The world is filled with many inventions, discoveries, science, technology, culture and arts. The human mind is capable of making wonderful things happen. The beautiful nature has bestowed its creations with a uniqueness of its own. This uniqueness is different from one person to another. Believing the creativity of each individual is of great identity, such creativity has to be protected and here arise the Intellectual Property Rights. Wherein, the creativity is protected and harnessed. In this regard, my article dwells around one of the unique topics from trademark viz. names as trademarks under the heading “Unanswered Trademark Law”.
Briefly, Intellectual Properties are the intangible assets that each individual is blessed in disguised. Wherein, the intellect of individuals is protected from not being taken away or stolen. IP can be mainly divided into Patents – wherein one can protect the scientific inventions; Trademark – wherein one can protect brand names, logo, and tag lines in a graphical representation; Copyright – wherein literary, artistic, music, cinematography, sound recording can be protected; Designs- wherein 2D and 3D works can be protected. Other IPs such as Traditional knowledge, Plant varieties, Geographical Indication, etc.
This article covers various definitions in this realm and attempts at answering the question that whether names be trademarked. It also aims at bringing forth a few classifications of names that might be eligible for trademark protection, along with case laws.
Definitions as per Trademark Act, 1999
Before heading towards the core point of discussion, the basic definition as to what is “mark”, “name” and “trademark” needs to be understood.
Section 2(m)- “mark”: Includes a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colours or any combination thereof.
Section 2 (zb) – “trademark”: means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shape of goods, their packaging and combination of colours.
Can names be trademarked
‘Name’ can be trademarked as per Section 2 (m) of the Trademark Act which says a mark can be a name, ticket, logo, etc.
However, the grant of trademarks to ‘names’ is different. In this regard, the ‘name’ can be classified into:
Living person’s name/surname
Celebrities’ name
Dead person’s name/legacy
God’s name
Living person’s name/Surname
Generally obtaining a trademark on “names or surnames” is a herculean task. For the reason that they are not distinctive from the rest of the marks/names or they are devoid of uniqueness. In order to obtain trademark registration, the mark/name must have obtained secondary meaning and established distinctiveness.
For example – Bajaj, Ford, Ralph Lauren, Suzuki, Goenka, Sony, Ranbaxy (derived from Ranbir Singh and Gurbax Singh), Dabur (derived from Dr Burman), etc. are some of the names which have obtained a trademark registration.
On the other hand, there are names Such as – Tata, Honda, Dr Reddy’s Laboratory, Philips, Mahindra and Mahindra that have obtained well know marks status under the trademarks Act.
The Court decided and observed – though the word “Mahindra” is a common surname in India, the plaintiff had acquired distinctiveness and secondary meaning of the word “Mahindra” with its continuous use and if used by the defendant even in regard to a different field of activity, it would surely result in creating confusion in the public mind that it belongs to the plaintiff.
Dr Reddy Laboratories v Reddy Pharmaceuticals 2004 (29) PTC 434 (Del) – The court observed that the drugs and pharmaceutical preparations manufactured by the plaintiff have earned enormous trade reputation and goodwill and the plaintiff is distinctively identified and associated with the trademark/name “Dr Reddy” as well as their logo. The use of Trade Mark/name “Reddy” by the defendant on its pharmaceutical preparations is neither concurrent nor honest.
Celebrities’ names
Celebrities are people having goodwill, name fame and reputation in the society. Thus, Celebrities can reach the public in better ways.
Some of the examples of misuse of celebrities’ names are:
Actress Kajol Twitter Controversy of 2010
There were derogatory remarks twitted against one of the political parties. Such remark was made in the name of “kajolnysa” who was believed to be Actress Kajol. Many news channels reported depicting that tweet was posted by the actress herself due to the name of her Twitter account. Thereafter, Actress Kajol gave her justification in the News and media that it was not her. But someone misused her name.
Sanjeev Kapoor’s story
Sanjeev Kapoor – is a famous chef. He had authored a book called Khazana of Indian Recipes. However, once he found that a boy was selling a book Khazana of Chinese Recipes with Kapoor’s picture on the cover. The book cover and his picture were the same as that of his original book. His face was used to sell something that was not his creation.
Later, these celebrities applied for trademarks of their names.
Unauthorized use of a celebrity’s name or image to a product attracts – passing off, unfair competition, and misrepresentation and can cause damage to their reputation, breach of confidence or a violation of privacy. Such kind of damages attracts monetary compensation. Sometimes, mental agony could be suffered, which cannot be compensated through money. In such a case, there can be imprisonment imposed.
If a celebrity is desirous of registering his/her name it should be with respect to a particular class of goods or services. So that it restrains others from misuse such as the use for commercial purposes, including films, TV, and advertisements without their consent.
Celebrities like, Shah Rukh Khan, Ajay Devgan, Kajol, Sunny Leone etc. have registered their names as trademarks.
Dead person’s name/legacy
Wherein, one wishes to obtain trademark registration on a dead person’s name, in such case, Section 14 read with Rule 29 of the Trademark Act and Rules provides for obtaining permission/consent in writing from such dead person’s legal representatives that the name of a dead person can be used on goods or services. This consent is required by the Trademark Registry when the death took place within 20 years prior to the date of Application. Fail in furnishing the written consent, the Trademark Registrar may refuse to grant the trademark.
If in case more than 20 years of the death of a person whose name is applied for a trademark, then the registry may not require such consent for trademark filing.
God’s name
In the case of Trademark Application filed in the name of God, deities, religious texts, etc., there are differences of opinion raised. Some of the case laws are:
The present case was an appeal from IPAB, claiming trademark rights over “Ramayan” to sell incense sticks and perfumes.
It was Observed and held by the Supreme Court- no individual can be given an exclusive right over gods and holy books, especially to make a profit. “…. the photographs of Lord Rama, Sita and Lakshman are also shown on the label, which is a clear indication that he is taking advantage of gods and goddesses, which is otherwise not permitted,”
However, the court specified – if there was a prefix or a suffix to the word Ramayan which was of the same “length of the word Ramayan then Ramayan may lose its significance as a religious book and it may be considered for registration as a trademark”.
Is an injunction suit. The facts- The Appellant and Respondents are all involved in the business of manufacturing TMT bars under different variants of the trademark ‘SHYAM’. The Appellant had filed the instant suit seeking an injunction against the Respondents to restrain them from using the mark ‘SHYAM’ in respect of their goods and services.
The Court observed – “there is no authority or at least no authority was shown to us, which laid down that God’s name was not registrable as a trademark.”
Held – “this court cannot say as an infallible principle of law that registration of the word ‘Shyam’ was invalid and its registration should be cancelled. The respondent has to prove, by leading cogent evidence, before the Board, that indeed the name ‘Shyam’ refers to God only, is not distinctive of the appellant, and is generic and common. The respondent has not been able to establish this, even prima facie.” Accordingly, the Court granted an interim injunction against the Respondents.
Conclusion
The above case laws have set forth a divergent opinion. The name trademark can be registered under Trademark Act. However, while filing a trademark application in the category of ‘NAME’, one has to make sure that their mark/name has established distinctiveness or has obtained secondary meaning. Additionally, in the case of celebrities’ names, mere names cannot be applied for trademark registration. But their names should be applied under the classification of goods and services. Also, it is pertinent to comply with section 9(2) of the Trademark Act, 1999 in order to pass through the trademark registration procedure and obtain the registration. Thus, the ‘name’ plays important role in trademark registration.
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This article is written by Vandana Shrivastava, an undergraduate student at the Institute of Law, Nirma University. The article analyses Section 269T of the Income Tax Act, 1961 and examines the spectrum of the provision with case laws.
It has been publishedby Rachit Garg.
Table of Contents
Introduction
The notion of income tax has been prevalent in the pre-colonial era. It is understood as a tax that a citizen pays to the state subject to the citizen’s income and the companies’ profit. The state utilizes this tax revenue for many purposes which inter alia includes public services, development of infrastructure, expenditure on military and defence and subsidies. The Income Tax Act, of 1961 is a sophisticated and comprehensive statute that addresses the various rules and regulations that administer taxation in the nation. The Indian Government is responsible for levying, administering, collecting, and collecting income tax.
Section 269T of the Income Tax Act imposes a prohibition on companies, including banking companies and their branches, cooperative societies, firms, and cooperative banks and individuals to repay the loan or deposit or specified sum under certain specific conditions. This article extensively deals with the conditions specified under this Section.
Section 269SS & 269T of the Income Tax Act
People often strive to avoid paying taxes in whatever capacity they can. Tax evasion, on the other hand, is a significant criminal offence if it is done through fraudulent means or by concealing facts from income from tax authorities. If discovered, the individual might incur a significant penalty as well as imprisonment. People evolved tactics to rationalize the transactions to prevent these consequences. In the case of unaccounted cash, one such common justification was offered. If the tax authorities found unaccounted cash during raids, the person may avoid the penalty by saying that the money came from a loan or deposit from friends and relatives, as the Income Tax Act of 1961 (‘the Act’) had no restriction on the amount of such a loan/deposit. Therefore, Section 269SS and Section 269T were introduced to bring such transactions within the Act’s ambit and to restrict the transfer of black money.
Section 269SS of the Income Tax Act
Section 269SS of the Act stipulates that an individual can’t accept any loan or any other kind of specified sum with respect to advance or otherwise, in compliance to the transfer of any immovable property, from another individual otherwise than by an account payee cheque or account payee cheque or any means of electronic clearing system via bank account or any other specified manner, on the precondition that-
The amount of loan or deposit or specified sum is Rs. 20,000 or more
Illustration: X intends to take a loan of Rs 50,000 from Y, he cannot accept it in cash because it will contravene Section 269SS as the amount is more than Rs 20,000.
The sum total amount of the loan, deposit and the specified sum is Rs. 20,000 or more
Illustration: X wants to take a loan of Rs. 6,000, a deposit of Rs. 9,000 and an advance of Rs. 7,000 from Y, he cannot accept it in cash because the total sum is 22,000.
In a scenario where an individual had already received a loan, deposit or specified sum from the depositor (person giving the loan, deposit or specified sum) but the loan or deposit or specified sum hasn’t been paid back in such scenario if the unpaid loan or deposit or-specified sum is Rs. 20,000 or more;
Illustration: X had accepted a loan from Y on 1st June 2020 by crossed cheque for Rs 19,000. On 15th April 2021 X wants to take another loan from Y for Rs 2000 (the previous loan remains unpaid on the date). Then, since the total loan outstanding is Rs 21,000 (20,000 + 2,000) is more than Rs 20,000, the provisions of Section 269SS will be implemented. Thereby, X cannot accept the new loan on 15th April 2021 by cash mode.
In brief, an individual cannot receive a cash loan or a deposit of Rs 20,000 or more in a single day from another individual. Furthermore, according to the Income Tax Rules, 1962 the specified manner of accepting loans or deposits or any kind of specified sums, inter alia includes Account payee cheque/bank draft, Electronic Clearing System (ECS) through a bank account, net banking, credit card, debit card, Real-Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), Bharat Interface for Money(BHIM), Immediate Payment Service (IMPS) and Unified Payments Interface (UPI).
Exceptions to Section 269SS of the Income Tax Act
There are certain exceptions to the implementation of the Section 269SS of the Act which is as follows-
Exception 1
Any loan or deposit or specified sum ‘taken or accepted from’ or ‘taken or received’ through the following institutions–
The government.
Any banking company, post office savings bank or co-operative bank.
Any corporation established by a Central, state or provincial Act.
Any institution, association or body or class of institutions, associations or bodies notified in the Official Gazette.
Exception 2
An individual whose primary source of income is agriculture accepts a loan or deposit from another person whose primary source is agriculture. The individuals may have other sources of income (in addition to agricultural income) that are subject to taxation under the Income Tax Act; but, after accounting for exemptions and deductions, there should be no income tax liability. Other exceptional cases include receiving funds from a relative in an emergency. The purpose should not be to avoid paying taxes, partners making cash contributions to the partner company and the scenario where there is only a book entry and no cash or other form of payment.
Consequences of violating Section 269SS of the Income Tax Act
If an individual violates the provision of Section 269SS of the Income Tax Act, then the amount of the penalty that the assessing officer can impose is 100% of the loan or deposit amount. An individual who accepts loans and cash deposits in excess of the stipulated amount is liable to the penalty. As a result, the money receiver must guarantee that the provisions of Section 269SS are followed while making payments. However, if the individual can show that there was a valid basis for the transactions and that no malice was intended, he or she may not be penalized.
Section 269T of the Income Tax Act
Section 269T of the Income Tax Act stipulates a prohibition on individuals to repay the loan or deposit or specified sum otherwise than by an account payee cheque or account payee bank draft or by use of an electronic clearing system through a bank account, if-
i) The amount of loan or deposit, including interest amount, is Rs. 20,000 or more, or
ii) The aggregate amount of loans or deposits, including the interest amount, held by such an individual in his own name, or jointly with any other individual, is Rs. 20,000 or more.
In a brief, an individual cannot repay the loan or deposit in cash if the amount is Rs. 20,000 or more.
Exceptions to Section 269T of the Income Tax Act
Section 269T of the Income Tax Act also lays down the exception that an individual paying Rs. 20,000 or more towards repayment of loan or deposit does not have to comply with 269T if he pays to the following parties –
The government,
Any banking company, post office savings bank or co-operative bank,
Any corporation established by a Central, state or provincial Act,
Consequences of violating Section 269T of the Income Tax Act
In the event of a violation of Section 269T of the Income Tax Act, 1961 by an individual, Section 271E of the Income Tax Act stipulates that a penalty equivalent to the amount of loan or deposit repaid may be levied by the Joint Commissioner. The amount of the penalty that the assessing officer can impose is 100 percent of the loan or deposit amount.
Difference between Section 269SS and 269T of the Income Tax Act
If the portion of the loan or deposit is INR 20,000/- or more, the provisions of Section 269SS of the Act provide that no individual shall accept any loan from any individual other than by account payee cheque, account payee demand drafts, or online transfer through a bank account. However, there are a few exceptions listed under the Section. Likewise, if the sum of the loan or deposit is INR 20,000/- or more, the provisions of section 269T of the Income-tax Act stipulated that any loan or deposit shall not be repaid by the individuals mentioned in the Section other than by an account payee cheque, account payee demand drafts, or online transfer through a bank account.
The difference between Section 269SS and Section 269T is that both the provision deals with cash payment and repayment of loans and deposits. While Section 269T stipulates that the mode of repayment of certain loans or deposits amounting to INR 20,000 or more cannot be in cash, Section 296SS prohibits the use of cash as a mode of accepting certain loans and deposits amounting to INR 20,000 or more.
Meaning and scope of reasonable justification
If a failure to adhere to the standards of Sections 269SS or 269T of the Income Tax Act is due to some reasonable cause, no penalty will be imposed, according to Section 273B of the Income Tax Act. The question now is what constitutes a reasonable justification for disregarding the provisions of Sections 269SS and 269T. To understand the reasonable justification we will comprehend the rationale of the judicial decision on the issue.
Cases concerning ‘reasonable justification’
In the case of Commissioner of Income Tax v. M/S. Muthoot Financiers (2015), Justice V. Kameswar Rao of the Hon’ble Delhi High Court determine the issue, whether in a transaction between the firm and the partner the provision of Section 269SS would be attracted and if we hold that Section 269SS was drawn and therefore violated, whether the respondent-assessee would be entitled to benefit of Section 273B of the Act. The Court observed that if a partner introduces capital in cash in the firm or withdraws the same to the tune of Rs. 20000 or in excess of Rs. 20000, then Provisions of Section 269SS or 269T shall not be attracted as the introduction of capital or withdrawal from a firm cannot be called loans or deposits.
In the case of Narsingh Ram Ashok Kumar v. Union of India (1996), the bench of JusticeD. Wadhwa and Justice M Eqbal of the Hon’ble Patna High Court determined the constitutionality of 269SS of the Income Tax Act. The Court observed that the Assessing Officer is responsible for the statement of income of the assessee before him under the Act’s provision. According to Section 269SS of the Act, any loan or deposit transaction in the books of the assessee must be accompanied by an account payee cheque or an account payee bank draft. A provision like this was included in the Act to combat the widespread circulation of black money.
The Court further observed that it is critical to understand, how the assessee can protest that when he seeks money in the manner of a loan or a deposit for the conducting of his business, Section 269SS of the Act requires him to accept the money only in the manner of an account payee cheque or an account payee bank drafts. Why should he be concerned that the person who lends the loan or makes the deposit should be penalized equally if he does not make the payment or deposit using an account payee cheque or bank draught?
The assessee is responsible for maintaining his house in order. And besides, it is he who claims remedies under the Act, claiming that the sum represented in his books of account as a loan or deposit is not taxable. Unless the assessee can demonstrate reasonable evidence of the loan or deposit’s authenticity, the Assessing Officer might consider the loan or deposit in the assessee’s books as his income from undeclared resources. The Court concluded that the provision is rational since it accomplishes the objective of reducing the black money movement. The provision is not discriminatory or unreasonable. Therefore, any challenge to its constitutionality must be dismissed.
Frequently Asked Questions (FAQs)
Is it reasonable for any individual to repay a loan of more than Rs.20,000 in cash?
No, this would be in violation of Section 269T, which states that a person cannot return a debt of more than Rs.20,000 in cash.
Whether Section 269SS can be implemented if an individual takes a loan from my colleague for the purpose of personal use?
Yes, Section 269SS is implemented for every individual taking a loan above Rs 20,000 even if it is for personal purposes.
Whether an individual has to mention Section 269SS and 269T transactions and if yes, where?
Yes, every individual has to mention in clause 31 of Form 3CD, wherein the tax auditor has to report the transactions that have fallen under the provisions of Sections 269SS and 269T. Both the parties (payer and receiver) have to report the transactions.
Can an individual accept a cash loan or deposit amount of Rs.20,000 or more from the government or banking institution?
Yes, an individual can accept a cash loan or deposit amount of Rs. 20,000 or more from the government or banking institution because it falls under exceptions of Section 269SS.
Conclusion
Although the requirements of Sections 269SS and 269T of the Act were introduced to avoid the rise of black money and tax evasion. Even so, the sum of Rs. 20000 is minimal in the present situation, given the rate of inflation, which has resulted in a decline in the worth of money and an increase in the costs of various items, hence increasing the working capital requirements of every enterprise. Therefore, the limits under Section 269SS and 269T should be raised in the same way that the audit limit under Section 44AB was raised to support small assessees.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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This article was written by Monesh Mehndiratta, a student of BA LLB, Graphic Era Hill University, Dehradun. This article talks about IPR and then moves on specifically to copyright and patents and the difference between the two.
It has been published by Rachit Garg.
Table of Contents
Introduction
Intellectual Property Rights (IPR) deal with intangible property or the creations of human mind and intellect. According to Black’s Law Dictionary intellectual property means “a category of intellectual property rights which protects commercially valuable products of the human intellect”. The artistic works, ideas, creations, inventions, designs, symbols, names etc, are protected by the IPR law. It tends to give exclusive rights that a creator enjoys over his own original work for a certain period of time. Article 27 of the UDHR also mentions such rights. The two main historical events that led to its development are the Paris Convention for the Protection of Industrial Property in 1883 and the Berne Conventionon Protection of Literary and Artistic Works in 1886. In ancient times, there was no such mechanism to give recognition to the inventions, ideas, and artistic work done by the people. With innovation, economic growth and numerous discoveries, the need to safeguard people’s work was felt and taken into consideration. As a result, the country signed the TRIPS agreement (Trade Related Aspects of Intellectual Property).
Types of IPR
Following are the types of intellectual property rights:
Copyright
Patent
Trademarks
Trade secrets
Copyright
In India, the legislation relating to copyright is the Indian Copyrights Act, 1957. According to the Act, it means the exclusive right to do or authorize any act with regard to the work which forms the subject matter of the copyright given therein. This means that a person having copyright ownership has the right to reproduce the copies, circulate them in public, perform, translate or adapt the work, which can be literature, drama, film or an artistic work. Copyright subsists in head notes, editorial notes, etc. for case law reports. (Eastern Book Co. v. Navin J. Desai, 2001)
Criteria for the protection of a copyright
In order to qualify for copyright, the work must fulfill the following conditions:
It should be original.
