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Pendente lite : a legal maxim

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This article is written by Kanisha Goswami, a law student from Guru Gobind Singh Indraprastha University, Delhi. This article provides an in-depth analysis of the legal maxim pendente lite and its usage under different legislations.

it has been published by Rachit Garg.

Introduction 

Pendente lite means a pending legal suit in court or pending lawsuit. It is a temporary comfort that the court awards to the parties to suit. A hearing is generally scheduled within three or four months of the filing of a complaint. Pendente lite applies when court orders are temporarily in effect while the case or matter is undecided. The main aim of this maxim is to protect the rights of both parties. It is temporary maintenance awarded by the court during the continuation of lawsuits. 

In the case of a divorce, a pendente lite rule is often used to help the spouse who has zero earnings or who is unable to sustain while the legal procedure moves ahead. It is a temporary relief to establish financial or parental rights or responsibilities.

Application of pendente lite in case of maintenance in India

Maintenance from the law point of view refers to the financial support given to either of the disputing parties on the basis of the application made by them. The main purpose of maintenance is to help the dependent party manage his/her standard of living who has no other source of income. In India, maintenance entrusts the duty of a male to give support to his wife, parents, and child when they are not capable of maintaining themselves. It is also required to provide the same standard of life to the child as they had before separation.  The amount can be compensated either by way of monthly instalments or by lump sum payment. The court will examine the financial stability of the husband and the ground for which the wife wants to separate from her husband, before awarding maintenance to her. The husband can also claim maintenance under Section 24 of the Hindu Marriage Act if he satisfies the court that he is incapable of supporting his living or providing himself with a standard life due to his physical or mental illness. So, maintenance pendente lite is a grant to the needy party.

Statutory provisions with respect to pendente lite

Code of Criminal Procedure, 1973 

According to Section 125 of the Code Of Criminal Procedure (CrPC), a magistrate of the first class has the authority to order the person to give a monthly allowance to his spouse, old parents, legitimate or illegitimate child. The application will be registered when the husband denies maintaining his spouse, who is incapable of maintaining herself. If the husband proposes that he will maintain his wife on the condition that she has to live with him, but she refuses. Here the magistrate will consider her ground of refusal and stand by her side. The wife shall not be entitled to demand allowance if she lives in adultery.

Maintenance is awarded to the wife based on the husband’s income or financial capability and other major factors. Interim maintenance will be granted within sixty days from the date of a notice served to the respondent. Maintenance claim for all the dependents should be not less than Rs 500 per month but it has been increased now the magistrate has authority to exercise his power and grant a reasonable amount. 

The magistrate may order the father of a minor daughter to facilitate her quality of life until she attains the age of majority. Such allowance should be paid right after the date of order passed by the magistrate. A woman can claim maintenance at the time when she found that her husband has been married to another woman or he deserted her or he treated her with cruelty or when he changed his religion or ceased to be a Hindu.

Mohd. Ahmed Khan v. Shah Bano Begum (1985), was the most controversial maintenance lawsuit and a landmark case in India. Shah Bano Begum and her husband married in 1932 and they had three sons and two daughters out of that wedlock. In 1975, her husband drove her out of their matrimonial home. In 1978, she filed for maintenance under Section 125 of CRPC. She demanded 500 Rs per month as her husband was a professional lawyer and was able to give her a monthly allowance. Her husband denied it and said he was paying 200 Rs to her for the past two years. The Supreme Court delivered the judgment in favour of an aggrieved Muslim woman and said a Muslim woman has an absolute right to maintenance. The Court held Section 125 applies to every person regardless of gender, race, caste, religion, etc. It ruled that maintenance money, similar to alimony, would be paid to Shah Bano.

Hindu Marriage Act, 1955

Section 24 of the Hindu Marriage Act, 1955 entitles the wife as well as husband to claim maintenance pendente lite after showing that he/she doesn’t have any independent source of income. However, the husband has to prove his mental or physical disability to satisfy the court that he is incapable of earning and supporting his living. The court is empowered to award two specific relief, to the party:

  1. Monthly allowance during the proceedings.
  2. Expenses at the time of proceedings in respect of which relief is granted. Expenses of proceedings consist of travelling expenses, lawyer’s fees, clerical charges, etc.

The court cannot deny the grant expenses of proceedings and interim maintenance under this provision. 

Either wife or husband can get this maintenance for their own or their child also. Maintenance will be granted upon the fact that one party is proving that he/she doesn’t have any source of income for the basic expenses in daily life.

Maintenance pendente lite can also be commenced under Section 36 of the Special Marriage Act, 1954, but only the wife can claim maintenance here. She needs to prove the fact that she is indigent. 

In Rani Sethi v. Sunil Sethi(2011), Appellant (husband) filed an application that sought maintenance from his wife as she was running a business of paying guest hotels which means she was independent and financially stable. The husband was thrown out of the house and gave his belongings to him in court. They had a 26-year-old unmarried son and a 24-year-old unmarried daughter. The Court held that the respondent has to pay Rs.  20,000 per month and Rs. 10,000 for litigation expenses and provides a Zen car for their use.

Who can claim maintenance pendente lite

The wife, children, or aged parents who are unable to maintain their livings can claim maintenance under different provisions of the acts, but the husband is entitled to claim under Section 24 of the Hindu Marriage Act only. The court has to be satisfied that the person who is refusing or neglecting to maintain is capable of maintaining the others or has sufficient means.

Wife

Wife has the right to claim maintenance from her husband when she is not independent or she is not able to maintain herself or she has children to feed. She cannot claim maintenance if she is living in adultery or if she denies living with her husband without any acceptable reason or if they are mutually agreed on separation.

Children 

A child who is legitimate or illegitimate, whether married or not, can claim maintenance but only when they are unable to maintain themselves. Section 26 of the Hindu Marriage Act states that the court will from time to time pass interim orders for the maintenance and education of the minor children. Even if they have attained their majority, they can claim maintenance. The married daughter has no right to claim such maintenance.

In Smt. Jasbir Kaur Sehgal v. District Judge (1997), the wife was awarded maintenance under Section 24 at the rate of Rs. 1500 per month appealed against the judgment which she was granted. The husband was a retired army officer and after that a director in the oil and natural gas commission. The wife filed a case and stated that the husband has not mentioned the true account of assets and income and she said a father must maintain his unmarried daughter which is mentioned under the Hindu Adoption & Maintenance Act, 1956. Here, the Supreme Court held that the wife has a right to claim maintenance which includes her maintenance and her unmarried daughter’s expenses who is living with her under Section 24 of the Hindu Adoption and Maintenance Act.

Aged parents

Section 20 of the Hindu Adoptions and Maintenance Act, states that the person who is aged or infirm or unable to maintain himself or herself can claim maintenance under this Section. The Maintenance and Welfare of Parents and Senior Citizens Act, 2007 established a legal obligation for the children and legal heirs to provide maintenance to aged parents. Here, maintenance includes food, residence, clothing, and medical facilities.

In Dr. (Mrs.) Vijaya Manohar Arbat v. Kashi Rao Rajaram Sawai (1987), the appellant who is a medical practitioner at Kalyan is the daughter of the respondent, by his first wife who died in 1948 and then he remarried and he has a son from his second wife. The respondent claimed maintenance from his son and daughter both as he is unable to maintain himself and his wife. The daughter is married and independent. His father demanded maintenance at the rate of Rs. 500 from his daughter. The Court held that it is an obligation of a son as well as a daughter to maintain their parents. Section 125 of the Criminal Procedural Code imposes a duty on son and daughter both and the expression ‘his’ under this Section doesn’t exclude the parent’s right of claiming maintenance from his daughter.

Husband

Husband can claim maintenance under Section 24 if he proves his inability to earn or he proves that he has no sufficient means to maintain himself. The burden of proof lies on the husband as he has to satisfy the magistrate that he cannot support his living, either due to some mental or physical disability, thus, he is qualified to award maintenance from his wife.

Maintenance pendente lite and permanent alimony 

Maintenance pendente lite 

Maintenance pendente lite will be granted under Section 24 of the Hindu Marriage Act, 1955 when the court is satisfied that the claimant is not in a position to maintain himself or herself. It depends on the court, the power to grant maintenance and the cost of the proceedings to the spouse who is unable to maintain his or her living. Proviso under this Section provides that the application for the payment of expenses of proceeding and interim maintenance shall be disposed of within the 60 days from the date on which notice of service is addressed to the party. 

In Chitra Lekha v. Ranjit Rai on 30 July, (1977), It has been mentioned that the motive behind this Section is to provide financial aid to indigent party to maintain himself or herself during the pendency of the litigation so that the spouse does not need to suffer because of the financial crises.

Permanent alimony

Section 25 of HMA, 1955 authorises the court to award a right to either party to claim maintenance and permanent alimony. Such alimony or maintenance will be granted at the time of passing any decree. This provision empowers the court to grant a gross sum, periodical sum, or monthly sum. 

In Savitaben Somabhai Bhatiya v. the State Of Gujarat (2005), the Supreme Court held that the marriage is void on the ground of bigamy. Here, the wife is not entitled to maintenance under Hindu Marriage Act.

Landmark case laws where pendente lite was granted 

In Gulab Chand v. Sampati Devi on 19 November(1986), the wife applied in the Court and demanded maintenance from her husband. The Court granted maintenance to the wife as she is unable to maintain herself and the Court also granted maintenance to her minor children as they are living with her. It was argued by the respondent that no specific application which states maintenance for children was filed under Section 26. The Court held that they are entitled to grant maintenance to not only the spouse but also to the children who are living with her and dependent upon her. The Court granted Rs. 150 for litigation expenses and Rs. 200 per month as maintenance.

In Sandeep Kumar v. the State of Jharkhand and Another (2003), the application was filed by the petitioner(husband) against the order passed by the family court in Ranchi which was in favour of the wife. He challenged the judgment and said that his wife (2nd respondent) is running a music school and she is independent. It has been disputed by the wife and she said that the music centre is being run by her sister-in-law who she helps and she is not a salaried employee there. The Court ordered maintenance pendente lite to the wife and allowed a litigation cost of Rs. 2,500 and Rs. 1000 per month for maintenance. 

In Smt. Kanchan W/O Kamelendra v. Kamalendra Alias Kamalakar (1992), the husband demanded maintenance from his wife as he is unemployed and idle. The wife is an employee and she has to maintain her 10-year-old child. The husband is a mentally and physically well-bodied person. The Court held that Section 24 of the Hindu Marriage Act states that the husband can claim maintenance when he satisfies the court that he is mentally or physically disabled and he can’t earn or support his living. So, pendente lite maintenance was not granted to the husband here as the court states if maintenance is granted to a person who can earn then it will promote idleness to a skilled person.

Conclusion 

The object of this maxim is to provide financial support or standard life to the person who is unable to maintain it. When it comes to entitlement and justice, the needy wives are entitled to maintenance under different statutes, but Section 24 of the Hindu Marriage Act gives equal rights to both husband and wife to claim maintenance and other provisions grant the right to the children, wife, and aged parents to claim for maintenance. The court calls upon the parties to file documents like an income tax return, statement of accounts, lease deeds, etc. before granting any sum as maintenance will be granted upon the fact that one party of the proceeding does not have any sufficient source of income. The court can order a monthly amount or lump sum. 

References


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Doctrine of pith and substance

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This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article discusses the doctrine of pith and substance as adopted by the Indian Constitution. When a law approved by one legislature is contested or trespassed by another legislature, the doctrine of pith and substance is applied. 

It has been published by Rachit Garg.

Introduction 

The Doctrine of Pith and Substance states that if the substance of legislation falls within a legislature’s lawful power, the legislation does not become unconstitutional just because it impacts an issue beyond its area of authority. “True nature and character” is what the phrase “pith and substance” signifies. The infringement of the constitutional delimitation of legislative powers in a Federal State is the subject of this concept. The Court uses it to determine whether the claimed intrusion is just incidental or significant. Thus, the ‘pith and substance’ concept holds that the challenged statute is fundamentally within the legislative competence of the legislature that enacted it but only incidentally encroaches on the legislative field of another legislature. The present article discusses this doctrine majorly highlighting the same on how the Indian Constitution has perceived this doctrine. 

Evolution of the doctrine of pith and substance

The Canadian Constitution inspired the doctrine of pith and substance. The country of Canada is divided into two parts, namely, the Dominion and the Provinces. In order to divide the powers of the Dominions and Provinces, the framers of the Canadian Constitution inserted two separate lists to the Constitution. Section 69 of the Canadian Constitution, which was first established in 1857 as the British North America Act, separated the powers delegated to the Dominion from those delegated to the Provinces. Furthermore, Sections 91 and 92 of the Constitution Act of 1867 define the Dominions’ and Provinces’ exclusive rights.

The origin of this doctrine can be traced back to the case of Cushing vs. Dupuy  (1880) in Canada, and it has since spread to India, where it is firmly supported by Article 246 of the Indian Constitution and the Seventh Schedule, through which the Constitution of India divides the scope of legislative powers between the Centre and states. The Union, State, and Concurrent Lists of the Indian Constitution make up this schedule. 

While the term ‘Pith’ implies genuine nature or essence of anything, ‘Substance’ indicates the most important or vital aspect of something, to break down the concept to its molecular meanings. The state and union legislatures are made supreme within their respective areas, and they should not intrude on the sphere delimited for the other, according to the doctrine’s interpretation.

When a law approved by one legislature is contested or trespassed by another legislature, the doctrine of pith and substance is applied. This doctrine states that while assessing whether a certain law applies to a specific issue, the court looks to the content of the case. If the content of the thing falls inside one of the three lists, the encroachment by law on another list does not render it illegal since it is said to be ultra vires.

Reason behind the formation of doctrine of pith and substance

The objective behind the creation of this doctrine was to prevent absolute intrusion of legislative powers by evaluating the ‘content’ of enactment and then determining which list the specific subject matter fell within. As a result, this doctrine is applied to establish the legislative competency of a given law by examining the ‘content’ of that statute. Examining an enactment’s ‘substance’ might lead to one of two outcomes:

  1. The enactment’s substance corresponds to the subject matter given to the legislature for the purpose of enacting laws: This will constitute the enactment totally lawful.
  2. Enactment includes subject matter that is outside the jurisdiction of the federal or state legislatures: This may result in a partial or accidental incursion of legislative powers, which may or may not render the entire statute invalid and void. Certain subject topics enumerated in the three lists indicated in the Seventh Schedule might overlap at times, therefore incidental encroachments are permitted to some extent when evaluating legislative competency.

Early takes on the doctrine of pith and substance by the judiciary

During the course of examining the scope of the intrusion, a crucial question about the grounds on which legislative competence should be confirmed arose. In the case of Cushing v. Dupey (1880), the Privy Council came to the rescue in 1880. In its judgment, the Privy Council developed the doctrine of pith and substance, holding that the ‘pith and substance’ of enactment must be considered in determining whether it falls within or beyond the scope of legislative powers allocated to either the Dominion or the Province.

Lord Watson, while testifying for the Privy Council in the matter of Union Colliery Company of British Columbia v. Bryden in 1889, caught the notion of “real essence and character” of law and treated it as a metaphor “whole pith and substance” of an enactment.

Features of the doctrine of pith and substance

  1. The philosophy behind the doctrine emphasises that it is the primary subject matter that must be contested, not its unintended consequences in another discipline. Pith refers to a thing’s ‘essence’ or ‘real nature,’ whereas substance refers to a thing’s most significant or fundamental portion.’
  2. The adoption of this doctrine is necessary because otherwise every law would be considered unconstitutional since it encroaches on the subject matter of another realm.
  3. The actual character of law is defined by pith and substance. The true subject matter is being questioned in this regard and not its unintended consequences in another discipline. The idea has also been used in India to allow some flexibility in an otherwise strict electricity distribution structure.
  4. To identify which list a piece of legislation belongs to, the doctrine looks at its genuine nature and substance.
  5. It considers whether the state has the authority to enact legislation that affects a subject from another list or not.

Doctrine of pith and substance under the Indian Constitution

The doctrine of pith and substance, sometimes known as incidental encroachment, is a product of Canadian jurisprudence that has been applied to the Government of India Act, 1935, and the current Constitution. Occasionally, legislation is enacted under the authority of an item in one of the VII Schedule’s Lists. The idea of pith and substance is employed in such instances to determine which legislature has the authority to implement such legislation. The court must consider the genuine nature and character of the law, whether it essentially comes within the authority of the legislature passing it, and whether it is valid even though incidentally it touches upon some matter within the competence of another legislature.

In general, the Parliament and state legislatures are supposed to stay in their allocated sectors and not trespass on each other’s jurisdiction. If otherwise, the legislation would be declared illegal by the judiciary. But first, it will apply the doctrine of pith and substance to determine the true authority that the aforementioned piece of law comes under. To put it another way, the idea of pith and substance is used to identify which category a piece of legislation belongs to. However, the powers bestowed on each level are certain to intersect at some point. It is impossible to draw a clear line between the competencies of separate legislatures as they will inevitably overlap at times.

Need for the doctrine of pith and substance in India

  1. One of the key reasons for the doctrine’s adoption and use in India was to give flexibility to an otherwise inflexible framework for power allocation under a federal structure. 
  2. Another important ground establishing a need for the doctrine in India is that if every legislation were to be declared invalid on the ground that it encroached on the subject of another legislature, then these powers assigned to the legislature would be enormously restrictive, and this would not serve the purpose of the power being granted to the legislature.

