being subjected to the ‘judicial review’ of the courts is completely valid.

Rajendra Singh Rana v. Swami Prasad Maurya and Others (2007)

This case expanded the meaning of the term ‘voluntarily gives up the membership’ under the grounds for disqualification for the defection. It was stated that when an elected member of any political party gives a letter to the governor mentioning him to call upon the pioneer of the opposite party, then they are assumed to have deliberately surrendered the membership of the original party of which they were a part. Further, it also emphasized upon the power of ‘judicial review’ with the judiciary which unless otherwise stated, would be valid on any decision passed by the legislative member.

Mannadi Satyanarayan Reddy v. Andhra Pradesh Legislative Assembly and others (2009)

In this case, a question had been raised by the appellant regarding the jurisdiction of the chairperson or the presiding officer. However, the High Court of Andhra Pradesh explicitly stated that there are no provisions within the Tenth Schedule that completely restrain the chairperson from taking any decision. The Court further went on to state that the ‘judicial review’ is not available with the courts when the proceedings are still going on and a quia timet action would also not be permissible. Even any form of interference at the stage of the proceedings is not permitted. The power to resolve the disputes, that is vested in the speaker or the chairperson is a judicial power. Hence, the decision which they pass is going to be considered to be final. 

Keisham Meghachandra Singh v. Hon’ble Speaker of Manipur (2020)

This is one of the very recent judgments criticizing the existing anti-defection laws stated in the Tenth Schedule. Justice Nariman pointed out that the anti-defection laws were toothless tigers in modern times with the entire power being concentrated in the hands of the chairperson to disqualify any person. This could be highly discretionary in nature because the speaker will have an inclination towards their political party either de jure or de facto. As a result, he suggested that there should be an external mechanism that should deal with the cases of defection by the elected members. This would firstly ensure that there is no possibility of any form of bias or impartiality and secondly, it could provide a fair opportunity to the alleged defector to represent their case. 

Kihoto Hollohan v. Zachilhu and others (1992)

In this case, the question raised before the Court was whether the anti-defection law directly infringes the right to freedom of speech and expression of the legislative members. The Supreme Court of India explicitly stated in this case that though the freedom of speech and expression is guaranteed to all, it can’t be used in an unreasonable or unrestricted manner to obtain personal gains at the cost of the Political party and the people’s rights. The anti-defection law aims to give more preference to the properties of personal and social conduct over certain other theoretical assumptions. Therefore, the anti-defection law doesn’t violate any rights of the legislator and rather prevents them from indulging in malicious activities. As a result, this law constitutes a part of the basic structure of the constitution and protects citizens’ and government’s rights at the same time.

Role of the governor

The governor till almost the end of the 20th Century had a huge role to play in protecting the state from facing any form of political instability. If they felt that the ruling party was not capable of managing the state affairs or when there are mass defections from the ruling party leaving, they could convey this information to the President to impose a state emergency under Article 356 of the Constitution. However, making such a recommendation was banned after the judgement given by the Supreme Court of India in the case of SR Bommai v. Union of India (1994). 

In the present times, the governor doesn’t have any right to interfere in the matters of the disqualification of the ministers. The sole authority of the same under the Tenth Schedule rests with the speaker of the house or with the chairperson. If their decision is contrary to the existing legal provisions it could be taken up by the courts for ‘judicial review’, but the governor would still not have any powers to take the matter into his hands. The governor doesn’t have any constitutional discretion which he/she had been given previously to take away the constitutional right of the speaker to look into such matters.

Issues in the 52nd Constitutional Amendment

The 52nd Amendment was put forth in 1985 which suffered from several drawbacks. Despite this, hardly any changes have been brought to the law to make it more effective. The various issues relating to the 52nd Amendment are as follows:

  1. Among the grounds for defection, it has been stated that if the person gives a vote contrary to the party whip, they might be disqualified as they would be assumed to have committed defection. In other words, they would be required to follow the party’s decision blindly and will not have any freedom to vote for their decision if it contradicts the party’s policies.
  2. There is no specification of the maximum time limit to take a given decision. As a result, there might be lengthy delays in the process of decision-making on the part of the speaker or the chairperson of the concerned house.
  3. The anti-defection law proposed in this Amendment has completely broken the chain of accountability as the legislators have primarily become accountable to only the political party.
  4. The 91st Amendment made in the anti-defection law provided for an exception to the disqualification of the minister if two-thirds of them defected. This was considered to be a merger but in reality, this is a form of encouraging mass defection harming the party’s interests.
  5. The rules have led the major parties to take advantage of the regional parties. They have a lot of influence and money power which they could use to attract the ministers of these parties and make them join them. This has essentially encouraged the horse-trading of the legislators from one party to another which is detrimental to the democratic system of any country.
  6. There were continuous defections taking place in 1965 that led to the spread of the slogan ‘’Aaya Ram, Gaya Ram’’. It can hence be ascertained that defections lead to political instability thereby impacting the overall administration.
  7. The Supreme Court has time and again suggested to set up an independent tribunal to decide upon the cases of defection but no action has been taken by the Parliament in this respect. There have been several barriers to proper communication between the Court and the other authorities due to which there have been delays in taking appropriate actions.

These are some of the major issues in the present times that exist in the 52nd Constitutional Amendment relating to the anti-defection law. Hence, there is a need to make certain changes to ensure the welfare of the political parties and the entire society in general.

Current scenario

The current situation regarding the use of anti-defection law is not very encouraging. Despite the laws being amended, mass defections are still very common in India. This is having a detrimental impact on the political parties and the governmental system as a whole. 

The most recent case is of the defections taking place among the Shiv Sena in Maharashtra. On the 22nd of June, 2022 there was a meeting held between the Members of the Legislative Assembly of the Shiv Sena in Mumbai to discuss the recent shift of the legislators with the party’s rebel leader Eknath Shinde, who is protesting against the main party in Assam. The party gave a clear indication to all the members that their absence from the meeting would lead to a presumption that they want to leave the party thereby violating the anti-defection laws. The Supreme Court has interpreted the grounds for disqualification for defection with a very broad outlook and the conduct of the MLA can be kept in mind to determine their intention. 

However, in case two-thirds of the members defect from the party they would be protected from facing charges for defection since it would be considered a merger.

In the present case of Shiv Sena, around 30 MLAs were with Eknath Shinde, with around 55 required to constitute a merger thereby escaping liability under mass defection. Hence, the protection under the anti-defection law might not be applicable to them. In such a situation, either all the rebel MLAs would be disqualified owing to defection accompanied by the necessary documentary evidence, otherwise, the burden of proof would be on the group of Eknath Shinde and the MLAs with him to write to the deputy speaker that they have two-thirds of the elected members of the Shiv Sena in order to claim the protection. The case is still to be heard by the Deputy Speaker of the Maharashtra State Legislative Assembly. This is one of the most recent cases of the misuse of the loopholes in the anti-defection law which has still not been rectified.

Besides this incident, several other events have also taken place in the past few years. In 2021, 12 MLAs out of 17 in Congress defected to the Trinamool Congress. As a result, this mass defection of MLAs didn’t lead to their disqualification as it came within the purview of mergers.

In 2017, Congress was the single largest party that got the maximum number of votes but couldn’t form the Government at the Central level. This was because of the defections that the ministers indulged in for obtaining big money and in the quest for a higher power. As a result, around ten MLAs from the Congress defected to Bharatiya Janata Party (BJP) leaving the Congress members reduced to a mere two. This also didn’t amount to defection due to the exception of mergers. 

From both these instances, it can be clearly inferred that despite corruption being inherent in all these defections, the ministers even to this date are able to escape their liability. There are several loopholes and issues in the anti-defection law and there is a dire need to bring about a change in it.

Recommendations

After evaluation of all the major issues in the anti-defection laws of the country, the following changes are certainly required to be incorporated.

  1. The decision regarding the disqualification of the legislative member for defection must be taken up by an independent committee or even the election commission to reduce the possibility of any bias on the part of the speaker.
  2. There should be a specific time limit for the disposal of such decisions to ensure that there are no delays that might cause frustration to both the party as well as the citizens who elected them. 
  3. There should be some changes in the current anti-defection law to prevent mass defection by the ministers of a political party under the blanket of mergers.
  4. At the same time, the freedom of speech and expression of legislators must not be violated. For ensuring the same, the ground for disqualification stating that the person who casts his vote contrary to the guidelines of government should be disqualified should be completely eliminated.
  5. The parties should aim to strengthen their internal mechanisms so that the members, in the first place are held accountable and don’t resort to defection as result.

These are some of the major recommendations which should be considered by the Government as well as the political parties to curb the defection of ministers.

Conclusion

The anti-defection law was introduced in the 52nd Amendment Act of 1985 that became a part of the tenth schedule. It was a welcome move at that point but suffered from drawbacks that have still not been addressed. While certain grounds are discriminatory against the legislative members and restrict the practice of their legal rights, certain provisions provide discretionary powers to the speaker and protect mass defections. There is a need to achieve an effective balance between the rights of the legislative members and the interests of the citizens and the political parties by suitably modifying the anti-defection laws. 

Hence, it can be concluded that some speedy action is required to be taken to address this issue. This is required for the welfare of the political parties and to sustain the very system of democracy. 

Frequently asked questions (FAQs)

Which Schedule was added through the 52nd Amendment?

The 52nd Amendment Act, 1985 introduced anti-defection law in India which became the part of 10th Schedule of the Indian Constitution.

What is the exception to anti-defection law?

In the case where two-thirds of the members of the party defect, it would be considered a merger. Hence, the defecting members can’t be held liable under the anti-defection law.

Who has the power to make decisions concerning the disqualification of legislators on the grounds of defection?

The Chairperson or the Speaker of the concerned house (Lok Sabha or Rajya Sabha) has the power to make a decision regarding the disqualification of any elected member on the grounds of defection. 

References

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Article 18 of the Indian Constitution

By
Sneha Mahawar
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0

This article is written by Shraddha Jain, a student of the Institute of Law, Nirma University, Ahmedabad. The author discusses Article 18 of the Indian Constitution. The main discussion of the Article is on the abolition of titles, the purpose of this abolition in the country, and some landmark judgments on this issue. 

This article has been published by Sneha Mahawar.

Introduction 

Article 18 of the Indian Constitution talks about the abolition of titles. This Article prohibited title recognition and conferment in our country. In 1948, a draft version of Article 12 was created, and later on, this version was edited and presented as Article 18 of the Indian Constitution. This article only applies to those titles that may have an influence on social equality and create unfairness among members of the community.

This provision does not restrict the award and its usage to Indian nationals for their outstanding work in various fields. Even though it is mentioned in Part III of the Indian Constitution, the purpose of this Article is not to protect the fundamental rights of Indian citizens, but it seeks to limit legislative and executive action.

Provisions of Article 18 of the Indian Constitution

Article 18 consists of 4 clauses, which are as follows:

Article 18(1): The first clause is  for the state’s responsibility. Article 18 (1) prohibits all titles. It prevents the government from bestowing titles on anyone, whether a citizen or a non-citizen, apart from the titles in the fields of military and academic, for example, Paramveer, Doctor, etc. As a result, a university might bestow a title or honour on a deserving individual.

Article 18(2): The second clause and subsequent provisions are for nationals. It forbids an Indian national from taking any title from a foreign nation.

Article 18(3): It prevents an individual who is not an Indian citizen, but holds any office of profit or trust post under the Government of India, from taking any title from any foreign nation without the President’s assent.

Article 18(4): It states that no individual, whether citizen or non-citizen, possessing any office of profit or charity post under the government of India, should receive any gifts, emoluments, or office of any type from or under any foreign nation without the President’s assent.

Clauses (3) and (4) were inserted to guarantee that a non-citizen remains faithful to the government, i.e., does not violate the confidence placed in him.

Nevertheless, the modern bestowment of titles such as ‘Bharat Ratna’, ‘Padma Vibhushan’, ‘Padma Bhushan’, and ‘Padma Shri’, which were established in 1954, is claimed to be permissible under Article 18 because they just reflect the state’s appreciation of exemplary work by people in diverse spheres of activity. It should be kept in mind that Article 18 does not safeguard any fundamental rights, but rather limits executive and legislative jurisdiction.

Constitutional debate on Article 18 of the Indian Constitution

Today’s Article 18 was initially Article 12 of the drafted Indian Constitution.

Article 12 of the Draft Constitution, 1948 was as follows:

1) The state shall not bestow any titles.

(2) No Indian citizen shall receive any title from a foreign nation.

(3) No individual possessing any office of profit or trust post under the Government of India will take any gift, remuneration, rank, or office of any form from or under any foreign nation without the President’s assent.

On December 1, 1948, draft Article 12 (present Article 18) was discussed. It prohibited title recognition and conferment to any individual.

A Drafting Committee member suggested a modification to the article to specify that titles of military and academic excellence would be given exemption from the ambit of Draft Article 12. The Assembly adopted this modification without controversy.

Another participant of the assembly proposed to modify sub-section (2) to clearly indicate that the government will not acknowledge any titles bestowed by a foreign nation. He contended that, in its current form, Draft Article 12 only prevents an Indian national from taking a title and does not prevent the State from acknowledging it; furthermore, no punishment or penalties were specified for doing the same.

One of the members said that anyone who accepts such a title must be considered to have surrendered their citizenship of India. The Drafting Committee Chairman stated that the government might exercise its residuary authorities to impose a punishment for this action. The Assembly rejected the amendment.

On December 1, 1948, the amended Draft Article 12 was accepted.

What is meant by the term “titles”

A ‘title’ is anything that is attached to one’s identity as a prefix or suffix, such as Sir, Nawab, Maharaja, and so on. Titles and titular achievements must not be granted in a democratic country. It will be counterproductive to the development of social justice.

Titles refer to any inherited designations (such as Rai Bahadur, Khan Bahadur, Sawai, Rai Sahab, Zamindar, Taluqdar, and so on) used by people during the colonial period, and the objective of this Article 18 in our Constitution is to maintain fairness among everyone.

It excludes military and scholarly professionals, as well as civilian honours such as Padma Shri, Padma Bhushan, Padma Vibhushan, and Bharat Ratna, with the limitation that no one will ever use them as a suffix or prefix to their names.