It should be related to literacy, dramatic, musical, cinematograph film or sound recording work.
If not the abovementioned work, it should be the work of an international organization declared by the Central Government as per Section 40 or Section 41 of the Act.
It should be registered under the Designs Act, 1911, if it is a design.
It should be work that falls under the subject matter of copyright as per the Act.
Subject matter of a copyright
Section 13-16 of the Act, provides all the work that are under the protection of copyright:-
Literary work
Dramatic work
Musical work
Cinematograph work
Sound recording
Artistic work
Computer programme
Architectural work.
In the case of Express Newspaper v. Liverpool Daily Post (1985), the plaintiff’s grids and five letter sequences were published in his paper for a competition. The defendant copied it on his own paper. The court held that it is an infringement of copyright as grids and five letter sequences contain useful information.
However, the following subjects have been excluded from the purview of copyright.
These are:
Information of common place,
A single word,
Matter that is not in the form of a script,
Facial
Work done during the course of employment,
Folk song
Ownership of a copyright
According to Section 17 of the Act, the author has the ownership of the copyright on the work. But there are certain conditions:
If the work has been done during the course of employment by an employee, the ownership of the copyright will vest with the employer unless there exists an agreement for the same.
If the photographs, paintings, portraits, engravings or cinematograph are made at the instance of someone else, he/she will be the first owner in absence of any agreement.
In case of government work, the government will be the owner and vest ownership of copyright.
If the work falls in the category of Section 41 of the Act, the international Organization will be the first owner.
If the work has been published under the direction of any public undertaking, such public undertaking will be the owner.
If a speech has been delivered in public, then the person who made the speech will be the first person and not the organizer or host of the show.
In the case of Vicco Laboratories and Anr v. Art Commercial Advertising Pvt. Ltd. (2001), the appellants were involved in the business of pharmaceuticals but had sponsored a serial prepared by the respondents and invested a huge amount of money. They filed a suit to claim copyright on the title and format of the serial and requested a permanent injunction restraining the respondents to make use of title or format further. The Supreme Court in this case held that the facts do not fall under Section 17 as the appellants were unable to prove the conditions given under the section and hence, dismissed the case.
Rights of an owner of a copyright
Following are the rights of an owner having a copyright on his/her work:
The owner can reproduce the work in any material form whether physical or electronic,
Issue copies of work to the public,
Perform the work in public or communicate it to them,
Make translations, adaptations or cinematograph film of the work,
The owner can do the abovementioned work in case of computer programmes and he/she can also sell, or give it on commercial rent, or offer it for sale,
The owner has the above mentioned rights in the case of artistic works as well.
To make a copy of film or sell, hire, or communicate it to the public, in case of cinematographic film,
To make a sound recording or offer it for sale, give copies, or communicate it to the public,
Assign the copyright,
Duration of a copyright
According to Section 22 of the Act, the duration of copyright in the country is for 60 years counted from the next year of the owner’s death, which means the lifetime of the owner + 60 years.
In case the author is not known, the copyright subsists for a period of 60 years from the year of publication.
Patent
It is a right exclusively granted for the invention of a new product or a process or technique that offers a better way in production of any product. They also form a part of incorporeal rights. The patents were introduced in India by the Indian Patents and Designs Act, 1911, which was later amended and modified by another act of 1970, which was again amended in 2005 to meet the needs and demands of society. The amendment repealed the exclusive marketing rights (EMRs) and replaced them with a compulsory license.
Kinds of patents
Product Patents
These are the patents on a product invented by a person and cover in their ambit all uses of the product. It gives monopoly rights over a physical right irrespective of the method used in its production.
Process Patents
It gives monopoly rights and protection to a specific process or method used in the production of a thing. It is applicable in a situation where the product is known or some of its methods are known but a person has devised entirely new methods for its production.
Hybrid Patents
It is a combination of both product and process patents. For example, a product by process patent. In this, the protection lies in the steps involved in the production of a product.
Patents of Addition
These provide the owner with rights to make alterations, additions, or improvements to his patented invention. The term of this patent is the remaining period of the patent of the original invention. It is granted by the Controller of Patents under Section 54 of the Indian Patents Act, 1970.
Secret Patents
It means that the government, if it thinks fit that the invention is such that it is important for the safety or defence of the country, may direct the person to apply for secret patents.
Dependent Patents
A patent which cannot be exercised independently and needs the use of an earlier patent is known as dependent patents. Such patentees can apply for a licence to use earlier patents under Section 91 of the Act.
Petty Patents
It is a patent over a new configuration or design of an already patented product. The term of such a patent is shorter than that of an independent patent. In India, there is no such patent.
Criteria of Patentability
In order to get patents right over an invention, the criteria must be fulfilled:
New invention
Section 2(1)(j) of the Act defines invention as “anew product which involves an inventive step and is capable of being used in the industry.” However, mere discovery of a new substance not increasing the efficacy is not patentable as per Section 3(d) of the Act. Section 3 and Section 4 of the Act provide the list of all the matters that are excluded from patents, i.e., non-patentability:
Frivolous invention
Inventions against public morality
Mere discovery
Admixing the mixtures
Duplicating the services
Method of agriculture or horticulture
Methods to treat disease
Biologication process used in reproduction of living beings.
Mathematical or computer programmes which are simple
Aesthetic Creation
Any mental act
Topography of integrated circuits
Traditional knowledge
Atomic Energy.
In Novartis Ag v. Union of India (2013) popularly known as the Novartis case, the Supreme Court held that mere discovery is not an invention and laid down certain principles for pharmaceutical patents. It was held that for patents in this area, inventions had to undergo tests apart from the criteria of patentability. One of them is the efficacy test.
Novelty
It is defined under Section 2(l) of the Act. It is the basic requirement for the patent that the invention should not have been published earlier in any form and made available to the public.
Inventive step
It also means the non-obviousness of any invention. Section 2(1)(ja) of the Act defines the term inventive step. The definition implies that if the invention is obvious to any person then it does not fulfill the criteria of patentability.
Industrial application
It is defined under Section 2(1)(ac) of the Act. It means that if an invention is in abstract form, it cannot be used in the industry and will lose its application. Thus, it is necessary that the invention has a capability of industrial application.
Rights of a Patentee
The patentee has a right to sell, use or distribute the patented product. It is an exclusive right of the patentee to use the patent in any manner.
If the patentee wishes, he/she can transfer his rights of patent or licence to someone else as a consideration.
He/She can also surrender the rights.
In case of any infringement of patents, the patentee can sue or file a suit against a person infringing his rights.
Duration
Patents in India are the monopoly rights given for a specified time period of 20 years from the date of application to a person who has invented something which is not excluded under Section 3&4 of the Act.
Difference between copyrights and patents
S.no.
Points of difference
Copyrights
Patents
Act
The Indian Copyrights Act, 1957
The Patents Act, 1970
Meaning
It means an exclusive right to do or authorize someone to do any act, with regard to the work which is the subject matter of the copyright given in the Act
It is a right which is exclusively granted to a person for any invention not excluded under the Act.
Criteria
Original Related to literacy, dramatic, musical, cinematograph film or sound recording work. If not the above mentioned work, it should be a work of international organization declared by the Central Government as per Section 40 or Section 41 of the Act. It should be registered under the Designs Act, 1911, if it is a design. It should be work which falls under the subject matter of copyright as per the Act.
New inventionNoveltyInventive step Industrial applicationNot excluded under the Act.
Duration
Lifetime of the owner + 60 years.
20 years from the date of application.
Rights of Owner
Reproduce, sell, issue copies, perform the work, communicate to the public etc.
Right to sue in case a person infringes the rights, surrender, sell, export etc.
Subject matter
Literary workDramatic workMusical workCinematograph workSound recordingArtistic workComputer programmeArchitectural work
Any invention of a product or methods to produce a product or any other invention which meets the basic requirements and not excluded as per Section 3&4 of the Act.
7.
Excluded matters
Information of common place,A single word,Matter that is not in the form of script,FacialWork done during course of employment,Folk song
Frivolous inventionInventions against public morality Mere discoveryAdmixing the mixturesDuplicating the servicesMethod of agriculture or horticultureMethods to treat diseaseBiologication process used reproduction of living beings. Mathematical or computer programmes which are simpleAesthetic CreationAny mental actTopography of integrated circuitsTraditional knowledge Atomic Energy
Conclusion
There are many types of intellectual property rights. Some of these are copyrights, patents, trademarks, trade secrets, etc. Copyright is dealt under the Indian Copyrights Act, 1957 whereas the concept of patents is dealt by the Patents Act, 1970. For both the types of IPRs, there is certain criteria which has to be fulfilled in order to enjoy the benefits. However, they differ to a great extent. Patents deal with inventions, while copyright deals with the creation of ideas and original works of the author, whether in literature, drama, music, art etc. Other differences have been explained in the article.
Frequently Asked Questions (FAQs)
Which act deals with copyright?
The Indian Copyrights Act, 1957 deals with copyrights.
What are the requirements for applying for copyrights?
In order to qualify for copyright, the work must fulfill the following conditions:
It should be original.
It should be related to literacy, dramatic, musical, cinematographic, or sound recording work.
If not the above mentioned work, it should be a work of international organization declared by the Central Government as per Section 40 or Section 41 of the Act.
It should be registered under the Designs Act, 1911, if it is a design.
It should be work which falls under the subject matter of copyright as per the Act.
What all subject matter are non-patentable?
Section 3 & 4 of the Patents Act, 1970 gives the list of subject matter excluded from patents.
Frivolous invention
Inventions against public morality
Mere discovery
Admixing the mixtures
Duplicating the services
Method of agriculture or horticulture
Methods to treat disease
Biologication process used in reproduction of living beings.
Mathematical or computer programmes which are simple.
Aesthetic Creation
Any mental act
Topography of integrated circuits
Traditional knowledge
Atomic Energy
What are the rights of a patentee?
The patentee has a right to sell, use or distribute the patented product. It is an exclusive right of the patentee to use the patent in any manner.
If the patentee wishes, he/she can transfer his rights of patent or licence to someone else as a consideration.
He/She can also surrender the rights.
In case of any infringement of patents, the patentee can sue or file a suit against a person infringing his rights.
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This article has been written by NikunjArora of Amity Law School, Noida. This article provides a detailed analysis of the Legal Services Authority Act, 1987 (as amended), along with the Act’s objectives, scope and structural organisation. This article also throws light on the legal aid services provided by the Act and the provisions of Lok Adalat.
The Legal Services Authorities Act, 1987, was enacted by the Central Government of India pursuant to Article 39-A of the Constitution of India and the recommendations of its committees. The Legal Services Authority Act, of 1987 came into effect on 9th November 1995, following the Amendment Act of 1994, which introduced several amendments to the main Act. According to this Act, the economically weak, the backward, and the disabled are eligible to receive legal aid. In 1971, Justice P.N.Bhagawati introduced the legal aid scheme, which was overseen by the Legal Aid Committee. On 5th December 1995, the National Legal Services Authority was established by Justice R.N. Mishra, which was an important contribution to the implementation of the Act.
There are different levels of legal aid, including provisions for legal assistance to illiterate, poor, and physically challenged individuals who are unable to access the courts due to their ignorance of the law or financial limitations. Anyone who qualifies for legal aid under Section 12 of the Act, may obtain legal assistance under the Act. The National Legal Service Day (NLSD) was declared on November 9, 2009, the day the law came into force. As stated under the Act, the legal aid is to be provided by the State, District, and Taluk Legal Service Authorities/Commissions formed throughout the country in order to bring about a re-dedication to ensure equality of opportunity and fairness to all individuals. Through its various forms of legal assistance, the NLSD promotes equal opportunity and justice for all citizens.
The Act envisions that no one will be denied access to justice because of disability or economic reasons, and aims to educate the public about the law, offer free legal aid, and establish Lok Adalats. As a result of the creation of Lok Adalats, the process of dispensing justice has been revolutionized in the country. There remains a large number of pending cases in the courts of the country. A number of measures have already been taken by the government to reduce the number of pending cases. In addition to providing a supplementary forum for conciliatory settlements, the plan achieved success in providing an additional forum for litigants.
Analysis of the Legal Services Authority Act, 1987
Types of services under Legal Services Authority Act
The Act provides many types of legal services to the general public:
Free legal awareness
This Act is primarily intended for the public to make them aware of laws and schemes issued by public authorities. The Legal Service Authority teaches some portions of the rules of law to the individuals. Legal camps and legal aid centres are organized by authorities so that the general public can seek advice from the legal aid centres located near their homes or places of work. The legal guides and centres can help address the grievances of ordinary people as well.
Free legal aid counsel
A person who wants to defend or file a case in a court of law but does not have the means to hire an advocate can seek the assistance of a free legal aid attorney. The Act states that free legal aid counsel is available, and the Council is responsible for assisting needy individuals to obtain justice. By adopting and establishing this philosophy, the Indian Courts should be freed from the burden of adjudicating the cases.
A Lok Adalat was held for the first time in Gujarat on 14th March 1982 and succeeded in resolving many disputes pertaining to labour disputes, family disputes, and bank recoveries. Lok Adalats are the primary method by which the legal services authorities decide disputes. Our Indian courts have a huge backlog of cases, and it takes an extremely long time to resolve disputes under judicial supervision.
Lok Adalat was, thus, seen as an Alternative Dispute Redressal (ADR) mechanism that was reliable, efficient, and friendly in resolving disputes. Lok Adalats can be constituted by the legal services authorities at such spans and locations to exercise the authority of their jurisdiction in such areas as they think fit. There is a mix of lawyers and non-lawyers on the Lok Adalat bench in order for it to possess a superior understanding of the dispute and convince both parties to reach a mutually agreeable compromise.
Objectives of Legal Services Authority Act
Under Article 39A of the Constitution of India, free legal aid and equal justice are provided to all citizens by appropriate legislation, schemes or other means to ensure that no citizen is denied access to justice on the basis of economic disadvantage or in any other way. The Legal Services Authorities Act, 1987 was enacted as a consequence of this constitutional provision with the primary objective of providing free and competent legal services to the weaker sections of society in the country.
Structural Organization under Legal Services Authority Act
As a result of the Legal Services Act, a National Legal Services Authority (NALSA) was established as the apex body for regulating the legal aid provisions. State Legal Services Authority (SALSA) handles the implementation of NALSA’s powers at the state level, which delegates further to a number of organizations. NALSA is considered to be an alliance between the State, Social Action Groups, individuals, and non-profit organizations that have their presence from the grassroots level to the state level.
NALSA
In response to Section 4 of the Act, NALSA has been established to provide free legal aid to all citizens of the country. The body has been established by the government. It is headed by the Chief Justice of India, patron-in-chief. The executive chairman of the organisation is a retired or serving judge of the Supreme Court of India. The nominees are selected by the president after consultation with the Chief Justice of India. An advisory committee referred to as the Supreme Court Legal Services Committee is formed by the central authority. A significant objective of the NALSA is to ensure that justice is equally distributed among citizens, regardless of economic or other factors. The main responsibilities of NALSA are the following:
Through legal aid camps, the organization promotes legal aid in slums, rural and labour colonies, as well as disadvantaged areas. It plays an important role in providing education about the rights and needs of the people who live in such areas. Lok Adalats are also formed by the authority to settle disputes between these people.
Amongst other things, it is primarily concerned with providing legal services through clinics in law colleges, universities, etc.
Arbitration, mediation, and conciliation are all methods that are used by these organizations to settle disputes.
The organisation provides grant aid to institutions that provide social services at the grassroots level to marginalised communities from various parts of the country.
Research activities are also conducted to improve legal services for the poor.
Ensures that citizens commit to the fundamental duties they have been entrusted with.
As part of the proper implementation of the schemes and programmes, they tend to evaluate the effectiveness of the actions taken for the legal aid problems at specific intervals so that the correct functions are being performed.
Through the policy and scheme they laid down, the body ensures that the legal services could be made available to the general public. Through these schemes, the body is able to provide the most economical and effective legal services
Financial matters are handled by this body, and the funds allocated by it are allocated to respective district and state legal services authorities.
InNALSA v. Union of India (2014) the National Legal Services Authority of India (NALSA) filed this case to recognize those who are outside the binary gender distinction, including individuals who identify as “third gender”. There was a question that the Court had to address regarding the recognition of people who do not fit into the male/female binary as “third gender” individuals. During the discussion, the panel deliberated whether ignoring non-binary gender identities constitutes an infringement of Indian Constitutional rights. For developing its judgment, the panel referred to an “Expert Committee on Transgender Issues” established under the Ministry of Social Justice and Empowerment.
There is no doubt that this was a landmark decision because the Supreme Court of India recognised the identity of ‘third gender’ and transgender persons for the first time. In its judgment, the Court recognized that third-gender individuals had fundamental rights under the Constitution and the International Covenant. As a result, the government of the state was directed to develop mechanisms for the realization of the rights of “third gender”/transgender individuals.
According to the Court, the concept of ‘dignity’ under Article 21 of the Constitution includes all forms of self-expression, which permits a person to live a dignified life. The rights to dignity under Article 21 include the right to gender identity.
The Apex Court stated that Article 14 and Article 19(1)(a) were framed in gender-neutral terms, and thus, the right to equality and freedom of expression would extend to transgender persons also. Transgender persons all over society are subject to “extreme discrimination” which is a violation of their right to equality, which is illustrated by the fact that they are treated as second-class citizens. Furthermore, under the freedom of expression, it was indicated by the Court that the right to express one’s gender was included by dressing, speaking, acting, or acting in a manner consistent with their gender identity.
Thus, Articles 14, 15, 16, 19(1)(a) and 21 of the Constitution confer fundamental rights on transgender individuals. The Court also relied on the Yogyakarta Principles and core international human rights treaties while recognizing the human rights of transgender people. To reduce the stigma against transgender communities, public awareness programs were held to be necessary by the Court.
State Legal Services Authority
Each state has a legal service authority, which provides free legal advice to those who cannot afford it. This is covered under Section 6 of the Act. They provide preventative and strategic legal assistance programs. Lok Adalat sessions are also conducted by the authorities to assist clients. Among their main duties is to implement the policies and schemes as directed by NALSA. The respective High Court’s chief justices serve as patrons-in-chief. These bodies are supervised by an executive chairman who is a retired or serving judge. A high court legal service committee is usually formed by the state authority. This body is headed by a sitting High Court judge, who is the chairman and is administered by the Chief Justice of the respective High Court.
Legal Aid under Legal Services Authority Act, 1987
In 1971, Justice P.N. Bhagwati formed the Legal Aid Committee to introduce the Legal Aid scheme. In his opinion, the legal aid system is aimed at making the missionary of administration of justice easily available to the people able to enforce their legal rights. The poor and the illiterate will be able to approach the courts and as a result, they will get justice faster from the courts.
Poor and illiterate people should have access to legal aid. An individual does not have to be a litigant in order to obtain legal aid. According to Article 39A of the Indian Constitution, it is the duty of the State to ensure that the legal system operates on the basis of equality and that in particular, it must ensure the provision of free legal aid to ensure that citizens of every economic category have access to justice. Furthermore, Articles 14 and 22(1) make it mandatory for the State to ensure equality under the law and a legal system that promotes justice from an equal opportunity standpoint. It is the aim of legal aid to ensure that the law is enforced in its letter and spirit, and equally just treatment is provided to the weakest, poorest, and most downtrodden sections of society.
The concept of legal aid can be traced back to the year 1851 when in France, enactments were passed to provide legal assistance to those in need. As far back as 1944, England and Wales had also supported the provision of legal advice to the poor and needy as part of its organized efforts to provide legal services to the poor. The Rushcliffe Committee was appointed by the Lord Chancellor, Viscount Simon, to look into the current facilities available to provide legal advice to the poor and to recommend any measures that appear relevant to ensuring that the needs of these individuals are met. As per the Act, the Supreme Court Legal Services Committee, the High Court Legal Services Committee, the State Legal Services Authority, the District Legal Services Authority, and the Taluk Legal Services Committee have been entrusted with the responsibility of organizing all Lok-Adalats in India.