Article 246 of the Indian Constitution : all you need to know

The distribution of authority between the Union and the States is addressed in the Constitution’s Seventh Schedule, which is enshrined under Article 246 of the Indian Constitution. Article 246 of the Constitution defines the Union’s and states’ powers by categorising them into three lists, namely, Union List, State List, and Concurrent List. The Indian Constitution establishes the doctrine of separation of powers between the national and state governments. The three lists have been placed hereunder: 

  1. Union List: This is the List in which the Centre has sole authority to enact legislation. The Union List essentially covers military, foreign affairs, railways, and banking, among other areas where Parliament can enact legislation.
  2. State List: This is the List in which states have sole authority to enact legislation. Public order, police, public health, and sanitation, as well as hospitals and dispensaries, betting, and gambling, are some of the subject matters covered under the same.
  3. Concurrent List: The List in which both the Centre and the states can pass legislation is the Concurrent List. The central law takes precedence over state law in circumstances of repugnancy. It covers subject matters such as education, population management, family planning, criminal law, animal cruelty prevention, wildlife and animal preservation, forests, and several others. 

The Constitution’s Seventh Schedule has been amended several times since 1950. The Union List and the Concurrent List have grown in size, while the State List has converged over the years. In 1976, the 42nd Amendment Act rebuilt the Seventh Schedule, guaranteeing that State List subject matters such as education, forest, wildlife, and bird preservation and administration of justice. Whereas, weights and measures were transferred to the Concurrent List.

Interpretation of the doctrine of pith and substance

In Kartar Singh v. the State of Punjab (1961), the Supreme Court’s Constitutional Bench explained how the doctrine of pith and substance should be applied. It was discovered that when the idea of pith and substance is applied, legislation relating to a topic in one of the lists may also be connected, if indirectly, to a subject in another list. The essence and substance of the legislation must be determined in such a case. If a comprehensive examination of the law reveals that it is on a topic listed in a list pertaining to the legislature, the act in its whole is to be deemed legal, regardless of any accidental encroachments that may exist.

When there is a question of legislative power, the courts must apply the theory of pith and substance. The court analyses the statute’s subject matter to the subjects covered by the three Lists, namely, the Union, the State, and the Concurrent List, and determines which of the three lists would cover the law. If the statute is covered by the List that pertains to the legislature in question, it is intra vires and hence lawful. However, if the enactment is unconstitutional, it will be declared null and invalid.

It was decided in State of Rajasthan v. Vatan Medical and General Store (2001) that once enactment is inside the four corners of an item in List-II (State List), no central law, whether issued with respect to an entry in List I or List III, can impact the legality of that state enactment. The Court further concluded that once enactment is related to Entry 8 in List II, or any other entry in List II for that matter, Article 246 cannot be used to argue that the state legislature is not competent to pass that statute. 

In the case of Zameer Ahmed Latifur Rehman Sheikh v. the State of Maharashtra and Ors. (2010), the notion of pith and substance was effectively articulated. The doctrine, according to the Court, should be used when the legislature’s legislative power in relation to a certain statute is called into doubt. If there was a challenge to the legislature’s capacity, the court would assess the law’s gist and content after the Act had been scrutinised. It is critical for the courts to evaluate the real character of the legislation, its goal, scope, and impact, as well as to determine if the law in issue was genuinely covered by a subject matter listed in the legislature’s concerned list.

Doctrine of ancillary or incidental encroachment

The idea of ancillary and incidental powers broadens the legislative power’s scope. It specifies that the authority to legislate includes the ability to legislate on supplementary or incidental subjects. These abilities are intended to assist the primary goal of the enactment in question. This concept allows for a broad and liberal reading of the items in the three legislative lists. The doctrine of ancillary or incidental powers is utilised to determine the legislative authorities’ goals and scope. The ability to legislate on incidental and supplementary topics aids in the extension of these powers.

The question in R. D. Joshi v. Ajit Mills (1977) was whether the State legislature had the authority to adopt a statute allowing it to forfeit the sales tax received by dealers. The Court ruled that this was a punitive measure to ensure that social policy was properly and effectively enforced. It further said that the entries must be given a broad interpretation in order to include ancillary and incidental capabilities.

The doctrine of ancillary or incidental encroachment is in addition to the doctrine of pith and substance. The Constitution specifies the legislative powers of both the Union and state governments. Neither of them should meddle with the other’s power. When one person’s powers are encroached upon, the notion of pith and substance comes into play. It aids in determining whether the legislature in issue was competent to pass the law in question. The ‘pith and substance’ of law, i.e., the legislation’s goal, must be within the limits of the issue over which the concerned legislature has the authority to legislate. If such is the case, the law would be unconstitutional, even if it appeared to trespass on the power.

Application of doctrine of pith and substance by the Indian judiciary 

When declaring an Act null and invalid, several considerations must be taken into account. It’s possible that the concerned legislature inadvertently encroached on the authority of another legislative, and in that case, careful inspection is required to ensure that it wasn’t done on purpose. The Supreme Court of India had observed in the case of Assn. of Natural Gas v. the Union of India and Ors. (2004) that understanding what would ordinarily be treated as “covered within that subject in legislative practice” as well as the practice of such State that had conferred such power.

This concept is a well-established legal theory in India, having been recognized by different high courts and the Supreme Court. The doctrine of pith and substance comes into play whenever a law is deemed to be intruding or trespassing into an area whose legislation has been allocated to another. The essence of the theory is that if a dispute arises about whether a certain law applies to a specific subject (which would be listed in one of the lists under the 7th Schedule), the court, in deciding such questions, examines the content of the case. Although there are several notable decisions by courts across India concerning the discussed doctrine, five landmark judgments that contributed to embedding this doctrine in the Indian Constitution have received explanation hereunder.

Prafulla Kumar v. Bank of Commerce, Kulna (1947)

The Bengal Moneylender Act, 1940 was passed for the greater good of the people and set a limit past which money lenders could not collect any money. Even the rate of interest was set at a maximum that the money lenders could collect. Moneylenders questioned the Act’s legitimacy since the loan rate was so low. 

The issue that arose with respect to the case of Prafulla Kumar v. Bank of Commerce, Kulna (1947) concerned the constitutionality of the Bengal Moneylenders Act, 1940, which was adopted by state legislatures. It was contested on the grounds that the Act only applied to promissory notes. As the subject matter of promissory note comes under the Union List, it was argued that the state had no power to create laws concerning a union matter.

Privy Council’s observations

  1. The Privy Council correctly determined that the genuine object, scope, and effect of the Act is money lending and interest on the same, that the primary issue is not promissory notes, and that the state legislature can pass legislation to safeguard the true object, extent, and effect.
  2. In this case, the doctrine of pith and substance is critical in interpreting the case’s main subject matter. The doctrine is used to safeguard the rigorous pattern of power-sharing between the state and the Union since the major subject matter is money lending.
  3. Whatever is supplementary or indirectly influences legislation established by a state legislature must be credited to the proper list according to its genuine nature and character to serve the wider public interest.

State of Bombay and another v. F.N Balsara (1951)

The decision in the case of State of Bombay and another v. F.N Balsara (1951) is noteworthy in constitutional law because it clarified several ambiguities around the doctrine of pith and substance. When a legislature’s legislative competence in regard to a particular enactment is challenged with reference to entries in different legislative lists, the doctrine of pith and substance is applied, as a law dealing with a subject in one list within the competence of the legislature concerned also touches on a subject in another list, not within the competence of that legislature. In such a circumstance, what must be determined is the essence and content of the legislation, its genuine character, and nature.

Observations of the Supreme Court of India

  1. Under List II, Entry 31 of the Indian Constitution, the state legislature has the authority to entirely outlaw the keeping, marketing, and use of intoxicating wine. As a result, there is no issue about the state’s and the centre’s jurisdictions clashing with each other in this regard.
  2. The Apex Court viewed that any act passed by the state legislature that prohibits or restricts the export of the items listed in Entries 27 and 29 of List II outside the state’s borders is illegal. However, because this Act was approved under List II Entry 31, Section 297(1)(a) of the Bombay Prohibition Act, 1949 does not apply to it. As a result, the exemption granted to Army men, Land Forces messes, and Water Ships cannot be ruled unconstitutional under Section 37 of the aforementioned Act.
  3. The Supreme Court ruled that the portions of the Bombay Prohibition Act that dealt with maintaining alcohol-mixed medications and toilet products, selling and buying them, as well as using them, were unconstitutional under Article 19(1)(g) of the Constitution, but the remainder of the provisions were upheld to be valid. It was also established that an Act cannot be deemed entirely invalid simply by declaring any of its sections to be illegal.
  4. The Apex Court had also stated that under Article 277 of the Constitution, any taxes, duties, cesses, or fees that were lawfully levied by the government of any State or municipality or other local authority or body for the purpose of the state, municipality, district, or another local area immediately before the commencement of the Constitution may continue to be levied and applied for the same purpose until provisions to the contrary are made by Parliament by law. Thus the legal principle that has been established provides that if the state government has adopted an Act on a topic over which it has constitutional authority, the Act is valid.

Synthetics and Chemicals Ltd. and Others v. the State Of U.P. and Ors.

The above-discussed case is no longer relevant because it was overturned by the Apex Court’s decision in the case of Synthetics and Chemicals Ltd. and Others v. State of Uttar Pradesh and Others (1989).

This decision was made on the grounds that there could not be a full restriction of therapeutic remedies including alcohol. As a result, it was argued that in the case of alcohol that is unfit for human consumption, commerce in such an object cannot be regarded as a noxious trade. Only when it is produced or processed for human use will it be a toxic trade.

The reasoning provided in the FN Balsara’s case was followed here. As alcohol is counted under luxurious goods, the state legislature will have to collect taxes on the ownership of alcoholic liquors suited for human consumption. However, because alcohol that is unfit for human consumption is not a luxury, state legislatures will not be able to charge taxes on it, according to the learned Attorney General. It was held that all alcohol taxes not covered by any other entries in Lists I and II will be levied by Parliament. 

State of Rajasthan v. G Chawla (1959)

The state of Rajasthan passed legislation prohibiting the use of sound amplifiers in the case of State of Rajasthan v. G. Chawla (1959). The respondent broke the law, and the judicial magistrate declared the deed unconstitutional. On appeal to the Supreme Court, the state argued that the law was within the legislative competence of the state legislature under Entry 6 of List II, that is the power to legislate in relation to public health includes the power to regulate the use of amplifiers because they produce a loud noise, whereas the opposition argued that amplifiers fell under Entry 31 of List I that includes post and telegraphs, telephones, wireless, broadcasting and other like forms of communication.

Supreme Court’s observation

The Apex Court observed that even though the amplifier is a broadcasting and communication apparatus, it did not fall under Entry 31 of List I because the legislation was a state matter in its essence and was not held invalid even if it encroached on the subject of broadcasting and communication by accident.

State of Karnataka v. Drive-In Enterprises (2001)

The imposition of tax on ‘drive-in-cinemas’ was at issue in State of Karnataka v. Drive-In Enterprises (2001). A drive-in cinema is an open-air theatre premise in which entrance is generally granted to people who want to see the movie while sitting in their automobiles. The state assessed an entertainment tax on automobiles entering the theatre, in addition to collecting an entertainment tax on those being entertained. The dispute arose as to whether the state legislature has the authority to adopt legislation imposing a tax on entry of cars/motor vehicles within such theatres under Entry 62, List II of the 7th Schedule or not. It is to be noted that the state legislature has the authority to charge a tax on ‘luxuries, entertainment, amusements, betting, and gaming,’ according to Entry 62.

Observations by the Apex Court 

  1. The Supreme Court stated that what must be determined is the true character of the levy, its essence and content and that it is in this light that the state legislature’s competence must be assessed. The doctrine of pith and substance states that enactment cannot be held ultra vires simply because its nomenclature indicates that it encroaches on matters assigned to another heading of legislation if it substantially falls within the powers expressly conferred on the legislature by the Indian Constitution.
  2. The Court further observed that the true nature and character of the contested tax, in this case, is not on the entrance of cars/motor vehicles, but on the person amused who drives their automobile into the theatre and watches the movie from their car. In essence, the tax is placed on the person who is entertained, and it makes no difference under whichever name or forms it is enforced. The term ‘entertainment’ is broad enough to encompass the luxury or comfort with which one entertains oneself. The levy is justified and lawful if a link between legislative competence and the subject matter of taxes is established.

State of A.P. v. K. Purushotham Reddy (2003)

The A.P. State Council of Higher Education Act, 1988, established a State Council for higher education in the present case. The Council’s responsibilities and tasks are divided, and it must operate in accordance with Central UGC’s rules. It must support the UGC in determining and maintaining standards, as well as proposing corrective actions for higher education in the state. It lacks the authority to operate as an independent entity in the areas of coordination and standard-setting for higher education, research, and technical institutes. The state Act is within the legislative competence of the state legislature and does not trespass on the Central field. In addition, the Act is not a colorable piece of legislation.

Observations by the Supreme Court of India 

  1. It was decided in State of A.P. v K. Purushotham Reddy (2003) that the state legislation may only be declared ultra vires when it cannot coexist with the Central legislation. The legislation should be construed in such a way that its constitutionality is preserved. 
  2. The Apex Court further noted that the entries in Schedule VII should be construed broadly. On a combined reading of List I Entry 66 and List III Entry 25, it is evident that, while the State has a large legislative field to cover, it is subject to List I Entries 63-66. When it is determined that a state Act does not encroach into the legislative sphere defined by Entry 66 List I, the state Act cannot be declared illegal.

Conclusion 

The doctrine of pith and substance has been relevant in a number of cases in which the Centre and the States have fought for legislative primacy. Because the Centre has more clout in India than the states, several of the subjects on the Union List are extremely important. States are only obligated to legislate on things that affect them. Even yet, overlaps may exist merely because one legislation is linked to another, either directly or indirectly. It is therefore important that the courts carry out their responsibilities without error.

References 

  1. https://lawcirca.com/the-doctrine-of-pith-and-substance/.
  2. https://lawcorner.in/explain-the-rule-of-pith-and-substance-with-case-laws/.
  3. https://www.researchgate.net/publication/322236376_The_Doctrinaire_Trident_Testing_Constitutionality_of_the_Laws.

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Drug de-addiction laws in India

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addictions

This article is written by Akshita Rohatgi, from Guru Gobind Singh Indraprastha University, New Delhi. It discusses the rehabilitation provisions in the Narcotic Drugs and Psychotropic Substances (NDPS) Act, the Drug De-Addiction Programme and the National Program for Tobacco Control and Drug Addiction Treatment. The author concludes by comparing India to other jurisdictions and analyzes their experiences to suggest a way forward. 

This article has been published by Sneha Mahawar.

Introduction 

Article 47 of the Indian Constitution imposes an obligation to the State to endeavour to bring about prohibition of the consumption of intoxicating drinks and of drugs which are injurious to health except those used for medicinal purposes. India has also signed various international treaties and conventions to mitigate the menace of drug abuse. This includes the United Nations (UN) Convention on Narcotic Drugs (1961), United Nations (UN) Convention on Psychotropic Substances (1971), United Nations (UN) Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) and Transnational Convention Crime (2000). To this end, the rehabilitation of those suffering from drug addiction is essential. 

Recent high profile allegations of drug use in Bollywood have brought India’s drug control policy to the mainstream discussion. Various high profile celebrities were called out and publicly castigated for allegedly taking drugs. In the background of this, the Ministry of Social Justice and Empowerment called for a ‘humane’ approach to offenders, saying that drug users are victims that need de-addiction and rehabilitation, not jail. It called for the decriminalisation of possessions of ‘small quantities’ of drugs that are only for personal consumption. This is in line with the approach of experts who work with those suffering from Substance Use Disorder (SUD). To understand this perspective, it is imperative to look at the status quo of rehabilitation provisions for addicts in Indian law. This article sheds light on rehabilitation provisions in the Narcotic Drugs and Psychotropic Substances (NDPS)  Act, 1985 and other allied schemes and concludes by providing suggestions for a more suitable policy towards addicts in India. 

Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985

The National Drugs and Psychotropic Substances Act was enacted back in 1985, a time when the scale of the drug abuse problem was rapidly expanding in India. The law’s main objective was to curb the supply of drugs, from production to possession to sale, storage, transport or consumption of any narcotic drug or psychotropic substance. It covers three types of stimulants-

  1. Narcotic drugs like opium, cannabis and poppy straw;
  2. Psychotropic substances, which includes stimulants like LSD, Amphetamines, Methamphetamines and MDMA; and
  3. Controlled substances that are used to manufacture narcotic drugs or psychotropic substances.

At the same time, the Act also focused on demand-side measures by undertaking to establish de-addiction centres for addicts. It recognized that the rehabilitation of drug addicts provides them with a better lifestyle. Thus, it not only improves the growth of a country but also fulfils the government’s goal of social justice.

De-addiction provisions

The NDPS Act (hereinafter referred to as ‘the Act’) includes various provisions regarding the de-addiction procedure and the creation of such centres by the government. Section 71 imposes the obligation of establishing identification and de-addiction centres for addicts in the country. Moreover, it imposes the positive obligation of education and social development of addicts who undergo de-addiction treatment in the State. 