What was the need for introducing Article 18 of the Indian Constitution

  • Titles are used to differentiate an individual’s rank by pinning inferiority complexes upon other people. As a result, the constituent assembly agreed to eliminate such inequality and drafted this article, which has four provisions.
  • It would endanger the current societal harmony and unity. The nationalists decided unanimously to eliminate titles in order to protect the aim of a democratic republic.
  • Honours and titular achievements should not be established in democratic government. This is in the development of a nation that aims to achieve political, cultural, and economic justice and aspires to become really democratic. There is really no place for a handful of people to possess titles, which might establish artificial disparities among the members of an equal community.
  • If people have been given titles, they will create concerns that will prevent the establishment of good interpersonal relationships.

Punishment under Article 18 of the Indian Constitution

  • Accepting a title is a breach of a regulation, but it is not an offence.
  • By using Article 226, an individual may impose a restriction on the state through the writ of Mandamus.
  • The recourse is only applicable for the enforcement of constitutionally protected rights.

Landmark judgments under Article 18 of the Indian Constitution

In the judgement of Balaji Raghavan v. Union of India (1995), the petitioners questioned the legitimacy of national awards like the Bharat Ratna, Padma Vibhushan, Padma Bhushan, and Padma Shri, and asked the Court to prohibit the Indian government from bestowing these honours. They have argued that the National Awards come under the purview of titles under Article 18 of the Constitution of India and hence contravene Article 18(1).

The petitioners are of the belief that the term ‘title’ must be granted the broadest possible interpretation and range in order to give effect to the statutory interpretation, provided that the only exceptions to this rule are military and technical excellence. It was also asserted that these honours are being excessively misappropriated, that the reason for which they were given has been undermined, and that they’re being given to people who are not eligible for them.

Balaji Raghavan brought a writ of mandamus in the High Court of Madras under Article 226 of the Indian Constitution to prohibit the Government of India from bestowing any of the major awards.

The issue that went to the Hon’ble Supreme Court was—“Whether the honours such as Bharat Ratna, Padma Vibhushan, Padma Bhushan, and Padma Shri come under the purview of “titles” within the definition of Article 18(1) of the Indian Constitution?“

The Supreme Court ruled that the notion of equality doesn’t really require that excellence be denied and also that people who have done great service to the nation be denied awards. Article 51A(j) of the Indian Constitution exhorts every individual “to aspire for expertise in all fields of collective and individual interaction, so that the nation continually increases to higher levels of undertaking and accomplishment“. 

National Awards such as the Bharat Ratna, Padma Bhushan, and Padma Shri do not violate the concept of equality protected by the provisions of the Indian Constitution. These National Honours are not ‘titles’ in the spirit of Article 18 and hence do not violate Article 18 of the Indian Constitution. To prevent abuse of this power, the Court advised that the Prime Minister should appoint a high-level commission, in agreement with the President, to guarantee that only meritorious individuals receive the honours.                       

In the case of Indira Jaising v. Supreme Court of India (2017), a complaint was lodged in this matter questioning the usage of the term ‘senior advocate’ before the names of the advocates. The Supreme Court ruled that this is not the title, but rather a demarcation, and therefore does not violate Article 18 of the Indian Constitution.

Section 16 of the Advocates Act 1961 establishes the foundation for such a division. Section 16(2) of the Advocates Act of 1961 states that an advocate could be classified as a senior advocate if the Supreme Court or the High Court feels he possesses the necessary skill, expertise, and understanding of the law. The Court granted orders in all of these instances and established a regular body called the ‘Committee for Senior Advocate Designation’.

Position in other Nations

United State of America: Article I Section 9 Clause 8 of the U.S. Constitution contains a similar prohibition that forbids anyone from holding positions of profit or trust after accepting gifts of any kind from a foreign government without the consent of Congress. The American Constitution, on the other hand, follows the tradition of periodically granting civil honours, such as the Presidential Medal of Freedom.

Canada: The Order of Canada was created by the Canadian government in the year 1967 and is given for a broad range of achievements such as farming, ballet, science, philanthropy, and so on. There are three different levels of membership in the Order of Canada: Companions, Officers, and Members.

France: The Order of Academic Palms, Order of Agricultural Merit, and Order of Arts and Letters were adopted by France to give honour for excellence in education, writing, technology, rendering service in agricultural activities, artistic and other creative activities. 

Conclusion 

The bestowal of awards generates inequality between recipients and ordinary people, but this also promotes undesirable rivalry among winners. It is important to recognise people for their contributions to empower them. Article 18(1) was enacted to stop the corrupt and immoral conduct of citizens, which makes them go about currying favours with power in order to get certain differentiation. Awards not only honour accomplishment, but also many other traits such as skill, difficulty, and effort. Giving awards to citizens is constitutionally legitimate and does not violate Article 14 of the Indian Constitution. If an honour is misused, the defaulter’s reward will be revoked, and some penalty may be imposed. The government should determine the legality of titles on a regular basis. The purpose of awarding titles should be clarified.

Frequently Asked Questions (FAQs) 

What is the distinction between titles and awards?

At the time of British administration, the titles were given to people who pleased Britishers with their administrative abilities. Individuals are honoured for their services to the advancement of art, literature, and technology, as well as for exceptional public service. While rewards are given solely on the basis of a person’s performance without regard to religion, class, gender, or colour, British rulers conferred titles on certain groups.

Why is it necessary to give an award to someone?

Individuals would be motivated to work more for the betterment of the nation if they were rewarded. As a result, a system of honours and decorations has been established to recognise excellence in the execution of certain responsibilities.

What are the criteria for selecting people for ‘Padma awards’?

The Union Government established a ‘High Level Review Committee,’ led by the Vice-President, to look into current regulations and determine the method for choosing people for “Padma awards” in order to increase respect for such honours. This Commission proposed the formation of State-level Committees to provide suggestions to the Union. The proposed names will be considered by the Union government and a commission composed of the Cabinet Secretary, the Home Ministry, and the Secretary to the President of India. Following that, the completed names must be presented to the Prime Minister’s office and then to the President. There are no rules governing ‘Bharat Ratna’ awards.

 References 

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

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

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Is pre-pack paradigm the future of Indian Insolvency Laws

By
Sneha Mahawar
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0
insolvency-law

This article is written by Hardik N. Sawant a student of a “Certificate Course in Insolvency and Bankruptcy Code pursuing the United States – Certified Public Accounting (US-CPA). This article has been edited by Ojuswi (Associate, Lawsikho). 

This article has been published by Sneha Mahawar.

Background

The IBC, 2016 has been instrumental in inculcating the discipline with which the promoters and the boards run the day-to-day affairs of the corporate debtor, emphasizing good corporate governance practices, making them answerable to the authorities for the financial decisions they take in the best interest of the stakeholders. The prime objective of the Code is to ensure the resolution of the corporate debtor with liquidation only as a matter of last resort and that under no circumstances the law is to be referred to as a recovery mechanism.

After considering the vast experience gained through the highs and lows of the Implementation and Execution of the Law since the inception of the Insolvency and Bankruptcy Code, 2016 (IBC/ The “Code”), the Insolvency Law Committee decided to put in place a Sub-committee of itself to study the Prospects of the Pre-Packaged Insolvency Resolution Process (PPIRP) as one of the Feasible options for speedier Resolutions of the Stress faced by the Defaulting Corporate Debtors.

The Sub-Committee which was constituted on 24th April 2020, under the Chairmanship of Dr. M.S. Sahoo, the Chairperson of the Insolvency and Bankruptcy Board (IBBI) vide the Circular of the Ministry of Corporate Affairs (MCA) finally submitted its Report on 31st October 2020 consisting of Recommendations for going ahead with the Pre-packaged Insolvency Resolution Process in the Indian Context, while also learning from the similar Practices followed by the International Community. 

The Recommendations of the Sub-committee were duly recognized and the Ordinance was floated in the Parliament on 4th April 2021 by the Hon’ble Union Minister of Finance and Corporate Affairs Mrs. Nirmala Sitharaman making amendments to the Insolvency Code, which was converted into IBC (Amendment) Act, 2021 w.e.f. On the same date introduced PPIRP for Corporate Persons classified as Micro, Small, and Medium Enterprises to the Indian Market. Sections 54A through 54P, in Chapter III-A of Part 2 of the Code envisage the Pre-packaged Insolvency Resolution Process. This article will dive deep into the details of how the Country shall navigate through the newly prescribed Law and only time will tell how India shall move ahead with the same, gaining experience through the Process in due time.

The purposeful relevance of the PPIRP mechanism

The Covid19 pandemic-induced difficulties exposed a lot of Corporates, financial markets, and Economies around the world to Financial Realities and the Ability to Survival in the Testing Times of the Developed and Developing World likewise. This also brought many of the companies in the MSME Sector, which is held as the Backbone of the Economy, to the edge, impacting their Financials, ability to create jobs, and stand firm through the Storm. The Government did provide the necessary Relief to them by suspending filings under the Code for one year starting 25th March 2020. 

These Small and Medium enterprises have been Critical to the Indian Economy as they contribute a considerable chunk to the Gross Domestic Product (GDP) and also provide Employment Opportunities to the population. Therefore, understanding and addressing the concerns of the MSMEs were necessary for their survival and to help them strive through the resolution of their stress, due to their unique nature of businesses. 

Hence, it was proposed to provide an efficient alternative insolvency resolution mechanism for the MSMEs under the Code, ensuring quicker, cost-effective, and value-maximizing outcomes for all the stakeholders, in a manner that is least disruptive to the continuity of their businesses. 

Why is Pre-pack insolvency needed in India

The Code has a Positive Impact on both, the Promoters of the Corporate Debtor (CD) in terms of the Repayment and if possible, retaining the control as well as the Financial or Operational Creditors to whom the Debt is owed. The Possibility of a Liquidation is always a grave threat to the CD; as it may seem to be a better option in the short run, but may have devastating effects on the economy as a whole in the long run. This danger might further escalate when it comes to Micro, Small, and Medium Enterprises as there is often a lack of interest in the Assets of the Companies in the MSME sector and also unfavourable Resolution Plans. They might not have the skills, expertise, money, and manpower to handle the Lengthy process of the Corporate Insolvency Resolution Process (CIRP) to be able to present the viability to continue as the Going Concern and prove their Mettle in the Market. 

One of the Importance of the Pre-pack is that- there may be a situation where before the Pre-pack Resolution stage, the Corporate Debtor may enter into the Management Buyout which would, in turn, result in Transferring the assets to another entity. However, such transactions may not have the approval of the Courts or Regulators such as the Competition Commission of India, the SEBI, or the RBI for that matter. These cases may face an open challenge by the Creditors claiming their Rights on the Assets of the Company irrespective of the fact that much time shall be lost and the Value of Assets of the CD would deplete through every single day of delay in the Process.

The Pre-packaged system is the Answer for shortening the Timelines even further while at the same time being able to maintain the Legal Sanctity of the Process through the timely detection of Stress or Default. Pre-packs can be thought of as a mix of Court-oriented processes under the IBC and the out-of-court Debt Restructuring involving the Lender Banks. The Process under Pre-Pack emphasizes the formation of the Resolution Plan to save the stressed assets and debts of the CD, before initiating the formal provision-bound court process through the NCLT as in the case of CIRP. In this case, A Plan would be negotiated, circulated to the Creditors, and voted upon, before the case is filed. Because of its very nature, a PPIRP has to have a very high level of support from its stakeholders, thereby ensuring the highest chances of the revival of the CD. This is the need of the hour, as, without the Promoter’s Cooperation, it would be nearly impossible to negotiate a Pre-pack. A Robust Framework of Pre-Pack would push the Debtors to settle their debts voluntarily and out of court, thereby reducing the burden of the Courts.

A typical Process of Pre-Pack in India will have the Flow as follows:

Source: Annexure to the Report of the Sub-committee of the Insolvency Law Committee

International Practices in the area of Pre-packaged insolvency

United Kingdom

  • It is commonly used as the Strategy for selling a Business as a Going Concern, by using the Administrator’s Power to sell the Company’s Assets without the Approval of the Creditors.
  • It commences with the co. resolving to appoint an Insolvency Practitioner as an Advisor, with a possibility that the same person would be appointed as an Administrator.
  • Once the terms of sale are agreed upon, the Insolvency Practitioner is officially appointed as an Administrator who helps in the negotiation and arrangement of the Rescue Plan for a debtor, before formal administrative proceedings. 
  • There is a procedure here formulated by the Statement on the Insolvency Practice wherein, the Administrator has to Disclose the activities undertaken to market the Assets of the Debtor in question to be sold and a detailed narrative justification is needed as to why the pre-packaged sale was given a priority over the other methods. This information may be later used to challenge the conduct of the Administrator in charge of the process.

United States of America

  • The US has more of a common Bankruptcy approach towards the resolution of companies. In that, the US Bankruptcy Code provides for three forms of pre-packs, namely:
  1. Pre-plan sales u/s 363 of the Code;
  2. Pre-packaged Bankruptcy Proceedings u/c 11;
  3. Pre-Arranged Bankruptcy Proceedings u/c 11.
  • The Pre-plan sales are somewhat similar to the one followed by the UK as mentioned above. Even in this case, their law does not put forth any specific guidelines or procedures to deal with the sales of the assets of the CD.
  • For the Pre-packaged procedure, the CD reaches an agreement with the terms of the plan with the key creditors and manages to gather approvals from them while also circulating a Disclosure statement to them. With the majority of the votes of the class of creditors in favour, the CD proceeds to submit a petition for ‘Chapter 11 Bankruptcy’ in the Court.
  • In the case of Prearranged Bankruptcy process, also known as Pre-negotiated, the CD reaches an agreement with its key Creditors, but does not circulate the plan or does not even try to gather favourable votes in this regard, as this is done after filing for Chapter 11 Proceedings formally in the Court.
  • In either of the cases, the plan must be reviewed and approved by every class of affected parties, including the Creditors, of course, with at least 2/3 of the amount and half of the number of them accepting the plan. 
  • If the Required majority of the parties vote in favour of the plan, it is deemed to have passed and is binding on all the concerned parties. 
  • The plan filed with the Chapter 11 Bankruptcy petition shall be approved by the court subject to compliance with the stipulated disclosure requirements. Once the Reorganisation plan is confirmed by the Bankruptcy Court, it stands to be binding on all parties whether or not any one party voted in favour or against or not voted at all. 