Eligibility criteria for free legal aid
There was even an item on the committee’s (headed by Justice PN Bhagwati) agenda on the eligibility criteria for the people to qualify for free legal aid, which has been also mentioned in the Code of Criminal Procedure, 1973 under Section 304 to provide free and competent legal assistance to a marginalised member of the society at the expense of the state. As established inHussainara Khatoon v. State of Bihar (1979), legal aid will be provided at the expense and cost of the state to marginalised groups within society, and the state is required to make such assistance available to the accused.
In a similar vein, the Supreme Court has also ruled inSuk Das v. Union Territory of Arunachal Pradesh(1986) that an accused who cannot afford legal aid may have his or her conviction set aside on socio-economic grounds.
The following are the people eligible for free legal aid under Section 12 of the Act:
a member of a Scheduled Caste or Scheduled Tribe;
a victim of trafficking in human beings or beggars as referred to in Article 23 of the Constitution;
a person under circumstances of undeserved want such as being a victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or industrial disaster; or
in receipt of annual income less than rupees nine thousand or such other higher amount as may be prescribed by the State Government, if the case is before a court other than the Supreme Court, and less than rupees twelve thousand or such other higher amount as may be prescribed by the Central Government, if the case is before the Supreme Court.
Lok Adalat under Legal Services Authority Act, 1987
Section 19 of the Act provides for the establishment of Lok Adalats. Legal service authorities at all levels, including the central, state, and district levels, shall hold Lok Adalats. Lok Adalats serve as an alternate dispute resolution system. Their purpose is to settle cases that are pending or that have not been heard in the courts. It consists of judicial officers or an authorized person under the jurisdiction of the state, central government, or local government. Following the conciliation of disputes between the parties and the agreement of the parties, the award is handed down by conciliators in accordance with Section 21 of the Act. The award has the same legal effect as a court decision.
Scope of Lok Adalat
Unlike the Supreme Court, Lok Adalat is extremely broad to incorporate most of the cases pending before it as well as new cases that will be filed in the near future to be settled. The Lok Adalat does not have jurisdiction over cases relating to offences that cannot be compounded under any law. The Lok Sabha does not refer such matters to committees without giving the other party a reasonable opportunity to be heard. The Lok Adalat proceeds to resolve any case referred to it and tries to negotiate a mutually acceptable outcome between the parties involved with the case. Whenever a Lok Adalat decides a case before it, it adopts the most extreme efforts for a trade-off or settlement. The following points elaborate on the scope of Lok Adalats:
If no settlement or compromise is reached by the parties after the Lok Adalat passes, no order is given.
A reference will be sent automatically to the Court that drew up the reference for disposition. Those involved in the dispute are urged to seek redressal in courts.
If the terms proposed by the bench do not satisfy the parties, the Lok Adalat cannot be forced to compromise or reach a settlement. Orders from Lok Adalats are definitive and restrict the parties.
An order passed by a judge is a satisfactory means of stopping the proceedings that demand justice.
Lok Adalats have enough powers under the Act to make justice without compromising the quality of their awards. The Lok Adalat’s final order is considered judicial since it is given the status of a decree.
A Civil Court recognizes it as a form of evidence and is given the power to summon, discover, and get an affirmation.
In the case ofP.T. Thomas v. Thomas Job (2005), the Apex Court specifically explained what Lok Adalat is. According to the Court, Lok Adalat is an ancient form of adjudicating system that once predominated in India, and its validity has not been questioned even today. According to Gandhian principles, the term Lok Adalat means “People’s Court”. It is an essential component of alternative dispute resolution. If the dispute is resolved at Lok Adala, there is no court fee, and if it is already paid, the fee will be refunded.
According to the case ofB.P. Moideen Sevamandir and others v. AM Kutty Hassan(2008), the parties can communicate directly through their attorneys, which is far more convenient than speaking in a regular courtroom. Because Lok Adalats are dynamic, they are able to balance the interests of both parties and pass orders that both sides find acceptable.
Functions of Lok Adalat
The following are the functions of Lok Adalat:
Lok Adalat members should be impartial and fair to the parties.
Lok Adalat is responsible for handling pending cases in court. In the case of a Lok Adalat settlement, the court fee paid to the court on the petition will be reimbursed
When filing a dispute with Lok Adalat, you do not have to pay a court fee.
Types of Lok Adalat
Lok Adalats can take the following forms:
National level Lok Adalat
The Lok Adalat held at the national level is held regularly throughout the country at the Supreme Court level and taluk level, where thousands of cases are disposed of. Every month a different topic is discussed in this Adalat.
Permanent Lok Adalat
The body is governed by Section 22B of the Act. There is a mandatory pre-litigation mechanism in Permanent Lok Adalat that settles disputes concerning public utilities such as transport, telegraph, postal service, etc. As a result of the caseAbdul Hasan and National Legal Services Authority v. Delhi Vidyut Board and other(1999), the courts directed that permanent Lok Adalats be established.
Permanent Lok Adalats are charged with resolving public utility disputes quickly. Therefore, if parties neglect to show up at the settlement or compromise, then it has a further advantage of choosing the dispute based on merit. In this way, the possibility of postponement in the resolution of questions is eliminated. Rather than following the formal procedure for resolving disputes, it is bound to follow the principle of natural justice in order to save time.
Thus, the establishment of the Permanent Lok Adalat is fundamental to settling disputes with public utility administrations in a quick and amicable manner. The awards of the Permanent Lok Adalat made under this Act are conclusive and binding. In no case will it be included as a defence in an original suit, application, or execution proceeding. Such actions are considered announcements by a civil court. In case the Permanent Lok Adalat makes an award, that award will be communicated to a civil court having nearby jurisdiction, which will then execute the order as if it were a decree made by the particular court.
Permanent Lok Adalats and Lok Adalats are indistinguishable in their essential features. There have, however, been some differences. The fundamental difference is that a common Lok Adalat must convene periodically and not consistently whereas a Permanent Lok Adalat is a setup that functions like any other court or tribunal.
Despite the Legal Services Authorities Act, 1987, which set up the Lok Adalats, the permanent Lok Adalats were not established right away. Through the Amendment Act of 2002, the foundation of the Permanent Lok Adalat was enabled.
Mobile Lok Adalat
Mobile Lok Adalat is a method of settling disputes that travels from place to place. Over 15.14 lakh Lok Adalats have been held in the country as of 30th September 2015, and over 8.25 crore cases have been settled.
Mega Lok Adalat
The Mega Lok Adalat is an ad hoc body that is constituted at the state level on a single day in all courts.
Daily Lok Adalat
On a daily basis, these Lok Adalats are held.
Continuous Lok Adalat
It is held continuously for a specific number of days.
Jurisdiction of Lok Adalats
Lok Adalats fall under the jurisdiction of the courts which organize them, thus, they cover any cases heard by that Court under its jurisdiction. This jurisdiction does not apply to cases regarding offences which are not compoundable by law and the Lok Adalats cannot resolve these cases. The respective courts may accept cases presented to them by parties concurring that the dispute should be referred to the Lok Adalat. The Courts may accept such cases in situations where one party makes an application to the court for the referral of the case to the Lok Adalat and the court might consider that there is a possibility of compromise through the Act.
Limitations of Legal Services Authority Act
The Government should not only establish the four-tiered Legal Services Authority but also establish an independent body to oversee the workings of these tiers and actively work to promote coordination between the Taluka, District, State, and National Legal Services Authority. When establishing the independent monitoring body, the government should recruit young legal professionals who hold no other judicial posts, so that they will exclusively serve the interests of the independent monitoring body. An institutional network of legal services is constituted by the Legal Services Authority at the Central, State, District, and Taluk levels have some limitations in relation to the manner in which they are constituted, the composition, etc.
Major limitations under Legal Services Authority Act
Section 3
The National Legal Services Authority is established under Section 3 of the Act. The organization chart of the body reveals, however, that the members are all already overcharged with the assigned duties of their primary work; therefore, a light modification of Section 3 is needed. As the government builds up the National Legal Services Authority, it should emphasize the importance of recruiting young legal professionals who do not hold other legal positions so they can devote as much time to the purpose of the Act as possible.
Section 3-A
As set forth in Section 3-A of the Act, there is a requirement that the chairman of the Supreme Court Legal Services Committee shall be a judge of the Supreme Court. Now, in this case, the respective judge is already overburdened with his entrusted duties of day-to-day litigation. As a result, there is the possibility that the office may not be able to achieve the expected results in providing legal services in the future if such an overburdened person is again given the functions of the Supreme Court Legal Services Committee. Therefore, if Section 3-A of the Act is to be implemented properly, then it will be essential to amend this section.
Section 6
A State Legal Services Authority is established by Section 6 of the Act. Although the organization of the body appears to be fairly straightforward at first glance, a closer look at it reveals that each of the members is to a certain extent occupied with duties outside the body, and therefore, a minor alteration of Section 6 is required. It is important for the government to emphasize when establishing the State Legal Services Authority that it will be recruiting young qualified legal professionals who have the zeal to work in the field with utmost devotion to achieve the core objective stated in the Act.
As a consequence ofSupreme Court Bar Association v. Union of India and Others(1988), it has been held that the normal rule should be that the Chairman of the State Legal Services Authority should be a sitting judge and retired judges were only to be appointed under exceptional circumstances.
Conclusion
As everyone knows, the Indian constitution stresses equality. All individuals are equal under the law in a democracy. Regardless of one’s economic status, race, creed, gender, sex, or any other social condition, each citizen has the right to equal access to law and equal opportunities to obtain legal services. The Legal Services Authorities Act of 1987 was passed by our government to address these needs. The act ensures equality of opportunity in the pursuit of justice. The Act has ensured that its officials tasked with executing its provisions have adequate abilities. Recognition as a community servants has been granted to them, along with the assurance that anything they do in good faith will be protected. This Act’s provisions supersede different Acts, which provide for the execution of its provisions with a minimum of disruption. Even if such disruption occurs regardless of its superseding impact, the national and state legislatures will be able to develop rules and guidelines for the effective implementation of these provisions. Such guidelines and principles must pass a rigorous approval process which eliminates any possibility of defiling, wrongdoing, or other forms of neglect
Lok Adalats have become an integral part of the Indian legal system, providing opportunities for the poor and discouraged to access justice. The organization has overcome all obstacles to lawful aid, although there are specific areas for improvement that could make it more effective. Although they are overcoming any barriers to access to justice, they should also provide genuine admittance to equity for aggrieved parties. There is more activity than was expected, which could make Lok Adalats a better mechanism to deal with cases that are on the rise.
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The goal of contract law is to guarantee that the parties to a contract fulfil their responsibilities more than just to ensure that they enjoy the advantages anticipated by the contract. Confidence is built into any general or commercial contract through the use of the representations and warranties clause, which acts as a statement or declaration made by the parties. Contracts may differ in terms of the concrete agreement and terms, but the concepts of fact-based demonstration and assuredness to safeguard stakeholders are nearly identical across the board.
Customers/buyers/clients are expected to accept these statements as true unless they can be proven otherwise. Representations and warranties are usually combined in a single contract clause, which provides the best protection for the buyer/client in the event of a dispute. This article discusses the importance of reps and warranties in a Shareholder’s Agreement.
Who is a shareholder
Someone who owns stock in a company is referred to as a shareholder. Because of his investment, the corporation gives him a set amount of stock options as compensation. In exchange for his shares, he will become a shareholder and have the authority to vote on things pertaining to the corporation.
What is a shareholder’s agreement
The rights and responsibilities of the shareholders, as well as the relationship between the firm and the shareholders, are laid forth in a shareholder agreement. Agreements between the different company partners are akin to a partnership agreement. Shareholders’ agreements are designed to guarantee that shareholders are treated properly and to give them control over who becomes a shareholder at some point in the future. Since this agreement’s stated purpose of protecting all shareholders, it is especially significant to minorities because it defines the majority shareholder’s commitment to safeguard minorities from abuse and provide them with a voice when crucial decisions are taken.
The shareholder agreement serves as a safeguard for existing shareholders against future management abuses of their power. Agreements such as this one assist protect the firm in the event of a change in management or acquisition, such as the distribution of dividends and the issuance of additional shares or debt.
Shareholders’ problems, corporate distributions, the management team of the firm and limitations on authority, minority shareholders’ rights, voting of shares of stock, limits on share transfer and allotment and other matters are addressed in the shareholder agreement. Using the agreement as a reference document in the event of future disputes will safeguard shareholders. However, although articles of incorporation may include some clauses, the scope and protection offered by an SHA much exceeds that of an article of incorporation. When it comes to the special demands of shareholders, there is no standard form.
Key provisions shareholders agreement usually contain
A preamble that specifies the parties, including the firm name and all shareholders involved in the agreement.
The purposes of the agreement.
How shares will be acquired, sold, or transferred (this includes both the optional and mandatory buying-back of shares by the company and what happens in the event of the death of a shareholder).
Protection of minority shareholders.
Dividends.
Fair Price of shares.
Facts on the company’s governance and management, including information about board meetings, management information, banking arrangements and other financial details.
Methods for resolving disputes between shareholders and the company’s management.
Meaning of representations
As the name implies, a representation asserts a fact that is expected to be true at the time it is formed. In order to get another party to sign a contract, a representation is made. The following is an example of a mutual representation in a contract:
“Each Party hereby represents to the other Party that all representations contained in this Agreement are true and accurate and that such representations are deemed to be given or repeated by each party, as the case may be, as at the date of this Agreement.”
The term “representation” is not defined under the Indian Contract Act, 1872 (“ICA”), but the act does clarify what constitutes a misrepresentation. A misrepresentation can be classified as either a fraudulent misrepresentation or an innocent deception (no intent to deceive) according to Section 18 of the ICA. These two categories are important since the treatments available for each are different. However, the right to repudiate the contract is contingent on whether the deception could not have been identified with ordinary diligence in cases where there was no intent to deceive. False representations, on the other hand, allow for a claim for damages and a cancellation of a contract. However, the innocent party does not have the right to repudiate the contract if the deception did not lead to the contract.
Under Section 17 of the ICA, Fraud is defined as “the purposeful concealment of a truth by one who has knowledge or belief of the fact,” yet it’s interesting to note that the ICA defines “silence” as “not fraud, save in cases where the quiet is required by law.” If there is no legal responsibility to disclose, then there is no obligation on any party to do so.
Meaning of warranties
Warranties guarantee the truthfulness of statements or conditions while also covering the other party in the event the statement or condition turns out to be untrue. It is a formal declaration that an assertion or circumstance is and will be accurate when the assertion of fact is made and/or for a set length of time. Again, the ICA fails to define the phrase “warranty.” Intellectual property infringement is a common example of a warranty offered by parties in business contracts. For instance, the agreement can contain a clause stating: “There will be no infringement of another party’s intellectual property rights if the deliverables/work product is delivered by the service provider. The offended party may terminate the contract and seek damages for breach of contract in the instance of a warranty violation.”
In Idemnitsu Kosan Co Ltd v Sumitomo Co Corp, the Court had to decide whether or not warranties might be used as statements in a court of law or arbitration. The Court ruled that warranties and representations are distinct and that the two are not interchangeable. A warranty or representation depends on the intent of the parties involved.
Importance of representation and warranties clause in shareholders agreement
The representations and warranties contained in a shareholders agreement serve as promises made by one party to the other. Regardless of how the contract and the wording of the agreement differ, the concepts of factual representation and warranty to safeguard the parties involved are common to all contracts. In the absence of compelling evidence to the contrary, a shareholder should take these statements as gospel. A party’s best defence is a combination of representations and warranties.
There are many advantages to including statements and guarantees in a shareholder’s agreement. In the event of contract termination or amendment, the terms of the representations and warranties serve as a solid foundation. The warranty stipulates the steps that one signer can take against the other if one of the claims made is incorrect. Most warranties allow the opposite party in a contract to terminate or deny a transaction if a representation is untrue, but this is not always the case.
Contracts are drafted by lawyers or legal representatives who have a legal obligation to safeguard their clients from any hazards while obtaining the benefits that come from signing a contract. As long as the contract contains representations and warranties, the lawyer can rest easy knowing that their duties have been met. If one includes representations and warranties in your contract, they will safeguard them in the event that any of the claims made by either party are untrue.
What should the representations and warranties clause include
The Representations and Warranties provision is unique to each contract. To avoid future duties, the parties agree to their respective representations and warranties clauses in their contract. The following issues are primarily addressed by the Representations and Warranties clause:
The corporation is legally constituted and possesses the necessary capacity and authority to perform and carry out the terms, conditions and provisions of the agreement.
Insolvency proceedings have not been filed against or expected against it, nor has it been declared insolvent.
As a result, it has not been the subject of any civil or criminal liability that in the aggregate could have a significant impact on its ability to perform its responsibilities under this Agreement.
Conclusion
At all stages of a contract’s lifecycle, representations and warranties play an essential role in the negotiation and execution of the agreement itself. For this reason, it is imperative that all parties to a contract make sure that any representations and warranties provided by the other party are truthful. These should also be carefully drafted to avoid any potential future disputes. Using statements in contracts or agreements might place a corporation in danger of being sued for fraud, hence some organizations avoid using them. The terms “representations and warranties” may also be omitted from the contract in order to make it simple and minimize redundancy. Additionally, referring to information as representations in a contract is a way to decrease the contract’s word count while still ensuring that the company and the shareholder are protected.
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This article is written by Shraileen Kaur, student of ICFAI University, Dehradun, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. In this article, the author discusses in detail the legality of gay marriages in India.
It has been published by Rachit Garg.
Table of Contents
Introduction
When something pertains to civil liberties and fundamental freedom, numerous industrialized nations have accepted same-sex marital relationships. Undoubtedly, the LGBTQ+ community has constantly been subjected to sexual identity-based prejudice. They have struggled for judicial acknowledgement of human basic freedoms for many years. The constitutional safeguarding of homosexual marriages on an equal basis with heterosexual marriages is now becoming a need. Marriages, since time immemorial, are seen as a basic human right. Nevertheless, there seems to be no legislation in place to protect same-sex marriages and their rights.
In political, cultural, and societal considerations, marriage is regarded as one of the most crucial aspects of an individual’s existence. It is a legitimate organisation that recognizes the relationship between different persons under numerous constitutional provisions. It is of tremendous national relevance since it has significant implications for rights and responsibilities such as inheritance, succession, and other associated rights. These rights are the result of a matrimonial relationship. Marriage is not just a civic right in the present era, but it has also garnered influence on the world stage. The nation must grant marriage rights. The freedom to marry is currently acknowledged as a fundamental right in India, giving a person the ability to pick their preferred partner.
The article examines the legality and scope of same-sex marriages in India. It also includes the stance of several governments concerning the topic of LGBTQ+ rights.
History of the legality of gay marriages in India
Homosexual behaviour has a longstanding history on the Indian continent, as evidenced by various writings dating back to antiquated periods. Sexual behaviours among women are depicted as insights into a female-oriented cosmos of pleasure and productivity in historical writings such as the Rig Veda, monuments, as well as remnants dating back to around 1500 BC. Photographs of gay practices in the Hindu scriptures, as well as photographs of adolescent boys possessed by Muslim nizams and Hindu nobles, are examples of irrefutable evidence of homosexuals throughout the Muslim Middle Ages, as well as confirmation of homosexual acts amongst Tantric ritualist couples.
These interactions became less relevant with the emergence of Vedic Mahayana Buddhism and then British imperialism. According to Giti, one of the 27 matravratas in Sanskrit, the Aryan colonisation of 1500 B.C. attempted to subjugate homosexuality as the patriarchal society gained power. For same-sex conduct, the Manusmriti mentions repercussions such as caste forfeiture, substantial financial penalties, and whipping. Before the British colonisation grew more institutional and clear in its repression of gay images and gender expression, in particular, all social determinants lived in harmony because of differences in seeming disposition and egalitarianism. Explicitly sexual photos are considered ‘pornographic but also evil’ by homophobic attitudes and standards.
The western perspective on sexual orientation has significantly impacted childbearing expectations following European expansion. Such ancient concepts and practices have already been sequentially transferred into the explanation of imperialist sexual preferences, and they can be detected through reactions to almost any sort of ‘unnatural’ intercourse.
Rather than accepting organic displays of tendency as part of Indian society, India adopted the modern view of ‘psychological and ethical’ sexual identity as ‘abnormal.’ The concept of homosexuality has changed dramatically during the past century. Following 1974, homosexual acts were no longer regarded as abnormal conduct and were thus omitted from psychological disease categories. Various nations, notably India, have decriminalized homosexuality. Many countries around the globe have introduced laws and taken steps to protect LGBTQ+ community facing discrimination without due process. South Africa became the first state in the world to acknowledge the human rights of homosexuals as well as gays back in 1994.