Under Section 39 of the NDPS Act, they have the discretion to send convicted offenders to de-addiction centres if the offender consents to it. Moreover, under Section 64, a tender of immunity for immunity from prosecution can be made by the Central or State Government. This is awarded to an offender in return for giving evidence for a prosecution related to the NDPS Act. The extent of the immunity is determined by the tender and wilful concealment or false evidence may be withdrawn.

Under Section 64A, prosecution against an alleged offender can be withdrawn if they are caught with a small amount of narcotic drugs or psychotropic substances if they volunteer for treatment at a hospital or an institution maintained or recognised by the Government or local authority. This immunity can be withdrawn if they fail to complete the de-addiction treatment. 

Punishments

The punishments and penalties for the various offences under the NDPS act are described as follows: 

Provisions involvedOffences describedPenalty prescribed
Section 18(c) for opiumSection 20 for cannabisSection 16 for cocaThis punishes the cultivation of opium, cannabis or coca plants without licence.Cultivation is punishable by rigorous imprisonment up to 10 years along with a fine of up to Rs.1 lakh.
Section 19 This punishes the embezzlement of opium by a licensed farmer.Embezzlement is punishable by rigorous imprisonment of 10 to 20 years along with a fine ranging from Rs. 1 to 2 lakhs, regardless of the quantity.
Section 17 for prepared opiumSection 18 for OpiumSection 20 for CannabisSection 21 for Manufactured drugs or their preparationsSection 22 for Psychotropic substancesThis punishes the production, manufacture, possession, sale, purchase, transport, import inter-state, export inter-state or use of narcotic drugs and psychotropic substances.In case of a small quantity of narcotic drugs or psychotropic substances, rigorous imprisonment of up to 6 months or fine up to Rs. 10,000 or both. More than small quantity but less than commercial quantity is punished by rigorous imprisonment of up to 10 years along with a fine up to Rs. 1 Lakhs. Commercial quantity is punished by Rigorous imprisonment 10 to 20 years along with a fine of Rs. 1 to 2 Lakhs.
Section 23This punishes the import, export or transhipment of narcotic drugs and psychotropic substances.The punishment prescribed is the same as above.
Section 24This provision punishes external dealings in NDPS, i.e. engaging in or controlling trade whereby drugs are obtained from outside India and supplied to a person outside India.This is punishable by rigorous imprisonment 10 to 20 years along with a fine of Rs. 1 to 2 lakhs, regardless of the quantity.
Section 25This punishes knowingly allowing one’s premises to be used for committing an offence.The punishment described is the same as for the commission of the actual offence.
Section 25AThe given provision penalises violations pertaining to controlled substances, i.e., precursors.The prescribed punishment is rigorous imprisonment of up to 10 years along with a fine of Rs. 1 to 2 lakhs.
Section 27AThis provision punishes financing traffic and harbouring offenders.The prescribed penalty is rigorous imprisonment of 10 to 20 years along with a fine of Rs. 1 to 2 lakhs.
Section 28 for AttemptsSection 29 for Abetment and criminal conspiracyThis provision deals with attempts, abetment and criminal conspiracy.The penalty prescribed is the same as for the offence.
Section 30The given provision refers to preparation to commit an offence.Half the punishment for the offence.
Section 31Section  31AThe given Section deals with repeat offences.The penalty for a repeat offence is one and a half times the punishment for the commission of the actual offence. A 2014 amendment allowed the imposition of the death penalty in certain cases.
Section 64 Section 64A for immunity The given Section deals with the consumption of drugs and immunity offered.The penalty for cocaine, morphine, heroin is rigorous imprisonment up to 1 year or a fine up to Rs. 20,000 or both, whereas, for other drugs, there is imprisonment of up to 6 months or a fine up to Rs. 10,000 or both. Addicts volunteering for treatment enjoy immunity from prosecution.
Section 32This Section prescribes the punishment for violations not elsewhere specified.The penalty prescribed is Imprisonment for up to six months or fine or both.

National Program for Tobacco Control and Drug Addiction Treatment

Originally called the Drug De- Addiction Programme (DDAP), the National Program for Tobacco Control and Drug Addiction Treatment (NPTCDAT) originated in 1988, according to the recommendations of a Cabinet Sub Committee on drug control. It aims to provide affordable, accessible and evidence-based treatments for all Substance Use Disorders (SUD), through government facilities. 

Under the efforts of the Ministry of Health and Family Welfare (MoHFW), it builds the capacities of governmental health care staff in recognizing and managing SUDs. It provides financial help for post abuse treatment facilities in certain Central Government Hospitals and institutions. To this end, National Nodal Centre, the ‘National Drug Dependence Treatment Centre (NDDTC)’ has been established under the All India Institute of Medical Sciences (AIIMS), New Delhi in Ghaziabad (U.P.). It coordinates the services of more than two dozen Drug Treatment Clinics (DTCs) in the country.  For the full list of centres, click here.

The programme works towards reducing the demand for drugs through activities like awareness building, treatment and de-addiction. It conducts research and provides training to doctors working in de-addiction. This is in line with the recommendation of SUD experts who encourage a reduction in demand for drugs, instead of supply-side measures.

National Action Plan for Drug Demand Reduction

The National Action Plan for Drug Demand Reduction (NAPDDR) by the Ministry of Social Justice and Empowerment lays down a structured pathway to reducing adverse consequences of drug abuse. This includes awareness generation initiatives in colleges and schools, peer-led and community-based interactions, intervention programmes for adolescents and youth vulnerable to abuse, seminars and workshops with parents, capacity building of service providers and better treatment facilities.

The programme extends to focused intervention in vulnerable districts, promoting collective initiatives and self-help among those vulnerable to addiction or individuals found at risk. This is supplemented by other community-based services for the identification, motivation, counselling, de-addiction, aftercare and de-addiction for Whole Person Recovery (WPR) of addicts.

Drug demand reduction in countries outside India  

USA

The United States of America’s federal system of laws causes significant variation in inter-state drug and de-addiction policies. The broad trend within the country is the criminalisation of possession of illegal drugs and controlled substances with the potential for dependence and abuse. The crime of simple possession is committed when someone has a small amount of drugs available for their own use, without the intent to sell or give to others. 

Under federal law, simple possession is a misdemeanour and entails imprisonment for one year or less for the first offence. The term of imprisonment may also vary according to state laws. 

The policies for de-addiction vary according to state laws. Generally, those with SUD (Substance Use Disorders) are not permitted to receive treatment without voluntarily committing to staying clean. Moreover, health authorities are reluctant to fund the treatment in case of a multiplicity of barriers to success.

Civil commitment laws

Laws for involuntary treatment typically take the form of civil commitment laws. Such laws allow those suffering from a particular disease to be admitted into treatment facilities. In 37 US states along with DC, SUDs can be classified under the umbrella of mental illnesses after requisite psychiatric assessment.  Out of these, only 5 states put an involuntary SUD commitment under the definition of a mental disorder. 13 US states explicitly exclude SUD from involuntary commitment for treatment.

Civil commitment laws for involuntary SUD treatment are applicable here. 37 US states have provisions for the involuntary treatment of those suffering from SUDs. For instance, Kentucky enacted Casey’s law of 2004 that gave the families of addicts the right to initiate court-ordered de-addiction treatment. This law rests on the rationale that addicts are substance-impaired and incapable of seeking help. They need others to intervene and help them out. In Ohio, Casey’s law is made more stringent with the added requirement of proof that the addict would benefit from the treatment.

State variations

In civil commitment laws too, there are variations in state-level drug control and de-addiction policy. 

  • In Alaska and Connecticut, a person can be admitted to court-ordered treatment if they are deemed to pose danger to themselves or to others.
  • In Arizona, mandatory treatment for addiction needs a written application from a friend, relative, a peace officer or a police officer. 
  • In Colorado, those who have harmed others may intend to harm others or are incapacitated owing to drugs or controlled substances can be involuntarily committed to treatment.
  • In Delaware and Lowa, any person may petition to commit others to a treatment centre.
  • In Mississippi, committing someone to involuntary treatment costs $150. 
  • In Indiana and Wyoming, involuntary treatment is not allowed if a person has been charged with an offence. 
  • In the case of Louisiana, a coroner or minister needs to commit someone with SUD for medical treatment. Moreover, the sheriff or police officer is allowed to detain a person for 72 hours for an assessment. 
  • The Rhode Island law allows involuntary treatment for alcoholism but not SUDs.
  • Vermont adds a condition of a written recommendation from a physician for involuntary commitment to treatment.

South Africa

Recreational use of all drugs other than cannabis has been criminalised by the South African Drugs and Drug Trafficking Act 140 of 1992. This includes the widely used Nyaope made of heroin, cannabis, other antiretroviral drugs and other materials. This is owing to the fact that widespread drug abuse is a significant problem in South Africa and leads to a sharp increase in drug abuse and crime in the country that it causes.

Cannabis

In the 2018 case of Minister of Justice and Constitutional Development v. Prince, South Africa decriminalised the private consumption of cannabis. Thus, an adult may possess and consume cannabis in private, away from the public, including children and non-consenting adults. 

Currently, there are no quantitative limits on what quantity adults are allowed to carry, consume or produce. It is the domain of the legislature to specify this. In 2020, the Cannabis for Private Purposes Bill was brought out. The Bill has not been passed yet.

Criticism and recommendations

The South African Drug policy has been widely criticised for criminalising drug users and traffickers in the same manner through imprisonment. Harsh sentences are meted out to drug traffickers who might also be victims of drug abuse themselves. 

It is pertinent to point out that often, imprisonment does not deter those with drug abuse problems. This approach was considered ‘latching the stable door after the horse has bolted’. According to Mampolokeng Monyakane of the University of South Africa, innovative means and early involvement of medical experts are better approaches to combat the drug endemic. Early interventions would ensure that drug abusers are not punished without being healed. 

A robust system of correctional facilities is needed to this end. However, South Africa has a dearth of  facilities and professionals. This would need urgent development of forensic care facilities. A roadmap towards developing this would need the South African Department of Justice and the South African Department of Health to collaborate on this issue. 

Additionally, the police need to work hand in hand with mental health professionals and the special police force investigating drugs must be trained with identifying high-risk cases. This would mitigate the risks of addiction before the justice system kicks in.

United Kingdom

With the Misuse of Drugs Act, 1971 at the centre, the UK’s drug control legislation is predominantly based on prohibition and criminalization. The comparatively minor drug-related offences garner non-criminal sanctions with diversion schemes like treatment and referral to drug awareness programmes. 

Deaths and review

In recent years, this strategy has come under fire by activists, academicians and medical experts as the pandemic witnessed drug-related deaths soaring to record levels in the country. As the view of the UK’s drug policy increasingly turned against it, calling it ineffective and counterproductive, the government commissioned a review of this policy. 

Led by independent expert Carol Black, the review highlighted how the UK’s half-a-century old drug policy was unable to curtail either rising demand or availability of drugs. Crumbling government infrastructure coupled with ineffective de-addiction services had a significant role to play here. 

The 2021 policy

This report triggered a widely- publicised ‘reform’ by the UK government, announced via publication of a fresh policy document. Titled ‘From harm to hope: A 10-year drugs plan to cut crime and save lives’, the document detailed a strategy to reduce the demand and the supply of drugs and deliver better quality of de-addiction and recovery services. It broke the trend of de-addiction funding cuts by increasing the total budget outlay for de-addiction programmes, now amounting to £780 Million for three years. The new strategy also included housing, employment as well as community care provisions for drug users.

At the same time, the new strategy allocates ‘tough enforcement’ twice the funding than it does to de-addiction services. It has been castigated for continuing with a punitive approach to the war against drugs, in spite of touting itself as a reform. The new policy ends up content with the status quo, by making peace with the tried, tested and failed approach of criminalisation of addiction.

China

Decriminalisation model

The Chinese strategy towards drug control and prevention underwent a radical reform in 2007, by the passing of the Anti-Drug law. This law was based on a strategy to balance leniency and severity while curbing arbitrary preventive detention. Now, drug users were looked at as victims of dependency and de-addiction was preferred over penalisation. Pursuant to this, the use of drugs in China is categorised as an administrative offence, as opposed to a criminal one.

The Chinese system categorises drug de-addiction treatment into four stages:

  1. Voluntary treatment,
  2. Community-based treatment,
  3. Compulsory isolated treatment (CIT),
  4. Community-based rehabilitation.

But not really

At first glance, it is a model drug control policy. However, a deeper dive reveals that this is not the case. The Chinese strategy focuses heavily on coercive, custodial methods that disregard the basic liberty of the sufferers by enforcement of rehabilitation in detention. It forces addicts to go through a compulsory nine years of coercive treatment, increasing the stakes and deterring addicts from opting for treatment. 

In certain situations, the government may order an addict to be detained for rehabilitation without a criminal conviction, trial or right to appeal. Moreover, the Chinese Criminal Code classifies trafficking, production, supply as criminal offences, with punishments from up to 3 years of jail to the death penalty. There is compulsory registration and a ban on driving licence for those with a record of using drugs, thus increasing the stigma among victims and preventing them from seeking help. 

Therein lies the inconsistency in the Chinese approach. While drug use is officially considered ‘decriminalised’, the punitive administrative sanctions hark back to prohibition-era thinking. 

The way forward

Infrastructure

As explained above, the NDPS Act gives addicts immunity from prosecution, providing them with the option to undergo de-addiction treatment at de-addiction centres. To examine the impact of the Act, Vidhi Centre for Legal Policy surveyed several districts in Punjab in its study titled ‘from addict to Convict: the working of the NDPS Act in Punjab’. This state was chosen due to the massive scale of its drug crisis. Its report revealed that between 2013-15, none of the accused under the Act were mandated to attend de-addiction centres.

The report highlighted the infrastructural issues in government-run de-addiction treatments. Government facilities for de-addiction are insufficient, considering the number of people suffering from drug addiction. Only 26 out of the total 31 rehab centres in the state were found to be functional.  According to Dr. Debashish Basu, Professor of Psychiatry, the beds available at a de-addiction centre he interacted with was just 20, even as around 2,000 new patients and 8,000 older follow-ups come to the centre annually. 

According to governmental figures of 2016, 1.49 lakh patients came to both government and private centres in Punjab for de-addiction. As of 2018, there were only 96 de-addiction and 77 private rehab centres in the state. The COVID19 pandemic and the consequent lockdown hindered the supply of drugs and narcotics in the state. This resulted in a spike of addicts opting to join the government’s de-addiction centre. In April 2020, the number of registered addicts with the government’s health department spiked to 4.14 lakh.

Facilities available at government-run centres are not enough to cater to those who approach it. Lack of adequate infrastructure for the de-addiction of addicts encumbers the State’s capacity to handle the drug problem. Thus, there is an urgent need for the allocation of more resources to this cause. 

The attitude of courts

There is a stark gap between the letter of the law, i.e. the mandate of the NDPS Act and ground-level enforcement of it. Insensitive judges look at drug users as criminals instead of patients in need of help. They use the discretion awarded by the NDPS Act to send consumers of drugs to jail instead of de-addiction centres. 

This liberty in the hands of judges to allow suffering addicts a chance to get better is sparsely used due to the lack of tangible guidelines in the law. This continues unabated due to an absence of political will to set up the machinery to enforce de-addiction and a lack of policy measures to sensitise judges. Statutory guidelines to minimise the discretion awarded to individual judges is one way to break this trend. 

Treatment of addicts

Critiques of the Indian policy on drugs argue that a fundamental flaw in the Act is the criminalization of addiction. The Indian Psychiatric Society published a report in 2016, acknowledging addiction as a serious disease and emphasising the need for de-addiction centres. Addicts can not stop consuming drugs as a result of their disease. It is argued that criminalising this consumption is akin to criminalising the disease itself. 

Nevertheless, Section 27 of the Act punishes the consumption of any narcotic drug or psychotropic substance. Various NGOs that work with addicts argued Section 27 goes against the stated legislative intent of de-addiction and reformation of addicts. 

This is a logically unsound approach. Consider an analogy- those suffering from madness have an unsound mind. Thus, they are exempted from criminal sanctions and incarceration. This is because they did not have the self-control to stop committing this crime. Similarly, addicts often are not able to control their want of consuming drugs. Nevertheless, the legal system turns a blind eye to this by making the act of consumption an offence in itself.

Incarceration further adds to the stigma among drug users and discourages them from seeking the help they need. A more effective approach to combating the drug epidemic is ending the stigma attached to drug use and providing better facilities for de-addiction for users. 

Hard and soft drugs

The NDPS also refuses to make any distinction between ‘hard’ drugs- heroin and cocaine, which are more addictive and ‘soft’ drugs – like cannabis, which are comparatively less addictive in nature. Thus, consumers of soft drugs are being labelled as ‘criminals’ by the act already. They would have no legal incentive to forgo the consumption of hard drugs in favour of soft ones since the penalty for the consumption of both is the same. 

Addicts and casual users

The distinction between casual users and addicts is an important one. Treating them as one and the same is a bad idea. The Vidhi report flagged the problem of a lack of any distinction between those who simply consume the drugs and the addicts. 

The legislative deliberations in 1985 while the act was being considered, failed to differentiate between the two. More than two decades later, the Standing Committee Report of 2011 made a futile attempt to rectify this by attributing comparatively lesser guilt to the ‘addict’ but demanding penal sanctions against them too. It failed to mitigate the problem by claiming that such a provision was necessary to encourage deterrence.

The NDPS act must forgo its focus on uniformity and acknowledge the various classes of drug and psychotropic substance holders. Treating addicts, casual users and commercial drug lords as one and the same hurts the efficacy of drug control measures and hurts the actions of NGOs to rehabilitate addicts. 