Singapore

  • The Scheme of things in Singapore in the context of Pre-packs is noticed to have been somewhat identical to that of the Provisions of the Indian Companies Act, 2013 – Sections 230 through 240 that we have about the Schemes of Arrangement or Compromises, Mergers, and Amalgamations. 
  • Sections 210 (3AB) (a) and (b) and 211I of the Companies Act of Singapore empower the Court with certain wide discretionary powers to satisfy itself with the fact that- had the meeting of the Creditors not taken place, the outcome of the Resolution Plan would still prove to be carried out in the best of interest of all affected parties. Then, and, only then, the court shall approve the Resolution Scheme presented to it.
  • These Provisions relating to the Compromise and Arrangement were shifted to a New Law brought into force in mid-2020 namely: ‘Insolvency, Resolution and Dissolution Act, 2018.’
  • ‘Insolvency, Resolution, and Dissolution (Amendment) Bill, 2020’ proposed a new Pre-pack Scheme for the MSMEs to be able to sail through the Covid19 Pandemic period. 
  • An automatic Moratorium would be triggered when a company gets admitted into the Scheme and there would be no requirement to convene the meeting of Creditors.
  • The Company thus admitted would rather be prepared to prove that if a meeting of the Creditors or the class of Creditors had been called, a majority of them would have approved the proposed scheme.

India is yet to have its own first-hand experience in the context of the Pre-packaged Insolvency Resolution Process (PPIRP) as it is a relatively new and uncharted territory that has to be followed in the years to come. Maybe that is why we don’t have material case studies to draw references from and learn from them. Some more International practices can be studied to gain an understanding of the ways to deal with Pre-packs, for eg. The Systematic 4-point approach of France categorizes the Stressed CDs according to their Financial Status.  

What is the “Swiss Challenge” method

  • A “Swiss Challenge” is a method of Bidding wherein a base price for the assets of the Corporate Debtor is Set and published to the market and the counter-bids are invited to either Match the base price or enhance the same. 
  • It is a method of bidding wherein the interested party initiates a proposal or the Bid. The Details of the CD and its assets and liabilities are already in the public domain. The bids are invited from the interested parties to go ahead and execute the same to bail out the company. Thereafter, the original contractor gets an opportunity to match the Best Bid received in the auction.
  • The Submitter of the Resolution Plan shall have an option to improve the plan in the following manner:
  1. The Submitter which is falling behind in bringing up a competitive Resolution Plan has an option to improve the same.
  2. Then, the Submitter of the other Resolution plan shall have an opportunity to further improve it by at least a margin or a percentage point.
  3. The Submitters in the 1st or 2nd case are then again allowed to improve their plans making them even more competitive while setting aside the ineligible and the lowest bidder in the process.

This process of improvement shall continue till either of the submitters fails to use the option within the time specified for the invitation of the Resolution Plans.

Benefits of Pre-packaged Insolvency regime

The Pre-packs combine the “Best of Both Worlds” so that it causes the least possible disruption to the Business of the Debtors and their Business activities by combining the efficiency, speed, cost, and flexibility of the workouts with the binding effects and structure of formal insolvency proceedings. The benefits of the Pre-packs are as follows:

Value maximization

A distressed asset in the ever-changing world of Commerce and Business has a Life cycle, and the longer it stays in the state of Stress, the more value is lost. The Pre-packs preserve value by cutting down the elements of a formal process. Early initiation and the closure of the Process minimize the possibility of liquidation and also the destruction of the economic value of an otherwise viable business. This is a key to saving for small businesses.

Job preservation

As the Pre-pack commences at the earliest sign of distress, it facilitates the continuity of the operations of the Business without any job losses. It ensures that a company keeps going, as compared to that of the formal court-monitored process which might result in loss of both employees and customers.

Preliminary work is already done before filing the application to AA

PPIRP commences only after 66% of financial creditors approve the proposal for PRIP and approve the name of the Resolution Applicant; the CD passes a special resolution with 75% majority of the members approving the same; CD prepares the Base Resolution plan; and last but not least, the name of the Resolution Professional has been approved by the Financial and Operational Creditors alike.

Informal understanding with the creditors before applying to AA formally

The Pre-pack system allows the CD and the Creditors to come on the same page and maintain that consensus on various issues relating to PIRP and work on the Resolution Plan informally before proceeding to the Formal filing to the Adjudicating Authority i.e. the National Company Law Tribunal (NCLT).

Fast approval and reduction of the burden of the NCLT

A Pre-pack does not require the involvement of the court during the informal part of the process and also requires the minimum role of the courts even in the formal process. Hence, it reduces litigation costs and delays and helps to make the life of the courts easier.

Base Resolution Plan is a good starting point

The Management of the CD, which has inside-out knowledge of their business, is in the best position to chart the course of the Recovery from Stress. The Base Resolution Plan chalked by the same management having the inside know-how is the best place to start with.

The existing management continues to be in control of the CD

Unlike CIRP where the entire operation of the CD transfers to the Resolution Professional, who does not know the working of the company, the management of the Corporate debtor in the case of the PPIRP itself continues with the operations of the CD, except only in case of Fraud.

Freedom to the management of the CD to partner with others

The Management of the CD in Stress, while in the PPIRP, has the freedom to bring in another person or a body corporate to jointly file the Resolution Plan. The Management can also take the help of Specialists in the field of Financial Management, Marketing, Tax, and legal consultants and present a Plan in an Individual capacity considering the insights provided by the experts.

Conclusion

“Speed is of the Essence in the process of Implementing the effective Reorganisation or Bankruptcy practices” to instill & maintain the confidence of the General Public, the legal fraternity, and the members of the Business Class of the Country in the Policies put forth by the Government. One of the Important Objectives of the court is to bring different aspects of the Law under a single integrated platform to ensure a speedy, efficient, cost-effective revival of the Debtor in Stress. Here, there is an increased responsibility on the Insolvency Professionals, balancing the Interest of the Stakeholders, and also ensuring that no undue advantage is being taken by the Creditors as this law is a Creditor-in-control one. The regulated environment outlined in the form of the Insolvency and Bankruptcy Board of India shall also be watchful in preventing the Misuse of the law.

The Concept of Pre-packs promotes the very objective of the Insolvency and Bankruptcy Code, 2016, which is to maximise the value of the assets of the Corporate Debtor and safeguard the interest of all the Stakeholders.  The Indian version of the Pre-pack will be a unique one that learns lessons from the other Jurisdictions and builds an India-centric variant within the basic structure of the Code while making it ready for the Future in all possible facets. 

Hence, the legislature is expected to strike a perfect balance between the existing law and the pre-pack framework. The Transition might not be a Smooth one but the continuous Innovation and discoveries while practising the law will get us a Breakthrough into this Groundbreaking REFORM.

References

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

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

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Central Waqf Council

By
Rachit Garg
-
0
Islamic-Law-Law-of-the-Muslim-World-eJournal.-June-14

This article is written by Rimsha Riyaz, a student of BA LLB (Hons.) at Jagran Lakecity University, School of Law, Bhopal. This article explains about features of the Central Waqf Council and its background and members.

It has been published by Rachit Garg.

Introduction 

A waqf is any dedication of property to God for religious or charitable purposes. Any waqf is a permanent dedication and can only be used for religious or charitable purposes. The waqf property can only be transferred by a deed and can be owned by any person, even a non-Muslim.  The waqf properties are governed by the state waqf boards created under the Waqf Amendment Act, 1995. The state waqf properties are managed according to the directions of and by the State Waqf Boards. However, there was no central authority for managing waqf properties throughout the country. Therefore, the Central Waqf Council was created as a statutory advisory body for advising the central government in matters concerning the management and administration of waqf properties all over India. The body was also created for regulating the working of the State Waqf Boards in the administration of waqfs. This article will cover most of the aspects of the Council. It shall, however, be limited to the Waqf Act and Rules made for the Council and the recent efforts to restructure the Council.

The Waqf Council

The Waqf Council is a central authority and a statutory body established under the Waqf Act, 1954, under Section 9 of the Act. The Council was established in the year 1964 by the Government of India. The Waqf Council is under the control of the government under the Ministry of Minority Affairs. The Council is an advisory body which is empowered to advise the central government on matters concerning the management and administration of the waqf properties across the country. The council is also supervisory as it supervises and regulates the working and administration of the state waqf boards and their functions. Each state has an individual waqf board whose members govern the affairs of the waqf properties in that particular state. 

Why was the council constituted? 

The growing number of awqaf( plural of waqf properties), or rise in the number of properties dedicated to the waqf, has led to an increasing number of property disputes relating to waqfs and issues of ownership. Therefore, a need was felt to manage such a large number. For this purpose, the Waqf Act was passed by Parliament in the year 1954. The Act applies to the whole of India except for Jammu and Kashmir; hence, it does not have a waqf board of its own. This Act governed the dedication of properties as waqfs and gave rules for regulating the same. The Waqf Act also provides for the creation of a separate waqf tribunal for the resolution of disputes related to waqf properties. 

The constitutional validity of the Act has been recently challenged on the ground of giving preferential treatment to one particular religion and unbridled powers to the waqf boards determine properties as waqfs, which is a threat to the properties owned by non-Muslims and discriminates against other religious institutions. The petition was refused by the Supreme Court; however, a notice on the same was issued by the Delhi High Court.

The Act empowers the central government to establish state waqf boards in every state and a Central Waqf council to advise the government in the administration of waqfs and the state waqf boards. The Act lays down the responsibilities, powers, and functions of the council. 

Functions of the Council

The Central Waqf Council performs the following functions: 

  • The Council has been authorised by the Waqf Act to issue directives to the State Waqf Boards in the matters relating to their performance in the financial aspects of waqf management which include maintenance of the properties, execution of the deeds, examination of the revenue records, surveys etc.
  • The Council, being an advisory body, provides legal advice to the central government and state waqf boards in matters about the protection and recovery of properties dedicated as waqfs.
  • The Council also must govern the Central Waqf fund and its maintenance is also done at its discretion. 
  • The Council is directed by the central government to keep and maintain all the books of accounts in the manner prescribed by the central government.

The Central Waqf Council was also created to overcome the challenges faced by the state waqf boards and establish a national authority over them. The state waqf boards are riddled with a lot of issues that vary from their constitutions to their functioning. The state governments have been empowered to create waqf boards in their particular states, yet many states have not been able to constitute them due to the political affiliation of the members who work for their interests and neglect their duties. The waqf has been created to survey the properties, but many state boards do not give importance to appointing survey commissioners for this purpose. 

There are also economic barriers to the efficient functioning of the state waqf boards. The income yielded by the waqf boards is mostly transferred to their members and mutawallies as salary, and thereby, the net income is very low. This has led to it being unable to afford sophisticated legal machinery and it lags behind inefficient dispute resolution and encroaches upon the ownership rights of waqfs.

All these problems faced by the state waqf boards are to be dealt with and tackled by the Central Waqf Council, hence making it a body of national significance.

State Waqf Boards

The state governments of each state are empowered by Section 13 of the Waqf Act to establish a waqf board. There are separate waqf boards for Sunnis and Shias. The state waqf boards are composed of the chairperson, members nominated by the state government, Muslim legislators and Muslim members of the legislative assemblies, Muslim members of the State Bar Council, recognised Islamic scholars and theologians, and Mutawallis who manage the waqf. The term of the members of the Waqf board as given under Section 15 of the Waqf Act is five years.

Section 32 of the Waqf Act details the functions and powers of the state waqf boards. Some of the most important functions of the waqf boards are maintenance, directions, administration of waqf properties,  appointment and removal of mutawallis, and scrutinizing and inspecting budgets and waqf accounts. It also institutes as well as defends suits with respect to the waqf property. 

Composition of the Waqf Council 

The Central Waqf Council is composed of various members from various backgrounds and expertise. Section 9 of the Waqf Act, 1954, establishes the council and also details its composition. The Council, being a central body, is headed by the Union Minister of the Waqf as its Chairperson, Ex- officio. The current Union Minister in charge of Waqfs and the chairperson of the council is Dr. Najma A. Heptulla. The Section empowers the central government to appoint members of the Council. Such members shall not exceed 20 in number. These members are to be appointed among the Muslims all over the country.

The members of the council, apart from the chairperson, include the following:

  1. Three persons, who represent Muslim organisations in the nation have an all-India character. 
  2. Four persons, who have national prominence in the fields of administration or management, financial management, engineering or architecture and medicine, one each from each field.
  3. Three members of Parliament in total. Two shall be from the Lok Sabha and one from the Rajya Sabha.
  4. Chairpersons from any three state waqf boards, but by rotation among states.
  5. Two persons, who have been judges of the Supreme Court or the High Court of a state.
  6. An advocate of nationwide eminence.
  7. One person, who is a representative of the mutawallis of the waqfs and has an annual income of more than or equal to five lakh rupees.
  8. Three persons, who are eminent scholars or theologians of Muslim law.

However, among all these Muslim members of the Central Waqf Council, at least two of them should be women.

A secretary is also appointed by the Council as its executive head, who performs the day-to-day functions of the Council and implements the provisions of the Waqf Act. The Secretary is appointed based on the reports submitted to the Union Minister of Minority Affairs, who is also the ex-official chairman of the council. The Secretary is also assisted by four members from the areas of development, administration, accounts and legal matters. 

The Central Waqf Council is also supported by four committees that together help in the implementation of its functions. The four committees meet from time to time to discharge their functions. The committees are as follows:

  1. Planning and Advisory Committee: This committee decides matters with respect to the administration and financial matters like the annual budget and the formulation of welfare programs.
  2. Waqf Development Committee: This committee looks after the schemes of the council for the development of waqf properties and better utilisation of the resources of the waqf boards. 
  3. Education and Women welfare Committee: This committee deals with the matters related to the educational schemes and loans for women’s welfare.
  4. Monitoring Committee: This committee monitors the functioning of various schemes and projects and looks after the overall work of the council. 

Central Waqf Council Rules

The working and functions of the Waqf Council are regulated and guided by the rules made by the central government, which it is empowered to make under Section 12 of the Waqf Act. These rules are known as the Central Waqf Council Rules, 1998. These rules govern the appointment, removal of members and secretaries, allowances and procedure of the meeting of the council. These rules cover the important aspects of the council, such as:

  • Tenure: The tenure of the members of the Waqf Council is for a term of three years. After their tenure has ended, the members of the council are eligible for reappointment. The members are free to resign at any time by providing notice in writing of the same to the central government.
  • Removal: The members of the Waqf Council can be removed on the basis of insolvency, disease or infirmity, conviction, absence from three consecutive meetings, and abuse of power and position. When any vacancy on account of the removal of a member occurs, the central government may appoint a new person as a member. 
  • Meeting: There shall be at least 4 meetings of the council per year and a maximum of 6 times. The date and venue are decided by the Chairperson, who prepares the agenda for the meeting. The quorum necessary for the meeting is at least one-third of the council members. 
  • Annual Statement of Accounts: The Council is also required to maintain records of accounts and the Waqf fund and discuss them each financial year.