Botswana, Trinida and Tobago, Germany, Luxembourg, the Netherlands, Belgium, Norway, Finland, Spain, and New Zealand are also covered by specific legislation. In 1996, the United States Supreme Court held that no jurisdiction may pass legislation discriminating against gays based on hate. After the decriminalisation of Section 377 of the Indian Penal Code, 1860 in Navtej Singh Johar v. Union of India, Indian citizens accepted homosexuality in 2018.
All about gay marriages in India
Since the freedom to marry is essential for maintaining the rights of all people and living a worthwhile existence, the court system has viewed marriage as a fundamental human right, illustrated under Article 21 of the Indian Constitution. Even though the freedom to marry, depending on an individual’s wishes, has been proclaimed as a basic right, this right does not extend to same-sex marriages. Even the basic rights of the LGBTQ+ community are being threatened. Lawmakers are doing nothing to protect them from losing their constitutional right to marry. Most advanced nations have accepted same-sex marriages in their statutes to compensate for the fact that heterosexual couples receive the same sociopolitical support. Potential benefits offered to heterosexual spouses, such as maintenance and succession, are forbidden to homosexual couples.
Sexual identity is included in the term “sex.” Consequently, harassment based on sexual inclination is illegal under both civil and criminal legislation. Existing family legislation solely embraces heterosexual unions, effectively depriving gay couples of sociopolitical and legal recognition and also of the privileges that these laws place on people who are married. Prejudice on the ground of sex is unquestionably a violation of the fundamental rights accorded by Article 15.
Sociological aspect of homosexuality and gay marriages regarding Indian society
In India, currently, no specific socially conscious advances in social and political acceptance have occurred, and gays continue to be the sufferers of abuse in various forms sponsored by the government and the community. Homosexuals in India have grown from a small community of a few hundred to 10 crores and counting. The group is developing its style and events. Both physical and digital, individuals are making their path from metropolitan areas to semi-urban cultures. This figure is steadily rising as even more people join. People like this are stepping out of the shadows and in Delhi, Mumbai, and Kolkata, to a lesser extent, individuals from outlying areas in India flock to Bengaluru and other metropolitan cities, which are the epicentres of the Indian LGBTQIA+ movement.
Several Indian gays are chatting in online forums in real time, searching for bosom buddies, finding love, engaging in sexual activity on the internet, and traveling across regions to just be with one another in the present world. This demonstrates that homosexual partnerships are not uncommon in India; nonetheless, partnerships are more common in the nation’s major regions, wherein individuals are much more upfront about their sexual orientation.
Kolkata, Bengaluru, Mysore, Nagpur, Hyderabad, Bihar, Varanasi, Kottayam, Trichi, and Gwalior, for example, provided a variety of options for homosexuals, lesbians, and transgender people, including counseling services, media publications, healthcare systems, community areas, and drop-in facilities. The homosexual communities of Kolkata, Mumbai, and Bengaluru have all recently staged gay pride marches. All of the preceding examples demonstrate that India’s homosexual community is noticeable and increasingly loud in its demands.
The legality of homosexuality in India
The British colonialist administration adopted Section 377 of the Indian Penal Code, 1860 which made all forms of consensual yet non-begetting sex illegal. The tyrannical rule not only targeted gays, but also all other sorts of modern sexual activity, even within heterosexual relationships. As a result, this rule was nothing more than a holdover from Victorian orthodoxy that had no validity in a representative democratic society like India.
Unfortunately, it ended up taking over 70 years and nearly two decades of judicial battles to overturn this antiquated statute, which had developed as a tool for harassing and exploiting anyone who did not fit into the standard dichotomy of gender and sexual orientation. As of now, homosexuality is legal in India, and Section 377 of the Indian Penal Code, 1860 has been abolished to a certain extent. The section still includes activities related to sex with individuals below 18 years of age, bestiality, and sexual practices that are non-consensual.
The never-ending debate on gay marriage
Marriage is a critical predictor of well-being for both individuals and society. In numerous countries, gay couples have been barred from formally enforceable marriage. The recent debate over same-sex marriage legalization has raised concerns among heterosexual marriage supporters and legislators that permitting homosexual couples will result in fewer homosexual marriages.
Arguments in favor of legalising gay marriages in India
Equality is just about compassion and liberation and refusing marriages to those of the fellow citizens, who deserve. It means curtailing their rights, handling them unfairly, psychologically and socially penalising them, as well as endangering their lives. It is a retaliatory action that requires a considerable justification to not enable someone to marry; belief systems should only impose tight regulatory limitations if they are satisfied that certain injunctions are required to avert individual and interpersonal harm.
All these made enough circumstances for the finest legal minds to discuss the matter, such as when the judicial officers of the Supreme Court of the United States told certain attorneys who favored gay marriages how none of them could make a coherent justification as to what harm it may cause to the general populace.
Yes, the homosexual union affects everyone. The idea that gay marriage in whatever form is harmful is false; nobody’s union is injured by the actions of others, and the authenticity of a person’s right to marry is not based on the disapproval of others. The nations that approved such legislation have still not been harmed by the environment since 2001 when the Netherlands did so for the initial time.
There are presently 25 nations where same-sex marriages are allowed, and all of them, including some of the developed nations, have addressed a certain sociological issue. In every nation where same-sex marriages are legal, there has been no loss of heritage or a decrease in the credibility of traditional family values.
Arguments against gay marriages
Many males, especially in India, are opposed to this because it is rude, unrefined, and unethical. Former Prime Minister Manmohan Singh was asked how he thought about the Canadian restriction against gay unions. The individuals’ opposition was built on religious convictions and procedural fairness.
Some people do not think gay marriages are acceptable since they cannot procreate. This is religiously incorrect; God created Adam and Eve since homosexual marriage was legal. If gay marriage was authorized, why falsify Jesus’s rule? If nature intended gays to cohabit, one sex instead of distinct genders should also have emerged.
Marriage and societal bonding are central to the culture. The norm is banned in this case. Humanity was built to remain unchanged. This goes against the land’s regulations, which have been in place for countless generations and are based on the New Testament.
Legislations that deal with homosexuality
Unnatural offences are covered by Section 377 of the Indian Penal Code, which includes homosexual activity within its scope. This law was provided by the British during the colonialist regime from the British Penal Code of the nineteenth century in India. According to Section 377, “whoever willfully engages in carnal intercourse against the order of nature with any man, woman, or animal shall be punished by life imprisonment, or by imprisonment of either sort for a period of up to 10 years, and shall also be liable to a fine.”
Section 292 of the Indian Penal Code relates to obscenity, with plenty of room to encompass homosexuality under its ambit.
Section 294 of the Indian Penal Code, which punishes “obscene behavior in public,” is also applicable and used to discriminate against gay men. It is crucial to highlight that the Protection of Children from Sexual Offences Act, 2012 removed the penalty for homosexual behavior involving consensual sex in England, however in India, consent is largely irrelevant for creating an offense as described under this provision.
The Transgender Persons (Protection of Rights) Bill, 2019, was passed to protect transgender people’s rights by preventing workplace harassment, education, medical services, and accessibility to government and private businesses. However, in the name of community upliftment, the legislation exposes individuals to institutionalised tyranny and dehumanises their bodies and identities.
The LGBTQIA+ community in India has passionately opposed the law, claiming that it infringes on their basic rights and does not conform with the NALSA ruling.
Homosexual Marriage under Personal Laws
Marriages and intimate unions have a high historical and sociological prominence in India. Spiritual roles are at the heart of what are known as sacraments. It defines numerous aspects of lesbian committed relationships, including the conduct of church ceremonies and, in some cases, the ceremonial exchanging of shrines.
In 1988, for instance, a Hindu service wedded two female police officers. Their marriage was approved by their families and cultures, although their nuptials could not be recognized and their employment was cancelled. It is noteworthy to note that there are several homosexual unions between residents and non-English-speaking individuals who have not been affiliated with the transgender movement.
Hindu marriage laws, which include Hindus, Sikhs, Jain, and people following Buddhism, assert that a marital ceremony would take place in natural settings, in conjunction with conception, between two individuals in India.
Under the Christian definition of ‘marriage’, a woman must be 20 years old, while a man must be 18. There is no explicit idea of ‘marriage’ because the legality of Muslim unions is irrelevant; yet, the requirements of the agreement with the end goal of conception are commonly accepted. All Indian personal laws favour patriarchy.
Homosexual Marriage under the Special Marriage Act
Another approach to preventing raising ethical objections is to attempt to amend the Special Marriage Act, 1954 to allow gay marriages. The Special Marriage Act is a non-religious statute that makes it simple to marry individuals of diverse faiths or those who do not want their laws to be enforced. Instead of a religious ritual, the registration officer certifies the relationship. As it stands, the Special Marriage Act appears to only apply to heterosexual couples, as it states that men must be 21 years old and women must be 18 years old.
Accepting same-sex marriages is not difficult under the Special Marriage Act. Only Section 4(c) must be altered to allow an individual to marry at the age of 21 if he is a man and 18 if he is a woman, and to add a clear provision that gay marriage is legal. It is just necessary to change Section 4(c). Even if personal law provisions were altered to recognize same-sex unions, the Special Marriage Act should be amended in each instance to grant equivalent sanction to couplings among people of distinct denominations.
Even though the proposed adjustments are simple to articulate and therefore do not appear to restrict religious liberty, they are certain to elicit serious resistance. The Special Marriage Act legislation would have been comparable to those that have been put in place in numerous nations to recognize same-sex nuptials. From the Netherlands in 2000 to the United Kingdom and the United States in 2015, 25 countries have so far adopted these regulations.
Current standing of the government in respect of legalisation of gay marriage in India
Tushar Mehta, the solicitor-general of the Delhi High Court, claimed that same-sex marriages violate “our laws, judicial system, societal norms, and morals.” It is disheartening that a youthful democracy has become so constrictive because of principles and culture that it took roughly 24 years to decriminalize homosexual behavior and enable individuals to openly love one another, and it is appeared so rigorous due to various moral standards and communities that a group of homosexual people are not allowed to get married to someone of their own choice.
As a result, it can be stated that although the judiciary is adopting various initiatives to protect and safeguard the LGBTQIA+ community’s rights, the government is undermining those same rights. It is need of the hour for the administration to recognize and enact legislation in conformity with the groundbreaking decision, or the gay community will continue to endure obstacles in their fight for the very same rights as heterosexuals.
International perspective with respect to gay marriage
As of now, there are a total of 31 nations that have allowed same-sex marriages. The countries which have allowed homosexual marriage are Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Costa Rica, Denmark, Ecuador, Finland, France, Germany, Iceland, Ireland, Luxembourg, Malta, Mexico, the Netherlands, New Zealand, Norway, Portugal, South Africa, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, the United States of America, and Uruguay.
Legalisation procedures
Federal legislation has authorized same-sex marital relationships in 22 nations. Only after national votes did Australia, Ireland, and Switzerland allow same-sex marriage via legislation. Austria, Brazil, Colombia, Costa Rica, Ecuador, Mexico, South Africa, Taiwan, and the United States of America are among the nations that have allowed same-sex marital relationships by judicial pronouncements. Following the court orders, two nations, South Africa and Taiwan approved a bill recognizing the same-sex civil union.
Nations that have made marital equality lawful
Chile: Chile’s president has approved a matrimonial equal rights bill into law. Since 2015, same-gender civil partnerships have been legalised.
Switzerland: The Swiss Senate voted to pass laws allowing same-gender individuals to marry. A national referendum held in September 2021 found that 64 percent of people approve of marital equality.
Other than these 2 nations, there are several other countries wherein marriage equality has been approved. Some of these nations are – Ecuador, Taiwan, Costa Rica, as well as Austria. In numerous regions, homosexual partners do not have the same benefits and protections as heterosexual spouses, including the privilege to inherit. Same-sex unions are subjected to supplementary prohibitions in several jurisdictions. In Taiwan, for instance, same-sex civil partnership is only permitted between Taiwanese nationals and citizens of countries that acknowledge same-sex union.
The global trend of same-sex marriages
Nations around the globe have varying attitudes toward homosexuals and same-sex unions. Many governments are welcoming of these partnerships and have legalized same-sex weddings, while others are strongly opposed to gay marriage and sometimes even deem it a felony. When it comes to dealing with the issue, government servants and LGBTQIA+ organisations take different perspectives.
They openly welcome the behaviour on occasions, while in other situations, they advocate the legal recognition of these partnerships on the grounds of combating prejudice towards individuals of the very same sexes. In other cases, they chose to give logically valid gay relationships psychological equivalency and offspring the same adoption rights. As a consequence, a growing number of jurisdictions have legalized gay behavior in a variety of countries. Despite the various statements made by organizations and individuals that such prohibitions are obsolete and should be abolished, several countries continue to prohibit homosexual acts through legislation. Nonetheless, the concept of homosexual behavior has changed dramatically during the previous century. Since 1974, homosexual acts have no longer been considered aberrant conduct, and it is no longer classified as a psychological disorder. Several countries have since legalized homosexual activity. Several nations all over the globe have passed anti-discrimination or equal opportunity laws to protect LGBTQ+ rights.
Even though homosexual activity is a punishable offence in over 70 countries, it is indeed punishable by death in several nations such as Afghanistan, Nigeria, Somalia, Iran, Brunei, Pakistan, Saudi Arabia, Qatar, Sudan, the United Arab Emirates, and Yemen, as well as life imprisonment in Burma, Bhutan, Georgia, Indonesia, and the Maldives. The legal standing of homosexuals varies substantially across countries. In England, for instance, homosexual sodomy nuptials amongst consenting adults are lawful till they reach the age of 21 and therefore are held confidentially.
Are gay marriages legal in India
When it comes to gay marriages in India, the first and foremost question that arises is, whether gay marriages will ever be legal in India or not?
In a culture and tradition conformist nation like India, marriages are seen as a highly prominent socio-cultural and legal institution. Marriage includes matrimonial rights as well as social obligations in our value system. Because marriage has become a crucial component of an individual’s life, the ‘Right to Marry,’ which is recognized underArticle 21 of the ‘Right to Life and personal liberty,’ has allowed all of us the opportunity to choose our future spouse. The Apex Court ruled in Shakti Vahini v. Union of India(2018) that an individual has the constitutional freedom to marry whoever he chooses. Even in the Hindu Marriage Act of 1955, there is no requirement that the marriage is solely between a heterosexual couple.
A survey conducted by OkCupid, a dating website, discovered that approximately 69% of individuals support legalizing same-sex weddings.
The concern is, if legalizing same-sex marital relationships does not violate any personal law and the general public wants it, what would be the loss in incorporating two individuals of the same gender to marry? Are we still adhering to the conservative society’s standards? Why do the people from the LGBTQIA+ community have to still fight for their basic rights even though our legal and social system is changing and progressing?
In September 2020, four LGBTQ individuals filed a Public Interest Litigation under Article 32 in the Delhi High Court, claiming that they must be permitted to marry under the Hindu Marriage Act of 1955. The petitioners claimed that they are being deceived of their fundamental privileges as a result of the constraints.
Nikesh Pushkaran filed a parallel suit in the Kerala High Court, challenging the Special Marriage Act and demanding the same privileges as a heterosexual couple. The Madras High Court has ruled that under the Hindu Marriage Act of 1955, a transsexual individual might be termed a bride.
The Court referred to passages from the Hindu mythology holy books such as Ramayana and the Mahabharata and ordered that the petitioners’ marriage be recognized. Despite this, homosexual couples are denied the fundamental human rights of marriage, parenthood, and succession. The primary problem with legalizing gay marriages is that many begin to oppose it based on religious, cultural, and societal factors. Leaving aside religious and ideological considerations, the judicial system should allow homosexual couples to register their marriages under the Special Marriage Act of 1954.
Conclusion
Although Indians are aware of homosexual occurrences all around the globe and their legal recognition, many have moral qualms concerning homosexual relationships. Even nowadays, the plurality of Indians remains against homosexual weddings for themselves. However, the desire for recognizing same-sex nuptial bonds is severe as well as strenuous, but it is hidden because it is not gaining societal support. It appears that social tolerance of homosexual relationships in India is still a long way to go.
As constitutional protection of same-sex marriage unions would imply not only acceptance of homosexual behavior, thus seeking to make it a simulation in today’s societal structure, but it could also arcane the fundamental ideals of household, cohabitation, childbearing, and species coherency, all of which are part of humankind’s widely accepted intestate succession. However, Indians must understand that sexual inclination is a physiological and organic phenomenon, not an illness. Certainly, the quest for societal and constitutional acknowledgment of homosexuality has yet to be recognized, but the homosexual population must not be abused or humiliated in any scenario.
As a result, considering the prevailing Indian sociocultural framework and the escalating struggle for the sanctity of marriage, the desire for recognizing homosexual marital relationships is mostly dismissed. However, in the not-too-distant future, the current societal preconception of the marital relationship as a heterosexual institution involved with childbearing and childraising may embrace homosexual marriages, in which affection among the spouses takes precedence over sexual identity. The inability to concede how the community and the household are evolving will then cause more damage than benefit. In any event, the call for legalizing homosexual marriages has sparked a new battle in marriage, community, and legislation that cannot be ignored.
However, granting societal and statutory acceptance in this conservative culture is more difficult than in developed states, but ignoring this rising tension in the structure of life and civil partnership will be narrow-minded and can have catastrophic consequences if not addressed delicately.
Lastly, if regulations are designed to symbolise culturally acceptable terms and conditions, then a shift in thinking is critically needed.
Frequently Asked Questions
Are homosexual couples better parents?
The overwhelming proportion of scholarly researchers who compared lesbian and gay parents to heterosexual parents have repeatedly observed that same-sex partners are just as competent and skilled caregivers as other partners and that their offspring are as emotionally sound and well adapted.
How are gay and lesbian persons affected by legislation that restricts marriage to heterosexual people?
Having been deprived of the opportunity to marry adds to the prejudice attached to having a minority gender orientation, which can cause severe psychological issues and other health ailments.
Is there a difference between same-sex and heterosexual marriages?
According to researchers, the cognitive and interpersonal features of relationships among same-sex partners are very similar to those of heterosexual unions.
What causes individuals to be heterosexual, lesbian, gay, bisexual, or any other sexual preference?
No one knows for certain. The large bulk of trustworthy professional specialists, on the other hand, feel that sexual preference, like handedness, is a component of our biological experience.
What is the distinction between sexual identity, sexual expression, and sexual orientation?
Everyone has a sexual orientation, gender identity, and expression. One defines our sexual desires; another represents our mental sensation or experience of being masculine, feminine, a mix of both, or none; and yet another describes how we portray ourselves to others.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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This article is written by Michael Shriney from the Sathyabama Institute of Science and Technology. This article discusses whether forex trading is legal in India. The article discusses forex trading, its purpose, and its operating process. How does this forex trading work with strategies, and who can trade this forex trading. Finally, is it illegal in India to use a foreign forex trading platform and FAQs have also been discussed.
India is a country with different cultures and a constantly increasing economy. In India, foreign exchange (forex) trading is a new platform with greater chances. Currency trading is not totally legal. Only currency exchange which comprises the Indian rupees is allowed to be traded (INR). The INR’s weakness against the US dollar is the main reason for this restriction (USD).
Forex is a decentralised form of foreign exchange or currency trading on the worldwide market. All currencies of different economies are bought and sold in forex trading. The currency market is the world’s largest and most liquid market. Forex trading is the act of buying and selling currencies both within and outside the country. This trading is carried out through an electronic network of banks, brokers, institutions, and individual traders, but banks and brokers mainly carry it out.
Traders in India who wish to buy USD have to buy it through the Central Bank of India, i.e., RBI. This article discusses all aspects of forex trading in India, including whether it is legal or not, under what circumstances it is illegal; how forex trading works and what its aims are; who operates this trading; and commonly asked questions. Let’s take a brief look at these headings separately in the article below.