Conclusion

Having examined the drug control policy in India and its issues, there is a clear need to amend our drug policy from being centred on de-addiction instead of criminalization. Disproportionate and harsh punishments tend to treat victims as criminals and have the effect of incarcerating innocents. This takes the focus away from drug dealers and traffickers who profit off of this immoral activity. 

Reducing the demand for drugs, instead of the supply is the way forward. Those addicted to drugs need to be provided with the medical attention they need and law enforcement can focus on the hardened criminals. Ramping up medical infrastructure and mental health institutions is imperative to win the drug war. 

To achieve this end, we need to give a legal sanction to the distinction between consumers and addicts. Decriminalising the consumption of certain drugs is the need of the hour. Those consuming soft drugs infrequently should not be subjected to any legal penalising. This would help reduce the stigma and help prioritise those who need help. Harsh punishments can be reserved for traffickers and smugglers who prey on innocents by treating the drug trade as a commercial activity. 

References


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IPO eligibility requirements for Indian Capital Markets

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This article is written by Madhavan Vasdev and pursuing a Diploma in General Corporate Practice: Transactions, Governance, and Disputes.  This article has been edited by Ruchika Mohapatra(Associate, Lawsikho). 

This article has been published by Sneha Mahawar.

Introduction

It is a sight to behold for a promoter or startup founder to witness the shares of his company being traded at stock exchanges. But keeping aside the matter of pride, raising money from the public through stock exchanges involves the work of a lot of parties, and eligibility criteria is also a big concern.

The primary legislation that governs the laws related to the listing are the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2018, as amended (the ICDR Regulations) and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, as amended (the Listing Regulations). In this article, the listing eligibility for NSE is discussed.

The listing requirements can be categorized under the following heads:

  1. Common conditions for public issue(Chapter 2 of SEBI ICDR)
  2. Eligibility requirements for getting listed(Chapter 3 Part 1 of SEBI ICDR)
  3. Mandatory Perquisites for NSE

Common conditions for public offering

There are some common conditions that should be considered if there is a public or rights issue. These conditions can be categorized into dos and don’ts and are as follows:

Don’ts for Public issue

  • The issuer should not be debarred from accessing the capital markets.
  • The issuer should not be a promoter, director of a company that is debarred from accessing the capital markets.
  • In relation to convertible debt instruments, the issuer should not be in the list of wilful defaulters published by RBI or in default of payment of interest(or principal amount) issued by it to the public for a period of more than 6 months.

Do’s for Public issue

  • The issuer should have made an application to at least one of the stock exchanges for a listing of the specified securities and has chosen one of them as a designated stock exchange.
  • The issuer should have entered into an agreement with a depository for dematerialization of specified securities already issued or proposed to be issued.
  • All the existing partly paid-up equity shares of the issuer should have either been fully paid up or forfeited.
  • There must be a firm arrangement of finance through verifiable means towards seventy-five percent of the stated means of finance excluding the amount to be raised through the proposed public (or rights) issue or through existing identifiable internal accruals.

Eligibility requirements for getting listed

The applicant who wants to get listed can take one of the two routes i.e Profitability or Non-Profitability route.

Profitability route

Under this route the applicant should satisfy the following conditions:

  • Net tangible assets of minimum three crore rupees in each of the preceding three full years(of twelve months each), of which not more than fifty percent are held in monetary assets.
  • Track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three out of the immediately preceding five years.
  • The net worth of minimum of one crore rupees in each of the preceding three full years(of twelve months each).
  • The aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size does not exceed five times its pre-issue net worth as per the audited balance sheet of the preceding financial year.
  • If it has changed its name within the last one  year, at least fifty percent of the revenue for the preceding one full year has been earned by it from the activity indicated by the new name.

Non-profitability route

In case the above conditions are not fulfilled, the entity can go for IPO by taking care of the following conditions:

  • The issue is made through the book-building process and the issuer undertakes to allot at least fifty percent. of the net offer to the public to qualified institutional buyers and to refund full subscription monies if it fails to make an allotment to the qualified institutional buyers; OR

At least fifteen percent. of the cost of the project is contributed by scheduled commercial banks or public financial institutions, of which not less than ten percent. shall come from the appraisers and the issuer undertakes to allot at least ten percent. of the net offer to the public to qualified institutional buyers and to refund full subscription monies if it fails to make the allotment to the qualified institutional buyers;

  • The minimum post-issue face value capital of the issuer is ten crore rupees; OR

The Issuer undertakes to provide market-making for at least two years from the date of listing of the specified securities, subject to the following:

  1. The market makers offer to buy and sell quotes for a minimum depth of three hundred specified securities and ensure that the bid-ask spread for their quotes does not, at any time, exceed ten percent.; 
  2. The inventory of the market makers, as on the date of allotment of the specified securities, shall be at least five percent. of the proposed issue.
  • An issuer may make an initial public offer of convertible debt instruments without making a prior public issue of its equity shares and listing thereof. 
  • An issuer shall not make an allotment pursuant to a public issue if the number of prospective allottees is less than one thousand. 
  • No issuer shall make an initial public offer if there are any outstanding convertible securities or any other right which would entitle any person any option to receive equity shares after the initial public offer: 

Exceptions to the above rule

  1. A public issue made during the currency of convertible debt instruments which were issued through an earlier initial public offer, if the conversion price of such convertible debt instruments was determined and disclosed in the prospectus of the earlier issue of convertible debt instruments.
  2. Outstanding options granted to employees pursuant to an employee stock option scheme framed in accordance with the relevant Guidance Note or Accounting Standards, if any, issued by the Institute of Chartered Accountants of India in this regard.
  • Subject to provisions of the Companies Act, 1956 and SEBI (ICDR) regulations, equity shares may be offered for sale to the public if such equity shares have been held by the sellers for a period of at least one year prior to the filing of the draft offer document with the Board in accordance with sub-regulation (1) of regulation 6 of SEBI (ICDR).
  • No issuer shall make an initial public offer unless as on the date of registering prospectus or red herring prospectus with the Registrar of Companies, the issuer has obtained grading for the initial public offer from at least one credit rating agency registered with the Board.

Mandatory prerequisites For NSE

An applicant who desires listing of its securities with NSE must fulfill the following prerequisites:

Paid-up equity capital

The paid-up equity capital of the issuer should not be less than 10 crores and the capitalization of the equity should not be less than 25 crores.

Conditions precedent to listing

The issuer should follow all the laws inter alia of Securities Contracts (Regulations) Act 1956, Companies Act 1956/2013, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

Three years track record

At least three years of track record of either the applicant or promoters or a partnership firm and subsequently converted into a company.
For this purpose, the applicant or the promoting company shall submit annual reports of three preceding financial years to NSE and also provide a certificate to the Exchange in respect of the following: 

  1. That the company has not referred to the Board of Industrial & Financial Reconstruction (BIFR) and No proceedings have been admitted under Insolvency and Bankruptcy Code against the issuer and Promoting companies.
  2. The company has not received any winding-up petition admitted by a NCLT.
  3. The net worth of the company should be positive. (Provided this criterion shall not be applicable to companies whose proposed issue size is more than Rs.500 crores).

Others

The applicant desirous of listing its securities should satisfy the exchange on the following:

  1. Redressal Mechanism of Investor grievance

The points taken for consideration are:

  • Details of pending investor grievances against Issuer, listed subsidiaries, and top 5 listed group companies by Market Cap. 
  • Arrangements or mechanisms evolved for redressal of  investor grievances including through the SEBI Complaints Redress System.
  1. Defaults in payment

Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant, promoters/promoting company(ies), group companies, Subsidiary Companies shall also be considered while evaluating a company’s application for listing. The securities of the applicant company may not be listed till such time it has cleared all pending obligations relating to the payment of interest and/or principal.

Failures of recent IPOs

The year 2021 was a historic year for the Indian capital markets as 59 companies went for IPO. One of these 59 companies was Paytm which set the record for the largest IPO in India by raising Rs. 18,300 CR. Though Paytm’s IPO got subscribed 1.89 times, it made a disastrous debut at the stock market crashing 27 percent from its issue price ( ₹2,150 per share) on the first day due to lofty valuation and skepticism about its business model.

One of the reasons which can be attributed to the IPO failures of such startups is their Non-profitability. According to the normal route these startups won’t have been able to see the light of the stock market because of their low profitability. But the QIB route(Non-Profitability Route) of SEBI has made the day for these loss-making startups. Finding a QIB or a scheduled commercial bank for investment is not difficult for them. But the challenge comes when their shares post listing is made to stand the wrath of the market. 

These startups also put a very high valuation. The majority of companies going for IPO are technology companies. The majority of these companies are at losses or have some level of profits. Despite this fact, they seek gigantic valuations than other traditional listing companies. Investment bankers frequently assign a high valuation for the company, leaving no room for regular investors.

What should the retail investors watch out for

Capital markets have started to penetrate deep into the economy. As a result, retail investors are also growing. The majority of them are inexperienced. With frequent IPOs in the market, retail investors should be careful of the following things.

Don’t believe everything

Most of the common media is manipulated. They want you to believe that every IPO will give you listing gains, every new tech company is the apple of the 80s, etc. Don’t believe everything the media portrays.

Focus on management and vision of the company

Retail investors should inter alia focus on the vision of the company. Most startups start strong and after reaching a competitive valuation they lose their focus. Consequently, they lose sight of their long-term vision. They start deviating from their core competency. As a result, their stock nose dives in the market.

Be Patient

Sometimes due to some temporary market sentiments, the stock of a company is not able to achieve the desired result. Stocks of some well-reputed companies may also not be able to gain momentum after the initial days of listing. Thus investors should patiently observe the market and not haste their decisions. For example, in the case of MTAR technologies, the stock almost doubled on a listing day. But after that, the stock performed average and did not achieve the necessary momentum. After about a year from its listing, the stock has quadrupled its offer price and doubled the listing day price.

Conclusion

India possesses a lot of potential for upcoming startups. It has the 3rd largest startup ecosystem in the world; expected to witness YoY growth of consistent annual growth of 12-15%. The startups should focus on their competitive edge and problem solving rather than getting sky-high valuations. The startups should not rush for listing. If the idea is great but the business model outlook is hazy, they should consider raising funds through private placement(like CRED did) and avoid listing as non-performance post listing can impact the market in a significant way. 

References


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Voter card and Aadhar card link : an assault on the Right to Privacy

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This article is written by Ayushi Kumari from Gujarat National Law University. The article elucidates the repercussions of linking an Aadhar card to voter IDs of an individual and how it affects the legal rights of people.

It has been published by Rachit Garg.

Introduction

The Aadhar card, these days, seems to be one of the most important things that a person carries as his identification card, something that is used to identify the real identity of an individual. Any information related to the Aadhar card, if, goes into the wrong hands can cause a myriad of complications to that person, infringement of an individual’s Right to Privacy being one of them. While we keep this in mind, let us take a hypothetical situation wherein the Aadhar cards are linked to Voter ID cards. Certainly, a myriad of personal information will be shared with the election-related databases, something which most individuals would not consent to, if asked for personally. It will lead to increased cases of voter fraud, disenfranchisement, and of course infringement of a person’s right to privacy.

Take for instance, very recently, during the State Assembly elections in Telangana around 27 lakh voters’ names were missing from the voters’ list. This happened because the Election Commission decided to link the Aadhar to voter identity cards without any consent from the public. Moreover, when it came to removing names from electoral rolls, it didn’t fulfil any of the legal criteria. The people whose names were removed from the electoral records were not notified, and no plans were made for them to re-apply either.

History of linking the Aadhar with the Voter ID

The Election Commission had first decided to link the Aadhar (or the Unique Identification Authority of India, UIDAI) number with the Voter ID cards of the public, in 2015. This step was taken in order to bring error free and authenticated electoral rolls by removing the duplicate voters’ information. This comprehensive programme was called the National Electoral Roll Purification and Authentication Programme (NERPAP)

However, the programme was called off, or rather put for temporary suspension, when the constitutional validity of Aadhar was challenged and the Supreme Court on August 11, 2015 issued an interim ruling forbidding the use of Aadhaar for “any purpose” other than the state-facilitated distribution of food grains and cooking fuel such as kerosene and LPG. By order dated August 13, 2015, the ECI decided to halt the said process.     

Puttaswamy verdict 2018

The case involved a legal challenge against the government’s Aadhaar scheme which is basically a biometrics-based identity card that the government proposed making mandatory for access to government services and benefits. The case was brought before a three-judge Supreme Court panel on the grounds that the scheme violated the right to privacy. 

On behalf of the Union of India, the Attorney General contended that the Indian Constitution does not provide specific protections for the right to privacy. He based this on findings by an eight-judge bench in the case of M.P. Sharma v. Satish Chandra (1954) and a five-judge bench ruling in the Kharak Singh v. Uttar Pradesh (1962). The dissenting view in Kharak Singh was upheld by a subsequent eleven-judge Court, which determined that basic rights were not to be regarded as independent, unrelated rights. Later rulings by smaller Supreme Court benches that explicitly affirmed the right to privacy were based on this precedent. 

However, the Supreme Court while overruling the decisions made in MP Sharma and Kharak Singh with regard to not expressly recognising the Right to Privacy, in the present case unanimously recognized that Article 21 of the Constitution safeguarded the right to privacy as an integral aspect of the right to life and personal liberty. 

The judges’ concurring opinions, in this case, strengthened the right to privacy, recognising that it involves autonomy over personal decisions, bodily integrity, and the protection of personal information (e.g., beef consumption, reproductive rights, the privacy of health records respectively). Specific ramifications of this right were discussed in the concurring decisions.

The Bench’s finding in the concurring decisions reflects the diversity of viewpoints and numerous aspects of privacy that have been incorporated into the reasoning given in this case. While it was held in this case that the right to privacy is not absolute in nature, the Court had also provided us with an overview wherein it stated that the judicial review threshold must be employed when the government tries intruding on an individual’s privacy. 

Chandrachud’s dissent 

On behalf of Chief Justice J.S. Khehar, Justice R.K. Agarwal, Justice Chandrachud himself, and Justice S. Abdul Nazeer, Justice D.Y. Chandrachud delivered the main judgement. Justice Chandrachud while overruling the Kharak Singh judgement, stated that the Right to Life under Article 21 suffers from internal instability. Furthermore, stated that on the one hand, because of privacy reasons the regulation enabling domiciliary visits was struck down without explicitly using the phrase, but on the other hand, it recorded the absence of constitutional protection of privacy. Moreover while holding privacy as a sacrosanct natural right Justice Chnadrachud stated that privacy is a very important and inherent part of life, dignity, liberty, and freedom and thus, is inseparable from the human personality. He also stated that the notions of liberty and dignity are the source of origination of fundamental rights. 

Justice Chandrachud while overruling the ADM Jabalpur v. S.S. Shukla (1976) case stated the inalienable character of the privacy right and held the state responsible to protect the privacy rights of each individual. Furthermore, held that these rights are not subject to circumscribed limits set up by either the Constitution or the state.

Justice Chandrachud went on to say that the Aadhaar Act was unconstitutional in its entirety due to the manner in which it was passed. The Aadhaar Act is found unconstitutional for failing to meet the required standards to be certified as a Money Bill under Article 110, according to Justice Chandrachud, who used the idea of Pith and Substance and examined how a Money Bill should be passed in great detail. However, as the majority Bench in this case already upheld that the Aadhar Act has passed the constitutionality test, his rulings will have no effect.     

2019 Amendment

To replace the ordinance which was promulgated in March 2019, the Aadhaar and Other Laws (Amendment) Bill, 2019 was introduced on June 24, 2019, by the Minister of Electronics and Information Technology, Mr. Ravi Shankar Prasad, in Lok Sabha. Some of the highlights of this amendment are as follows:

  1. Offline verification of the Aadhaar number holder: Aadhar authentication provides for verification of an individual’s identity under the Aadhar Act. The amendment also allows for ‘offline verification’ of an individual’s identification without authentication, using techniques outlined by the Unique Identification Authority of India (UIDAI) in regulations.
  2. The use of Aadhaar for government assistance programmes: States will be authorised to use the unique identity number for their own welfare schemes now that the cabinet has approved the Aadhaar and Other Laws (Amendment) Act, 2019. The measure will allow states to adopt the Centre’s direct benefit transfer (DBT) scheme based on the Aadhaar number.
  3. In some instances, information must be made public: The Act initially provided that when security and confidentiality of Aadhaar related information are disclosed after the order of a district court, the restriction related to the disclosure of information will not apply. However, the Bill modifies this to allow such disclosure only in response to high court orders.
  4. Voluntary use: The Act initially allowed for the use of an individual’s Aadhaar number as proof of identification, subject to authentication. This clause is repealed in the Bill, which states that an individual may freely use his Aadhaar number to establish his identity through authentication or offline verification.
  5. Complaints:The Amendment amends the provision that only when UIDAI registers a complaint, the court can take cognizance of the offense not otherwise, to a provision that allows individuals to file complaints in certain circumstances, such as impersonation or identity exposure.

2020 rules that elaborated how Voter ID linked with Aadhar can be used

A state or a central government department can ask the Unique Identification Authority of India (UIDAI) to allow Aadhaar authentication for “use of digital platforms to ensure good governance, prevention of dissipation of social welfare benefits, and enablement of innovation and the spread of knowledge,” according to the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Rules, 2020. The UIDAI is in charge of enrolling people in the 12-digit unique identity number and designing policies, procedures, and systems for issuing Aadhaar numbers to them.