Restructuring and reform

The NITI Aayog has submitted a report on the restructuring of the CWC for the restructuring and reform of the Council. Some of the recommendations made by the report are as follows:

  • Increased Manpower: The report recommended an increase in manpower even in the higher positions in the council. The report recommended a new position of a joint secretary along with the Secretary of the council who shall report and be accountable to the Secretary. 
  • New functional divisions: The report increased the number of divisions in the administration of the council and restructured it into five functional units. These new divisions are:
    • Land and Property Development Division (LPDD),
    • Legal Affairs Division (LAD),
    • Administration & Establishment Division (AED),
    • Planning, Finance and Audit Division (PFAD),
    • Information Technology Division (ITRD).

These divisions are each headed by a Senior Class I officer and shall also be headed by deputy secretary level officers.

  • Creation of Zonal Offices: The report recommended the establishment of four zonal offices in the country to facilitate the functioning of the Council and its meetings. These zonal offices are proposed to be at Lucknow (NZO), Bengaluru (SZO), Kolkata (EZO), and Pune (WZO). These offices shall each have 5 members and shall meet at least 4 times a year.
  • Meetings of the Council: The report also proposed to increase the frequency of the meetings of the council. It recommended at least six meetings a year for the efficient working of the council. The Secretary is also asked to call monthly meetings of the four committees and the five proposed divisions to check on their progress. 

All these recommendations have been made according to the needs and areas of improvement, and hence to make the functioning of the Council more efficient. However, these recommendations of 2017 have still not been implemented, but measures have been taken to implement the same in the best possible manner. 

There have also been efforts made by the Council itself to reform and improve its functioning for the better. One such measure that has been taken is the launching of the Shahari Waqf Sampatti Vikas Yojana. This scheme was passed by the Central Waqf Council to improve the financial position of the waqf boards and to provide grants in aid or interest-free loan assistance to waqf boards for proper maintenance of the waqf properties. 

Another such scheme was launched known as the Qaumi Waqf Board Taraqqiati Scheme (QWBTS) for the development of state waqf boards and was aimed at computerization and digitization of the records of waqf properties for easy access and prevention of fraud in the deeds of waqfs.

Conclusion 

The Central Waqf Council is, hence, an important body with national significance. The Council is a body for the regulation of waqf properties across the nation. The council performs various functions for governing the administration of the state waqf boards. There are a total of 32 waqf boards, including both the states and union territories, except for Goa, Nagaland, Arunachal Pradesh, Sikkim, and Daman and Diu. The state waqf boards face a lot of challenges and disputes regarding the constitution of the boards, their finances, surveys, and maintenance. Tackling them is one of the primary functions of the council. The council has various members who are appointed by the central government and have various powers. The council performs the function of advising the central government and the state waqf boards. However, the waqf administration in India is in a disastrous state. The implementation of the Waqf Act has been ineffective and insufficient due to the negligence of its members and lack of financial strength.

Frequently Asked Questions (FAQs) 

Do the Union Territories also have their own waqf boards?

The Waqf boards are a creation of the state government and, hence, their constitution also depends on the states. The country currently has a total of 32 waqf boards, including both the states and union territories. However, not all states and union territories have waqf boards. The northeastern states of Mizoram, Nagaland, Sikkim, and Goa. However, the union territory of Dadra and Nagar Haveli do not have waqf boards. 

Can a waqf property be leased?

A waqf property’s ownership is transferred to God and its usage is only for religious or charitable purposes. The Waqf Amendment Act, 2013 laid down that all waqf properties, on which lie a mosque, dargah, khanqah, or imambarah, cannot be leased for any other purposes. Only the waqf property of unused graveyard land can be leased out before 2013 only in the states of Punjab, Haryana, and Himachal Pradesh.

What are some of the challenges faced by the Central Waqf Council?

Some of the most prevalent issues with the Central Waqf Council are the corruption in the officers and members of the council, illegal occupancy of waqf properties, increase in encroachment of the waqf properties, growing litigation, and lack of record management, and absence of suo motu actions taken in cases of illegal occupancy of the waqf properties. These issues require the restructuring of the functioning of the council.

What are some of the developmental activities of the Central Waqf Council?

The Council issues loans to the Waqf boards across the country for the development of institutions such as commercial complexes, marriage halls, nursing homes etc. It also provides grants-in-aid to regions with Muslim populations for vocational and industrial training. It provides financial support for educational institutions for the welfare of the community.

References 

  1. Explained: What Is Waqf Act And Who Owns The Waqf Land In India 
  2. Understanding the essential provisions of the Waqf Act, 1995 – iPleaders 
  3. Central Waqf Council – JournalsOfIndia 
  4. About: Central Waqf Council 
  5. https://commons.m.wikimedia.org/wiki/File:The_Union_Minister_for_Minority_Affairs_%26_Chairperson,_Central_Waqf_Council

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What is Monogamy

By
Rachit Garg
-
0
Marry

This article is written by Sambit Rath, a B.A. LL.B student of Dr. Ram Manohar Lohiya National Law University, Lucknow. In this article, the author aims to provide all the necessary information about the practice of monogamy. 

It has been published by Rachit Garg.

Introduction

The recent instance of a woman marrying herself in India has raised questions about the practice of sologamy. Since the marriage of two people is the most common form of marriage, it becomes difficult for us to imagine what the legal consequences of such a  marriage could be. Although there isn’t any law applicable to sologamy at present, other practices of marriage are properly regulated in India. 

Marriage as a practice dates back to 2350 B.C in the Far East. Humans, being social creatures, have always depended on relationships to fulfill various needs. These relationships can be friendships, family, partners, producer-consumer, etc. In many cultures, marriage has been the way to tie together two people to form a socially acceptable relationship. 

As time has passed, the concept of marriage has evolved and has gone through a few changes. Everyone is aware of the idea of multiple marriages that were popular during the times of kings and queens. This practice of one person marrying multiple individuals is called polygamy. When a married person gets married to another person while his/her spouse is still alive, it is called bigamy, and when one is married to just one person, it is called monogamy. In this article, we shall look into monogamy in detail.

Meaning of Monogamy 

The word ‘monogamy’ generally means a relationship with one partner at a time. According to the Oxford dictionary, monogamy refers to the practice of having only one husband or wife at a time. It is a form of marriage that is well known to everyone in the modern world. Leaving a few exceptions, most societies these days follow this form of marriage. For example, in India, Hindus and Christians follow the monogamous form of marriage. In fact, Christians all over the world follow this practice. Among the other forms, monogamous marriages are the norm in the modern world. 

Origins of Monogamy 

In the early days, marriages normally involved multiple partners. From the Christian perspective, monogamy became the norm somewhere between the 6th and the 9th centuries. It was the outcome of a tussle between the Catholic Church and the nobility, who preferred having multiple wives. Marriages in those days were arranged for various economic or political reasons. This practice of arranging marriages is continued to this date in various cultures all over the world. 

As per the history of Hinduism, the concept of monogamy has prevailed since the Vedic period (1500-500 BCE). Even though other forms of marriage like polygyny and bigamy have been permitted under certain conditions, monogamy has been the dominant form of marriage.

Ancient Greece and Rome are the places from where socially imposed monogamy originated. It was done based on the belief that monogamous groups were at an advantage because fewer men would leave the group to search for wives. This also meant that they would be available for battle and pay taxes, which wouldn’t be the case if men left the group too often in order to find more wives. With the emergence of Christianity in the Roman Empire, the practice of monogamy was promoted even more widely than before.  

Comparison of monogamy with other forms of marriage 

Different societies have different forms of marriage based on their beliefs and logic. In modern society, the idea of live-in relationships is growing rapidly. Sologamy, which means marrying oneself, is a new concept too. Similarly, at various points in history, different forms of marriage were adopted according to the requirements of that time. Let’s compare monogamy with other forms of marriage for a better understanding.

Difference between Monogamy and Sologamy 

Monogamy and sologamy can be differentiated on the basis of:

  • Number of spouses: In monogamy, there is only one spouse for an individual. Whereas, in sologamy, an individual marries themselves, making it a marriage with no spouses.
  • Legality: Monogamy is found in various cultures and there are laws that recognise it, which makes it legal. Sologamy, on the other hand, has no legal existence as there are no laws dealing with it.
  • Popularity: Monogamy is the dominant form of marriage in the modern world. Sologamy is a very new concept and is slowly being adopted by people who strongly believe in self-love.

Difference between Monogamy and Polygamy 

Monogamy and polygamy can be differentiated on the basis of:

  • Number of spouses: In monogamous marriages, one person can marry only one other person, which means only one spouse at a time. In polygamous marriages, one person can have more than one spouse at a time.
  • Legality: Monogamy is considered legal in virtually all countries. On the other hand, leaving out some exceptions, polygamy is considered illegal in most societies.
  • Popularity: Monogamy is the most popular form of marriage in the modern world. Polygamy was once a popular form of marriage in the past, but now it is losing relevance.

Legal scenario of monogamy in India 

India is the birthplace of Hinduism, which preaches that monogamy is the best form of marriage. After the emergence of Christianity and Islam in the country, India became a land of vast cultural differences. Today, the laws dealing with marriages of these three major religions are separate. Out of these three, Hindu and Christian law only accept monogamy as the valid form of marriage. Hindu marriages are governed by the Hindu Marriage Act, 1955, and Christian marriages are governed by the Indian Christian Marriage Act, 1872. 

The Hindu Marriage Act, 1955

The Hindu Marriage Act, 1955, was brought into existence to regulate marriages of Hindu people. Section 5 of the Act talks about the conditions for a Hindu marriage. For our discussion, Section 5(i) becomes important. This provision entails that neither party is allowed to marry someone else if they already have a spouse. To be eligible for another marriage, a married person will have to obtain a divorce first to be eligible for another marriage. So, this provision of the Act prohibits bigamy, polygamy, and polyandry, whereas it provides for only monogamous marriages.

Section 11 of the Act makes any bigamous marriage of Hindus void. Section 17 of the Act makes bigamy a punishable offence and provides for the application of Sections 494 and 495 of the Indian Penal Code, 1860 if one is found guilty of this offence. 

The Indian Christian Marriage Act, 1872 

This Act was enacted to simplify the laws governing Indian Christian marriages. As Christians are staunch supporters of monogamy, it is no surprise that the law dealing with their marriages provides only for monogamous marriages. According to Section 4 of the Act, one or both of whom is (or are) Christian(s) can marry as per the provisions of this Act. Although not specified, the wording of this Section implies that one person can have only one spouse at a time. 

Parties have to be truthful while taking oaths for the registration of their marriage. If found to be lying about their previous marriage, then they can be punished under Section 193 of the Indian Penal Code. Bigamy is not permitted under this Act either, just like in the Hindu Marriage Act, bigamy is not permitted under this Act either. 

Muslim Personal Law (Shariat) Application Act, 1937

This Act deals with marriage, succession, inheritance, and charities among Muslims. Muslims in India are governed by various laws specific to them that are derived from sources such as the Quran, Sunna of Hadis, customs, etc. Muslim personal laws are largely uncodified and that is why they are regulated by these sources.

In Islam, monogamy is the general rule, and according to the Quran, polygamy may be permitted if a man is capable of taking good care of multiple wives. According to Muslim laws, a Muslim man can have a maximum of four wives, whereas a Muslim woman can have only one husband at a time. So we can say that only polygyny is permitted and polyandry is not. Hence, monogamy is to be followed compulsorily by women.

The Special Marriage Act, 1954 

The Special Marriage Act was enacted to make inter-religion marriages legally possible and also act as a middle ground for people not wanting to be regulated by a religion-specific Act. Just like the above two Acts, the Special Marriage Act contains provisions that prohibit bigamy. According to Section 4(a), neither of the parties should have a living spouse. Committing the offence of bigamy would attract penalties under Sections 494 and 495 of the Indian Penal Code, 1860.

Legal scenario of monogamy globally

United Kingdom

The Marriage Act of 1949 is the Act that regulates marriages in England and Wales. Since the UK has historically been a Christian country, it is not a surprise that its laws have reinforced the monogamous form of marriage. According to Section 26 of the Act, only a marriage between a man and a woman can be solemnized. As per Section 26(2)(b), same-sex marriages are permitted too. Hence, monogamous marriages are the only legal form of marriage in the UK.

Russia

The law dealing with marriage in Russia is the Family Code, 1995. According to Article 14 of the Code, no person shall be allowed to marry if they are already involved in another registered marriage. It means only monogamous marriages are permitted and other types of marriages aren’t. 

Australia

Marriage in Australia is regulated by the Marriage Act 1961. It applies uniformly throughout the country. It does not recognize any other form of marriage except monogamous marriages, including aboriginal marriages. Section 23 of the Act provides the grounds on which marriages are void. A marriage in which either of the parties was, at the time of the marriage, lawfully married to some other person, would be void. Thus, Australian marriage law provides for only monogamous marriages.

It is to be noted that the original Act did not define marriage and left it to the courts to apply the common law definition. It was only after the Marriage Amendment Act, 2004, that marriage was defined as the union between a man and a woman. Later in 2017, the definition was changed, and the words “a man and a woman” were replaced with “2 people.”  This allowed monogamous same-sex marriages in Australia. 

China

Traditionally, in China, polygamy has a long history. But monogamy is the norm in modern-day China. It is the only legal form of marriage except for some minorities, such as Tibetans are allowed to practice polyandry. Since the promulgation of the Marriage Law in 1950, monogamy has replaced the long history of polygamy. The law states that the New-Democratic marriage system was based on the free choice of partners, monogamy, and equal rights of both sexes. Further, it explicitly stated that bigamy shall be prohibited. Thus, the intention of the policymakers from the beginning was to have a society where a family constituted of one man, one woman, and their children. In 1981, a new Marriage Law was promulgated. It made a few changes, but the rule of a monogamous marriage remained same. As per Article 2 of the Act, a legal marriage system consisted of a monogamous form of marriage with a free choice of partners. Hence, it can be concluded from this provision that, at present, monogamy is the only form of marriage that is legal in the People’s Republic of China.