Forex trading
Foreign exchange is a global market for the exchange of national currencies. Foreign exchange markets are the world’s largest securities market by nominal value, with trillions of dollars changing hands every day. Another way to engage in the currency market is through forwards and futures deals. Exchanging one currency for another at a local bank is a simple example of foreign exchange. It may also include currency trading on the foreign exchange market. For example, when a trader predicts that the central bank will ease or tighten monetary policy and that one currency will strengthen versus another, the other will fall in value. Currency trading pairs are formed, such as IND/USD, or Indian rupee versus US dollar; USD/CAD or US dollar versus Canadian dollar (CAD).
The forex market is open 24 hours a day, five days a week in major financial centers around the world, allowing traders to purchase and sell currencies at any time of day. It’s not nearly a one-stop-shop. In order to conduct forex transactions, an investor can choose from a number of various options. One can go through a variety of dealers or financial centers that employ a variety of electronic networks. Nowadays, trading currencies is made easy by a single mouse click, and accessibility is not an issue, meaning that anybody can do it. However, many investing businesses allow individuals to create accounts and exchange currencies.
The foreign exchange market has two distinct trading communities. They are as follows:
Interbank forex market
The interbank forex market is a network of banks and institutions that exchange currencies with one another. These transactions are often large and make up the bulk of the global forex market volume. The currency desks at several trading banks transact continuously, ensuring that the currency exchange rate remains constant.
The retail forex market
A vast number of traders participate in the retail forex market. However, because the value per transaction is minimal, the trading volume is lower than the interbank market. The currencies can be bought and exchanged or sold here in a matter of seconds. Traders seek to benefit from currency exchange rates.
Forex terminologies
Every day, millions of individuals trade forex. Before beginning forex trading, traders should familiarize themselves with the following terms:
Pip: In a currency pair, the smallest unit of price fluctuation is known as a pip. Forex pairings are often listed to the fourth decimal point. For example, if USD/INR moves from 64.8050 to 64.8060, it is considered a 10 pip gain.
Lot size: the total amount of cash purchased or traded The normal lot size is 100,000 units. However, traders can trade smaller units as well.
Orders: An order allows the trader to carry out the transaction. For example, if a person wishes to purchase 100 USD/INR, he or she will place a buy order. Similarly, if someone wishes to sell 100 USD/INR, they will place a sell order. There are several kinds of orders available to assist traders to limit losses and enhance profits.
Calls: When a trader’s trading positions require more financing to be maintained, their online broker sends a call. To minimise more losses, they should regularly monitor the trader’s account for any calls they may have received.
Types of forex markets
Spot market
Trading in the spot market occurs at the point of transaction with immediate effect or in a short period of time. For most currencies, the spot market is two business days. Spot transactions might take up to six days to settle when there are many holidays such as Easter, Christmas, and Pongal. On the trading day, the price is set, but money is exchanged on the value date. Trading in the spot market may be quite risky. Technical trading, which focuses on direction and speed of movement, leads to short-term movement. Chartists are persons who concentrate on technical analysis.
Forward forex market
The transaction takes place at a future date or a set of dates based on a personalized contract between the parties to swap the currency at a specified exchange rate. Any deal that settles longer in the future than the spot is considered a forward trade. The forward price is made up of the spot rate plus or minus forward points, which indicate the difference in interest rates between the two currencies. The majority have a duration of less than a year, although longer durations are possible. The price is determined on the transaction day, just like in a spot market, but money is exchanged on the expiry date. A forward contract is personalized to the needs of the parties involved. They can be for any amount, and they can be settled on any day that isn’t a weekend or a holiday in one of the countries.
Future forex market
A futures contract is similar to a forward contract in that it settles later than a spot contract, but it is for standard size and settlement date, and it is traded on a commodities exchange. As the counterparty, the exchange market is involved. It’s also a contract to trade in the currency on a specific date and at a specific exchange rate. A futures contract is standardised, legally enforceable, and tradable on a stock exchange.
Foreign currency swap
A forward contract, in which two parties agree to pay each other in the future, is included in a foreign currency swap. However, before entering into a forward contract, the two parties exchange currencies at a spot rate. The swap occurs when the two parties’ currencies have the same value.
Purpose of forex trading
The goal of the forex market is to determine the currency value at which an international transaction will be calculated. This protects the party from a rapid fall in the value of the foreign currency. The unpredictability of the foreign currency market provides good ground for speculation. While hedging may appear to be an institutional strategy to handle exchange rate risks, retail traders stand to benefit the most from speculative foreign currency trading.
Operational details
Any forex exchange involves two currencies: the first stated currency is known as the base currency, and the second is known as the quote currency. If INR is the base currency and GBP is the quote currency, then INR/GBP trading at 0.0097 indicates that one Indian rupee (INR) is worth 0.0097 British Pound sterling (GBP). Exchange rates fluctuate according to demand-supply dynamics, but they are also influenced by central banks since they manage currency supply. The exchange rate of the domestic currency is also influenced by the country’s economic performance, current events, and market sentiment. There are currency pairs that can be branched into the following categories:
Major currency pairs: This pair is highly traded. Count to seven currencies that account for 80 percent of worldwide forex trade, such as the Euro/US dollar [EUR/ USD], the British Pound/ US dollar [GBP/ USD], US dollar/ Japanese Yen [USD/JPY], the British Pound/ Swiss franc [GBP/CHF];
Minor currency pairs: This pair is less frequently traded. Instead of the US dollar, they frequently match major currencies against one another such as the British Pound/ Japanese yen [GBP/JPY], Euro/ British Pound [EUR/GBP], Euro/ Swiss franc [EUR/CHF];
Exotic currency pairs: This pair is the main currency against one currency from a small or developing economy such as the British Pound/ Mexican peso [GBP/ MXN], Euro/ Czech koruna [EUR/CZK], US dollar/ Poland Zloty [USD/PLN]; and
Regional currency pairs: These are the pairs classified by region, such as the Australian dollar/ New Zealand dollar [AUD/NZD], Australian dollar/Singapore dollar [AUD/SGD], and Euro/ Norwegian krone [EUR/NOK] are all available to traders.
Indian currency market
Currency futures can be traded on the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the Multi Commodity Exchange (MCX) in India. The trader must create an account with the broker and trade between the hours of 9 a.m. and 5 p.m. The trades are cash paid and do not require any physical delivery. For this type of trading, the trader must meet the broker’s Know-Your-Customer (KYC) requirements. The trader must make a margin deposit, which is the amount that the broker maintains while the trader’s forex trade is open. They can begin trading after the broker has shared the trading account access credentials.
Risks involved
A country’s central bank, i.e., the RBI in the case of India, makes decisions based on its domestic monetary policy. If a trader uses that country’s currency, the exchange rate will fluctuate unexpectedly. Currency trading is regarded as a high-risk activity. The greatest risk is a depreciating currency. If not chosen and checked timely and regularly, speculators may suffer significant losses. Non-payment of an outstanding currency position carries a credit risk as well. The risk of losing more than the margin amount is referred to as leverage risk. The trader’s loss might be increased if he or she uses this leverage amount aggressively. A trader’s interest rate risk might be increased by other variables such as instability and inconsistency in forward contract amount in the transaction.
Choosing the right broker
When anyone trades forex using a broker, they must ensure that the broker is registered with the exchange and has a good reputation. The broker’s leverage and margin options are also significant. The broker’s fees should be chosen by the trader. The trader must choose if the commission is set or whether the broker intends to profit by widening the spread between the bid and asking prices for the traded currency pair. The broker’s first deposit should not be excessively large, and the deposit and withdrawal methods should be simple. The broker should provide traders with the currency pairings that they wish to deal with.
Trading style
Different methods and styles are common among forex traders, such as the Daily Fibonacci Pivot Trade might be difficult to understand at first. Scalping is a basic strategy in which traders trade several times each day while holding a position in another period. Scalpers maintain track of significant news releases such as GDP, unemployment rate, and inflation, aiming to profit from them in one day. Longer positions are held in the positional approach to profit from large changes in the market. Whatever the trader’s trading style, they should keep a check on their leverage utilisation and focus attention on market movements to avoid or reduce forex losses.
Strategies for forex trading
Forex traders rely on some fundamental strategies to succeed in global markets. These forex trading methods are simple to learn but tough to master. Some of the most important forex trading strategies are as follows:
Scalping
Scalping is a forex trading strategy in which minimal profits are made through several trades. To obtain minimal margins, traders can arrange their entry and exit positions with modest fluctuations in the currencies. Scalping needs careful execution in order to make the most of its transactions. These are short-term trades that can last from one to sixty minutes. Being knowledgeable about currency patterns is essential for successful scalping.
Day trading
Day trading, as the name implies, is the act of opening and completing a deal on the same day. These transactions can take any time from a few minutes to a couple of hours. With this strategy, traders can avoid experiencing huge losses as a result of overnight market fluctuations. Day trading is a simple and straightforward way to start making money if the trader is new to forex trading. It can reduce traders’ risk while enhancing their chances of profit.
Swing trading
Swing trading is a strategy for trading foreign currencies over the course of a day or a week. This strategy provides the trader with sufficient time to deflect daily fluctuations in the value of currency pairs. With this medium-term forex trading strategy, traders may find a way to reduce the risk to stop losses along the way.
Position trading
Position trading is a trading strategy that entails keeping a trader’s trade positions open for an extended period of time. These transactions might last anywhere from a week to several months or even years. This method allows them to profit from large changes in the value of currency pairings without stressing about micro-changes in the market. With position trading, traders may establish their entry and exit positions for longer periods of time. Checking and monitoring current affairs and socioeconomic policies that impact the world at large is critical to making this form of trading a success. They can sign in to the trader’s account once or twice a week.
Range trading
Range trading is a strategy that involves trading currency pairs with predictable price fluctuations. This strategy identifies repeated patterns of lows and highs using historical performance data of currency pairs. Based on the financial data, the trader can establish a larger entry and exit position in order to capitalize on historical price trends. It is a safer option alternative to day trading due to the calculated risks involved.
Price action strategy
The price action strategy is one of the most regularly used forex trading strategies. It is fully dependent on the bulls and bears of price action in currency trading and is normally useful in all market circumstances. Rather than depending primarily on technical indicators, it is a trading approach that enables a trader to analyze the market and make subjective financial decisions based on previous and actual price swings.
Trend trading
In this type of strategy, traders must identify the fluctuation of the currency price, whether upward or downward, in order to choose their entry point. Online tools like as moving averages, relative strength indicators, and so on are also accessible to help traders with their analysis. It is a type of trading that attempts to seek profit by analysing an asset’s momentum in a specific direction.
Counter trend-trading
This strategy involves trading against the current trend in the hopes of generating small gains and is based on the predictions that the trend will revert. It is a type of swing trading in which the trader expects that a dominant trend will have reversals and seeks to benefit from them as the trend continues. It is often a medium-term strategy with positions held for many days to several weeks.
Breakout trading
In this strategy, a trader joins the market when it is breaking out of a previous trading range, i.e. a breakout. This method looks for levels or places where security has been unable to move beyond and waits for it to move beyond those levels. A breakout occurs when a price rises above one of these levels.
Carry trade
The focus of this strategy is on the carry trade, which has an interest rate differential between the two countries whose currencies are being exchanged. This entails selling the currency with a low-interest rate and buying the currency with a higher interest rate and is thus regarded as a very effective strategy if properly implemented. It is often focused on borrowing in a currency with a low-interest rate and exchanging the borrowed money into another currency.
It is a well-established fact that no Indian person, as guided by SEBI and supervised by the Reserve Bank of India (RBI) in order to limit risk, can engage in forex trading within Indian territory using any electronic or online forex trading platform under any circumstances. The RBI issued a Circular in 2013 prohibiting currency trading using electronic or online trading venues. Forex trading, on the other hand, is considered legal when done through certain foreign exchange trading platforms when the base currency is INR. The Indian government has limited trading for Indian citizens to only trade currency pairs that are benchmarked against the INR.
As an Indian citizen, as long as traders trade through any specified Indian Brokerage that gives access to Indian exchanges such as the NSE, BSE, and MCX-SX, and also allows access to currency derivatives, the transactions performed for the trade are totally legal. From the 10th of December 2015 onwards, the RBI permitted exchanges to provide cross-currency futures contacts and exchange-traded currency options in three new currency pairs: EUR-USD, GBP-USD, and USD-JPY. At this point, it should be remembered that under the Foreign Exchange Management Act (FEMA) of 1999, illegal forex trading in India can result in jail or a fine. However, it should be noted that there is no ban on NRIs doing foreign exchange trading in India.
Foreign forex trading platforms and their legal status in India
Anyone who has used social media may have come across advertisements for online Forex trading platforms. Many of them also advertise in Indian languages. The advertising discusses how to quickly trade in the forex market and make quick money. Many of these forex trading platforms are well-known all around the world. They are, however, prohibited in India. They carry out binary deals. It means that the trader will either receive a fixed amount or nothing at all. For example, if someone bets on the US dollar falling against the Indian rupee. If it does, the individual receives a fixed amount. If that individual loses, the money is kept by the platform. Binary trading is illegal in India and many other countries across the world.
Binaries are exchanged between the platform and the trader. There is no third party engaged. The exchange’s role is to offer a platform for trading between buyers and sellers. Many internet platforms provide users with a lot of leverage. The Foreign Exchange Management Act (FEMA) prohibits binary trading. According to the Reserve Bank of India’s Liberalised Remittance Scheme, an individual cannot utilise the money that is transferred overseas for speculative reasons or to provide margin money for trading. It encourages investments, but only on a delivery basis. Individuals in India can trade Forex on stock markets, but only with certain limitations.
For example, there are just four currency pairs available: US Dollars (USD), Euros (EUR), British Pounds (GBP), and Japanese Yen (JPY). Because of these restrictions, the forex market in India is smaller than in many other developed markets. By creating a trading account with a broker, an investor can trade the four pairs. There is also the possibility of falling victim to scammers portraying as an online currency platform. Initially, the trader wins minimal transactions. However, when the transaction amount rises, the individual begins to lose money. The platform will stop operating within a few months.
Steps to get started with Forex in India
A step-by-step guide to assist traders in getting started with forex trading:
Step 1: Get a digital device with fast internet connectivity
Forex trading can be done on a computer, laptop, tablet, or smartphone. The exchange rates of currency pairs listed on the stock exchange fluctuate a lot. Successful forex trading requires a personal gadget that can continuously track these fluctuations.
Step 2: Find an online forex broker
There are various online foreign exchange brokers. Examine each broker’s website to find one that allows traders to trade INR currency pairings. Check the bottom of every webpage for regulatory information. The broker cannot be trusted if the trader cannot get such information from the Securities Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or other similar regulatory authorities.
Step 3: Sign-up for an account
On the forex broker’s website, a trader must create a new account. Some forex brokers require a minimum deposit in order to open a new account. These brokers also provide several types of accounts based on the financial goals of the trader. Choose the best option for that trader.
Step 4: Transfer funds to the trader’s account
After opening an account, the trader must transfer funds to begin trading forex. Depending on the broker chosen, the trader can select their native currency and finance their account using a variety of strategies. These financing options often include bank transfers, wire transfers, and debit cards.
Step 5: Download a forex trading platform
The trader must next download the forex trading platform on their computer or smartphone. Take the time to personalise the platform’s appearance and feel in order to maximise forex trading opportunities.
Step 6: Begin trader’s forex trading journey
Before beginning to trade forex, traders might also want to perform a few demos with virtual money. These demonstrations can assist traders in becoming familiar with the forex broker’s interface without risking excessive expenses. They can begin trading forex with real money once they have gained confidence in utilising the platform.
Conclusion
In India, forex trading has grown into a continuous market that is transacted on a daily basis. It is a global trading platform for exchanging national currencies. It is an over-the-counter market that determines worldwide currency exchange rates. In India, forex trading is legal. However, citizens are not allowed to trade on electronic or online currency trading platforms.
In comparison to other nations, India’s forex trading is unique in that most of the international currency trading is done electronically or online. Forex trading is a legitimate means of earning money. It is permissible to trade forex on Indian exchanges such as the BSE, NSE, and MCX-SX. In forex trading, India is the fourth-best and largest forex reserve country.
Frequently Asked Questions (FAQs)
Who regulates forex trading in India?
The SEBI is in charge of regulating forex, brokers and safeguarding investors.
Because India is a very liquid market, the chance of making a profit is as small as those of losing money anywhere in the world. All the tricks of the trade must be learned with the proper skillset and control of the fundamentals.
Where can I trade forex in India?
Forex traders can lawfully trade on Indian exchanges such as BSE, NSE and MCX-SX.
Is forex trading just gambling?
Gambling is a game in which anyone may rely entirely on pure luck. Forex trading is not a form of gambling. It is a high-risk technique in which a trader attempts to profit by predicting market movement.
Which currency pairs can be traded in India?
The following currency pairs are available for trading in India:
Rupee-dollar,
Rupee-pound,
Rupee-yen,
Rupee-euro,
Euro-dollar,
Pound-dollar;
Yen-dollar.
What if I want to trade forex markets with international brokers?
The person is prohibited to trade the forex markets using international brokers.
What is the punishment for forex trading in India?
According to Section 13 of the FEMA Act, violating the Act can result in penalties as well as imprisonment. Under the section, the penalty can be up to five thousand rupees for each day the contravention continues.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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This article is written by Vipul Garg, a law graduate and currently working as Vice President at Coinmen Capital Advisors pursuing a Diploma in M&A, Institutional Finance, and Investment Laws. This article has been edited by Ojuswi (Associate Lawsikho).
India envisages becoming a 5 trillion dollar economy by 2025. With the growing interest and euphoria around the start-up ecosystem on hand and increasing distress on the balance sheets of Indian companies on other hand, the capacity of enforcing the contracts as well as effective dispute resolution is the key to achieving India’s economic goals. With the increasing clogging of cases in Indian Courts, both the Insolvency and Bankruptcy Code 2016 (IBC) and Arbitration and Conciliation Act 1996 are important mechanisms to resolve disputes.
This article shall first analyse whether any kind of conflict of authority exists between insolvency and arbitration. It will then assess the need for arbitrability during insolvency and then discuss the powers of NCLT in this regard with the help of judicial precedents.
Is there a conflict of authority between insolvency and arbitration
Although both domains have their own merits, there is a key distinction in their respective approaches. The insolvency/ bankruptcy proceedings emphasize more on a centralized approach by bringing all suits against a debtor under one jurisdiction and allowing the creation of third-party rights for all creditors of that debtor to claim their rights. This leads to a system of proceeding in rem whereby the case is against the world at large.
The arbitration proceedings champion the cause of a decentralized approach to dispute resolution whereby the parties have inherent rights of autonomy without inviting any third-party interests. This leads to a system of proceeding in personam whereby the case is only against a particular person.
The Hon’ble Supreme Court in the case of Vidya Drolia & Ors vs. Durga Trading Corporation propounded a fourfold test thus establishing that as soon as a dispute’s matter comes under the purview of a proceeding in rem, then it cannot be taken to arbitration. The provision of moratorium under Section 14 of the IBC also abides by this principle whereby once a case is admitted into the insolvency resolution process, all other suits and proceedings stay. This moratorium also applies to arbitration proceedings.
The reasoning behind this is that dispute resolution can be achieved effectively under one insolvency proceedings by bringing all the stakeholders to one table, rather than expecting a mutual reconciliation between only one creditor and the debtor. However, one needs to dig deep to understand whether despite this there is a need to allow arbitration during an ongoing insolvency proceeding.
Is there a need to give an option of arbitration during insolvency proceedings
The debate was started over the parallel proceedings under arbitration as well as insolvency. Given the avoidance of the maxim ‘justice delayed is justice denied’, this debate revolved around whether by allowing arbitration proceedings during pending insolvency proceedings, the cause of justice shall be delayed or eased?
However, since the facts change and evolve on a case-to-case basis, it cannot be established clearly whether arbitration during a pending insolvency proceeding helps in exacerbating the process or is just being used to delay and frustrate the process of insolvency. The Court has over its various cases given different views and finally, some clarity has emerged over the powers of NCLT to refer the matter to arbitration during insolvency proceedings.
Analysing the powers of NCLT
The National Company Law Tribunal is a quasi-judicial body, which was notified under the aegis of the Companies Act (2013) and deals with disputes between companies of civil nature. Under the IBC 2016 vide Section 60, it has been given the status of adjudicating authority on insolvency resolution and liquidation for corporate persons.