The government can use Aadhaar authentication to verify a person’s identity before granting them access to consumer services, subsidies, and other benefits. This can be done with a one-time pin issued to the Aadhaar number holder’s mobile number or email address, or with fingerprint or iris-based authentication. However, before collecting information about an individual’s identification, the government must obtain their agreement.

Andhra Pradesh case of data leak

The problem

A first information report (FIR) was filed against IT Grids Pvt. Ltd. for illegally storing and using the Aadhar data of people. The complaint was made by the Unique Identification Authority of India (UIDAI).

After the YSR Congress filed a complaint against the TDP’s ‘Seva Mitra’ mobile app, the company was investigated by the authorities. IT Grids is a Telugu Desam Party (TDP) affiliated company. 

Forensic investigations, following multiple raids by the Cyberabad Police on the Madhapur office of IT Grids, were carried out on the materials recovered. The Telangana State Forensic Science Laboratory (TSFSL) concluded in its initial investigation that the corporation was storing the data of 7.8 crore people from Telangana and Andhra Pradesh using Amazon Web Services’ cloud storage services. Through the company, the Telugu Desam Party allegedly exploited the Seva Mitra application for voter profiling.

The application included voter information, including images, as well as more area for TDP volunteers to collect additional field data. It also contained information about government subsidy recipients, implying (but not confirming) that personal information was obtained from official databases.

Meanwhile, the TDP maintained its position that all data were gathered legally, mostly through surveys conducted by the party officials with voters’ approval. Perhaps most importantly, the investigation conducted by the officials showed that the data stored by IT Grids were strikingly similar to those used by Aadhaar-centric databases such as the State Resident Data Hubs (SRDH) and the Central Identities Data Repository (CIDR).

No legitimate cause (duplicate IDs)

In 2010, the undivided Andhra Pradesh was one of the first States to accept the Aadhaar project, as part of the UIDAI’s early experimentation with the initiative. Not only the central identities data repository (CIDR) is the only database that contains the information regarding the project, rather the Aadhar programme itself has many databases to store the information about the programme. The UIDAI has assisted numerous states, including Andhra Pradesh, in developing State Resident Data Hubs (SRDH) over the years. 

The process included working UIDAI with state governments to gather Aadhaar enrolment data, with the possibility for states to obtain additional personal information through a system called Know Your Resident Plus (KYR Plus). Following the deduplication process, the UIDAI actively shared all Aadhaar numbers against enrolment EIDs, as well as 44 additional criteria. This was sent to states in the form of excel sheets for storage in their SRDHs in some situations.

Through the programme “Smart Pulse Survey”, the Andhra Pradesh’s government has also been aggressively gathering data from its inhabitants. The survey uses Aadhaar to create a 360-degree profile database known as “People Hub” (an SRDH), which is part of the state’s “e-Pragati” real-time governance system. 

Andhra Pradesh, in essence, keeps track of everyone’s Aadhaar data and links it to every other database for the real-time government. As part of the e-KYC of every person in the state, the geo-location of everyone in the state was also acquired. Almost every government official in the state has access to the SRDH portal. The issue is that all of this information has been made public for years, and multiple data leak complaints have been filed with both the UIDAI and the AP government.

Extent of the compromise of Right to Privacy 

To widen the scope of Aadhaar authentication, the government issued the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Rules, in 2020. Under these rules, the law ministry has approached the UIDAI to request Aadhaar authentication for voter verification. The Election Commission of India (ECI) has previously approached the law ministry, requesting authorization to use Aadhaar numbers to de-duplicate the voter database through suggested revisions to the Representation of People’s Act and the Aadhaar Act. According to the ECI, the Supreme Court allowed the voluntary use of Aadhaar for state services if there is a legislation authorising it, a clear state interest is implicated, and the proportionality test as set out in the Puttaswamy judgement is met. Even if the ECI’s view is accepted, the proposal will most likely fail to pass the proportionality test.

Moreover, attempts by the government to integrate voter ID and Aadhaar demonstrate the exclusionary consequences. The National Election Roll Purification and Authentication Programme, which attempted to link Aadhaar with voter IDs, was blocked by a Supreme Court ruling in 2015. Despite the order, the Telangana and Andhra Pradesh Governments went ahead and linked the two States which produced disastrous results.

Only if there are no other less restrictive and equally effective alternatives can a law be called proportional. India, as the world’s largest democracy, has a system in place for revising voter lists on a regular basis, throughout numerous election cycles. The ECI hasn’t explained why traditional verification procedures don’t work or how to address them with technology. The Constitutional Conduct Group, a nonpartisan group of retired civil employees who have examined issues linked to electoral roll verification, emphasises that the ECI must focus on registering all eligible voters, particularly migrants and marginalised groups, as soon as possible.

Finally, a law may only be regarded as proportional if it has no disproportionate effect on the rights of the holder. The ECI does not appear to have considered the attendant privacy risks or the possibility of exclusion as a result of its proposal. Our Indian Constitution, in Articles 325 and 326 provide universal adult suffrage. No one can be barred on the basis of religion, race, caste, sex, or other protected categories if they are otherwise qualified. The Representation of People Act establishes a clear method for disqualification of non-Indian nationals, individuals who are of “unsound mind,” and those who have been disqualified for electoral offences. Therefore, any disenfranchisement resulting from the connection of Aadhaar and voter IDs is illegal, because it disproportionately affects people from marginalised communities and minority groups and affects their legal right of privacy by misusing the personal data given in the Aadhar as details.

Moreover, integrating these two databases would be a violation of the right to privacy and open the door to abuse. The concern here is that such a plan will infringe on our constitutional and fundamental right to privacy, as well as the vote’s secret. India currently lacks a data protection law, and the existing personal data protection bill allows the government to make extensive exceptions. Any attempt to link Aadhaar to voter IDs would result in demographic data associated with Aadhaar being linked to the voter database. This opens the door to identity-based disenfranchisement, increased monitoring, targeted advertising, and economic exploitation of personal information.

Conclusion

Since its adoption in 2010, Aadhaar has played a pivotal role in providing every Indian resident with a unique identification number that can be used to access government services. It has progressed from being optional to being necessary information for direct cash transfers over time. To combat tax evasion and monitor tax filings, the government has made it essential to link Aadhaar with a Permanent Account Number (PAN).

Moreover, a year ago, the government enabled voluntary linkage of the 12-digit identity number to register bank accounts or obtain a mobile connection as part of knowing your customer requirements. The government also stated that no service will be refused to anyone who does not have or provide an Aadhaar card for authentication. As discussed, the Supreme Court declared in 2017 (in Puttaswamy judgement) that Aadhaar could only be used for direct benefit transfers for social schemes, and that private enterprises could not utilise the unique identifying number for customer identity verification.

Twenty-three organisations and almost 500 important individuals have criticised the attempt to link Aadhaar to voter ID, calling it an “ill-thought, irrational, and unneeded step” that threatens India’s electoral democratic process. The signatories of this proposal, considering the repercussions it will bring, have asked the Election Commission to abandon the “dangerous” proposal, claiming that rather than cleaning up voter rolls as the EC claims, the move will result in mass disenfranchisement and increased voter fraud. 

References


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All you need to know about special contracts

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The article is written by Ansruta Debnath, a law student of National Law University Odisha. This article talks about defining features of special types of contracts that have specific legal recognition in India.

This article has been published by Sneha Mahawar.

Introduction

A contract is a legally binding agreement between two or more parties. While contracts can be of various types, certain specific and special types of contracts have been recognized by Indian law to attribute some kind of formality to them. The Indian Contract Act, 1872 recognizes five kinds of special contracts, namely indemnity, guarantee, bailment, pledge and agency. Each of these categories of contracts has developed its jurisprudence. They are peculiar to one another and warrants individual discussion as has been done by this author.

Contract of Indemnity

In English law, “indemnity” refers to a promise to save a person and render them legally harmless from the consequences of a particular act or incident. The pledge could be explicit or assumed, based on the facts of the case. The English meaning of indemnity is broad enough to encompass a promise of indemnification against loss resulting from any source, such as a fire or other calamity. Except for life insurance, every contract of insurance under English law is an indemnity contract.

Defining contract of indemnity

The definition of “indemnity” as given in Section 124 of the Indian Contract Act is quite narrow. It states that a contract by which one party promises to save the other, from a loss caused to them by the contract of the promisor or by the conduct of any other person is called a “contract of indemnity”. Thus, the loss must be caused by human agency and the contract aims to rectify a loss caused by human agency. For example, if goods are lost at sea due to a storm, the same cannot be considered to be within the purview of a contract of indemnity. 

The person who gives the indemnity is called the “indemnifier” and the person for whose protection it is given is called the “indemnity holder” or “indemnified”.  Further, the promise of indemnity may be expressed or implied. An important case in this regard is the decision of the Privy Council in the Secretary of State for India in Council v. Bank of India Ltd. (1938). A fake endorsement was submitted to a bank, which accepted it for its face value and in good faith. In their name, the Bank sent it to the Public Debt Office for renewal. The actual owner of the note was compensated by the State, and the State was entitled to sue the bank based on an implied contract of indemnity.

A strict reading of this Section does not include implied promises or losses caused by accidents. But in Gajanan Moreshwar v. Moreshwar Madan (1942), it was held that Section 124 and Section 125, the two Sections on indemnity in the Contract Act are not legally exhaustive and that “Indian Courts should apply the same equitable principles that the Courts in England do”.

Essentials

Thus the essentials of the special contract of indemnity can be summarised as follows-

  1. There must be two parties, namely, promisor or indemnifier and the promisee or indemnified or indemnity-holder. 
  2. A contract of indemnity is entered into, to protect the promisee from the loss. The loss may be caused due to the conduct of the promisor or any other person. 
  3. The contract of indemnity may be expressed (i.e., made by words spoken or written) or implied (i.e., inferred from the conduct of the parties or circumstances of the particular case). 
  4. A contract of indemnity is a special contract. The principles of the general law of contract contained in Section 1 to 75 of the Indian Contract Act, 1872 apply to them. Therefore, it must possess all the essentials of a valid contract. 
  5. In indemnity contracts, there is only one contract that is between the Indemnifier and the Indemnified. 

Insurance contracts

Section 124 does not include insurance contracts involved in non-man-made accidents within it. Other than that, almost all insurances other than life and personal accident insurance are contracts of indemnity. The insurer’s promise to indemnify is an absolute one. A suit can be filed immediately upon failure of performance, irrespective of actual loss. If the indemnity holder incurred liability and that liability was absolute, they would be entitled to call upon the indemnifier to save them from that liability by paying it off. 

However, through an insurance contract, if an insurer promises to pay insurance in the event of an accident like a fire, the same is not mentioned within Section 124. However, they are still valid contracts and come under Section 31 of the Contract Act which talks about contingent contracts.

Extent of liability under the contract of indemnity

Rights of indemnified

The rights of the indemnified or indemnity-holder, which can also be considered the duties of the indemnifier are as follows: 

  1. Section 125 talks about the extent of liability that an indemnity-holder or indemnified is protected against. According to Section 125(1), the indemnified is entitled to recover all damages that they are compelled to pay in a suit with regards to any matter the contract of indemnity applies, from the indemnifier. 
  2. Section 125 (2) states that the indemnified would also be able to recover all costs from a suit which they initiated or a suit in which they are the defendants. In this case, the indemnified must have acted in a way that would have been reasonable even in the absence of a contract of indemnity and must not have gone against the orders of the indemnifier. Further suits in which the indemnified is involved with the permission of the indemnifier are also within this sub-clause. 
  3. Finally, Section 125(3) talks about sums made as a compromise concerning any suit. The suit must fulfil the same conditions as was required for costs of suits as in Section 125(2).

Rights of indemnifier

The Indian Contract Act is silent about the rights of the indemnifier. From a general idea of an indemnity contract and case laws like Jaswant Singh v. the State (1965), the following can be made out:

  1. After successful indemnification, the indemnifier gains rights over the indemnified property of the indemnity-holder. Consequently, the indemnifier will have the right to sue third parties over the indemnified property.
  2. Indemnifiers have the right to pay for only those losses that are covered in the indemnity contract.
  3. The indemnifier has the right to recover money and possession from the indemnity-holder in certain cases, as the contract may specify.  

Commencement of liability

There is a difference of opinion in India among various High Courts regarding the time when the liability of the indemnifier starts. English law initially stated that action for indemnity cannot be brought against the indemnifier unless some loss is suffered by the indemnity-holder. However, this principle evolved through judgments by the Court of Equity that allowed for indemnity claims before the loss had been suffered.

The original English law principle has been used by the Nagpur High Court in Ranganath v. Pachusao (1935). The Court has held that indemnity could be claimed only when the indemnity-holder has been demnified in the first place.

The new principle of commencement of indemnity has been followed by the High Courts of Calcutta, Bombay, Madras, Patna and Allahabad. The main rationale behind this principle is that indemnity is not about repayment to the indemnified once the indemnified has been paid. It means that the indemnified should not have to make a payment by themself in the first place. This principle has been used in the case of Osman Jamal and Sons Ltd. v. Gopal Purshttam (1928)

Contract of Guarantee

Defining contract of guarantee

According to Section 126 of the 1872 Contract Act, a “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety” and the person in respect of whose default the guarantee is given is called the “principal debtor”. The person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written. In English law, a guarantee is defined as “a promise to answer for the debt, default or miscarriage of another”. 

A basic illustration of a contract of guarantee is as follows. Suppose a person A buys an item from B. C, another person states that if A does not pay B for that item, C themself will pay for that. Thus, in the given scenario, A is the principal debtor, B is the creditor and C is the surety. Thus, the primary motive behind the creation of contracts of guarantee is to provide additional security to the creditor.

Section 127 talks about consideration for guarantee. According to this Section,  anything done for the benefit of the principal debtor is sufficient consideration for the surety for giving the guarantee. For example, in the above scenario, C promises to pay B if A defaults with the consideration that the item that A is buying from B is delivered to the latter. This is a valid contract where the consideration is delivery of the item to A. 

But in an alternate scenario, suppose the delivery of the item already happens to A and then C promises that they will pay in case A defaults on the payment. In this case, there is no consideration and hence no valid contract.

Essentials

Thus, the essentials of a contract of guarantee can be summarised as follows-

  1. Can be an oral or written contract.
  2. Presence of principal debtor, surety and creditor
  3. Fulfilment of essentials of a standard contract including but not limited to-
  1. Consideration to surety must be present 
  2. The guarantee should not be obtained by concealment or misrepresentation (Section 142 and Section 143)

Extent of guarantee

The scope of a guarantor’s responsibility is determined by the contract’s provisions. In Syndicate Bank v. Channaveerappa Beleri (2006), this was effectively explained. The Supreme Court ruled that a surety’s or guarantor’s liability cannot be universal and that a contract of guarantee can take many forms. There is a distinction between a guarantee that states that a surety is only obligated to pay the creditor on demand and a guarantee that does not contain such a condition. Furthermore, depending on the terms of the contract, a surety’s responsibility may be limited to a specific amount rather than being equal to that of the principal debtor. The liability to pay may arise on the principal debtor and surety at the same time or at different points of time. A claim may be even time-barred against the principal debtor but still enforceable against the surety. The parties may agree that the liability of a surety shall arise at a later point of time than that of the principal debtor.

Continuing guarantee 

According to Section 129, a guarantee which extends to a series of transactions is called a continuing guarantee. A continuing guarantee can be revoked by the surety as to future transactions by giving notice to the creditor (Section 130). Further, Section 131 states that the death of a surety also acts as a method for the revocation of contracts of guarantee for future transactions.

Surety

A surety or guarantor is a person who comes forward to pay an amount when a person is unable to do so. If a decree is passed in favour of a creditor and against a principal debtor, the same can be extended to the surety as according to Section 128, the liability of a surety is co-extensive with the principal debtor unless stated otherwise, as mentioned in the previous section. 

Discharge of surety

The methods by which the surety in a contract of guarantee can get discharged from the contract are as follows-

  1. Section 133: by any variance of terms of the original contract of guarantee without the surety’s consent.
  2. Section 134: by release or discharge of the principal debtor.
  3. Section 135: by way of contract between the creditor and principal debtor wherein the creditor promises not to sue and give time to the debtor unless the surety assents to such a contract. 
  4. Section 139: by an act or omission by the creditor which affects the rights of the surety and eventual remedy of the surety as against the principal debtor is affected.

However, a discharge of surety does not occur in the following circumstances-

  1. Section 136: when an agreement is made with a third person by the creditor to give time to the principal debtor.
  2. Section 137: mere forbearance to sue the principal debtor or enforce any other remedy does not discharge the surety unless otherwise is provided in the concerned contract of guarantee.
  3. Section 138: discharge of one co-surety does not automatically discharge the others.

Rights of a surety

According to Section 140, once the surety performs the required act or omission or makes the required payment to the creditor, the surety gains all the rights that the creditor had against the principal debtor. Further, a surety is entitled to the benefit of every security that the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not. This is given in Section 141

In every contract of guarantee, a surety has the right to be indemnified by the principal debtor. This promise is implied (Section 145). Also, according to Section 146, co-sureties are liable to all contribute equally in a contract of guarantee. In case they are liable to pay different sums, even that must be paid as equally as possible as far as the limits of their contract permit. For example, A, B and C, as sureties for  D, enter into three several bonds, each in a different penalty, namely, A in the penalty of each 10,000  rupees,  B in that of 20,000 rupees, C in that of 40,000  rupees, conditioned for D’s duly accounting to E. D makes default to the extent of  30,000 rupees. Person A, B and C are each liable to pay 10,000 rupees. 