South Africa

Much like India, South Africa is a diverse country with different religions and cultures. These cultures have their own practices, and the legal system of South Africa has recognized these practices. That is why, according to the Recognition of Customary Marriages Act, 1998, polygynous marriages are allowed subject to certain conditions. Apart from this, in a civil marriage, monogamy is the sole legal form of marriage. The Marriage Act of 1961 regulates civil and religious marriages between a man and a woman. Although no Section of the Act specifically talks about monogamous marriages, the language used in the Act provides for monogamous marriage. Similarly, the Civil Union Act of 2006 allows marriage between two people regardless of sex. The definition of ‘civil union’ as per the Act defines it as a voluntary union of two adults. Also, Section 8 of the Act talks about requirements for solemnisation and registration of civil unions. A person may be a partner or spouse in one marriage at any given time. Thus, two out of three marriage laws in South Africa permit monogamous marriages only.

Important Case Law

Yamunabai Anantrao Adhav v. Anantrao Shivram Adhav (1988)

Facts of the case

  • In this case, the appellant got married to the respondent in June 1974 under Hindu Law. The respondent already had a subsisting marriage and the wife was alive.
  • Alleging ill-treatment, the appellant left the house and filed for maintenance in 1976. Her application was rejected by the Trial Court and later by the High Court.

Issue of the case 

  • The issue before the Court was whether a woman marrying a Hindu man who has a subsisting marriage is eligible to claim maintenance.

Judgement of the Court 

  • The Apex Court held that a woman marrying a man having a legal spouse would not be eligible to claim maintenance as the marriage would be null and void as per Section 11 of the Hindu Marriage Act.
  • The marriages that do not fulfil the conditions of Section 5 of the Act are considered void from the beginning. These have to be ignored as not existing in law at all.

Conclusion 

Monogamy, being the most common form of marriage, is becoming the norm in most societies. The other forms are losing their popularity as time passes. One of the reasons could be that having more partners would complicate a lot of things, like maintenance, transfer of property, nomination, etc. The laws are being simplified to deal with things effectively, and this is an outcome of that. For the most part in the modern era, monogamy has been the dominant form of marriage, leaving the middle east countries as exceptions. 

The recent instance of an Indian woman marrying herself has raised a lot of questions and has got people to wonder if it is something new. But as it turns out, it is not so new and thus indicates a future where sologamy would be a choice for people who do not want a partner. It sure sparks a lot of legal debates, and it is to be seen how modern societies approach this novel concept. Up until that point, monogamy seemed to be the top choice for people in most countries. 

Frequently Asked Questions (FAQs) 

What is the punishment for bigamy in India? 

Bigamy is a non-cognizable and bailable offence under Section 494 of the Indian Penal Code, 1860. Anyone committing the offence of bigamy shall be punished with imprisonment which may extend to 7 years or with a fine or in some cases, both.

Why is polygamy legal in India but not bigamy? 

Polygamy is legal because it is recognised in Islamic texts, whereas, bigamy is not recognised in any text of any religion. Also, bigamy is a form of cheating because the spouses of that person are often not aware of each other’s existence, whereas, the spouses are well aware of each other in polygamy as they live under the same roof.

Which form of marriage is common in India? 

Monogamous marriages are the dominant form of marriage in India. It is because Hindus and Christians strictly follow monogamy. Indian Muslims, although allowed to have multiple partners, most have only one partner.

References

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

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AFSPA Act, 1958

By
Sneha Mahawar
-
0

This article is written by Gautam Badlani, a student of Chanakya National Law University, Patna. This article examines the provisions and judicial decisions relating to the Armed Forces (Special Powers) Act, 1958. The article highlights the special powers conferred on the armed forces by the Act and critically analyzes the debate regarding the need and harms of the AFSPA Act. The article also makes certain suggestions with respect to the amendment and changes that can be made to the Act to make it more efficient. 

This article has been published by Sneha Mahawar.

Introduction

The Armed Forces (Special Powers) Act (AFSPA) received the sanction of the Parliament on 11th September 1958. Item 2A of List I to the Seventh Schedule of the Constitution empowers the Union to deploy the armed forces for aiding the State’s civil powers. Recently, in April 2022, the government withdrew the Act from certain parts of Assam, Nagaland, and Manipur. The Act was withdrawn on account of the improving law and order situation and development in the region. This article discusses the salient features of the act and highlights the needs as well as drawbacks of the Act. 

Need for the Armed Forces (Special Powers) Act, 1958

The AFSPA Act was needed to enable the armed forces to maintain peace and control violence in the northeast regions. The armed forces are conferred with wide powers through this Act, and such powers enable them to deal with internal security issues.

This Act is invoked only in those areas where the ordinary statutes and the local police are unable to prevent the insurgents. Article 355 of the Indian Constitution provides that the Central Government is under an obligation to protect the States from “external aggression and internal disturbance“. The AFSPA enables the Central Government to discharge its Constitutional obligation.

Historical perspective 

After India got independence from the British, the government was faced with several internal security issues which led to the promulgation of 4 ordinances – the United Provinces Disturbed Areas (Special Powers of Armed Forces) Ordinance; Assam Disturbed Areas (Special Powers of Armed  Forces) Ordinance; the East Bengal Disturbed Areas (Special Powers of Armed Forces) Ordinance; and the Bengal Disturbed Areas (Special Powers of Armed Forces)  Ordinance; and. Subsequently, the 1948 AFSPA was passed in order to consolidate all the aforementioned ordinances. 

In 1951, the Nagas voted in a referendum favoring independence from India and thereafter boycotted the 1952 general elections. Looting and arson were witnessed in several areas and resultantly, the AFSPA was passed. In 1957, the 1948 AFSPA was repealed but had to be re-enacted the next year in view of the poor state of law and order in the region. 

Scope and applicability of the AFSPA Act

The AFSPA originally applied to certain parts of Assam and Manipur. It was passed to prevent the unrest caused by the Naga tribes. The Act provided for a legal framework conferring special powers on the armed forces for restoring peace and order in the disturbed areas. This Act was thereafter amended several times to increase its scope. 

The Act was amended in 1972, and its scope was increased to cover the states of Arunachal Pradesh, Meghalaya, Mizoram, Tripura, and Nagaland. Furthermore, the 1972 Act conferred the power to declare an area to be a disturbed area on both the Central and State Governments. 

The Act was subsequently applied to Punjab and Chandigarh through the enactment of the Armed Forces (Punjab and Chandigarh) Special Powers Act, 1983. It remained applicable in Punjab and Chandigarh for nearly 14 years and was withdrawn in 1997. 

Thereafter, the scope of the Act was extended to the State of Jammu and Kashmir by the Armed Forces (Jammu and Kashmir) Special Powers Act, 1990. The Act enabled the armed forces to deal effectively with the insurgency in the region. 

General overview of the AFSPA Act

The Act provides special powers to the armed forces to maintain law and order in disturbed areas. The armed forces are conferred with wide powers under Sections 4 and 5. It includes the power of arrest, carrying out search and seizure operations, destroying camps used for attacks or shelters used for training by armed rebels. The armed forces are empowered to use force to the extent of causing death. The Act also vests legal immunity on the members of the armed forces acting or purporting to act under this Act. The provisions of the Act appear to coexist with the provisions of the Code of Criminal Procedure as the provisions of the Code are followed in carrying out search and seizure and other operations under the Act. 

This Act is generally invoked to counter insurgency groups that challenge the integrity of the nation. The government states that this Act is essential to enable the armed forces to effectively tackle the insurgent groups. On the other hand, critics accuse the Act of conferring absolute powers on the forces. 

Section 5 of the Act provides a safeguard to the person arrested under the AFSPA. It provides that a person arrested under the Act needs to be taken over, at the earliest, to the nearest police station. Furthermore, a report of the circumstances of the arrest must also be made over to the police station. 

In the case of Peoples Union For Human Rights v. Union Of India (1991), numerous writ petitions were filed challenging the proclamation providing for the application of AFSPA in Assam. The Court provided the list of districts over which the concerned notification was to apply and directed the government to review the notification every month. The Court also stated that any person arrested under the Act must be taken to the police station with minimum delay and produced, within 24 hours, before the nearest magistrate. Furthermore, only those persons can be arrested who have, or are suspected to have, committed a cognisable offence. 

Justice BP Jeevan Reddy Committee 

The provisions of the Act were reviewed by a 5 member committee appointed by the Central Government under the chairmanship of Justice BP Jeevan Reddy. The Committee was tasked with the review of the AFSPA.

It considered whether any amendments needed to be made to the Act to give it a more humane character or whether there was a need to replace the entire Act with a new and more liberal Act. The Committee recommended that the Act should be repealed and the Unlawful Activities (Prevention) Act, 1967, should be amended and modified to include the relevant provisions of the AFSPA Act.

The Committee further recommended that the Central Government may deploy, for a period not exceeding 6 months, the armed forces upon the request of the State Government. The Central Government may deploy forces even without the State’s request. However, any deployment beyond 6 months would require Parliament’s approval.

Disturbed area 

The expression “disturbed area” is defined in Section 2(b). This Section provides that a disturbed area is an area which has been notified under Section 3. Section 3 provides that the Central Government or the Governor or Administrator of the State of Union Territory, respectively, can notify the whole or any part of such state or union territory to be a disturbed area. An area may be notified as disturbed if the Central Government or Governor is satisfied that the area is in such a dangerous condition that it is essential for the armed forces to come to the aid of the civilians. 

In the case of Inderjit Barua v. State of Assam (1983), the order of the Governor under Section 3 of the AFSPA Act was challenged before the Delhi High Court. The petitions, which were originally filed by the Guwahati High Court, were heard by the Delhi High Court as the Union Government as well as the State Government had preferred transfer petitions before the Apex Court. The Court, while upholding the promulgations of the Governor, made the following observations in the case:

  • The AFSPA would apply to an area only as long as the situation as contemplated by Section 3 subsits. Once the situation becomes normal and the declaration is rescinded, the powers of the Act would cease. 
  • With regards to the definition of the expression, “disturbed area,” the court noted that it means an area where peace and tranquility are absent. The Court observed that this term has been used in several legislations and it is not needed to specifically define it as the expression might have one different meaning in a sensitive and non sensitive area.
  • It is the duty of the State to safeguard the civil population and their properties. In order to discharge its duty, the State has the power to use legitimate force. This power is the basis of the Act but it should not be misused. 
  • While the Governor is empowered to declare an area as a disturbed area, such declaration should not be arbitrarily exercised. 
  • Where an area is declared to be disturbed without any rational basis or justification or where such a declaration is fanciful, it would not stand the test of arbitrariness and would be violative of Article 21 as it would not be deemed to be a declaration made in accordance with the procedure established by law.  
  • Whenever a person is found to be breaching the law and order, a warning must be given to him before using force. 

Powers of armed forces under the AFSPA Act

Section 4 of the Act deals with the special powers of the armed forces in a disturbed area. This Section confers special powers on a commissioned or non-commissioned officer, warrant officer, or officer of equivalent rank. Under this Section, they have the following powers:

  • The armed forces have the power to prevent five or more people from gathering. 
  • Furthermore, people in a disturbed area are prohibited from carrying weapons, ammunition, firearms or explosive substances. The armed forces may fire upon a person or use force, even to the extent of causing death, on a person who is found to be carrying such objects. 
  • The armed forces are empowered to destroy any such arms dump, position, or shelter that is likely to be used for attacks or from which attacks are made. Furthermore, the forces may destroy any structure used for hiding by armed absconders, gangs or for training by armed volunteers. 
  • The armed forces are entitled to arrest any person without a warrant who has committed, or against whom there is a reasonable suspicion that he has committed, a cognisable offense. The officer may use the necessary force to effect such an arrest. The forces may also enter and search any premises, for the purpose of making such an arrest, without a warrant.
  • The forces can search any premises without warrant for rescuing a person wrongfully confined or for recovering any stolen property or such periphery which is reasonably believed to be stolen or for recovering unlawful arms, explosives or explosive substances. 

In the landmark case of Harendra Kumar Deka v. State of Assam and Ors (2008), the petitioner’s son had driven over a 13 year old boy and was trying to escape. There were six other persons in the vehicle. The petitioner’s son was pursued by a mob subsequent to the accident and in order to escape, he was driving the vehicle at a very fast speed. At the first checkpoint, the police signaled him to stop, but the deceased did not stop the vehicle. He didn’t stop at the second check point either and hit a police personnel on the third signal. Subsequently, the police person fired at the vehicle with the intention of firing at the wheels. However, they hit the petitioner’s son, who succumbed to the injuries. The Court made the following observations in the case:

  • The Court noted that the armed forces can use deadly force only if they are satisfied that the use of such force is necessary for maintaining public order and after they have warned the person about the use of such deadly force. Furthermore, the deadly force can only be used against persons involved in any activity prevented by Section 4(a).
  • Section 6 does not confer absolute immunity. Where the act of the armed forces is not in strict compliance with the powers conferred by the Act, the Central Government is obligated to give its sanction so that the legal proceedings can be undertaken against the defaulting members. 
  • The Court, while referring to Article 21 stated that no person can be deprived of his life except in accordance with lawfully defined procedure.
  • The Court stated that while it is the duty of every organized state to control insurgent, terrorist, and extremist activities, the State cannot go beyond lawful authority in fulfilling its duty. 
  • The Court noted that the members of the police force did not form part of the “armed forces” as defined in the Act and hence were not entitled to the protection conferred by the Act.
  • Moreover, while the officers had the authority to use force for the purpose of effecting the arrest, the extent of force used was unjustified as they had no reason to believe that the person driving the vehicle was an extremist or belonged to any extremist group. 

In the case of Extra-Judicial Execution Victim Families Assn. v. Union of India (2016), enquiry into 1528 fake encounters was pleaded in a writ petition. The petitioner contended that the writ petitions before the High Court, the lodging of FIRs or complaints to the human rights commission had not resulted in any effective remedy. 

The Attorney General contended that investigation in some of the cases must not be reopened on account of the lapse of time since the incidents occurred. However, the Court held that such incidents must have been inquired into by the government at the time they occurred. Furthermore, the Attorney General pleaded that in those cases where the next of kin had not approached the court, no proceedings should be initiated. However, the Court held that the petitioner was raising the collective public interest of all the petitions. Lastly, the Attorney General submitted that since appropriate monetary compensation had been paid to the kin of the deceased, the proceedings should not be initiated. The Court held that compensation was meant to tide over the agony that they had to suffer due to the death of the family member. It could not be a ground for overriding legal proceedings.

The Court consequently directed the constitution of a Special Investigation Team (SIT). Since the Attorney General had expressed doubts regarding the impartiality of the Manipur police, the Court directed the CBI to investigate the allegations of the fake encounters. The Court also made a suggestion to all the States to constitute a State Human Rights Commission in the interest of liberty, justice, and human rights. 