In the wake of encroachment of jurisdiction over any other law, two provisions in the IBC empower the NCLT-
Section 60(5)(c), empowers the NCLT to entertain or dispose of a petition which contains any question of law about insolvency/liquidation of corporate persons, even if that question may be contrary to any other law which is in force at the time.
Section 238, states that the provisions of IBC will have an overriding effect on any other law or instrument in force, even if it is inconsistent with IBC.
It can be seen from the provisions that the NCLT has sufficient powers under the IBC to override any other law to do complete justice under an insolvency/liquidation proceeding of a corporate debtor. We can also analyse the Section 8 of the Arbitration and Conciliation Act, 1996 to understand the role of a judicial body in this regard, which states that-
A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to the arbitration.
The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
Thus, this section can be entertained by NCLT when the subject matter is that of an Arbitration Agreement. To have further clarity over the powers of NCLT, it is important to study and analyse the key judicial precedents on this matter.
Key judicial precedents
Gujarat Urja Vikas v. Amit Gupta & Ors
In this case, the Hon’ble Supreme Court opined that NCLT’s jurisdiction cannot be restrained by Section 14 of IBC, rather Section 60(5)(c) gives it extensive residuary powers. The Court even expressed that any such intervention by NCLT shall not be deemed as any re-writing of the contract between the parties. Since the responsibility of NCLT is to preserve the Corporate Debtor’s survival, it can intervene to disallow any third party to escape the reliefs granted under IBC.
TATA Consultancy Services Limited v. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited
In this case, the corporate debtor and the appellant were bound under a Facility Agreement. Under this, the corporate debtor had to provide certain services for educational institutions. Clause 11(b) of the Agreement empowered both parties to terminate the agreement, which required an immediate notice and non-compliance of cure by the other party within 30 days of that notice.
The appellant served a termination notice and in response, the corporate debtor applied under Section 60(5)(c), IBC to quash the notice. The NCLT granted an ad-interim stay and the NCLAT upheld the same. However, the Supreme Court stated that NCLT did not have residuary powers here, since the termination of the Facility Agreement was not motivated by the insolvency of the Corporate Debtor.
Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund & Ors
In this case, the Hon’ble Court opined that even if applications of arbitration and insolvency are filed together under Section 8 (1996 Act) and Section 7 (IBC) respectively, still the adjudicating authority has a role to play. The Court declared that the authority has to examine and satisfy itself regarding the default and the material placed before it. If the default is established and the debt is payable, then the authority must ensure that the opposing parties do not delay the insolvency proceedings by using the means of arbitration. In this particular case, NCLT held that it wasn’t satisfied that a default had taken place on behalf of the Corporate Debtor. Thus, NCLT referred the matter to arbitration under Section 8.
Swiss Ribbons vs. Union of India
In this case, the Hon’ble Supreme Court was interpreting the constitutionality of withdrawal provisions under Section 12A of IBC. It held that a mere application towards insolvency does not automatically imply that the proceeding has become a proceeding in rem, rather the Court held that the party must be allowed to withdraw/settle the case vide Rule 11 of NCLT Rules, 2016. It stated that until the committee of creditors has been constituted, the proceedings remain in personam. Thus, NCLT should focus only on the applicability of the insolvency petition based on the characteristics of the default claimed. If the default cannot be construed, then the parties can avail Arbitration route.
Harish P. vs. Chemizol Additives Pvt. Ltd.
In this case, the NCLT Bengaluru was dealing with a petition filed under Section of the IBC. There was an Arbitration provision available to the parties under their contract. The NCLT using its powers under Section 442 of the Companies Act, 2013, therefore suo moto referred the parties to Arbitration.
However, the apex Court held the action of NCLT to be erroneous, because Section 442 empowers the ‘Tribunal’ under the Companies Act for such an action. Whereas the NCLT is not a tribunal, rather it is an ‘Adjudicating Authority’. The Court also referred to Innoventive Case to establish that the NCLT under Section 442 cannot refer the parties to arbitration or mediation for the proceedings pending under the Code.
Conclusion
It is still not clear on the classification of insolvency matters, one which can be taken to arbitration and others which cannot be taken to arbitration. However, there is sufficient clarity over the procedure which has to be followed. It can be established that until and unless the NCLT does not ascertain and establish the default of the debtor, it is under no obligation to proceed with the insolvency proceedings since it still hasn’t become an in-rem proceeding. However, once the default is established, the NCLT does not have the power to refer parties to Arbitration, since it becomes an in-rem insolvency proceeding.
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This article is written by Akshaya V, pursuing LLB from CMR University, School of Legal Studies. This article discusses the concept of Section 269SS of the Income Tax Act, 1961, its implications on deposits and loans with judicial insights and its applicability in various cases.
It has been published by Rachit Garg.
Table of Contents
Introduction
We all are aware of the black money menace ongoing in our country as we see that almost every day some or the other money laundering scam is unearthed by the Income Tax Authorities. One of the main reasons for this is the large amount of unaccounted cash that is circulating in the country. Along with this, tax evasion also seems to be a serious problem causing economic disparities. Tax evasion happens when there is unaccounted money because of false cash transactions. During income tax raids, when the income tax authorities discover unaccounted money, people usually escape the consequences without disclosing the source of such money and claim the money as loans and deposits received from family. Section 269SS of the Income Tax Act 1961 is an important provision that brings such transactions within the scope of the Act and helps keep such unaccounted money in check. This article details the provision of Section 269SS of the Income Tax Act, 1961 which extends to all kinds of receipts irrespective of their nature above a specified limit, along with the section analysis and supporting judicial decisions.
Section 296SS of the Income Tax Act, 1961
This Section states that –
No person shall take or accept from any other person, any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if –
the amount of such loan or deposit or specified sum or the aggregate of the loan or deposit or specified sum, or
on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum accepted earlier by such person from the depositor is remaining unpaid, or
the aggregate amount of loan or deposit or sum mentioned in clause (a) together with the amount or the aggregate amount mentioned in clause (b), is twenty thousand rupees or more.
To explain in simple terms, no person can accept any deposit or loan of rupees twenty thousand or more in any manner other than by way of account payee draft or account payee cheque. Such a limit will also apply if any loan or deposit was taken or accepted earlier by a person, remains unpaid and such unpaid amount is more than the aforesaid limit along with the loan and deposit to be accepted or taken. This can be explained by an illustration.
Illustration 1 -=
Illustration 2 – If Mr. X wants to obtain a loan of Rs. 60,000/- from Mr. Y, he cannot accept the said amount in cash. The lending must be through account payee draft or account payee cheque only as the loan amount exceeds Rs. 20,000/-
Illustration 3 – If Mr. Shiv wants to obtain a loan of Rs. 7,000/-, a deposit of Rs. 8,000/- and advance money of Rs. 7,000/- from Mr. Ram, the said amount cannot be given in any other mode other than account payee cheque or account payee draft as the sum exceeds Rs. 20,000/-
Illustration 4 – Mr. A borrowed a loan of Rs. 13,000/- from Mr. B and Rs.15,000/- as a deposit in cash on 12.0.5.2022. In the instant case, there is a contravention of section 269ss as the amount exceeds Rs. 20,000/-
Specified modes of transaction
Rule 6ABBA of the income tax rules specify the mode of accepting deposits or loans which are as follows –
Net banking;
Credit card;
Debit card;
Electronic Clearing System (ECS) through any bank account;
Account payee cheque or bank draft;
National Electronic Fund Transfer (NEFT);
Bharat Interface for Money (BHIM);
Immediate Payment System (IMPS);
Unified Payments Interface (UPI);
Real-Time Gross Settlement (RTGS)
Exceptions to Section 269ss of Income Tax Act, 1961
The said provisions of the Section do not apply to any deposit or loan or specified sum taken or accepted from or taken or accepted by –
the Government;
any banking company, post office savings bank or co-operative bank;
any corporation established by a Central, State or Provincial Act;
Such other institutions, associations or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify on this behalf in the Official Gazette.
Provided further that the provisions of this Section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act. To explain in simple words, this Section will not be applicable in the case of both the parties, ie., the depositor and acceptor whose income is agricultural income and neither of their income is taxable under the Income Tax Act, 1961. For instance, If Mr. A has taken a loan of Rs. 17,000/- from B and has a credit balance for the same, he cannot take loans above Rs. 2099 in any manner other than account payee cheque or account payee draft.
Interpretation of Section 269SS of Income Tax Act, 1961
1. Loan or deposit
The term “loan” has not been defined under the Act. However, it was given meaning through various judicial decisions. In the case of CIT v. Mahindra and Mahindra Ltd [(2006) 200 CTR Bom 28, 2006 284 ITR 679 Bom], the term loan was defined as a sum of cash which has to be repaid along with interest mutually decided by the parties. The debtor has the liability to pay back the principal amount along with the agreed rate of interest within the stipulated time as agreed between them.
Two parties: A loan transaction involves two parties, ie., the lender and borrower.
Obligation to return the money: A loan is lent by one person to another, wherein the person taking the loan promises to repay the loan.
Unpaid purchase price: Where there was a purchase of goods and the money has not been paid but deferred is not considered a loan as it does not convert an unpaid purchase price into a loan.
A loan may be interest-free: A loan may not always be interest-bearing but also interest-free.
Whether a renewal of a loan is a loan –Renewal of a loan is taken as a fresh loan and such renewal will be taken as a payment from the debtor on one hand and fresh borrowing on the other hand. This was held in the case of Lachmi Lal v. Babu Narain Das, AIR 1950 All 152.
In Sunflower Builders (P.) Ltd. v. Dy. CIT [1997] 61 ITD 227, the difference between ‘loans’ and ‘deposits’ was observed. Section 269SS of the Income Tax Act, 1961 uses the phrase ‘take or accept.’ It means the borrower goes to the lender for obtaining the loan and the depositor deposits money with the person who accepts it. So this Section can be applied only where money passes from one person to another by way of deposit or loan. Therefore, this provision cannot be applied if the debt has been shown by an entry in the books of accounts but has not been passed from one person to another by way of a loan. Similarly, when the parties agree that the amount standing to the credit of the partner who is retiring may be a loan for the continuing partners. In such a case no cash is passed from one person to another but only journal entries are made in the books of accounts.
Whether trade advances are loans – In Chemmanur Metals and Alloys (P.) Ltd. v. Addl. CIT [ITA No. 934/Bang/2016, the Court held that trade advances are loans. When there are advances for the supply of trade goods or sale of property or application money for allotment of securities, it will not be termed as a loan. Where any advance is given in the nature of a loan during the regular course of trade or as a trade practice, it cannot be called an advance in the nature of a loan. When the advance is more than the value of an order and is far in excess of the period for which advances are usually given, it may be called a loan.
1.2 Specified sum
Any sum which is receivable, whether as an advance or otherwise, about the transfer of immovable property, even if the transfer takes place or not.
1.3 Transfer
Section 269SS is also applicable to any amount in cash received with regard to the transfer of an immovable property irrespective of whether such immovable property transferred is shown as a capital asset or as stock-in-trade. Section 269SS does not limit itself to only cash transactions in relation to immovable property held as a capital asset.
1.4 Immovable property
Section 269SS of the Income Tax does not define the term “immovable property”. However, this does not exclude rural agricultural land and the Section applies to even the transfer of rural agricultural land except when both parties have agricultural income and neither of their income is taxed under this Act.
1.5 Account payee cheque v crossed cheque
The question of account payee cheque or crossed cheque comes to light when the loan or deposit is paid by cheque and not when it is done through an electronic clearing system (ECS). If the transaction is genuine and if the bank confirms that these amounts have been deposited in the assessee’s account and fulfil the banking norms, the penalty will not be imposed for such trivial violation when the words ‘account payee is not written but if the cheque through which the loan is received is ‘crossed’. Therefore, although there is a distinction between crossed cheque and an account payee cheque, distinction on this is not warranted in Section 269SS context. This was deliberated in the case of CIT v. Makhija Construction Co. [2002] 123 Taxman 1003 (MP) the Court.
1.6 Transactions between sister concerns
Funds may be transferred from one sister concern to the other which can constitute a ‘loan or deposit’ as and when required. When the manager is the same for both the concerns, it is largely the same individual who will be transferring and repaying the money. In such situations, the transactions inter se between sister companies, the assessee cannot naturally be partaking the transaction as a loan or deposit though he may be paying the interest for the same.
In the case of Shree Durga Distillery v. Addl. CIT (Inv.) [ITA No. 349/Bang/2004], the tribunal considered whether the transactions between sister concerns constitute a loan or deposit or not, for this Section. The Court held that it cannot be termed as a loan or deposit because a loan is given at the request of the borrower and a deposit is given only for a fixed term. It would be difficult to construe it as loan or deposit because the person lending and borrowing is the same individual and it is difficult to define it as loan or deposit as understood in general parlance.
1.7 Applicability of Section 269SS to capital contributions of partners
In Munjal Sales Corpn. v. CIT [2008] 168 Taxman 43 (SC), the Apex Court held that capital contribution by partners in the partnership firm is not a loan or borrowing in the hand of a firm. According to the assessee, Section 40(b)(iv) applies to the partner’s capital whereas Section 36(1)(iii) applies to loan/borrowing. Conceptually, the position may be correct but we are concerned with the scheme of Chapter IV-D’. From the Court’s remarks, it appears that the Court’s ruling is only in the context of Chapter IV-D and this definition of borrowings will not apply in other contexts in the Act. Hence, it is clear that section 269SS of the Act does not hit capital contributions in money by the partners. However, to be on the safer side, it is better to comply with Section 269SS by partnership firms and LLPs.
1.8 Applicability of clause 31(a) of the Income Tax Act, 1961
Clause 31(a) states the particulars of every loan or deposit taken or accepted exceeding the limit of rupees twenty thousand as specified under Section 269SS of the Act must be obtained. The following are the particulars which are to be disclosed in Form 3CD:
Name of the lender or depositor;
Address of the lender or depositor;
PAN number of the lender or depositor;
Amount of loan or deposit taken or accepted;
Squared up loan or deposit, if any;
The mode in the loan or deposit is taken or accepted whether by cheque or electronic clearing system;
Whether loan or deposit is taken or accepted by an account payee cheque or account payee draft;
Name of the person from whom individually or in aggregate loan or deposit taken or accepted more than twenty thousand rupees during the year;
Maximum deposit or loan during the year;
Mention if the cheque or electronic system is made for a loan or deposit taken or accepted; and
In case of cheque or bank draft, mention if it is account payee cheque or account payee draft.
However, clause 31(a) does not apply to the following assessees:
Any banking company;
Any corporation established by a Central, State or Provincial Act;
Any Government company as defined in Section 617 of the Companies Act, 2013
Applicability of Section 269SS of Income Tax Act, 1961
This Section applies to all the persons as defined under Section 31 of the Income Tax Act, 1961. It includes an individual, a company, a Hindu Undivided Family, a firm, an association of persons, the body of individuals and an artificial judicial person.
Case 1
Whether retention bills of the contractor as ‘security deposit’ amount to deposit under the ambit of Section 269SS? Let us say Mr. Y paid Rs. 15,00,000 to Mr. Z, after retention of Rs. 18,00,000 to be taken out after the expiry of the warranty period. Whether the above transaction has to be reported in Form 3CD for Mr. Y?
Para 39(c) of AS-7 reads that construction contracts are called ‘retention’. Thus it is not right to bring this under the meaning of deposits. Hence withholding such amounts and releasing them after the expiry of the warranty period does not attract clause 31(a) as the money is not ‘received’ by anyone per se. clause 31(a) will be attracted only if the contractor deposits money with the assessee and if it is refunded to the assessee after the warranty period expires. In this case, the money will be considered as “received”.
Case 2
Whether a person can contribute to a firm otherwise than by cheque?
When there is a receipt of the amount to partners in the form of contribution or withdrawal of Rs. 20,000 or more, the provisions of Section 269SS would not be attracted as such contribution or withdrawal cannot be called as loans or deposits. Amount paid by partners to the firm or vice versa is like a payment to self and does not amount to a loan or deposit in common law parlance. This was also held in the case of CIT v. Lokhpat Film Exchange (Cinema) [2007] 212 CTR Raj 371.
Case 3
Whether share application money falls under the scope of Section 269SS?
Share application money accompanied by appropriate documentation is neither a loan nor a deposit. Subsequent repayment or allotment of shares as a part of the allotment process does not change the character of application money and provisions of Section 269SS are not applicable in such a case. Held in the following cases:
However, the contrary was held in the case of Bhalotia Engineering Works (P) Ltd. 275 ITR 399. The Court held that according to the guidance note issued by ICAI on Audit of Capital and Reserves, a share application not accompanied by an application form or certificate from share transfer agents or resolution of appropriate authority would be treated as an unsecured loan.
Case 4
Whether a loan vide cheque which is a crossed cheque but not an account payee cheque attracts a penalty under section 271D?
There is no imposition of penalty as long as the transaction is genuine and as per the banking norms. Although there is a distinction between ‘crossed’ and ‘account payee cheque’ there is no necessity for hair-splitting under Section 269SS.
Case 5
Whether direct deposit of cash by the director in a closely held Bank account is loan or deposit under Section 269SS?
Although the company and its director are two different entities, the company’s affairs are solely managed by the directors. The company can bank upon only its directors. Hence the provisions of Section 269SS are not contravened when a direct deposit of cash is made in the bank account of the company. For instance, if Mr. A is the director of a company entrusted with the duty of managing the finance of the same. If Mr. A deposits Rs. 80,000 in a closely held bank account of the company, it shall not be termed as a loan or deposit.
Penalty for violation of Section 269SS of Income Tax Act, 1961
Section 271D of the Income Tax Act, 1961 states that if a person takes or accepts any loan or deposit or specified sum in violation of the provisions under Section 269SS, the penalty levied by the joint commissioner would be hundred per cent of the loan or deposit or specified sum.
Who can initiate penalty provisions: There is no such categorical condition specifically stated in the Act for the initiation of a penalty under section 271D. However, only the Joint Commissioner of Income Tax has the authority to impose a penalty under section 271D.
Some courts believe those penalty proceedings penalty bought by the assessing officer under Section 271D are also lawful, citing the reason that the Act makes no provision for the initiation of penalty proceedings under section 271D. As a result, if an AO issues a show cause notice pursuant to section 271D r.w.s. 274, it will be regarded the start of penalty proceedings.
Some courts, on the other hand, believe that because the JCIT has the right to impose penalties, it also has the power to commence penalty procedures. The satisfaction recorded by the AO to initiate is useless if the AO is unable to enforce a penalty. Only the JCIT’s satisfaction would be taken into account for imposing a penalty.
In response to the controversy, the Central Board of Direct Taxes (CBDT) issued the following circular, stating that penalty proceedings under Section 271D should only be considered as having begun once the JCIT issues a Show Cause Notice under Section 274 r.w.s 271D of the Act.
Time limit for imposing penalty under section 271D: (i) within the end of financial year in which proceedings, during the course of which action for imposing penalty were initiated, gets completed;
(ii) within the end of six months from the end of the month in which penalty proceedings were initiated, whichever is later;
The CBDT issued a circular in which it was directed that the provisions of paragraph (c) of section 275(1) be applied to penalty proceedings under sections 271D and 271E, and that related appeals be withdrawn.
Cases where no penalty shall be levied for contravention of Section 269SS of Income Tax Act, 1961
Transactions involving acceptance or repayment of any amount mentioned under Section 269SS only through entries made in the books of accounts.
Cash payment or repayment transactions due to any business exigency.
Any loan taken from and within the family including father-in-law.
Any advance received from promoters through current accounts.
A genuine transaction made at the time of emergency does not attract a penalty.
Any loan taken in cash from the unorganised finance sector to repay lenders.
Any current account transactions between sister concerns.
Repayment or receipt of partner’s capital. If any money is exchanged in the form of a loan, deposit, etc. (through capital/current account) between partners and the partnership firm amounting to INR 20,000 or more, then it shall not be covered within the ambit of Section 269SS.