Contract of Bailment

Defining contract of bailment

The word “bailment” comes from the French word “ballier”, which means “to deliver”. Bailment is derived from the words ‘handing over’ and ‘change of possession’. According to Section 148 of the Act, a bailment is defined as the conveyance of goods by one person to another for a specific purpose with the condition that the items would be returned or otherwise disposed of according to the directives of the person who delivered them. The “bailor” is the person who delivers the merchandise. The “bailee” is the individual to whom they are handed.

The main characteristic of bailment is that there is the delivery of possession for a temporary purpose. If there is a transfer of ownership, then it is no bailment. The delivery is done with the promise that the bailee will restore the property to the bailor as directed by the latter. In Tilendra Nath Mahanta v. United Bank of India (2002), it was stated that the primary responsibility of the bailee was to deal with the goods according to the directions of the bailor.

Bailments can exist independent of contracts. They are said to exist sui generis as was stated in the case of Building and Civil Engineering Holidays Scheme Management Ltd. v. Post Office (1964). Thus, voluntarily taking into possession or custody goods which are the possession of another is a bailment of finding and is independent of any contract.

Essentials

  1. Delivery of possession of some goods.
  2. Delivery of some goods for some purpose.
  3. Return of the goods to the bailor after the end of bailment. 

Delivery of possession is given in Section 149. The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. Essentially there are two types of delivery possible-

  1. Constructive delivery involves a change of physical possession while goods remain where they are. For example, delivery of a railway receipt amounts to delivery of the goods.
  2. Actual delivery involves physical handing over of goods by the bailor to the bailee.

Even if a person takes delivery of certain goods without a prior formal arrangement, the same can constitute bailment. For example in Ulzer v. Nichols (1894), a waiter took the plaintiff’s court when the latter entered a restaurant. Later the coat went missing and the defendant, i.e., was considered a bailee and thus liable. But if the bailor retains possession and control over a good, the same does not constitute bailment. In Kaliaperumal Pillai v. Visalakshmi Achi (1937), a lady was melting her jewellery and making new ones by a goldsmith. Every evening she used to keep the half-made jewels in a locked box in the premises of the goldsmith’s workshop but retained the key to the box with herself. The box then got stolen. The goldsmith was not held liable as they had not received possession of goods at all.

Bailor

As mentioned above, the bailor is the person to whom the goods belong and is the one who initiates the contract and transfers possession of their goods to another person. There are two types of bailors-

  1. Gratuitous bailor: A person who lends his articles or goods without any charge, is called a “gratuitous bailor”. His duty is naturally much less than that of a bailor for hire or consideration. Section 150 states that a bailor is responsible for disclosing all the known flaws of the good that is being given for bailment. Also, Section 162 states that a gratuitous bailment terminates with the death of either the bailee or the bailor. 
  2. Bailor for reward: A bailor for consideration has a far bigger responsibility. He is profiting from his occupation, so it is his responsibility to ensure that the commodities he provides are reasonably safe for the bailment’s purposes. He has no defence if he claims he was unaware of the flaw. He must inspect the goods and correct any flaws that a reasonable assessment would have shown.

Rights and liabilities of a Bailor

Other important rights and liabilities of a bailor as given in the Indian Contract Act are as follows-

  1. Section 153 states that a bailor can terminate bailment if the bailee’s acts concerning the bailed goods are inconsistent with the terms of bailment. 
  2. Section 158 makes it necessary for the bailor to pay for the expense that the bailee has to undertake in relation to transportation etc. of the bailed goods if the latter is not receiving remuneration of the same. 
  3. Section 163 states that the bailor is entitled to any increase or profit which may have accrued from the goods by the bailee unless stated otherwise in the contract.
  4. Section 164 re-iterates the bailor’s responsibility to the bailee and states that the former shall be responsible for any loss which the bailee may sustain by the reason that the bailor was not entitled to make the bailment or to receive back the goods or to give directions respecting them. 

Bailee

The person to whom the possession of certain goods is temporarily given is the bailee. They have the following duties-

  1. Duty to take reasonable care of goods bailed as given in Sections 151152
  2. Duty to not make unauthorised use of the good bailed as given in Sections 153154
  3. Duty to not mix own goods with the bailor’s goods as given in Sections 155157
  4. Duty to return the goods on fulfilment of purpose as given in Sections 159161 and 165167

Bailment of finding

According to Section 71, a person who finds items belonging to another and takes them into his custody is subject to the same liability as a bailee. Because the role of the finder of goods is similar to that of a bailee, he is expected to exercise the same level of care with the goods as a bailee under Section 151. He also has all of the responsibilities of a bailee, including the obligation to return the goods once the rightful owner is identified. If he refuses to return, he may face conversion charges. Furthermore, he shall be liable for any loss, damage, or deterioration of the products as a result of his failure to return the goods. (Section 160 and 161 of the Indian Contract Act).

Section 168 further states that the finder of goods has no right to sue the owner for compensation for the trouble and expense voluntarily incurred by him to preserve the goods found. Also under Section 169, when a thing which is commonly the subject of sale is lost and the finder cannot locate the original owner with reasonable diligence, the same can be sold if the thing is in danger of perishing or losing the greater part of his value or when the lawful charges of the finder in respect of the things is determined to be two-thirds of its value. 

Contract of Pledge

Defining the contract of pledge

“Pledge”, which is also called “pawn”, is a kind of bailment of good with a special purpose. It is defined in Section 172 of the Contract Act. The goods pledged to serve as security for the payment of a debt or performance of a promise. The bailor, in this case, is called the “pawnor” or “pledger” and the bailee in this case is called the “pawnee” or “pledgee”. The pawnee thus has a special property or special interest in the thing pledged. The special property or interest is continuous and exists to compel the payment of the debt or sell the property if the need arises. The special nature of a pledged property was explained by the Supreme Court in Bank of Bihar v. the State of Bihar (1971). Sometimes a case may arise when a pledge in which the pawnor has a limited interest is made. Even then, the pledge is valid to the extent of that interest (Section 179).

Ordinarily, goods may be pledged by the owner or by any person with the owner’s authority. A pledge made by any other person may not be valid. Thus, in Biddomoy Dabee v. Sitaram (1878), it was observed that a pledge made by a servant in whose care the good was left by the owner is not a valid pledge. However, an exception to this rule is found in Sections 178 and 178-A which provide for certain circumstances in which a person, being left in possession with the consent of the owner, may make a valid pledge though without the owner’s authority.

Essentials

The following are the essentials-

  1. There shall be a bailment for security against payment or performance of the promise.
  2. The subject matter of the pledge is goods. 
  3. Goods pledged for shall be in existence.
  4. There shall be the delivery of goods from pledger to the pledgee.

Rights of a pawnee

  1. Section 173 gives the pawnee the right to retain the goods that have been placed to them in case of the non-performance or non-payment of the debt by the pawnor. Further, the pawnee is entitled to retain the goods or the expenses that he had to incur for the possession and preservation of that pledged good. This section was used in the case of Central Bank of India v. Siruguppa Sugars and Chemicals Ltd (2007)
  2. Section 174 also states that unless stated otherwise by a contract it shall be presumed that subsequent advances are included within the original debt and the good can be retained to recover those advances. This position was reiterated in Cowasji Muncherji Banaji v. Official Assignee of Bombay (1928). Ordinarily, however, a pawnee can retain goods only as security for the debt or promise the good was pledged in the first place.
  3. Section 175 gives an additional right to the pawnee. This is the right to receive extraordinary expenses from the pawnor which he had to undertake for the preservation and possession of the good. The same right could be enforced by filing a suit. 
  4. Upon default of payment by pawnor, Section 176 gives two distinct rights. First, the pawnee can bring legal action against the pawnee and retain the goods as collateral security. Secondly, the pawnee can also sell the pledged goods after giving reasonable notice to the pawnor. If the cost of the pledged product is less than the debt, then the pawnor continues to be liable. If it is more than that, the pawnee is liable to return the surplus amount to the pawnor. Further, the pawnor is allowed to pay the amount after receiving notice of sale and before the actual sale takes place. But he will be liable to pay for all extra expenses that the pawnee had to incur because of the default.
  5. In K.M. Hidayathulla v. Bank of India (2001), it was held that the pawnee’s two rights, namely the right to sue the pawnor for personal recovery or resort to selling the security after reasonable notice, are disjunctive, i.e., being independent of each other. The fact that a period is prescribed for filing suit would not mean that the prescribed period would also apply to the alternative remedy of selling the goods.

Rights and duties of a pawnor

The pawnor is responsible for repaying the loan or fulfilling the commitment, as the case may be. It is the pawner’s responsibility to reimburse the pawnee for any out-of-pocket expenses. It is the pawner’s responsibility to disclose any hazards that may put the pawnee in jeopardy. If the pawnee suffers a loss as a result of faults in the pledged goods, the pawnor must compensate the pawnee. The pawnor must pay the deficit if the pawnee sells the item because of the pawnor’s default.

On the other hand, the pawnor has the right to receive back the pledged good on successful payment of debt or performance of the act as the case may be.

Contract of Agency

Defining contract of agency

According to Section 182, an “agent” is a person employed for acts/activities to be committed for another person and to represent that person in dealings with a third person. The person who employs an agent is called the “principal”. Thus, a “contract of agency” involves the creation of a principal-agent relationship. The test of determining the existence of agency relationships has been explained in the Allahabad High Court case of Loon Karan Sohan Lal v. John and Co. (1967)

The relationship of principal and agent may be created in any of the following ways: 

  1. by express appointment,
  2. by the conduct or situation, 
  3. by the necessity of the case,
  4. by subsequent ratification of an unauthorised act, or
  5. by the presumption of agency in a husband-wife relationship. 

Essentials

  1. Agreement between agency and principal  
  2. Competency of principal, as given in Section 183. Competency is determined by the same factors whose fulfilment is required for a basic standard contract. Although a minor is incompetent to appoint an agent, it was held in Madanlal Dhariwal v. Bherulal (1964) that a guardian was allowed to appoint an agent for a minor and such an appointment was protected by Indian law.  
  3. According to Section 184, an agent is just the connecting link between the principal and third party and need not be competent to make a contract with the third party on behalf of the principal. Thus, anyone can act as an agent of the principal and enter into contracts on behalf of them. However, an agent must be competent to enter into a contract when the contract is with the principal for the creation of a principal-agent relationship. If the agent is not competent, they cannot be made legally responsible to the principle.  
  4. The contractual relationship must be created to enter into legal relations.
  5. Consideration is not required in a contract of agency and this is given in Section 185.  The law does not require any consideration as for the validity of a contract of agency. Since consideration may be of some benefit to the plaintiff or some detriment to the defendant, the principal’s willingness to be bound by the acts done by the agent on his behalf serves as a sufficient detriment to the principal. Also, Section 222223 of the Indian Contract Act imposes a duty on the principal to indemnify the agent.

Principal-agent relationship

Duties of an agent

The duties of an agent are as follows-

  1. A principal’s mandate must be carried out by an agent, according to Section 211. They must complete the tasks that have been assigned to them. In the absence of instructions, the agent should work according to the trade’s customs. Any failure to do so would result in the agent being held accountable for the principal’s loss. A commission agent purchased commodities for his principal and placed them in a godown in Pannalal Jankidas v. Mohanlal and Anr. (1950). The agent was given the task of insuring the items. The agent collected the insurance premium but failed to insure the goods. Following that, the cargo was lost in an explosion in the Bombay harbour. The agent was held liable to compensate the principal for his loss.
  2. According to Section 211, every agent is bound to carry on the business of the agency with reasonable skill and care. The standard of care and skill which an agent has to maintain depends upon the nature of his profession. This was the major finding in the case of Pandurang v. Jairamdas Pandurang (1925).
  3. An agent has the duty to not delegate his duties. This is given in Section 190. The rule is contained in the maxim “delegatus non potest delegare” which means that an agent to whom some authority has been delegated cannot delegate that authority to another person. However, an exception to this does exist in Section 190 which states that delegation to another person cannot happen unless by the ordinary custom of the trade or from the nature of the agency a sub-agent can or must be employed.
  4. Section 214 states that an agent has the duty to communicate with their principal.
  5. The agent has the duty to not receive secret profits while in a contract of agency.
  6. The agent has the duty to remit sums received on behalf of the principal (Section 218)
  7. The agent has the duty to avoid conflict of interest and not act on his account. An act to the contrary by the agent gives the principal two rights-
  1. Section 215 says that the principal can repudiate the contract if the agent acts on their own account and conceals materials from the former or engages in dealings which are the disadvantages to the principal. 
  2. Section 216 says that in the event of the agent acting on their account the principal will get the right to extract and receive from the agent any benefit that might have arisen from those kinds of transactions. 

Rights of agent and corresponding duties of the principal

  1. According to Section 219, an agent is entitled to some amount of remuneration. It becomes due to him with the completion of the activities assigned to him. This rule is subject to special contracts between the principal and the agent. In Saraswati Devi v. Motilal (1981),  Motilal was an estate agent who was engaged by Saraswati Devi to find the purchaser for her property. The estate agent was able to find such a person and eventually, the deal was decided upon. However, later Devi refused to sell the property. The estate agent brought an action against the former to recover some amount of money as remuneration. It was held that according to the nature of this agreement the remuneration was payable to the plaintiff when he found the purchaser who was willing and able to purchase the property and since that had been done, he was entitled to the commission. However, the agent is not entitled to any remuneration for the misconduct of business (Section 220).
  2. All funds received on the principal account must be returned to the agency. However, he has the right to keep all money owing to him from advances given or expenditures properly paid by him in conducting such business, as well as any income that may be payable to him for acting as an agent, out of any sums received on account of the principal in the agency’s activity. 
  3. According to Section 221, an agent is entitled to retain goods, papers and other property of the principal received by him until the amount due to himself for commission, disbursement and services in respect of the same has been paid to him. This provision is subject to the absence of any contract to the contrary.
  4. Section 222-223 details how the agent has the right to be indemnified and the principal has the duty to indemnify the agent. 
  5. Every principal has the duty to protect the agent from their neglect. In cases of principal’s neglect causing injury to the agent, the latter must be compensated for the same.

Liability of the principal

The liability of a principal can be discussed in the following aspect-

  1. When an agent exceeds the authority granted to them by the principal, Section 227 states that a portion of the act performed by the agent may be within the authority while the other party is outside. The principal is liable for the part of the act that is within his or her authority, but not for the part that falls outside his or her power. This can be further appreciated by looking at the Kerala High Court’s decision in Ahammed v. Mammad Kunhi (1986). The agent in this instance was given power of attorney to sell a half-right over a property. He did, however, sign a contract to sell the entire land. It was held that the purchaser had rights over only that portion of the land that the agent was originally asked to sell. 
  2. If the two parts cannot be separated, then the principal is not bound to recognize the transaction (Section 228). For example, if A authorises B to buy 500 sheep and B buys 500 sheep and 200 lambs for a sum of ₹6000, A has to repudiate the whole transaction.
  3. According to Section 229, any notice given to or information obtained by the agent for the principal shall, as between the principal and the third person, have the same legal consequences as if it had been obtained by the principal.
  4. When agents acting in the course of the principal’s business make a misrepresentation or commit fraud, it has the same effect on agreements made by such agents as if such misrepresentation or fraud has been made or committed by the principal. Thus, principles of vicarious liability apply. Section 238 contains the following provision in this regard-
  1. Misrepresentations committed by agents acting in the course of the business for their principles have the same effects on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principal.
  2. Misrepresentations or frauds committed by agents in matters which do not fall within the principal’s authority do not affect the latter.

Personal liability of an agent

According to Section 230, the personal liability of an agent can crop up when-

  • the agent acts on behalf of a foreign principal,
  • the agent acts for an undisclosed principal, 
  • the principal is disclosed but cannot be sued, 
  • there is a contract for the agent’s personal liability and,
  • the agent makes a breach of some legal obligation. 

References


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Intellectual Property issues relating to Open Source Software

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This article is written by Shubhodip Chakraborty. This article has been edited by Ruchika Mohapatra (Associate, Lawsikho). 

This article has been published by Sneha Mahawar.

Introduction

Over the years, there has been a considerable shift in software technology and the functionalities it serves. Users, whether they are individuals or corporate entities, have massively benefited from the production of such software as it has catered to most of their daily needs and usage. However, it is commonly understood that most of these users barely review the click-wrap agreements before installation of the programs; thereby, exposing themselves to several risks and compliance obligations. By and large, the corporates need to be extra vigilant when signing up for any type of risk to be compliant with the necessary regulations. The software companies spend considerable time and effort, not only in building the necessary software but also investing in fine-tuning the User License Agreements or other Licensing requirements. 

The software that we were addressing here is known as Proprietary or Closed Source Software. At a time when technology experts were keen on protecting the license or IP rights of their creation, some of the experts believed that in order to expand the scope, quality, and usability of any software, one ought to disclose the source code of the software, so that the program is “open” for the other experts to work and learn from the same. Thus, the concept of Open Source Software (“OSS”) came into being, where instead of a copyright-license coverage, it was granted a copyleft-license. 