Special safeguards under the AFSPA Act

Section 6 of the Act provides that no person acting or purporting to act in the exercise of powers conferred by the Act can be prosecuted or tried in a suit or other legal proceedings without the Central Government’s previous sanction. This ensures that legal proceedings are not commenced against the armed forces based on baseless and mala fide allegations. 

In Naga People’s Movement of Human Rights v. Union of India (1998), the validity of the AFSPA Act was challenged before the Constitutional Bench of the Apex Court. The issue arose as to whether Parliament was competent to legislate such a statute. The Court held:

  • The Court ruled that Parliament had the authority to enact such a law and that the Act was valid. 
  • Under Article 355, the Union is obliged to safeguard a state from internal strife as well as external aggression.
  • The deployment of the armed forces will not substitute the State’s civil power but rather will be for the aid of such civil power. 
  • The declaration of an area as a disturbed area under Section 3 has to be reviewed every 6 months.
  • A Central Act vesting the power to make a declaration under Section 3 on the Central Government is not in violation of the federal structure of the Constitution.
  • Sections 4 and 5 are not violative of Articles 14, 19, and 21 of the Constitution.
  • While effecting an arrest under Section 4, the armed forces must use “minimal force”.
  • Where a person is arrested under Section 4(c), he must, with the least delay, be handed over to the nearest police station’s officer in charge. Such person shall then be produced before the Magistrate within 24 hours of the arrest. 
  • While conducting search and seizure in exercise of the powers  conferred by Section 4(d), the provisions of the Code of Criminal Procedure must be followed.
  • The army authorities would issue a list of do’s and don’ts which has to be strictly followed by the forces while exercising powers conferred by Section 4.
  • Lastly, Section 6 of the Act, which mandates the Central Government’s sanction for prosecution of a member of the armed forces acting under this Act is not arbitrary in nature. However, the refusal of the government to give such a sanction can be subjected to judicial review.

In the case of Army Headquarters v. CBI (2012), five people, who were purported to be terrorists, were encountered. The matter was investigated by the CBI, which filed a charge sheet. The matter was also investigated by the Army as per the provisions of the Army Act. The Union contended that the Court was not empowered to take the chargesheet on record without obtaining the sanction of the government, as the sanction of the government was mandatory under Section 7 of the Armed Forces (Jammu and Kashmir) Special Powers Act, 1990 (which is similar to Section 6 of AFSPA). The CBI, on the other hand, contended that the acts of the forces did not constitute part of their official duty and, hence, the sanction of the government was not required.

The Court held that the sanction of the Central Government is essential in accordance with Section 7 of the Armed Forces (Jammu and Kashmir) Special Powers Act, 1990. Such sanction has to be obtained before the charge sheet is filed before the criminal court. The Court held that the requirement for sanction arose at the stage of taking cognizance and not at the stage of investigation. Resultantly, the charge sheets were returned to the CBI. The Court held that where the legal proceedings are initiated without complying with the mandatory provisions of Section 7, the proceedings would stand vitiated. However, the previous sanction is not required in cases of court martials under the Army Act.

AFSPA Act and International Conventions

India is a signatory to several international conventions, including those concerning human rights. India ratified the International Covenant on Civil and Political Rights in April 1979. Article 6 of the Covenant provides that every person enjoys an “inherent right to life” and no person can be arbitrarily deprived of this right. However, as per Section 4 of the Act, the armed forces are empowered to use force and cause the death of disturbing factors based on their personal judgment. 

Article 7 of the Covenant states that no person is to be subjected to cruel, inhumane, or degrading behavior or punishment. It is often alleged that the AFSPA provides for inhumane punishments and thus violates Article 7 of the Covenant. 

Article 4 of the Covenant provides that, in a situation of emergency, a State can decide not to fulfill its obligations under the Covenant. 

Shortcomings and suggestions 

There is a need to clearly define the expression “disturbed area”. The Central Government must provide a clear set of factors that need to be considered before declaring an area to be a disturbed area. The guidelines should also be observed in proclamations made under state laws of similar nature. 

Furthermore, the Act does not establish a distinction between peaceful and violent protest. Resultantly, it prohibits all gatherings of five or more people regardless of the nature of the gathering. 

Furthermore, the forces must use the minimum force required to effect an arrest or search and seizure operation. The Act must also provide for the setting up of grievance centers where citizens can lodge their complaints. 

There need to be clearly defined procedures to be followed after making an arrest or detaining a person under this Act. In the case of Nungshitombi Devi v. Rishang Keishang, CM Manipur (1982), the Guwahati High Court issued a writ of habeas corpus as it was unsatisfied with the contention of the government that the petitioner had been released.  Such issues could be avoided by establishing a clearly defined post arrest or post detention procedure. 

The guidelines of the Apex Court in the case of Naga People’s Movement of Human Rights v. Union of India must be incorporated into the Act itself through appropriate legislation.

The Act has faced severe criticism for being violative of human rights. There have been several allegations of misuse of the absolute power vested by this Act. The armed forces must engage and coordinate with civil society members in their operations, as this will build trust among the people. 

Conclusion

The AFSPA has played a critical role in ensuring internal peace and security in the north eastern states. However, the guidelines issued by the Court must be strictly complied with and must also be incorporated in the statute itself. There is also a need to provide better training to the State police officials so as to make them more efficient. This would enable the State police to deal with rebellious groups and thus minimize the need for invoking the AFSPA Act. 

Frequently Asked Questions

  1. What is the historical perspective behind AFSPA?

The AFSPA Act is based on the Armed Forces Special Powers Ordinance of 1942, which was promulgated for the suppression of the Quit India Movement. Viceroy Linlithgow promulgated it. Subsequently, several Indian leaders were arrested in exercise of the powers of this ordinance.

When India got independence from the British, the need for a special Act was felt to deal with the Naga insurgents in Assam and Manipur. Subsequently, the Act was enacted, and it was based on the 1942 ordinance. 

  1. Which was the first state over which AFSPA was imposed?

The Act was imposed in Assam in 1958. The Act was applied to the entire state till 1990. However, since then it has been withdrawn from several parts of the state on account of an improving law and order situation. 

  1. In which case was the application of the Chandigarh Disturbed Areas Act, 1983 in the city of Chandigarh struck down? 

In the landmark case of Surinder Bhardwaj v. UT of Chandigarh (2012), the continuation of the notification declaring Chandigarh to be a disturbed area under the Chandigarh Disturbed Areas Act, 1983 was challenged. The petitioner contended that the law and order situation in the city no longer warranted the application of the Act and, hence, it must be withdrawn. The atmosphere of the city was peaceful and hence the application of the Chandigarh Disturbed Areas Act was totally unjustified.

On the other hand, the respondents contended that the petition was not maintainable as it did not seek to secure the public interest but rather was filed for mere publicity. The notification providing for the application of the special Act provided the people with a sense of security, and hence the continuation of the declaration was justified. 

The Court noted that the disturbed area declaration had been withdrawn from the State of Punjab since July, 2008, while Chandigarh continued to be a disturbed area. The respondents were unable to inform the Court as to when the powers contemplated by the Act had been employed. They merely stated that the application of the Act was necessary on the basis of the intelligence report received by them. However, no such fact was brought to the notice of the Court. 

The Court held that even if the continued notification did not add to the financial burden of the exchequer, the tag of being a disturbed area spoiled the beauty of the city and had a deterring effect on tourists visiting the city. Moreover, investors and multinational companies might not be interested in investing in a disturbed area. Thus, the notification declaring Chandigarh to be a disturbed area was stuck down.  

References 

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Research exemption : whether fair enough to maintain the fairness of patent system

By
Sneha Mahawar
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0

This article is written by Shreya Manoj Kasale a 5th Year BLS LLB student at Asmita College of Law pursuing a Paralegal Associate Diploma at Lawsikho. This article has been edited by Ojuswi (Associate, Lawsikho). 

This article has been published by Sneha Mahawar.

Introduction 

Patents grant the patentee exclusive rights for a short time to prevent others from creating, using, offering for sale, selling, or importing a patented invention without the patentee’s permission. The award of such rights is viewed as an inducement to invest in creative activities and knowledge development. In economic terms, however, this results in deadweight losses. A variety of remedies are available in the patent system to rectify the possible inefficiencies of market power produced by such exclusive rights.

The research exception is one of the most commonly offered exclusions in patent systems, whether by statute or case law. While the specific extent of the provisions varies according to national and regional regulations, in general, the research exception allows researchers to investigate the effects of copyrighted innovations mentioned in patents and enhance such patented inventions without danger of violating the patent. Without such an exclusion, scientists may be sued if they use a patented innovation in the course of their study. Such a contribution to a favourable environment for research activities is intended to enhance the diffusion and progress of technical information, as well as contribute to the development of technologies, thereby contributing to the patent system objectives.

Proponents of the research exception claim that the exemption for research and experimental usage is inherent in the patent system’s quid pro quo because no other rationale could explain the patent system’s interest in the open availability of the invention’s disclosure.

Patent holders are granted exclusive rights to prohibit others from utilising their patented ideas, and in exchange, patent holders are obligated to reveal details about the invention. The publication of information is seen as a necessary component of the patent system. It serves as the foundation for balancing the inventor’s and society’s interests. This article will focus on research exemption extensively.

Under Indian Law

The Patents Act, 1970, which replaced the Patents and Designs Act, 1911, entered into force on April 20, 1972, and was largely based on the suggestions made in Justice Ayyangar’s thorough Report on Patent Law Revision, which was delivered in September 1959.

In his report, Justice Ayyangar indicated that one issue pertaining to patentees’ rights that needs to be clarified is the right of research workers to use inventions—whether they be articles or processes—for the purposes of conducting experiments during research as opposed to use for a commercial purpose. In this regard, while noting the ambiguity of the legislation on this subject in the United Kingdom, Justice Ayyangar adopted the position stating that “I consider it desirable that the law should specifically exempt use of the patented articles or processes or the use of articles or products made by the use of the patented process or patented machine or apparatus for experimental purposes from being actionable as an infringement.”

Patents are designed to encourage investment in R&D, but they may sometimes make it more difficult to build on the ideas of others. A research exemption from infringement liability might be used to circumvent such past patentee reluctance, but such an exemption raises the risk that depriving patentees of control over the research applications of their innovations will reduce incentives to invest in developing them.

Exempted research does not require a licence, and refusals to licence driven by private attempts to gain undue influence over future innovation are avoided.

Experimentation and research are exempted from patent infringement under Section 47(3) of the Patents Act, 1970 (as modified) (“Act”). Any machine, apparatus, or other items for which the patent is granted, or any item made through the use of the process for which the patent is granted, may be made or used, and any method for which the patent is granted may be used, by any person, for the purpose of mere experiment or research, including the imparting of instructions to students, according to Article 47(3). The “experimentation/research” exclusion covered under Section 47(3) of the Act looks to be rather broad at first glance, but its extent and ambit have yet to be tested in an Indian court of law.

Although the Court has had occasion to interpret Section 47 of the Act, these decisions have been given in a different setting, namely in the context of patent disputes relating to Government tenders. Despite the seeming broad extent of protection, the actual limits of the exemption offered by Section 47(3) remain unclear, and any examination into its application remains extremely fact-specific.

Although the terms “experiment” and “research” are not defined in the statute, it is worth noting that the phrase “experiment or research including the imparting of instructions to pupils” used in this provision is qualified by the term “merely,” which means that an activity can qualify under this provision only if it is limited to experiment or research, and this usage would limit the scope of the term’s “research” and “experiment.”

Under United States Law

In Sawin v. Guild, Justice Story argued that an infringing use “must be with an intent to infringe the patent right, and deprive the owner of the lawful rewards of his discovery”.

In 1935, a court granted a research exemption solely because the infringing user was an academic research institution; by the 1970s, the court in Pitcairn v. the United States rejected the government’s argument that the manufacture and use of certain infringing helicopters “for testing, evaluation, demonstrational, or experimental purposes” should be permitted under the traditional research exemption. The court ruled that the tests in that instance were not excluded because they were “planned uses of the infringing aircraft made for the defendant and in conformity with the legitimate business of the user agency.”

The Federal Circuit significantly narrowed the scope of the “non-commercial” category in Madey v. Duke University in 2002. Several components of a free-electron laser utilised for the scientific study were patented by a Duke University scientist. When he and the university fell out, the institution continued to utilise his copyrighted research equipment, citing the customary research exemption to justify its infringement. This university study was declared unsuitable for the conventional research exemption by the court because it “unmistakably furthers the institution’s legitimate business objectives, including educating and enlightening students and faculty participating in these projects.” This finding ran counter to the generally held view among university professors that purely academic research was free from patent infringement penalties. However, academic research was the major planned application of the patented equipment in this case. A court exemption of such research appears to jeopardise the patent’s basic grant of exclusivity—the market for direct sales or licensing to research institutes. To prevent this outcome, the Federal Circuit broadened the definition of commercial use beyond recognition to include the university’s acts.

Bolar exception

The exemption for research or experimental usage allows researchers and product producers to make limited use of a patented idea. The main concept behind this exemption is that it limits patent holders’ rights in such a way that the patent holder cannot restrict third parties from engaging in specific activities related to the patented innovation. The experimental usage exception is known as the “Bolar exemption” in the pharmaceutical industry. The Bolar exception exempts generic manufacturers from patent infringement if they use patented pharmaceuticals for research and development for the sole aim of submitting information for regulatory approvals of generic versions of patented goods before the relevant patents expire.

Section 107A of the Indian Patent Act of 1970 is well known as India’s “Bolar exemption.” In India’s competitive generic market, it is critical to strike a balance between individual interests, such as patentee rights, and societal interests, such as the need for better and cheaper access to products.

According to Section 107A of the Indian Patent Act of 1970:

“107A. Certain acts not to be considered as infringement – For the purposes of this Act,—

  1. any act of making, constructing, [using, selling or importing] a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or a country other than India, that regulates the manufacture, construction, [use, sale or import] of any product;
  2. importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product,

shall not be considered as an infringement of patent rights.”

It is important to note that there are a few instances involving Bolar exemption in India. India has just one case involving this clause in which clinical trials were cited as part of the Bolar exemption, the case being Bayer Corporation vs. Union of India & Anr. It might be argued that, because of the limited history of pharmaceutical firms in India using the Bolar exemption for marketing authorizations and clinical studies, we view marketing authorizations and clinical trials to be part of the Bolar exemption.