Judicial insights relating to section 269SS of Income Tax Act, 1961
CIT v. Noida Toll Bridge Co. Ltd (2003) 184 CTR Del 266, 2003 262 ITR 260 Delhi
In the instant case, the issue was whether the liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts is within the ambit of 269SS of the Act or not. Held that, the applicability of section 269SS of the Income Tax Act, 1961 to non-monetary book-entry transactions of loans was discussed. The object of section 269SS is restricted to transactions that involve acceptance of money and does not impact those cases where liability has arisen merely on the basis of book entries, as there is no receipt of money in cash or by cheque or in any other form. Since there is no movement of money, section 269SS shall not be applicable for non-monetary book-entry transactions.
DCIT v. Chetan M Kakaria 4961 (Mum.) of 2011
In the above case, the issue was whether the transactions between the firm and the assessee were treated by the AO as repayment of a loan in cash. It was held that when partners of a firm give money to the business in case of exigencies and received it through a capital account, it will not attract a penalty for violation of section 269SS.
M/s Muthoot Financiers group firms v. CIT (Delhi High Court) 2015
In this case, the issue was whether the transaction has been made from capital or current account has no relevance since the partners have the right towards using both accounts for making contributions held that for the purpose of Section 269SS, partnership firms and partners are different assesses but the intention of acceptance of money is important to be considered. In terms of factual interpretation, partners are the owners of the firm and partners are the ones who make contributions through their capital account. This shows that money is transferred from one individual to himself, as they are the same person. Hence, the provisions of Section 269SS will not be contravened.
Nabil Javed v. ITO 3797 & 3798/DEL/2018
This case held that any transaction of loan between husband and wife does not attract the provisions of Section 269SS as there is no interest of parties involved and neither is there a creditor or depositor relationship between them. Similarly, in the case of Tuhinara Begum Hoogly Vs. JCIT Range 2, Hooghly ITA No. 2256/Kol/2014, it was observed that the wife gave money to her husband for the house construction in the joint family property land. Rs. 17,000/- was given to the husband and Rs. 26,000/- was given to the supplier of the materials directly. Though the amount spent was by the husband for constructing the house, it cannot be said that the wife does not have any interest in the house. The transaction was neither a gift nor a loan as there was no promise made to return the amount with or without interest. Therefore, the provisions of section 269SS do not apply to any transactions between husband and wife.
Sri Nikhil Banik Mazumder v. JCIT ITA No. 453 & 454/Kol/2016
In the instant case, The assessee had taken a loan of Rs. 4,00,000/- from Shri Mithun Banik, who was the assessee’s son and had repaid Rs.1,50,000/-. He had also repaid a couple of loans to his other son named Sri Indranil Banik and his wife Sandhya Banik amounting to Rs. 2,25,098/- and Rs.54,928/- respectively. The tribunal observed that transactions were between the husband, his wife and sons of the same family. The tribunal also noted that the assessee was a salaried employee and not a businessman. Therefore, such transactions do not fall under the provisions of Section 269SS of the Act.
FAQs regarding Section 269SS of Income Tax Act, 1961
How much deposit or loan can be accepted in cash
A loan or deposit up to Rs. 20,000/- can be accepted in cash from one person as per Section 269SS of the Income Tax Act, 1961. It has to be noted that the amount should not exceed Rs. 20,000 at any time together with the loan or deposit taken or accepted earlier.
Can an assessee accept a loan or deposit of money exceeding the limits laid down in section 269SS of the Income Tax Act, 1961 by book transfer entry or by bearer cheque or self cheque or any other mode other than account payee cheques
No, the only mode prescribed in section 269SS of the Income Tax Act, 1961 is Account Payee Cheque or Account Payee Bank Draft.
What is the intent behind the insertion of this section
The intent of the section is clearly to put restrictions on cash transactions and reduce the quantum of black money which affects the revenue of the government. Black money is generally transacted in cash and a large amount of unaccounted wealth is stored and used in the form of cash. Therefore in a bid to control unaccounted money, a section has been proposed which will limit cash transactions and in essence the black money
Will the provisions of this section apply If the assessee receives a deposit of Rs. 20,000/- as an agent
Provisions of Section 269SS shall not be applicable if a person receives an amount of Rs. 20,000/- as deposit as an agent or servant and not on his own.
Whether a penalty under Section 271D can be levied in a case where the amount of deposit is treated as income by the Assessing Officer
No, it cannot be treated as a loan when it is simultaneously treated as income by the assessing officer. Hence, no penalty can be levied in such cases.
Does it cover cash received by borrowers only
On a plain reading of the section it appears that all kind of receipts are covered by the section, therefore it appears cash received by the borrowers also gets covered. However when we look at the exclusion part of the section, it states that the provision of the section is not applicable to transaction of nature referred in section 269SS. While section 269SS is applicable in situations where a person receives cash as loan or deposit.
Conclusion
The application of section 269SS in various cases is thus iterated through provisions of the section and judicial decisions. The limit of Rs. 20,000 under the Section is fixed and any loan or deposit cannot be taken or accepted in excess of the above limit in cash. Although Section 269SS was formed with the object of curbing the black money threat hazard and preventing tax evasion in the country, the limit of rupees twenty thousand mentioned as limit under the Section is very small considering the rate of inflation resulting in a decrease in the value of money and increase in prince of goods. Therefore, it would be wise to increase the limit of rupees twenty thousand similar to how the limit was increased under Section 44AB to benefit all the small assessees.
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This article is authored by Nidhi Bajaj, pursuing BA.LL.B from Guru Nanak Dev University, Punjab. In this article, you will learn about the meaning and various components of intellectual property rights, the international and national regime of IPR and other related aspects regarding IPR in India.
It has been published by Rachit Garg.
Table of Contents
Introduction
Intellectual Property Rights (IPRs) are the rights associated with intangible property owned by a person/company and protected against use without consent. Thus, rights relating to ownership of intellectual property are called Intellectual Property Rights. These rights aim to protect intellectual property (creations of human intellect) by allowing the creators of trademarks, patents, or copyrighted works to benefit from their creations. The Universal Declaration of Human Rights (UDHR) also refers to intellectual property rights under Article 27 which states that “Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.”
Thus, the purpose of IPR is to reward human intellect by providing exclusive rights to the creators over their inventions, artistic, musical works, etc.
In this article, the author has discussed the meaning of intellectual property and intellectual property rights, the international regime of IPR and laws relating to IPR in India, etc.
Meaning and nature of the intellectual property
Intellectual property (IP) is an intangible property that comes into existence through human intellect. It refers to the creations of the mind or the products of human intellect such as inventions; designs; literary and artistic works; symbols, names and images used in commerce.
performances of performing artists, phonograms, and broadcasts,
inventions in all fields of human endeavour,
scientific discoveries,
industrial designs,
trademarks, service marks, commercial names and designations,
protection against unfair competition, and
all other rights resulting from intellectual activity in the industrial, scientific, literary, or artistic fields.
Other categories of intellectual property include geographical indications, rights in respect of know-how or undisclosed information, and layout designs of integrated circuits.
Meaning of Intellectual Property Rights
The term “Intellectual Property Rights (IPR)” is used to refer to the bundle of rights conferred by law on a creator/owner of intellectual property. These are the rights that a person has over the creations of his mind. They seek to protect the interests of the creators by rewarding their mental labour and allowing them to retain property rights over their creations. The creators and inventors are thus allowed to benefit from their creations. IP rights are the legal rights governing the use of intellectual property.
Need for legal protection of intellectual property
The various reasons behind granting protection to intellectual property through the enactment of suitable Intellectual Property (IP) laws are as follows:
To encourage inventions and creations that promote the social, economic, scientific, and cultural development of society by incentivising the creators and allowing them to make economic gains out of their creations.
To provide legal protection to intellectual creations.
To prevent third parties from enjoying the fruits of someone else’s creativity.
To facilitate fair trading.
To promote creativity and its dissemination.
Giving recognition to the efforts of creators.
Preventing the infringement of proprietary rights of creators in their creations from unauthorised use.
To encourage investment of skill, time, finance, and other resources into innovation activities in a manner that is beneficial to society.
Advantages and disadvantages of Intellectual Property Rights
Advantages of Intellectual Property Rights
IPR protection gives your business a competitive advantage over other similar businesses.
IPR protection allows you to prevent unauthorised use of your intellectual property and works.
IPR enhances the value of your company and also opens avenues for collaborations and opportunities for generating income such as by entering into licensing agreements to exploit/work the invention/work.
IPR helps to attract clients and creates your brand value. For example, the consumers start identifying your products with the unique logo or registered trademark.
Disadvantages of Intellectual Property Rights
You have to incur additional costs for getting IPR protection including legal costs and other fees.
Even after getting the intellectual property right, you might still face a lot of difficulties in curbing the copying and unauthorised use of your work. Moreover, sometimes an attempt to enforce IP rights could lead to a reduction in the consumer base.
IP rights aren’t absolute. There are certain limitations and conditions imposed by law on the exercise of these rights (such as a limited period of protection and compulsory licensing provisions) in the interests of the general public.
Components of Intellectual Property Rights
Copyright
The term ‘copyright’ concerns the rights of the creators/authors of literary and artistic works. A copyright is also called a ‘literary right’ or ‘author’s right’. Copyright gives an author exclusive rights to his creation and prevents the copying and unauthorised publishing of his work. Copyright protection begins at the very moment a work is created and expressed in some tangible form. Copyright protection is granted to a work that is an original creation. Also, the protection extends only to expressions. Mere ideas without any tangible expression are not granted legal protection and do not form the subject matter of copyright. Copyright protects the following two rights of the author:
Economic rights i.e., the right of the owner to derive financial benefit from the use of their works by others. For instance, the right to prohibit or authorise reproduction of the work in various forms, the right to prohibit unauthorised translation of the work, etc.
Moral rights i.e., protection of non-economic interests of the author. For instance, the right to oppose changes to work and the right to claim authorship, etc.
What kind of works can be protected under copyright
The following categories of works typically come under copyright protection:
Literary works such as novels, plays, poems, and newspaper articles;
Computer programs and databases;
Films, musical compositions, and choreography;
Artistic works such as photographs, paintings, drawings, and sculpture;
Architecture and advertisements, maps, and technical drawings.
In India, the term of copyright protection extends throughout the lifetime of the author and then 60 years after his death.
Law relating to copyright in India : the Copyright Act, 1957
The Copyright Act, 1957 is a comprehensive legislation dealing with copyrights in India. The Act regulates the various aspects relating to copyright regime in India such as:
Registration of copyright
Publication, term of copyright
Assignment, and licence of copyright
Special rights of broadcasting organisation and performer’s rights
Infringement of copyright and remedies thereof
Establishment of copyright authorities and copyright societies
International Copyright
The term of copyright protection provided under the Act for the various categories of works is given below:
Literary, dramatic, musical and artistic works: Life of the author plus 60 years after death.
Anonymous and pseudonymous works: 60 years from the date of publication. However, if the identity of the author is disclosed before the expiry of that 60 years, then the term of protection shall be life of the author plus 60 years after death.
Posthumous works: 60 years from publication.
Cinematograph films: 60 years from publication.
Sound recordings: 60 years from publication.
Government work: 60 years from publication.
Works of public undertakings: 60 years from publication.
Works of international organisations: 60 years from the publication of the work.
Copyright infringement
Section 51 of the Copyright Act, 1957 provides for ‘What constitutes copyright infringement’. Copyright is said to be infringed:
when a person does something that the owner of the copyright has the exclusive right to do, or permits for profit the use of any place for the purpose of the communication of the work to the public, where such communication constitutes an infringement of the copyright in the work, without a licence or in violation of the conditions of the licence.
When any person makes for sale or hire, sells or lets for hire, or displays or offers for sale or hire, or distributes either for the purpose of trade or to such an extent as to prejudice the owner of the copyright, or exhibits in public, or imports into India any infringing copies of the work.
Section 52 enlists the acts which do not constitute an infringement of copyright such as fair dealing in any work for personal, private use or for research, reproducing any work for the purpose of a judicial proceeding or replication by a teacher or a pupil in the course of teaching etc.
It is pertinent to note that the Copyright Act provides for both civil and criminal remedies against infringement of copyright.
How to register a copyright in India
The Registrar of Copyrights maintains a Register of Copyrights wherein he enters the names or titles of works and the names and addresses of authors, publishers and owners of the copyright. This entering or recording of names and other particulars of the copyright owners in the register of copyrights is called Registration of copyright.
The procedure for registration of copyright in India is provided under Section 45 of the Copyright Act, 1957 read with Chapter XIII of the Copyright Rules, 2013.
Steps to register copyright
Filing of application: The author/publisher/owner or any other person interested in the copyright can make an application (Form-XIV of Copyright Rules) for registration of copyright to the Registrar of Copyrights. Such application must be accompanied by the prescribed fee for entering particulars of the work in the Register of Copyrights.
Also, an application for registration of copyright shall be in respect of one work only. It should be signed only by the applicant, who may be the owner or author of the right. In case, the application is made by the owner of the copyright, an original copy of a no-objection certificate issued by the author in the favour of the owner has to be submitted.
Application for registration of copyright in an unpublished work: An application for registration of an unpublished work should be accompanied by two copies of the work.
Application for registration regarding an artistic work that is being used or could be used in connection with any goods or services: In case the application for registration is regarding an artistic work that is or can be used in relation to any goods or services, the application must include a statement along with a Certificate from the Registrar of Trademarks that no trademark identical to or deceptively similar to such artistic work has been registered under the Trademarks Act, 1999 or no such application has been made.
Application for registration in respect of an artistic work which is capable of being registered as a design: In this case, the application must be supported by an affidavit declaring that:
Notice of application: The person applying for registration of copyright has to give the notice of the application to every person who claims to have, or has any interest in the subject matter of the copyright or who is disputing the rights of the applicant to the copyright.
Entering of particulars in Register of Copyright: A thirty day period is given for filing of objections and if no objections to the registration are received by the Registrar, and on being satisfied that the particulars stated in the application are correct, the Registrar of Copyright shall enter such particulars in the Register of Copyrights.
Completion of registration process: The registration process is complete when a copy of the entries made in the register of copyrights is signed and issued by the Registrar of Copyrights or by the Deputy Registrar of Copyrights. Also, every entry made by the Registrar of Copyrights has to be published by him in the prescribed manner.
Need and benefits of registration of copyright
The registration of copyright is optional. However, the registration of copyright offers several advantages to the author or owner of copyright. This can be discerned from Section 48 of the Copyright Act. Section 48 provides that the register of copyright is prima facie evidence of the particulars entered therein and shall be admissible in evidence in all courts. Thus, a person who has got the copyright registered in his name is generally presumed to be the author/owner of the work. Registration of copyright is beneficial due to the following reasons:
It allows the owner to protect his work from being used in an unauthorised manner.
It becomes easier to claim ownership and royalties for your work when it is to be used or adapted in any manner.
Copyright registration specifies the date of publication.
Registration of copyright in your name might work in your favour in case of any claim of copyright infringement.
Patents
A patent is an exclusive right granted for an invention or innovation, which might be a product, a method or a process, that introduces a novel way of doing something or offers a new technical solution to a problem. In other words, it is a right of monopoly granted to a person who has invented:
a new and useful article, or
improvement of an existing article, or
a new process of making an article.
A patent is granted for inventions having industrial and commercial value. It is the exclusive right to manufacture the new article/manufacture the article with the invented process for a limited period of time (usually 20 years from the filing date of the application) in exchange for disclosure of the invention. A patent owner can sell his patent or grant licence to others to exploit the same.
Criteria for patentability of an invention
It should be novel.
It should have inventive steps or it must be non-obvious.
It should be capable of Industrial application.
What kind of protection is given by patents
The patent owner possesses the exclusive right to prevent others from commercially exploiting the patented invention.
Third parties are prevented from manufacturing, using, distributing, selling etc. the patented invention/product without the consent of the patent owner.
Patent law in India: the Patents Act, 1970
The invention of a person can be patented only if the procedure and other requirements prescribed in the Patents Act, 1970 are fulfilled. The Patent Act, 1970 provides for a detailed procedure for obtaining a patent, right from the filing of an application to the grant of a patent. The Act also contains provisions for rights and obligations of the patentee, term of the patent, transfer of patent, surrender, revocation, and restoration of patent, infringement of patent, and remedies thereof. The Act provides for patent protection for a period of 20 years after which the technology or invention goes to the public domain.
Section 3 of the Act provides a list of non-patentable inventions for which no patent could be granted. Under Section 4, the inventions relating to atomic energy are also declared as non-patentable.
It is worth mentioning that earlier no product patent could be granted for medicine, food items and chemicals and only the process of manufacturing medicines, food items and chemicals could be patented. However, after the Patent (Amendment) Act, 2005 product patents can be issued for manufacturing these products.
Patent infringement and remedies
Any violation of the rights of the patentee constitutes infringement of patent such as a colorable imitation of your invention or taking of the essential features of your invention. Under the Patents Act, Sections 47 and 107-A provides for the acts that shall not be considered as an infringement of patent. For example, the import of any machine or other articles by or on behalf of the government or the manufacturing or use of a patented process by or on behalf of the government does not constitute patent infringement. The various remedies available against patent infringement are as follows:
Injunction
Damages or account of profits
Delivery up or destruction of infringing goods
Certificate of validity
Procedure of obtaining a patent in India
You can file a patent application at the Patent Office in physical mode or in electronic mode.
Following are the steps involved in obtaining a patent:
Filing of application
Place of filing patent application: A patent application has to be filed at the head office of the patent office or the branch office, within whose territorial limits:
Applicant normally resides or has a domicile, or
Applicant has a place of business, or
At the place where the invention actually originated.
Who can file the application: Following persons either alone or jointly can file the patent application:
Any person claiming to be the true and first inventor of the invention;
Assignee of the above in respect of the right to make such an application;
The legal representative of any deceased person who was entitled to make such an application immediately before his death.
Form of application: Every patent application shall be for one invention only.
Every application must specify that the applicant possesses the invention and identify the individual claiming to be the true and first inventor. If the individual claiming to be the true and first inventor is not the applicant or one of the applicants, the application must state that the applicant believes the person so listed/named to be the true and first inventor.
Application must be accompanied by a provisional or a complete specification.
Filing of provisional and complete specification
What is patent specification: A patent specification is a technical document describing the invention. The provisional specification gives the initial description of the invention on the filing of the patent application. Whereas a complete specification gives full and sufficient detail of an invention in such a manner that a person skilled in the art can use the invention when he reads such a description.
If the patent application is accompanied by a provisional specification, the complete specification has to be filed within 12 months from the date of the filing of such application. In case it is not filed within the said period, the application is deemed to have been abandoned.
Claim of priority date: Priority date is the date on which the patentee claims his invention. There shall be a priority date for each claim of a complete specification. Generally, the priority date is the date of filing of the provisional specification provided the claims contained therein are fairly based on the description of the invention as given in the provisional specification. But when the patent application is accompanied by complete specification or if any application is post-dated to the date of filing of complete specification, in that case the priority date shall be the date of filing of the complete specification.
Amendment of specification: The applicant may amend the application, the complete specification and other documents before or after the grant of the patent. Such amendment shall be in accordance with the procedure prescribed as regards to the permission of the Controller and publication of the amendment.
Publication and Examination of application
The patent application shall not be open to the public until the expiry of 18 months from the date of filing of the application or the date of the priority of the application. However, applicants may request the Controller to publish the application at an earlier date.
The application is published within one month after the expiry of the said period of 18 months.
Thereafter, a request has to be made by the applicant or other interested persons for examination of the application. Such a request shall be made within 48 months from the date of priority of the application or from the date of filing of application, whichever is earlier. If the request is not made within the prescribed period, the application is treated as withdrawn.
Time for putting application in order for grant: The applicant must comply with all the requirements imposed on him by or under the Act in relation to the application within 12 months from the date on which the Controller forwarded to the applicant the first statement of objections to the application, complete specification, or other documents related thereto.
Opposition to grant of patent
Pre-grant opposition: Before the patent has been granted, any person may, in writing, represent by way of opposition to the Controller against the grant of the patent.
Post-grant opposition: After the grant of the patent but before the expiry of 1 year from the date of publication of grant of patent, any interested person may give notice of opposition to the Controller. Thereafter, the Controller constitutes the Opposition Board and the patent may be revoked on the basis of the report of the Board.
Grant of patent
If the application for patent is found to be in order for grant of patent, the patent shall be granted.
On the grant of patent, the Controller publishes the fact of such grant and thereupon the application and other documents shall be open for public inspection.