On the forefront, the concept seemed radical and progressive, considering this would indeed be beneficial to the enthusiastic software developers. However, the question remains, do the IP rights of software completely dissolve? In this article, we will discuss some of the IP issues relating to the Open Source Software, as well as the compliance issues for protecting the IP rights.    

OSS v. Proprietary Software Licensing: IP Rights involved 

The primary difference between an OSS and Proprietary Software is in the availability of the “source code”. This source code consists of the commands or the programming language, written by a software programmer, which specifies the actions that need to be performed by the computer. As per copyright law, the copyright for such source code is vested upon the computer programmer writing the source code or the author. Furthermore, most of the software is distributed without the source code-thereby being proprietary software. This software is distributed in the form wherein the executable files ensure the running of the software and the source code of the program is undisclosed. Since the proprietary software does not contain the source code, the users, any other programmers, or system administrators are unable to modify or reproduce or redistribute the software in their terms or the original form. OSS was a copyleft initiative for such users or programmers to utilize this source code to modify and improve upon the existing software, and maybe to redistribute the same on their terms. The idea behind such an initiative was that to improve the quality of software, the source code needed to be publicly disclosed and accessible for multiple programmers to develop or modify the same. Thus, improving the quality of the software, educating a large section of programmers, and 

Broadly speaking, the differences between an OSS License and a Proprietary License can be laid down as follows:

Accessibility to the Source Code

An OSS is available and the source code is made accessible by the public. Whereas in the case of proprietary software, the source code is never accessible by the public.  

Modifications

OSS can be modified and customized according to the users’ needs and specifications. Considering the source code is not accessible to the public, the users cannot modify the proprietary software. 

Redistribution

Users of OSS can also choose to redistribute the software, whether modified or verbatim, to other users. The software can be redistributed without charging any fee or at a minimal cost. Although such redistribution of OSS can only be conveyed upon complying with certain prescribed conditions provided in the license terms and conditions. Redistributing proprietary software, without having the license or authority to do so, may lead up to an offense under the law.  

The differences also highlight certain advantages of an OSS over proprietary software. Such as, since the OSS is a community-developed program with users, developers having access to the back-end operations of the software, it allows a faster remedial mechanism of correcting bugs, security issues, and frequently updating of such software. 

Types of OSS licenses 

Upon understanding the advantages of OSS Licenses, it would be pertinent to understand how OSS Licenses are divided. OSS Licenses have been categorized as a. Permissive Licenses and b. Restrictive or Copyleft License.

The differences are primarily on the imposition of further restrictions between the two, with Restrictive or Copyleft imposing further terms and conditions on certain obligations to be complied with while redistributing the derivative works. However, for both types the principles of OSS are maintained i.e., allowing licensees to use, modify, enhance, and share the software, and providing access to the source code.

IP Issues relating to OSS 

Traditionally, and also under copyright law, the copyright is vested upon the author of the creation. Under copyright laws, there is no mandate to formally register the work. However, authors who formally register their works, and then provide appropriate notice of copyright on their works certainly get some advantages in enforcing in the court of law. In the case of a proprietary software license, as the software is purchased, the purchaser merely obtains a license to use the software, and in no way does it convey any form of right, title, or interest over the software. The license over such software is governed by the End User License Agreement (EULA). This license also restricts the user to distribute/redistribute or selling this software to any other third party. The ownership of the software remains with the entity or the user creating the software, thereby the copyright and any related IP remains with the owner. In the case of an OSS, such copyright ownership over the software is waived off, and the creator has little or no copyright over the software.

Although conceptually there is a waiver of the copyright over the software, the OSS organizations such as The Apache Software Foundation, GNU, Free Software Foundation (FSF), ensure that the author and their copyright is duly recognized and acknowledged whenever such OSS is being redistributed or shared with other users, with or without modifications. This is ensured by the license terms, wherein it is mandated that the original copyright notice should be accompanying any distribution of the software. Therefore, merely because theoretically the copyright is waived off by its creator, it does not guarantee that there would be no scope of intellectual property infringement. OSS, like any other software license, is still copyright protected and infringement of its terms and conditions may result in copyright infringement. There have been instances where the open-source foundations governing such licenses may initiate such action against such infringing parties on behalf of the developers. As per the Indian laws, the Copyright (Amendment) Act of 2012, any alteration to the Rights Management Information, without the authority or distribution with the knowledge that such Rights Management Information has been removed without the owner’s consent would be subjected to punishment with imprisonment up to 2 years with fine. As per the Act, Rights Management Information includes the name of the author, any terms and conditions regarding the use of the rights. 

Over the years, several jurisdictions have seen cases of copyright infringement dealing with OSS licenses. In one of the matters, Cisco v. Free Software Foundation, the entity Cisco was identified to have been using source codes based on Open Source Software Licenses released by Free Software Foundation, without any compliance of any terms and conditions. This led to the Free Software Foundation suing Cisco for infringement of intellectual property. It was ruled by the United States District Court for the Southern District of New York, wherein Cisco was made to release part of the proprietary code into the public domain, and also was made to oversee compliance with the free software licenses, notify its customers about the rights under the GPL License. Cisco also had to provide certain financial contributions to the Free Software Foundation. 

A corporate entity or as an individual willing to use, modify, or distribute any open source product, should take important steps to review and comply with any such license terms that are associated with the product. One of the crucial obligations under any OSS License term is to include certain copyright notices and to make available the source code, in some cases, it may also ask to incorporate notices with details about the modifications made to the code. The complexity of compliance levels up if the entities decide to incorporate the OSS Components in the proprietary software. In such a scenario, not only are the compliance of license terms manifold but also the eventual nature of such a license or product becomes decisive. This often leads to third-party infringement claims as well wherein, the present proprietor may have distributed the product as an open-source product. However, the third-party entity may assert that the software eventually infringes an intellectual property right. This leads to even further conflicts between the owner of the IP and the individuals distributing the software to the public as it is now open-source. Failure in compliance of the OSS not only results in legal action by the original licensors but also attracts negative publicity and other adverse effects to a corporation’s reputation. Therefore, complexities associated with the usage of OSS need to be handled with utmost vigilance. 

Conclusion

Intellectual Property Law has been a subject of criticism by many authors considering it is a negative right and thus, although it encourages commercial exploitation for the developers, it also creates a restriction for many other developers. Thus, leading to a rather slower pace of innovation as the other market players are discouraged from performing the similar area of research.

Any users, or entities willing to incorporate OSS products in their system either to modify and develop tailor-made software for the industry’s usage or internal use, should ensure that the license terms for such OSS products are reviewed to understand how the IP rights are affected in their ability to protect or enforce copyright over the software. Such entities must also ensure and audit the compliance of the necessary notices, source code availability, and any other obligations are being maintained considering the last thing any entity would want is to be dragged into any legal proceedings for copyright infringement or even worse, pay damages for such copyright infringements along with the license of the software being revoked. 


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When is acceptance valid under Contract Law

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This article is written by Shreya Pandey, pursuing LLM from RamSwaroop University, Lucknow. The article provides information regarding valid acceptance, its essentials, and rules of valid acceptance in the Contract.

This article has been published by Rachit Garg.

Introduction

“Acceptance is to offer what a lighted match is to a barrel of gunpowder.” 

The initial stage of a contract is when one person presents an offer before another and the other person gives their consent. Giving consent generally shows acceptance. Acceptance is an essential element of a contract. Without accepting an offer a contract cannot take place. To form a valid contract, there must be a valid offer and the offer must get accepted by the offeree. The acceptance should be valid, i.e., it must be with free will and the person giving consent should be capable of giving their consent.

Acceptance under Contract Law

Acceptance is defined under Section 2(b) of the Indian Contract Act, 1872 as “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.” This Section states that an offer is accepted when the offeree to whom the proposal is made accepts the offer without any condition. When the offer is accepted then the proposal becomes a promise and it is irrevocable. An offer does not have any legal obligation but as soon as the offer is accepted, it creates a legal obligation on the parties and therefore it cannot be revoked. The offer can be revoked only till the offer is not accepted and once the offer is accepted, it can’t be revoked or withdrawn. 

Example: X offers Y to buy his horse for 1 lakh rupees and Y agrees to the offer and gives his consent to sell his horse to X at 1 lakh rupees. This becomes a promise.

Valid acceptance: Section 7 and 8 of the Indian Contract Act, 1872

For a valid acceptance of a valid offer, there are certain essentials that are specified under the Indian Contract Act, 1872. Section 7 and Section 8 of the Indian Contract Act specify certain essentials that make an acceptance a valid acceptance. 

Section 7 talks about an acceptance to be absolute. This Section clarifies that an acceptance must be absolute, unqualified, and be expressed explicitly or impliedly, unless as specified in the proposal. If the manner of expression is already mentioned in the proposal then the offeree must express his consent in that manner.

Section 8 talks about when an offer can be accepted without communication of such acceptance. The Section says when the offeree performs the conditions mentioned in the offeror accepts the consideration for a reciprocal promise then the offer is said to be accepted.

Essentials of a valid acceptance

Following are the essentials of a valid acceptance:

  1. Acceptance should be absolute and unqualified: Section 7 talks about acceptance to be absolute and unqualified. There must neither be any condition in acceptance nor any variations to be made while accepting the offer. Any such variation or condition in the offer can constitute a counter-offer. 

Example: Mr. X offers Y to sell his house for 10 lakh rupees. Y accepts the offer and promises to pay the amount in installments. Here, the offer made by Mr. X ceases to exist because Y made variations in the offer. Therefore, it becomes a counter-offer.

In Trollope & Colls Ltd. v. Atomic Power Constructions Ltd., 1963 during the construction of Atomic Power Construction the parties decided to form a contract on the points they have agreed and continued to negotiate on which they did not agree. In this case, the question was raised whether such a contract is valid. The Court held that since the parties have not mutually agreed upon all the clauses of the contract and it can create problems in the future therefore it cannot be said to be a contract.

  1. Acceptor has an intention to fulfill the promise: For an acceptance to be valid, it is necessary that the offeree is able and willing to fulfill the promise. If the offeree has no intention to fulfill the promise then the acceptance is invalid.

Example: Mr. X agrees to sell his horse for 2 lakh rupees to Mr. Y. Later it was found that Mr. X does not own any horse. Therefore it was an invalid acceptance because Mr. X had no intention to fulfill the promise.

  1. Acceptance must be communicated: To constitute a valid acceptance, the offeree shall communicate his acceptance to the offerer. Mere mental acceptance cannot be a valid acceptance. The communication can be expressed or implied. However, if the offer is such that the offeree has to act upon then by mere acting upon the offer, the offer is said to be accepted.

In Brogden v. Metropolitan Rly. Co., 1877 the question was raised whether the contract between Brogden and Metropolitan Rly Co. was a valid contract. The facts of the case are that Brogden is the complainant who used to supply coal to Metropolitan Rly Co. (defendant). Earlier both the parties used to transact on an informal basis without any contract. Later, the defendant decided to form a formal contract. So the defendant drafted a contract and sent it to the complainant. The complainant made certain changes in the contract and forwarded the draft to the defendant who filed that agreement but never communicated the acceptance and continued the supply and purchase of coal. When a dispute arose between the parties the question of the validity of the contract. The Court held that there was a valid contract between the parties because even though the acceptance of the counteroffer was not communicated still the defendant accepted it by conduct and the coal was delivered and the payment was done according to the draft. Therefore, it was a valid contract.

  1. Acceptance must be in the mode prescribed: The mode of communication of acceptance shall be done in the manner prescribed in the offer. If in case the mode of acceptance is not specified then the acceptance can be communicated in a usual and reasonable manner. If the mode of acceptance is mentioned and the offeree communicates the acceptance in any other mode other than specified in the offer then the proposer can reject or intimate the offer and if there is no communication from the offeree then it is deemed to be accepted.

Example: Mr. Y makes an offer to Mr. X stating that the mode of communicating acceptance is through WhatsApp and Mr. X sends his acceptance through telegram then since it is not the mode specified in the offer therefore it is deemed to be not accepted. Mr. Y need not inform Mr. X that he did not communicate through the mode specified.

  1. Silence cannot be a mode of acceptance: Mere silence is not an acceptance. The offeror cannot mention silence as a mode of communication of acceptance. 

Example: Mr. Y makes an offer to Mr. X to buy his horse for 1 lakh rupees and mentions that if Mr. X does not respond to the offer within one month then it will be presumed that Mr. X has accepted the offer. If Mr. X does not respond to the offer within one month then it will not be considered as an acceptance because silence is not a mode of communication of acceptance. 

Felthouse v. Bindley, 1862: In this case, Felthouse, who is the complainant, had a discussion with his nephew regarding buying his horse. Later, he sent a letter to his nephew stating that if Mr. Bindley does not respond to the letter anymore then he will presume that he has accepted the offer and the horse will belong to Felthouse. Mr. Bindley did not respond to the letter because he was busy. Later Mr. Bindley sold his horse to someone else and Felthouse felt aggrieved and filed a suit in the tort of conversion against Mr. Bindley. The Court held that there was no contract between Felthouse and Mr. Bindley as silence cannot be a mode of acceptance. The Court held that the offer to be accepted must be clearly communicated and since in this case, Mr. Bindley did not respond to the letter therefore his silence cannot be presumed as acceptance. Therefore, there was no contract between Felthouse and Mr. Bindley.

  1. Communication must be communicated within the time prescribed or within a reasonable time if a time limit is not prescribed: The offeree must respond to the offer within the time prescribed in the offer and if the time limit is not prescribed then the offeree must respond within a reasonable time or before the offer lapses or the offer is withdrawn by the offeror.

Example: Mr. X offers to buy Mr. Y’s house in July. Mr. X accepts the offer in December. Mr. X refused to buy the house since it is beyond a reasonable time. 

  1. No acceptance before the communication of offer: Acceptance to an offer cannot precede the offer. An offer needs to be presented before an acceptance. A person without any knowledge cannot accept an offer just because he has acted in accordance with the offer.

Laksham Shukla v. Gauri Dutt, 1913: In this case, the respondent’s nephew was missing and he asked his servant (complainant) to search for the boy. After the complainant left the house to search for the boy, the respondent made an announcement that anybody who brings his nephew back home safely will be rewarded with Rs. 500. The complainant found the boy and brought him home. When he reached he got to know about the announcement and he asked for his reward from the respondent. The respondent refused to give him the money so the complainant filed a case against him. The Court held that since the complainant wasn’t aware of the offer therefore there was no contract between both of them. 

  1. Acceptance of the offer and its communication must be made by the offeree or his authorized agent: The communication of acceptance must be done only by the offeree or his authorized agent. Anyone other than the offeree or his authorized agent communicates the acceptance of the offer then there will not be any contract.

Powell v. Lee, 1908: In this case, Powell applied for the post of headmaster in a school which was accepted by the School Board. The acceptance of his application was informed to him by one of the members of the School Board. Later, the School Board rescinded his application. Powell filed a suit of breach of contract. It was held by the Court that since the communication was not made by someone who was authorized by the School Board therefore there was no valid acceptance and no valid contract.

  1. Acceptance subject to contract is no acceptance: Acceptance to an offer means acceptance to all terms of the offer. If the acceptance is made by the offeree by “subject to contract”, “subject to formal contract”, or “subject to contract to be approved by solicitors” then it means that the agreement is in the negotiation stage and the parties are not bound to the offer. If such acceptance is made then the parties are not legally bound to follow the obligations of the offer unless a formal agreement has been made and signed by both parties to the contract.
  2. If a proposal is made through an agent, it will be sufficient if the acceptance is communicated to him: If X sends the offer to buy Y’s house through an agent, Z, and Y accepts the offer and gives his acceptance to Z then there is a valid contract even if Z communicates the acceptance to X or not.

Rules regarding valid acceptance

Acceptance can be given by the person to whom the offer was made

In the case of a specific offer, the offer can be accepted by the person to whom the offer was made. No other third party without the knowledge of the offeree can accept the offer. The offeree or his authorized agent can accept the offer.

In the case of Boulten v. Jones, 1857, Boulten bought Brocklehurt’s business. Brocklehurt did not inform all his creditors about the same. Jones, one of the creditors of the Brocklehurt, placed an order with him. Boulten accepted and supplied the goods to jones. Later, Jones refused to pay the money since he had to settle debts with Brocklehurt. The Court held that since Jones never made an offer to Boulten therefore his acceptance is immaterial so there was not a valid contract between Boulten and Jones.

In the case of a general offer, anyone who has knowledge of the offer can accept the offer. 

Acceptance must be absolute and unqualified

The acceptance must be unconditional and unqualified. If there is any condition or any alterations made in the offer then the alterations make the acceptance a counter-offer and the original offer gets nullified. It is known as the mirror-image rule where acceptance reflects like a mirror to the terms of the offer.

Acceptance must be communicated

The offeree shall communicate the acceptance in a prescribed way and if the manner is not prescribed then the acceptance shall be communicated in a proper and reasonable way and within a reasonable time. Silence cannot be a mode of communication. For a proposal to be a contract, the acceptance shall be communicated to the offeror. Communication must be done within a time limit specified in the offer or if not specified then within a reasonable time. 

Acceptance must be made in the prescribed mode

Acceptance shall be made in the manner that is prescribed in the offer. The offer must be accepted by the offeree in the manner demanded by the offeror. If the offeror does not prescribe any manner of acceptance then it must be in a reasonable manner and during the normal course of business. 