The notion of Bolar exemption is absolutely vital in the Indian context. According to one of the assertions made by an Indian pharmaceutical corporation, “To stimulate competition, a broad exemption was granted. The higher the competition, the better for public health protection “. As a growing country, India should enact R&D-friendly legislation. Furthermore, the highest authority should fully clarify the Bolar clause so that the patentee’s rights are never harnessed. Furthermore, the Supreme Court should consider whether the infringement was caused by R&D, profit, or scholarly purposes.

Conclusion

Any research exception reduces the private advantages that might otherwise be accessible to patentees. However, taking into account the contributions and motivations of researcher innovators, a research exemption may be less expensive than previously anticipated. Further economic study appears to be required to determine the impact of the research exemptions on scientific inquiry. What is known is that innovation strategies must balance incentives to invest in inventive activities with the encouragement of spill-overs. The best research exemption should give an incentive to invest while not restricting knowledge spill-overs that have a minor impact on this motivation to invest. Furthermore, any research exception must conform to the standards of international legal responsibilities, particularly the TRIPS Agreement. Furthermore, in order to fulfil its policy aim, clarity on the extent of the research exemption should be established at the national level. This would provide legal stability and predictability for both patentees and third parties doing research using the exemption.

References

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

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Bearer debentures

By
Rachit Garg
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0
Types of Debentures

This article is written by Sambit Rath, a B.A. LL.B. student of Dr. Ram Manohar Lohiya National Law University, Lucknow. In this article, the author aims to discuss bearer debentures, which is a type of debenture, in detail and compares them to other types of debentures to bring more clarity.

It has been published by Rachit Garg.

Introduction 

Every organisation whether small or large requires funds in order to operate and survive in the market. In accounting terms, these funds form the capital of the organisation. There’s a lot that goes into deciding on the amount of capital required, the source to finance it, and whether that source is feasible for the organisation. Suppose the organisation does not take into account the apparent risks associated with a particular source of financing. In that case, it could get into both financial as well as legal trouble when it fails to manage these funds properly. There are various types of organisations that can be distinguished based on their size, industry, etc. To cater to the diverse needs of these organisations, a country’s financial sector provides different financing sources. Some of these include the issue of shares, debentures, loans, retained earnings, working capital loans, etc.

In this article, we will be dealing with debentures as a source of finance for a business and particularly with bearer debentures. In order to understand what this sub-type of debentures means, we will need to first understand what a debenture is, the types of debentures, and their purpose. 

What are debentures

A debenture is a debt instrument used by businesses to raise capital for various purposes. It is issued for a medium to long-term period by organisations which are fixed and are paid back at a fixed rate of interest. Repayments can be made either in instalments or in a lump sum. Debentures are basically a type of long-term loan that the company borrows from entities. A debenture is different from shares, which form the equity of the company. Since it is a type of loan, it is recorded under the liabilities head of the balance sheet. Depending on the period after which it is redeemable, it is recorded under current liabilities or non-current liabilities. 

Now that we know what are debentures, let’s see how they are issued. Debentures are issued in the form of a physical document by the company. The person who purchases debentures is called a debenture holder and he becomes a creditor of the company. The document is issued to the debenture holder which he has to keep with him safely. In this document, the details of redemption and repayment are mentioned. Hence, this document/certificate acts as proof of the company’s liability to repay the loan with interest. 

It is also important to note that the interest payable on these debentures is a charge against profit; which means the company has to pay the interest amount even if it doesn’t profit for that financial year. Because debentures are loans, they may or may not carry a charge on the company’s assets. This means, depending on the type of debenture, the company may or may not have to sell off its assets in order to make the repayment. 

Debentures under the Companies Act, 2013

Section 2(30) of the Companies Act, 2013 defines debentures. It states that a debenture includes debenture stock, bonds, and any other instrument of a company that acts as evidence of a debt, irrespective of the fact that it constitutes a charge against the assets of the company or not. Section 71 provides that a company may issue convertible debentures and various other guidelines regarding it. The power of the Board of Directors to issue debentures on behalf of the company is provided by Section 179(3) of the Act. 

Types of debentures

Based on the company’s requirements, various types of debentures can be issued:

  • On the basis of the convertibility of debentures into equity shares, debentures can be divided into non-convertible, partly convertible, and fully convertible debentures.
  • It can also be divided into secured and unsecured debentures based on security. As the name suggests, secured debentures are secured against assets of the company and unsecured are not. 
  • Some debentures can be redeemable and some irredeemable. Redeemable debentures can be redeemed on demand but perpetual/irredeemable debentures have no fixed period of time and hence cannot be redeemed on demand. 
  • Lastly, on the basis of registration, debentures can be issued as registered debentures or bearer debentures. Let’s look at bearer debentures in detail.

Bearer Debentures 

Bearer debentures are those that can be transferred by mere delivery. Anyone who carries the certificate can claim the payment. This is due to the fact that this kind of debenture is not recorded in the register of debenture holders. This is why when a transfer of bearer debenture takes place, it is not recorded. These are also called unregistered debentures because of this feature. So in short, bearer debentures are unsecured and unregistered debentures that anyone can hold. 

Features of Bearer Debentures 

The features of bearer debentures are as follows:

Unregistered Debentures 

Bearer debentures are unregistered debentures as they are not recorded in the register of debenture holders. This makes the transfer of bearer debentures easy and convenient. It is due to this fact that anyone who bears the debentures becomes the owner of those.

Issued physically 

Bearer debentures are issued physically on paper to the debenture holder. 

Redemption of Bearer Debentures 

These debentures can be redeemed within a period of 30 days from the date of maturity.

Interest payment received through coupon – 

In order to receive interest payments, the bearer needs to submit the coupons that are attached to the security to the issuing company.

No third party involved  

Since the bearer debentures are unregistered, they can be sold without the involvement of any third party. It can also be transferred to someone else by mere delivery. 

Advantages of Bearer Debentures 

  • One of the biggest advantages that make bearer debentures favourable for companies is the lack of requirement of diluting equity. As debentures are debt instruments, they do not affect the shareholding of the company. Hence, debenture holders cannot participate in the management of the organisation.
  • The interest paid on debentures is a charge against profit. This factor makes it favourable for the company as tax is calculated on the profit of the company. A charge against it reduces the profit, which equates to a lesser tax deduction.
  • Debentures are considered to be a cheaper source of finance compared to other types of loans. This encourages long-term planning.
  • Bearer debentures are favourable for the holders as it is easy to transfer or sell. Since they are unregistered, there is no involvement of third-party during the transfer or sale of bearer debentures.

Disadvantages of Bearer Debentures 

  • There is a huge risk for the holder of bearer debentures as physical documents can get damaged, destroyed, misplaced, or stolen. In such a scenario, it becomes extremely difficult to replace such a certificate as the issuer does not record the details of the holder.
  • If the debentures are detached and sent through the mail, the coupons can get lost and that would lead to losing interest payments. 
  • Bearer debentures can be used for money laundering and this has led to many countries placing a ban on these.
  • Any person who possesses the certificates could claim the final payment. Hence, if it is stolen, there is no way to stop that person from claiming payment. 
  • In case of any rise in the interest rates, the issuing company is under no obligation and can call back the bearer’s debentures anytime.

Comparison of bearer debentures with other types of debentures

As we have seen earlier, debentures are of different varieties which serve a specific purpose. Let’s compare bearer debentures with the others.

Registered vs. Bearer debentures

S.noBasisBearer debenturesRegistered debentures
1MeaningBearer debentures are those that are not registered and anyone who possesses the certificate becomes the owner.Registered debentures are those that are registered in the debenture holders’ register.
2PurposeThese are used by people who want to stay anonymous with their purchases.These are used by people who desire a sense of safety with their purchases.
3Security It is not secure at all because if it is lost then the payment cannot be claimed.It is more secure as the owner can ask for a duplicate certificate in case the original gets lost.
4Transfer It is easy to transfer as it does not require the involvement of a third party. It is transferred through mere delivery.The transfer process of registered debenture is cumbersome as it requires the involvement of a third party and it is a long process.
5Registration These are not registered.These are registered in the debenture holders’ register of the company.
6Personal detailsOnly the amount and rate of interest are mentioned on the certificate.  Personal details of the holder are not mentioned.The personal details of the holder are mentioned on the certificate including the amount and other relevant details.

Bearer debentures vs. Secured debentures

S.noBasisBearer debenturesSecured debentures
1MeaningBearer debentures are those that are not registered and anyone who possesses the certificate becomes the owner.Secured debentures are those that are secured against some asset of the company.
2PurposeThese are used by people who want to stay anonymous with their purchases.These are bought by people who invest a larger sum and require added security for their funds.
3Security It is not secure at all because if it is lost then the payment cannot be claimed.It is more secure as the owner can ask for a duplicate certificate in case the original gets lost.
4Transfer It is easy to transfer as it does not require the involvement of a third party. It is transferred through mere delivery.The transfer process of registered debenture is cumbersome as it requires the involvement of a third party and it is a long process.
5Charge against assetIt does not create a charge against the asset of the company as it is unsecured.It creates a charge against the assets of the company.

Frequently Asked Questions (FAQs)

What is a bearer debenture? 

A bearer debenture is a type of debenture that is not registered in the register of debenture holders and is transferable through mere delivery.

What happens when a bearer debenture holder loses the certificate?

When the bearer debenture holder loses the certificate, he loses his right to claim payment from the company. This is because bearer debentures are unregistered and unsecured. As there is no registration, the name of the holder does not appear anywhere.

Are bearer debentures legal?

Bearer debentures are losing legal status in various countries like the USA and the UK due to the fact that they are unregistered. This makes it possible for criminals to launder money easily and remain anonymous.

Is bearer debenture a negotiable instrument?

A bearer debenture is a negotiable instrument as it has the qualities of a negotiable instrument which include transferability and promise of payment to the holder. 

Can a company issue bearer debentures?

For the purpose of financing long-term or medium-term projects, a company can issue bearer debentures as per the Companies Act, 2013.

How is a bearer debenture beneficial for a company?

Due to the nature of bearer debentures, the issuing company does not have to maintain a register of debenture holders for bearer debentures. Also, in case the debenture certificate is lost, the holder cannot claim repayment. In this case, the company can utilise the money without repayment. 

Conclusion

Debentures are debt instruments used by companies for capital-raising purposes. Being one of the popular ways of raising capital, debentures can be modified based on the issuer’s needs. Bearer debentures are one such type that is popular among investors who desire to remain anonymous. This ability makes it convenient for criminals to launder money. Thus, the advantage of being easily transferable gets outweighed by the downside of such debt security. These are getting banned in several economies like the USA and UK. Hence, the economies that still allow companies to issue bearer debentures should weigh the needs of investors and companies against the apparent downside of having them around. 

References

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

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

https://t.me/lawyerscommunity

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

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Alteration of Memorandum of Association 

By
Rachit Garg
-
0

This article is written by J Jerusha Melanie, a law student at SRM School of Law, Tamil Nadu. This article provides a comprehensive overview of the concept of altering the clauses in the Memorandum of Association of a company. It also explains the connection between the doctrine of ultra vires and altering a Memorandum of Association.  

It has been published by Rachit Garg.

Table of Contents

Introduction

Like most citizens have identity cards (ID) that help them show who they are, the corporate identity of any company is represented by its Memorandum of Association. A Memorandum of Association reveals everything that a third party needs to know about a company. 

At times, the company may have to alter the specifications of its Memorandum of Association. Defining the word ‘alter’ or ‘alteration’, Section 2(3)  of the Act states that it includes the making of additions, omissions, and substitutions. For instance, when the company shifts its principal office to some other location, the Registered Office Clause of the company’s Memorandum of Association will have to be altered. Nevertheless, such alteration cannot be done without satisfying the steps mandated under the provisions of the Companies Act, 2013 (hereinafter referred to as ‘the Act’).  In this article, we shall understand the process of altering the contents of a Memorandum of Association.  

What is a Memorandum of Association

A Memorandum of Association is defined under Section 2(56) of the Act. It states that a memorandum means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of the Act. 

As aforementioned, a Memorandum of Association is like the identity card of any company. 

It is a document drafted before incorporating any company. It is a public document prepared by the promoters of the company. A Memorandum of Association is also called the ‘charter of the company’ and specifies the affiliation between the company and its shareholders or creditors. The entire structure of any company depends upon the Memorandum of Association. It marks the scope of a company’s operation. It means that the company must function only as per the provisions of its Memorandum of Association. 

A Memorandum of Association essentially contains the powers and duties of the company towards its members, that is, the shareholders and creditors. If the company does anything beyond the limits permitted by the Memorandum of Association, it shall be held void as per the doctrine of ultra vires (which is discussed later in this article).

Purpose of a Memorandum of Association

The following are the main purposes of a Memorandum of Association: 

  1. To declare the reason for the company’s formation: The foremost purpose of a Memorandum of Association is to let the company’s members know why the company has been formed. 
  2. To let investors understand the company’s activities: It allows any person who is interested in investing in a company to know everything about its activities. 
  3. To let investors know the prospect of their investment: A Memorandum of Association is a public document, which means it can be read by anyone. So, with the help of the Memorandum of Association, prospective investors will know the exact purpose for which their investments may be used. 
  4. To assure the investors: The Memorandum of Association helps the existing investors in the company to stay assured that their investments are not used for any purpose for which they weren’t foretold.

Key clauses of a Memorandum of Association

As per Section 4 of the Act, a Memorandum of Association shall contain the following clauses: 

Name Clause

As the title suggests, a name clause specifies the name of the company. Under Section 4(1)(a) of the Act, the name of any public limited company must end with the word “limited”. Furthermore, in the case of a private limited company, the company’s name must end with the word ‘Private Limited’. However, the said Section exempts companies incorporated especially under Section 8 of the Act (for charitable objects) from such requirements. 

Sections 4(2) to 4(5) of the Act mandate certain characteristics of any company’s name. It states that the name stated under the Name Clause of the Memorandum of Association must not:

  • Be identical or overly similar to any other company already registered under the Act; 
  • Be such that it constitutes an offence under any law or is undesirable according to the Central Government; 
  • Contain any word or expression that may exhibit the company as having a connection with the Central Government, State Government, or any local authority in any way; 

Registered Office Clause

Section 4 of the Act states that the Memorandum of Association of any company must specify the state in which the registered office of the company is to be situated. As per Section 12 of the Act, within 15 days of its incorporation, a company must specify the location of its registered office. Further, within 30 days of its incorporation, such a company must provide to the Registrar of Companies (ROC) the verification of its registered office.  