What are the benefits of patent registration
Patent registration ensures the complete protection of your patent/invention against any unauthorised use for a period of 20 years.
Patent registration allows you to enjoy monopoly in the market as regards your invention during the period of patent protection.
Patent registration confers exclusive right to exploit the patent on patentee or his licensee or assignee.
You can licence the patent and gain royalties for the same.
Trademarks and service marks
A trademark is a symbol that is used to distinguish the goods of one enterprise from its competitors. A trademark may consist of a single letter, logo, symbol, design, or numerals and three-dimensional features such as shape and packaging, etc. Section 2(zb) of the Trademarks Act, 1999 defines “trademark” as a mark capable of graphical representation and which can be used to distinguish the goods or services of one person from those of others. A trademark may include the shape of goods, their packaging, and a combination of colours. Hence, distinctiveness is the hallmark of a trademark.
Trademarks used in connection with services such as tourism, banking, etc., are called Service Marks.
The owner has the exclusive right to the use of a registered trademark. There are 45 classes of trademarks, consisting of 34 classes of products and 11 classes for services.
What is the function/purpose of a trademark
A trademark is a symbol that identifies a product and its source.
It reflects the goodwill of a business.
It assures the consumer about the established quality of the product.
It serves as an advertisement for the product.
A registered trademark provides legal protection to your brand.
It helps to establish a dedicated consumer base by preventing others from imitating your brand.
Law regulating to trademarks in India: the Trademarks Act, 1999
The Trademarks Act, 1999 was enacted to provide for the registration and better protection of trademarks for goods and services, as well as to prevent the use of fraudulent marks. The Act contains provisions regarding:
Registration of trademarks
Effect of registration
Rights of the trademark holder
Special provisions relating to protection of trademarks through international registration under the Madrid Protocol
Use of trademark and registered users
Collective marks
Certification of trademarks
Assignment and transmission of trademark
Infringement and passing off action in trademark and legal remedies thereof, etc.
A trademark is registered for 10 years but it can be periodically renewed and can be used for an indefinite period.
Infringement of trademark
In order to constitute infringement of a registered trademark, following conditions are required to be fulfilled:
The person is not authorised to use the trademark.
The infringing trademark is similar/identical/deceptively similar to the already registered trademark.
The infringing trademark must be used in the course of regular trade in which the registered proprietor or user is already engaged.
The infringing trademark must be printed represented usually in advertisement, invoices or bills. Mere oral use of a trademark is not infringement.
Using either the whole of the registered trademark or an adopted one by making a few additions and alterations.
Section 29 of the Trademarks Act provides for the common forms of trademark infringement. For instance, the advertisement of a registered trademark of another for promotion of one’s trade amounts to infringement. Following remedies are available to the trademark owner against infringement of his trademark:
Filing suit for infringement
Criminal remedies
Process of registration of trademark in India
The various steps involved in registration of trademark are as follows:
Application for registration
A person claiming to be the proprietor of a trademark used or proposed to be used by him, who desires to register it has to file an application with the Registrar for registration of his trademark. Such an application shall be made in writing and must be accompanied by prescribed fees.
A single application may be made for registration of a trademark for different classes of goods and services.
The application has to be filed in the office of the Trade Marks Registry within whose territorial limits the principal place of business in India of the applicant is situated.
Refusal, acceptance and withdrawal of acceptance
The Registrar may accept or reject an application after it has been received. The application may be accepted with or without amendments, modifications, conditions and limitations.
If after acceptance, but before registration, the Registrar discovers that the application was erroneously accepted, he may withdraw the acceptance.
Advertisement of application
The Registrar shall after acceptance of the application, cause the application to be advertised in the prescribed manner.
The application is advertised in the Trademark Journal for the purpose of inviting objections from interested persons.
The Registrar may cause the application to be advertised before acceptance in certain cases.
Opposition to registration
Any person may within 4 months from the date of the advertisement give a written notice of his opposition to the registration. The notice of such registration is given to the applicant and thereafter evidence is submitted to the Registrar. After hearing the parties, the Registrar decides as to whether the registration is to be permitted or not.
Registration
If the application for trademark registration is accepted and not opposed, or if opposed, the objection is ruled in the applicant’s favour, the Registrar must register the trademark within 18 months of the filing of the application.
The date of registration of a trademark is the date of making of the said application.
On registration of a trademark, the Registrar shall issue to the applicant a certificate in the prescribed form of the registration thereof, sealed with the seal of the Trademarks Registry.
Benefits of trademark registration
A registered trademark is an intangible asset that adds value to the business.
Trademark registration aids in creating brand value and gaining a strong position in the market.
Registration of a trademark is prima facie evidence of its validity.
The registered trademark holder has the exclusive right to use that mark and to obtain relief in case of infringement of trademark.
Trademark registration is for a period of 10 years and can be renewed as well.
A registered proprietor of a trademark has the right to transfer his right through licence or assignment of his trademark.
Industrial designs
An industrial design means the ornamental or visual aspects of an article. It may consist of three-dimensional features, for instance, the shape of an article, or two-dimensional features, such as lines, patterns, or colour. An industrial design is purely aesthetic, non-functional, and has no utility. It is necessary to provide legal protection to the creative originality of an industrial design to prevent others from copying it.
Type of protection provided by industrial design
The owner of registered industrial design reserves the right to prevent others from manufacturing, selling, or importing articles bearing or embodying a design which is a copy of or is substantially similar to the protected design.
Kinds of products that can come under Industrial design protection
Products of industry and handicraft items
Household goods
Lighting equipment
Jewellery
Electronic devices
Textiles, etc.
Law relating to designs in India: the Designs Act, 2000
The Designs Act, 2000 seeks to promote the creation of novel, original designs along with balancing competing interests by granting the time-bound monopoly right to use registered industrial design by the owner. The Act contains provisions regarding registration of designs, copyright in registered designs, industrial and international exhibitions, restoration of lapsed designs, the penalty for infringement of registered designs, etc.
Geographical Indications (GI)
A geographical indication (GI) is used to identify goods having a specific geographical origin. These indications denote quality, reputation, or other characteristics of such goods essentially attributable to their geographical origin. Generally, geographical indications are used for foodstuffs, agricultural products, wine, industrial products and handicrafts. Examples of GI include Basmati Rice, Darjeeling Tea etc.
Benefits of registration of GI
Confers legal protection to domestic/national GI which in turn boosts exports.
Prevents others from making unauthorised use of a Registered Geographical Indication.
Promotes the economic well-being of producers of items produced in a specific geographic area.
Law relating to GI in India: the Geographical Indications of Goods (Registration and Protection) Act, 1999
The Geographical Indications of Goods (Registration and Protection) Act, 1999 provides for the registration and better protection of geographical indications relating to goods. The Act contains provisions relating to the establishment of a Geographical Indications Registry, registration of geographical indications of goods, rights conferred by registration, registration of authorised users of registered geographical indications, provisions for renewal, rectification and restoration of geographical indications, and prohibition of registration of geographical indication as a trade mark, etc.
Trade Secrets
Trade Secrets are IP rights on confidential information which may be sold or licensed. A trade secret refers to any confidential business information and may include designs, drawings, plans, business strategies, R & D related information, etc. In order to qualify as a trade secret, the information should be commercially valuable i.e. useful in a trade or business, known to a small number of people, and subject to reasonable steps taken by the rightful holder of the information to keep it secret.
Types of trade secrets
Technical information such as information regarding manufacturing processes, designs, drawings of computer programs, etc.
Commercial information, such as distribution methods, advertising strategies, etc.
Financial information, formulas, recipes, secret combination of elements, source codes, etc.
Layout designs of integrated circuits
Integrated circuits are used in products such as television, radio, mobile, washing machine, and data processing instruments. The layout designs of integrated circuits not only reduce the space but also enhance the capacity and performance of the system. In India, the Semiconductor Integrated Circuit Layout Design Act, 2000 regulates the registration, use, and protection of original and distinct layout designs.
The Semiconductor Integrated Circuits Layout Designs Act, 2000
The Act deals with the protection of Semiconductor Integrated Circuits layout designs. It has been enacted to give effect to Section 6 in Part II of the TRIPS Agreement relating to Layout-Design (Topographies) of Integrated Circuits. The Act contains provisions relating to registration of Semiconductor Integrated Circuits layout designs including the procedure and duration of registration, the effect of registration, assignment and transmission of registered layout-design, use of layout-design, and penalty for infringement of layout-design, etc.
Other laws relating to Intellectual Property Rights in India
The Protection of Plant Varieties and Farmers’ Rights Act, 2001
The Protection of Plant Varieties and Farmers’ Rights Act, 2001 seeks to provide legal protection to plant varieties, rights of farmers, and plant breeders and also encourages the development of new plant varieties. The Act contains provisions regarding the establishment of Protection of Plant Varieties and Farmers’ Rights Act Authority, registration of plant varieties and essentially derived variety, duration, and effect of registration, rights conferred by registration, framers’ rights, compulsory, infringement of any right provided under the Act and relief thereof.
The Biological Diversity Act, 2002
The Biological Diversity Act, 2002 provides for the conservation of biological diversity, sustainable use of its components, and fair and equitable sharing of the benefits arising out of the use of biological resources and knowledge. It contains provisions relating to the regulation of access to biological diversity, the establishment of the National Biodiversity Authority and its functions, the establishment of the State Biodiversity Board and its functions, the constitution of Biodiversity Management Committees, and the constitution of the Local Biodiversity Fund, etc.
A quick glance at the important Intellectual Property Rights
PATENT
COPYRIGHT
TRADEMARK
Subject of protection
Patents may be granted in any field of technology for inventions that are new and useful including a new product or an improvement of an existing product or a new process of making a product.
Original works of authors and artists ranging from books, music, paintings, sculpture to computer programs, databases, advertisements, maps and technical drawings.
Any symbols, phrase, word, design that identifies and distinguishes the source of the goods of an enterprise from those of others.
Requirements
Novelty and usefulnessInventive step/ Non-obviousnessIndustrial applicationMust be patentable according to the Patent Law in force
Original creative workMust be in some tangible medium
Distinctive (capable of identifying the source of a particular good)
Term of protection
20 years from the date of filing of application
It should be equal to or longer than 50 years after the creator’s death. In India, the copyright protection lasts for the life of the author plus 60 years after death.
Can vary but is usually 10 years and can be renewed on payment of an additional fee.
Rights granted to patentee/ copyright owner/ trademark holder
Right to decide who may use the invention/Right to authorise the use of patent by issuing licence and through assignmentRight to exploit the patentRight to surrender the patentRight to be issued duplicate patentRight against infringement
Right to derive financial reward from the use of work by othersRight to authorise or prevent certain uses of the workRight to authorise or prohibit reproduction of workRight to authorise or prohibit recording, for example in the form of CDs and DVDsRight to prohibit or authorise broadcasting by radio, satelliteRight to authorise or prohibit translation of work in other languagesRight to authorise adaptation of the work into a movie etc.Moral right to claim authorship of the workRight to transfer the rights through assignment or grant permissive use of the copyright to any personRight against infringement
Right to exclusive use of trademark by the owner or its licenseeRight to assignRight to seek legal remedies against infringement
Registration
Being a territorial right, a patent must be registered in a country according to the procedure prescribed by its Patent Law.
Copyright protection runs automatically without the need for any registration formalities. However, a system of voluntary registration is established by most countries.
Trademarks can be registered or unregistered. The Trademark Law offers protection for both registered and non-registered trademarks. However, a registered trademark provides prima facie evidence of its ownership.
International regime of Intellectual Property Rights
Various agreements and conventions have been formulated at the international level to govern and regulate the various aspects and emerging issues relating to intellectual property rights. Some of the major efforts undertaken in the form of major international instruments, treaties, conventions, and forums dealing with intellectual property rights are as follows:
The Paris Convention on the Protection of Industrial Property
The Paris Convention on the Protection of Industrial Property adopted in 1883 is the oldest international convention and was the first major step taken towards the protection of IP rights. The Convention contains 30 Articles dealing with various aspects and types of industrial property including patents, trademarks, service marks, utility models, industrial designs, geographical indications, and the repression of unfair competition. The Convention was revised in July 1967 in Stockholm.
The Convention is based on three guiding principles:
National treatment: Each contracting state must provide the same level of protection to nationals of other contracting states as it grants to its own nationals.
Right of priority: The Convention provides for the right of priority in the case of patents and utility models, marks and industrial designs. This right means that the applicant may, within a certain period of filing a regular first application in one of the contracting states, apply for protection in any of the other contracting states as well. The subsequent applications filed within the grace period shall be regarded as being filed on the same date as the first application. The benefit of this provision is that applicants seeking protection in several countries need not present all of their applications at the same time and have a period of 6/12 months to decide in which countries they wish to seek protection.
Uniform rules: The Convention lays down some common rules that must be followed by all member states such as:
Patents granted in different contracting states for the same invention are independent of each other and the inventor has the right to be named as such in the patent.
Industrial designs must be protected in each contracting state, and protection may not be forfeited on the ground that articles incorporating the design are not manufactured in that State.
Protection must be granted to trade names in each contracting state without there being an obligation to file or register the names.
Patent Co-operation Treaty, 1970
The Patent Co-operation Treaty (PCT) was concluded on 19th June, 1970 and came into effect on 24th January, 1978. The treaty aims to simplify the procedure of filing patent applications in states that are party to the treaty agreement. It provides a system for filing a patent application and entitles the nationals of a contracting state to obtain patents in multiple countries around the world on the basis of a single patent application.
Berne Convention for Protection of Literary and Artistic Works, 1886
The Berne Convention for Protection of Literary and Artistic Works adopted in 1886 is the most significant International Convention dealing with copyright protection. It provides for a minimum term of protection of copyright i.e. life of the author plus 50 years or an alternative of 50 years from the publication of anonymous and pseudonymous works. The Convention is based on three basic principles:
Principle of national treatment: The works originating in one member state must be given the same protection in each of the other member states as the latter grants to the works of its own nationals.
Principle of automatic protection: Protection should not be conditional upon compliance with any formality. This means that the original artistic and literary works shall be given automatic global protection from the moment of their creation, in a fixed medium, thereby ensuring equal treatment to such works.
Principle of “independence” of protection: This means that the protection is independent of whether the protection exists in the country of origin of the work or not.
Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (1961)
The Rome Convention secures protection in performances for performers’, in phonograms for producers of phonograms, and broadcasts for broadcasting organisations. The Convention was concluded in 1961 and came into effect on 18th May 1964. It grants protection to performers if their performance takes place in another contracting state such as prohibiting the unauthorised broadcast of the performance.
WIPO Copyright Treaty, 1996
The WIPO Copyright Treaty (WCT) is a special agreement under the Berne Convention providing for the protection of works and the rights of their authors in the digital environment. According to the treaty, the works/subject matter protected by copyright include:
Computer programs; and
Databases i.e. compilations of data or other material, in any form constituting intellectual creations.
Hague Agreement concerning the International Deposit of Industrial Design, 1925
The Hague Agreement concerning the International Deposit of Industrial Design, 1925, as revised in 1960 seeks to facilitate international protection of industrial design through the provision of a single deposit with the International Bureau of WIPO in order to prevent possible infringement by other member states. The protection is offered when the industrial design is deposited on payment of a prescribed fee. Once the industrial design is registered and published, it will have the same effect in the contracting states as if it had been registered under the national laws.
World Intellectual Property Organisation (WIPO)
Established on 14th July 1967, WIPO is a global forum for intellectual property (IP) services, policies, information, and cooperation. It aims to develop an effective and balanced international IP system that encourages innovation and creativity for the benefit of all. WIPO has 193 member states.
Objectives of WIPO
Promoting intellectual property protection around the world through state cooperation and partnership with any international organisation;
Harmonising national intellectual property legislations and procedures;
To provide services with regard to international applications for intellectual property rights;
For exchanging information on intellectual property;
To provide legal and technical assistance concerning IP to developing and other countries;
Facilitating resolution of private intellectual property disputes;
Marshal information technology is a tool for storing, accessing and using valuable intellectual property information.
TRIPS Agreement
The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 1994 is an international level multilateral agreement that deals with the protection of intellectual property rights. The TRIPS Agreement recognizes the importance of IP in international trade and also provides a dispute resolution and prevention mechanism for trade-related IP issues. Every member of WTO is required to observe the provisions of TRIPs and provide a minimum level of IP protection in their national laws.
Categories of IP covered by TRIPs
Copyright and related rights
Trademark
Geographical indications
Industrial design
Patent
Layout designs of integrated circuits
Protection of undisclosed information
Intellectual Property Rights in India : FAQs
FAQs regarding Patents in India
What is the term of patent in the Indian system?
The term of patent in the Indian system is 20 years from the date of filing of the application.
Does the Indian patent give worldwide protection?
No, since patent protection is a territorial right, it is effective only within the territory of India. No concept of a global patent exists. However, an applicant filing a patent application in India can file a corresponding application for the same invention in the convention countries or under the PCT, within 12 months from the date of filing in India.
What is the right time for applying for a patent?
A patent application should be filed as soon as possible. An application filed with a provisional specification revealing the essence of the nature of the invention aids in the registration of the priority of the invention. Delays in filing an application may expose the inventor to risks such as:
Another inventor filing a patent application on the same invention, and
The inventor inadvertently publishing the invention by himself/herself or by others independently of him/her.
Who can apply for a patent?
A patent application can be filed by the true and first inventor or his assignee, either alone or jointly with any other person.
How can I apply for a patent?
You can submit a patent application to the Indian Patent Office with either a provisional or complete specification, as well as the fee set forth in Schedule I of the Patent Act. If the application is filed with a provisional specification, then the complete specification has to be filed within 12 months from the date of filing of such provisional application.
In which language can a patent application be filed?
A patent application can be filed with the Indian Patents Office in English/Hindi.
FAQs regarding designs in India
What is the object of a design registration?
Registration of designs seeks to protect the original and creative designs and ensures that the creator/artisan/originator of a design is not deprived of the bonafidereward of his skill and labour.
What is the effect of registration of a design?
The registration of a design grants the registered proprietor “copyright” in the design for the duration of the registration period.
What is the duration of the registration of a design?
The duration of registration is initially 10 years from the date of registration. However, in case a priority claim has been allowed, the duration is 10 years from the priority date. This initial period of 10 years is extendable by 5 years if an application to that effect is made in Form-3 along with the prescribed fee before the expiry of said 10 years.
Can I re-register a design in respect of which copyright has expired?
No, you cannot re-register a design, the copyright of which has expired.
Why is it important to file for the registration of a design at the earliest?
It is important to file for the registration of a design as early as possible due to the applicability of the first-to-file rule. This means that if two or more applications are filed for registration of identical or similar designs on different dates, then only the first application shall be considered for registration of the design.
FAQs regarding Geographical indications (GI)
What is a Geographical Indication?
It is an indication originating from a specific geographical territory.
It is used to identify natural, agricultural, or manufactured goods.
The manufactured goods should be produced or processed in that territory.
It should have a special quality or reputation or other characteristics.
Who can apply for the registration of GI?
Any association of persons, producers, organisations or authority established by or under the law can apply for registration of GI:
The applicant must represent the producers’ interests.
The application must be submitted in writing in the prescribed format.
The application, along with the prescribed fee, should be addressed to the Registrar of Geographical Indications.
Is registration of GI compulsory?
No, registration of GI is not compulsory. However, registration affords better legal protection.
What is the period of validity of registration of GI?
The registration of GI is valid for 10 years.
Can a GI be renewed? What happens if it is not renewed?
Yes, GI can be renewed for an additional 10 years from time to time. In case a registered GI is not renewed, it becomes liable to be removed from the register.
Conclusion
The importance of IP in a world of technological, scientific, and medical innovation cannot be ignored at any cost. IP is a valuable asset since it provides a competitive advantage to the owner over other entities. To make the most out of IPR, it is advisable to get it registered. An intellectual property right is a proprietary right on the product of one’s intellect. These rights support innovation and help the innovators at every stage of the business development, competition, and expansion strategy. It is also noteworthy that registered and enforced IP rights enable the consumers to make an informed choice about the quality, safety, reliability of their purchase.
References
Dr. M.K. Bhandari, Law Relating to Intellectual Property Rights, Sixth Edn. 2021
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