Object Clause

Section 4(1)(c) of the Act mandates that the Memorandum of Association of any company must state the objects for which it is proposed to be incorporated. The object clause is arguably the most essential clause of a Memorandum of Association. It specifies the reason for which the company is incorporated. It states the business in which the company is involved. No company can operate beyond the scope enumerated in the Memorandum of Association. 

Generally, the object clause contains three kinds of objects- main, ancillary, and other objects. The ancillary and other objects follow the main object of the company. 

Liability Clause

Under Section 4(1)(d) of the Act, the liability clause of the Memorandum of Association must state the liability of the company’s members. It means that the Memorandum of Association must specify whether their liability is:

  • Limited or unlimited; or
  • Limited by shares or guarantee.

If it is a company in which the members’ liability is limited by shares, then such liability will be limited to the unpaid amount of the shares held by them. In contrast, if their liability is limited by guarantee, then such liability will be limited to the amount up to which each of their members attests to subscribe. 

Share Capital Clause  

The capital clause in a Memorandum of Association is one that specifies the company’s authorized capital. It states the total number of shares and the value of each share. Such an authorized capital is the maximum limit up to which a company can raise its capital. Section 4(1)(e) of the Act deals with the capital clause in a Memorandum of Association. It provides that the capital clause must state the share capital with which the company desires to be registered and the fixed amount and number of shares. Further, the said Section also mandates that no subscriber can subscribe to less than one share. 

Subscription Clause

The subscription clause in a Memorandum of Association contains the list of the names of the first subscribers of the company. It states the number of shares held or the amount agreed to be contributed by each subscriber as the initial capital of the company. The Memorandum of Association is signed by all the subscribers. 

The minimum number of subscribers for 

  • A one-person company is one,
  • A private limited company is two, and 
  • A public limited company is ten. 

There is no maximum limit on the number of subscribers. 

When is alteration of a Memorandum of Association allowed

Generally, the alteration of a company’s Memorandum of Association is allowed under the following circumstances: 

  • When such an alteration is needed to let the company venture into new businesses related to the one in which it is already involved;
  • When such an alteration is pertinent to enable the company to upgrade its existing means to carry out its objects, or
  • When altering the Memorandum of Association will help the company carry on its business more economically. 

Alteration of a Memorandum of Association and the doctrine of ultra vires

As discussed above, a Memorandum of Association defines the relationship between the company and its members. The Memorandum of Association states the object of incorporating the company. It provides an overview of the company’s operations. As per the doctrine of ultra vires, the company is not supposed to bypass the boundary set by the Memorandum of Association on the company’s activities. If the company does any act outside its operational scope specified under the Memorandum of Association, such an act will be held ultra vires. 

The term ‘ultra vires’ is Latin, and it means ‘beyond the powers.’ Such an ultra vires act shall be null and void. It cannot be ratified by the company’s Board of Directors (BoD). Similarly, any contract entered into by the company against the provisions of its Memorandum of Association shall be ultra vires and have no binding effect on the company. Nevertheless, the doctrine of ultra vires allows the company to do any act that may be incidental to its main object specified in its Memorandum of Association.  

The doctrine of ultra vires was essentially brought forth to safeguard the interests of the members—that is, the shareholders and creditors of any company. The shareholders or creditors of the company invest in it by essentially considering its main objectives. They invest in a particular company, considering various factors like the market trends, the reputation of the company, etc., and expect to get a good profit out of it. They invest, thinking that their investment will be used only for the purposes about which they were already informed. They expect the company to be consistent with its objectives. So, the doctrine of ultra vires prevents the company from going beyond its permitted limits of operation. That is why altering the Memorandum of Association of any company follows a lengthy and complex process to ensure the company expands its scope of operation without being affected by the doctrine of ultra vires. 

Basic principles of the doctrine of ultra vires

The following are the basic principles of the doctrine of ultra vires as derived through the course of various case laws. 

  • The defence of ultra vires is available to all parties. 
  • No member of the company can ratify an ultra vires act.
  • A party that has fully performed its part in an ultra vires transaction cannot later avail itself of the defence of ultra vires; it is prohibited under the doctrine of estoppel.
  • Any act committed or omitted by any agent or representative of any company within the extent of his employment cannot be repudiated availing the defence of the doctrine of ultra vires. 

Case laws relating to the doctrine of ultra vires

Let’s know more about the connection between the doctrine of ultra vires and the alteration of a Memorandum of Association through a few landmark case laws. 

Ashbury Railway Carriage and Iron Company Ltd. v. Riche (1875)

One of the landmark cases on the doctrine of ultra vires in company law is Ashbury Railway Carriage and Iron Company Ltd. v. Riche (1875). In this case, the object clause of the Ashbury Co. provided the following as its objects: 

  • To make, sell, lend, or hire railway carriages and wagons, and all kinds of railway plants, fittings, machinery and rolling stock; 
  • To carry on the business of mechanical engineers and general contractors; 
  • To purchase, lease, work, and sell mines, minerals, land and buildings; 
  • To purchase and sell as merchants timber, coal, metals, or other materials, and
  • To buy any such materials on commission or as agents. 

Ashbury Co. entered into a contract with the defendant company, Riche, to construct a railway line in Belgium. Though the contract was initially ratified by the members of Ashbury Co., it was later repudiated by it. The defendant sued Ashbury Co. for breach of contract. In the end, the Court held that the contract was beyond the objects specified in the Ashbury Co.’s Memorandum of Association, and so it was held void. The Court held that the phrase “to make, sell, lend, or hire railway carriages and wagons, and all kinds of railway plant” did not mean the company could build an actual railway line. Ultimately, the contract was held to be ultra vires.  

Evans v. Brunner and Mond Co. (1921)

In this landmark case, a company that carried out the business of manufacturing chemicals. The object clause in the company’s Memorandum of Association permitted it to do anything that may be incidental to accomplishing its business. Further, the Memorandum of Association allowed the company to provide funds to any English university for the advancement of science and research. Such an allowance was challenged in court. The challenge was based on the contention that it was not a part of the main object stated in the Memorandum of Association. 

Nevertheless, the Court acknowledged that funding for such activities was connected to carrying out the company’s future operations. The fund was needed to train the prospective students who may be easily recruited into the company. Such an act was held to be incidental to the main object and hence valid. 

Process of alteration of Memorandum of Association 

Below are the steps required to be followed to bring forth any alteration in a Memorandum of Association.  

Step 1- Notice of meeting of the Board of Directors

The first step to altering any clause of a Memorandum of Association is to convey to the Board of Directors (BoD) the proposal to make such an alteration. As mandated by Section 173 of the Act, the BoD must be intimated through a notice at least seven days prior to the actual board meeting. 

The notice must be accompanied by the details of the proposed alteration and a draft of the resolution.  

Step 2- Meeting with the Board of Directors

The second step in altering the Memorandum of Association involves the holding of the board meeting. The meeting witnesses the discussion of the need, pros and cons of the proposed alteration. Finally, if the BoD agrees to carry out such an alteration, the date, venue, and time for holding the general meeting are decided. Further, a director or someone else is authorized to furnish a notice to all the members of the company to participate in the general meeting.  

Step 3- Notice of Extra-ordinary General Meeting

Next, the notice of the general meeting is sent to all the directors, members, and auditors of the company. As per Section 101 of the Act, the notice should be sent at least twenty-one days before the date of the actual general meeting. The notice may be sent either via electronic or physical means. The notice should specify the exact date, time, and place of the proposed meeting. Furthermore, it should contain a brief note of the business that is proposed to take place at the meeting. 

Step 4- General Meeting 

Firstly, on the day of the general meeting, the quorum for the meeting is checked. The quorum for a private company is a minimum of two (personally present.) In the case of a public company, the quorum is a minimum of five; however, it changes according to the number of members present in the meeting under Section 103 of the Act.   

Secondly, the presence of the auditor of the company is checked. In case he/ she is absent, a leave of absence may be granted. 

Finally, the proposed special resolution for altering the Memorandum of Association has been passed. A special resolution is said to be passed when it is favourably voted by at least three times the number of votes cast against it. The votes can be cast either in person, through a postal ballot, or by proxy.   

Step 5- Filing application with the registrar of the company

After passing the required resolution, various applications have to be filed with the RoC within 30 days from the date of passing the resolution. The applications vary from one clause to another, as discussed below. 

Alteration of various clauses in a Memorandum of Association

Section 13 of the Act deals with the alteration of the Memorandum of Association. The said Section states provisions for altering every type of clause of the Memorandum of Association, as discussed below. Please note that the steps discussed in the above-mentioned subheading are mandatory for making any change in the Memorandum of Association of a company; such a procedure has to be fulfilled no matter which clause’s alteration is proposed. Nevertheless, the following provisions need to be followed with regard to the respective clauses of a Memorandum of Association.  

All the forms mentioned below are available on the MCA portal.  

Altering the Name Clause

Sections 4, 13(2), 13(3), and 16 of the Act provide for the alteration in the Name Clause of a Memorandum of Association. A company that has passed a special resolution for the purpose can change its name by filing an application (Form INC 24) in the Reserve Unique Name (RUN) web portal service approved by the Ministry of Corporate Affairs (MCA). The RUN service can be availed only after log-in into the MCA portal. 

The MCA takes 2-3 days to approve the newly proposed name. It will send the name approval letter if the name is in accordance with Sections 4(2) to 4(5) of the Act. Under Section 13(2) of the Act, any change in a company’s name shall take effect only after it is expressly approved by the Central Government. Nevertheless, such approval is unnecessary in case the change is simply the addition or deletion of the word ‘Private’ when the company gets converted from one class of company to another. 

Once the name of the company is altered, the RoC will replace the old name with the newly altered name in the register of companies. After registering it, the RoC will issue a new certificate of incorporation with the altered name printed on it. The issue of the fresh certificate of incorporation marks the end of the company’s name change.  

Altering the Registered Office clause

Sections 12(4), 12(5), 13(4), 13(5), and 13(7) of the Act give the provisions as to the change in the registered office clause of a Memorandum of Association. For altering the registered office clause in case the registered office is to be shifted within the local limits of the same city, after passing a special resolution for the purpose, the company can file an application (Form INC 22)  with the RoC. 

In case the company wishes to shift the registered office from one city to another within the jurisdiction of the same RoC, it should file e-Form MGT-14 and INC-22 within 30 days of passing a special resolution.  

To shift its registered office from the jurisdiction of one RoC to another within the same state, the company can file e-Form MGT-14 within 30 days of passing a special resolution. Furthermore, it should file INC- 23 with the Regional Director, who may issue an order approving the change in registered office. Then, INC-28 should be filed by the company within 60 days of the RD’s order. Lastly, within 30 days of getting the approval under INC-28, the company should file INC 22. 

In the event a company wishes to shift its registered office from one state to another, it should file an application (Form MGT 14) within 30 days of passing a special resolution in this regard. Then, the company must file Form GNL 2, followed by INC 26 for advertising the proposed change in newspapers in vernacular language and English. Then, INC 23 is to be filed to get the approval of the RD; the RD’s approval order should then be filed with the RoCs of the respective states from and to where the change in the registered office is proposed. Finally, the approval of both the RoCs must be filed as INC 22 within 30 days. 

Altering the Object Clause

Under Section 13(9) of the Act, the Object Clause in the Memorandum of Association of any company can be altered by passing a special resolution in this regard. The said Section provides that any company that wishes to alter its Object Clause must pass a special resolution and get it approved by the RoC within 30 days of passing the resolution. For that, the company should file Form MGT 14, following which the RoC shall register such a proposed change and issue a certificate thereof.   

Altering Share Capital Clause  

Sections 13 and 61 deal with the alteration of the share capital clause in a Memorandum of Association, provided the company’s Article of Association (AOA) permits it. Such an alteration may include the following;

  • Increase the authorized share capital of the company;
  • Increase or decrease the amount of each share;
  • Convert its fully paid-up shares into stock or vice versa, and
  • Cancellation of shares.

The alteration of the Share Capital Clause of a company requires the passing of an ordinary resolution at a general meeting in that regard. Within 30 days from passing the resolution, Form MGT 14 must be filed with the RoC, who shall then register the change in the Register of Companies. 

Altering Liability Clause

The Liability Clause in a Memorandum of Association can be altered by passing a special resolution in this regard. Within 30 days of passing the resolution, the company must file an application (Form MGT 14) with the RoC. 

Altering Subscription Clause 

The Subscription Clause in the Memorandum of Association cannot be altered throughout the life of the company. 

Documents required for alteration of Memorandum of Association

Generally, to alter any clause in a Memorandum of Association, the following documents are required to be sent along with the application filed under Section 13 of the Act; 

  • Copy of the Memorandum of Association along with the proposed changes;
  • A detailed report of the details of the board and general meetings in which the resolution allowing such an alteration was passed;
  • A certified copy of the resolution passed by the Board, and
  • The list of creditors and debenture holders, along with their names, addresses, debts, claims, or other liabilities due to them.

Conclusion 

As discussed in this article, the alteration of a Memorandum of Association involves a complex process. The process witnesses lengthy discussions and brainstorming to ensure that the company’s growth is ensured without hurting the interests of the members. Section 13 of the Act provides flexibility to alter the contents of a Memorandum of Association; at the same time, restricts the company from doing major changes in the business without the members’ express consent. The doctrine of ultra vires plays an intrinsic role in balancing the interests of both the company and the investors. 

A Memorandum of Association is one of the most important documents that every member of the company must go through before investing in it. It decides the prospective relationship between them and the company. Hence, it is always advised to thoroughly read it before investing in any company. 

Frequently Asked Questions (FAQs)

Is it possible to alter a Memorandum of Association?

Yes. A Memorandum of Association can be altered under Section 13 of the Companies Act, 2013. 

From where can I get the forms for altering the Memorandum of Association?

One can download the forms required to complete the process of altering a Memorandum of Association from the web portal of MCA. All the downloadable forms are provided in the ‘Company Forms Download’ section of the portal.

Can I alter the subscription clause of a Memorandum of Association?

No. The subscription clause of a Memorandum of Association cannot be altered throughout the span of the company. 

Can the liability clause be altered to make the liability unlimited? 

No, the liability clause of a Memorandum of Association cannot be altered so as to make it unlimited.  

What is the difference between a Memorandum of Association and AOA? 

Memorandum of Association stands for Memorandum of Association, while AOA stands for Articles of Association. A Memorandum of Association defines the relationship between the company and its members, while an AOA defines the functioning of a company.  

References 

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

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

https://t.me/lawyerscommunity

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

 

Download Now
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