Implied acceptance

Section 8 of the Indian Contract Act talks about acceptance by conduct of actions of the offeree. The Section states that if an offeree instead of communicating his acceptance, makes any conduct or actions through which makes it obvious that the offer has been accepted then the offeree need not communicate his acceptance. This will be deemed as an implied acceptance that is acceptable under this Section. 

Example: Y offers X to buy 200 pens at Rs. 2000 and X delivers 200 pens to Y. Then it is an implied acceptance.

What constitutes a valid acceptance

  1. Offer must be accepted without any condition. The offer must agree to all the terms of the contract. The offer must be accepted without any condition or without any alterations.
  2. Offer must be accepted by the one to whom the offer has been made. If someone else accepts the offer then it is invalid.
  3. The offer must be known to the offeree. Without conscious knowledge about the offer, the offeree cannot give acceptance.
  4. Acceptance can either be expressed or implied. In express acceptance, the communication is made through words, either written or spoken. In implied acceptance, merely by the conduct or action acceptance can be shown.
  5. Silence will not be presumed as an acceptance. If the offeree is silent about an offer that does not mean he has accepted the offer.
  6. There must be an intention to enter into the contract. Without an intention, there is no valid contract.
  7. Communication of acceptance is important. The offeror must be communicated that his offer has been accepted by the offeree.
  8. The offeror must receive the acceptance in an agreed-upon manner otherwise the offeror has an option to withdraw or reject his offer.
  9. If the mode of acceptance is already mentioned then the offeree must communicate his acceptance in the mode prescribed otherwise in a reasonable and usual manner the communication must be made.
  10. The offer must be accepted in the prescribed time limit if given. If the time limit is not mentioned then the offeree shall communicate his acceptance within a reasonable time. 

What is an invalid acceptance

When an offer is made and the offeree accepts the offer but it creates no legal obligations on both the parties to abide by the promise, it is an invalid acceptance. An invalid acceptance invalidates the entire contract. There are the following ways through which an acceptance becomes invalid acceptance:

Acceptance without communication

It is necessary that the offeree communicates its acceptance to the offeror. Unless the acceptance is communicated and received by the offeror the acceptance will not be considered as a valid acceptance. In Felthouse v. Bindley, the offer of buying the defendant’s horse was made. The defendant did not communicate his acceptance to the plaintiff therefore there was no legal contract between them.

Counter-offer

It happens when the offeree to whom the proposal is made brings any change in the original offer. The change might be bringing new terms in the proposal or making any extra conditions. Any alteration in the original proposal invalidates the entire proposal and thus it becomes a new offer. So now, it is upon the original offeror to accept or reject the counter-offer.

In General George Innih v. Ferado Agro Consortiums Ltd., 1990, the appellant made an offer to sell some of their properties to the plaintiff provided he communicated its acceptance within 3 days. The plaintiff accepted the offer but asked for an extension of 2 weeks. The appellant sold their property to a third person and the plaintiff filed a case of breach of contract. The Appellate Court held that mentioning a new term in the offer nullifies the original offer and becomes a counter-offer which the former offerer has liberty to either accept or reject.

Conditional acceptance

Conditional acceptance means accepting an offer but by keeping certain conditions to be fulfilled. An acceptance to be valid needs to be absolute and unqualified therefore if there is any condition put for an acceptance then that acceptance is an invalid acceptance.

In Winn v. Bull, 1877, the acceptance was made but with a condition “subject to a formal contract”. It was held that since the acceptance was not absolute and there was a condition in acceptance therefore it was an invalid acceptance.

In UBA v. Tejumola and Sons, 1988, the appellant requested a lease from the respondent but the request was made “subject to contract”. Both the parties agreed but later the appellant rescinded from the agreement. The respondent sued for breach of contract and they won in the High Court. The case was put on appeal before the Supreme Court who overturned the High Court’s judgement and held that the presence of the phrase “subject to contract” is a conditional acceptance so both the parties are still in the negotiation stage. Therefore neither of the parties are bound with a legal obligation and it’s their liberty to rescind the agreement.

Cross offer

When two offers are made by both the parties to each other having similar terms but “cross” at the post then it is a cross offer. 

In Tinn v. Hoffman & Co., 1873, there were two simultaneous offers by both the parties having identical terms but the offers crossed at the post. It was contended by one of the parties that it was a valid contract. It was held by the Court that since the parties were not consensus ad idem therefore there was no valid contract between the parties.

Acceptance in ignorance of offer

If an offer is made but the other party performs the actions asked in the offer without knowing that the offer is made then acceptance of the offer is not even possible. For an acceptance to be made, it is necessary that the offeree must have knowledge of the offer but if the offeree without knowing the offer performs certain actions that are prescribed in the offer then too it won’t constitute a valid acceptance. 

Who can give acceptance

In the case of a specific offer, the offer can be accepted by the person or his authorized agent to whom the offer has been made. Where the offer is a general offer then any person who has knowledge regarding the offer can accept the offer. This Section provides a way for the revocation after acceptance. The revocation must be done before the acceptance comes into the knowledge of the offeror. 

In Dick v. US, 1908, the acceptance of the offer was sent through the post and the revocation was sent through telegram. Since revocation reached earlier than acceptance therefore it was held that the acceptance is revoked and there is no valid contract between the parties.

Example: X offers to buy Y’s house for five lakh rupees. Here since it is a specific offer therefore either Y or Y’s authorized agents can accept the offer. 

X is a company that offers that whoever eats 100 packs of chips manufactured by them within 15 minutes will be given an award of 50 lakh rupees. Here since it is a general offer then anyone who has knowledge of the offer can accept the offer. 

In Carlil v. Carbolic Smoke Ball Co. 1893, the Court held that when an offer is made generally to the public at large then anyone who has the knowledge of the offer can come forward and accept the offer by performing what is required by the offer. Performing the requirements of a general offer would be a valid acceptance of that offer.

Revocation of acceptance

In English Contract law, an acceptance once made is irrevocable but in India an acceptance is revocable. Section 5 of the Indian Contract Act, deals with the revocation of offer and acceptance. According to this Section, an acceptance can be revoked if the acceptance is revoked at any time before the communication of acceptance is complete. Acceptance can be revoked if the revocation is received by the offeror before acceptance. 

Termination of an offer

There are certain ways through which the offer can be terminated and so the acceptance or rejection of the offer will be immaterial. Following are the ways when an offer can be terminated:

  1. If the offer prescribes a time limit and the offeree has not communicated the acceptance or rejection within the time limit stipulated then the offeror can terminate the offer.
  2. If the offeree makes certain alterations that bring or change the terms of the original offer and becomes a counter-offer then it terminates the original offer.
  3. If the offeree becomes incapable to fulfil the obligations of the offer then the offeror can terminate the offer. 
  4. The revocation of the offer shall be received by the offeree before the acceptance is sent by the offeree. This is a mailbox rule where it should be proved that the revocation of the offer is received by the offeree before he sends the acceptance. If the acceptance is sent before receiving the notification of revocation then the revocation becomes ineffective.
  5. A revocation can be expressed or implied. Express revocation is communicating revocation by words, either spoken or written. Implied revocation can be done by actions

Example: A offers to sell his house to B. Before accepting the offer if A sells the house to a third party then it is implied revocation.

  1. If the offeror terminates the offer, he forfeits the opportunity to accept it later.
  2. If either of the parties dies or becomes incapacitated then the offer automatically gets terminated.

Conclusion

For a valid contract, it is an important essential that the offer and acceptance must be valid. Invalid offer or invalid acceptance invalidates the entire contract. The Indian Contract Act provides for provisions relating to valid acceptance and when an offer or acceptance is revoked. So for a contract to be valid, it needs to be accepted. If the acceptance is not valid then neither of the parties are obliged to follow the terms of the contract and there will not be any breach of contract if anything is done which contradicts the terms of the contract. 

References

  1. https://thefactfactor.com/facts/law/civil_law/contract_laws/indian_contract_act/acceptance/377/#:~:text=Essentials%20of%20Valid%20Acceptance%3A%20It%20must%20be%20absolute,correspond%20with%20all%20the%20terms%20of%20the%20offer.
  2. https://djetlawyer.com/acceptance-contract-law/
  3. https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/acceptance/
  4. https://www.upcounsel.com/elements-of-acceptance-in-contract-law 
  5. https://lawcirca.com/revocation-of-proposals-and-acceptance-how-revocation-is-made-section-5-6-of-indian-contract-act-1857/#REVOCATION_OF_ACCEPTANCE_UNDER_INDIAN_CONTRACT_ACT 

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United Nations Convention on the Law of the Sea

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This article is written by Uzma Naureen and pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution. This article has been edited by Zigishu  (Associate, Lawsikho). 

This article has been published by Sneha Mahawar.

Introduction

In the present era, we have continents and countries, each with its unique history, establishing its own laws, rules, and regulations. Is chewing gum banned in Singapore? Yes, it is. Is it illegal to suspiciously hold a salmon in England? Yes. Is it prohibited by law to feed pigeons in Venice? Yes, it is. Is it true that some states even legislate and impose limitations on what people wear? Yes, very much. Thankfully, not all laws are universal. The laws of the State are different and distinct from one another. So, what happens if a dispute arises between two Nations or States? Which State’s law should we follow to resolve the dispute? That is where International law comes to play. 

International law, also known as public international law, in its broadest definition, is a set of laws, norms, and standards that are generally accepted as binding between nations. The goal of international law is to encourage the conduct of stable, consistent, and organized international interactions. It sets normative guidelines as well as a shared conceptual framework for countries in a variety of sectors, including war, diplomacy, trade, and human rights. It also governs outer space, the moon, Antarctica, and the ocean. In this article, we will talk about the ocean.

Are there any laws governing the ocean

The oceans have no discernible surface features, only a flat, huge, saline plain. They’re also all linked together. The world’s five oceans are technically one ocean that encompasses 71% of the planet. Land can be divided and distributed. Ocean, on the other hand, cannot be divided, and so ultimately, we own the oceans. But how much of it is owned by us?

During the age of great discoveries, the early maritime powers, Spain and Portugal, demanded exclusive sovereignty over the seas. A battle, which was settled effectively dividing the Atlantic Ocean into two, by Pope Alexander the 6th, and by the Treaty of Tordesillas in 1493-1494. Other powers did not accept this dispute settlement, particularly the French, Dutch, and English. Hugo Grotius, a Dutch legal scholar and early theorist of natural rights published the book Mare Liberum in 1609 to establish a different legal understanding, the Free Sea. Grotius is often called the father of modern international law. With his book, he provided the legal basis for controversy. He developed the freedom of navigation which continues to be valid to this day. 

Therefore, for centuries, it was agreed among the people that no one owned the ocean. People and explorers moved freely in the oceans, caught fish, traded, etc. This was referred to as the Freedom of the Seas Doctrine or the Doctrine of Mare Liberum. But when we say ‘ocean’ we don’t mean all of it. This freedom of the seas was not unlimited. Coastal states claimed sovereignty over their coastal waters for both economic as well as security purposes. The breadth of the territorial sea was limited to three nautical miles. Therefore, the sea surrounding a nation (extending to 3 miles) was a part of that nation’s territorial boundaries and if someone tried to enter those waters belligerently, it could be considered an invasion, which, more often than not, results in war. The remaining majority of the sea was the ‘ocean’ that was shared by all nations. The freedom of the seas and oceans was in place for many decades without significant further development of the legal framework. 

But, the two world wars, the colonization with tensions between industrialized and developing countries, the Cold War as well as technological developments, the exploration of marine resources, overfishing, increased marine pollution, and other marine usages all called for an international legal instrument for the seas and oceans.

The Geneva conventions on the law of the sea

Through an enormous international effort since 1949, the international community tried to incorporate the law of the sea in the framework of the United Nations. Very long negotiations followed with an interim solution in 1958 but it was only in 1982 that the UN convention for the law of the sea was adopted, which entered into force in 1994. UNCLOS was created to replace the 17th-century ‘freedom of the seas’ theory, which confined national sovereignty to a specified belt of water that normally extended up to 3 nautical miles (5.6 km) from a nation’s borders.

In 1956, the General Assembly of the United Nations conducted the first Conference on the Law of the Sea (UNCLOS I) in Geneva, Switzerland, which resulted in the adoption of four conventions in 1958. They were as follows – 

A) Convention on the Territorial Sea and Contiguous Zone, which came into force on 10 September 1964, 

B) Convention on the Continental Shelf, which came into force on 10 June 1964, 

C) Convention on the High Seas, which came into force on 30 September 1962, and 

D) Convention on Fishing and Conservation of Living Resources of the High Seas, which came into force on 20 March 1966. 

The Conference, whose purpose was to examine the law of the sea, taking into account not only legal but also technical, biological, economic, and political aspects of the problem, and to incorporate the results of its work into one or more international conventions or other instruments as it deemed appropriate. However, it was unable to keep the provisions on the Law of the Sea in one instrument. Four conventions and a protocol were adopted in lieu of a single convention, which was conceived as a device to lure a broad range of States to accept at least some of the Conventions, thereby steering clear of very radical reservations, or the decision by some States to refuse the acceptance an all-encompassing convention due to opposition to one or more of its key component parts.

Convention on the Territorial Sea and Contiguous Zone

The objective of this convention was to define and limit the contiguous zone and the territorial sea. It said that nations cannot prohibit foreign ships from passing through straits utilized for international navigation between one section of the high seas and another section of the high seas or a foreign state’s territorial sea. Beyond territorial seas, a number of other maritime zones exist. A contiguous zone—which must be claimed and does not exist automatically, unlike territorial seas—allows coastal nations to exercise the control required to prevent and punish violations of customs, sanitary, fiscal, and immigration restrictions both within and outside their territory or territorial sea. This zone is 12 nautical miles long.

Important provisions

Part I of the Convention deals with the Territorial Sea, which is defined in Section I as, “The sovereignty of a State extends, beyond its land territory and its internal waters, to a belt of sea adjacent to its coast, described as the territorial sea.” (Article 1).

 As per Article 2, a coastal state’s sovereignty extends to the air space above its territorial sea, as well as its bed and subsoil.

Section II provides for methods to calculate the breadth of the Territorial Sea, starting from a baseline as set out in Article 3, which says, “…the normal baseline for measuring the breadth of the territorial sea is the low-water line along the coast as marked on large-scale charts officially recognized by the coastal State.” 

Article 5 defines Internal Waters.  It says that the seas on the landward side of the territorial sea’s baseline are part of the state’s internal waters.

The right of innocent passage for ships is addressed in Section III. It sets the rights and duties of both the coastal and the flag states. Special provisions apply to merchant ships, government ships and warships under this section.

Part II of the Convention deals with the contiguous zone, which is defined in Article 24 which says that the contiguous zone may not extend more than twelve miles from the baseline used to determine the territorial sea’s breadth. 

“Where the coasts of two States are opposite or adjacent to each other, neither of the two States is entitled, failing agreement between them to the contrary, to extend its contiguous zone beyond the median line every point of which is equidistant from the nearest points on the baselines from which the breadth of the territorial seas of the two States is measured.” (Article 24).

Convention on the Continental Shelf

The objective of this convention was to delimit and define the rights of States to exploit and explore the rich natural resources found in the continental shelf. It establishes guidelines for the notion, limitations, and regime of the continental shelf. The essential concept of the coastal state’s sovereign right to resources in an area of the seabed beyond the territorial sea’s external limit has only recently developed in state practice. The Convention “crystallizes” a relatively short process of forming a customary rule, which incorporates the notion that the coastal state’s rights over the shelf do not require occupancy or public proclamation. The Continental Shelf Convention superseded the previous practice of nations having sovereignty over only a small strip of sea surrounding them, with everything beyond that strip being deemed International Waters. This strategy was followed until President Harry S Truman issued an Executive Order on September 28, 1945 declaring that the resources on the continental shelf bordering the U.S belonged to the U.S. Many other countries widely embraced similar practices, with the majority claiming that their section of the sea was 12 or 200 nautical miles from their coast.

Important provisions

For the purposes of exploration and exploitation, coastal states have sovereign and exclusive rights over the continental shelf as stated in Article 1. It says, “…the term “continental shelf” is used as referring (a) to the seabed and subsoil of the submarine areas adjacent to the coast but outside the area of the territorial sea, to a depth of 200 meters or, beyond that limit, to where the depth of the superjacent waters admits of the exploitation of the natural resources of the said areas; (b) to the seabed and subsoil of similar submarine areas adjacent to the coasts of islands.”

“Subject to its right to take reasonable measures for the exploration of the continental shelf and the exploitation of its natural resources, the coastal State may not impede the laying or maintenance of submarine cables or pipelines on the continental shelf.” (Article 4)

The convention outlined not just what was permissible in continental shelf zones, but also what could not be done. Such exploration or exploitation must not obstruct shipping, fishing, or the conservation of the sea’s living resources, or oceanographic or other scientific study, in an unjustified way. (Article 5).

Convention on the High Seas

This convention’s goal was to codify the rules of international law governing the high seas. The high seas are defined as all areas of the sea that are not part of the territorial sea or internal waters. It specifically addresses freedom of the high seas as well as a State’s right to have ships flying its flag under its control if certain conditions are met, including the contentious requirement of a “genuine link”; the flag State’s rights and obligations; piracy; hot pursuit; the right of visit; and the laying of submarine cables and pipelines. It also includes two groundbreaking measures on pollution caused by oil spills and radioactive wastes. This convention is divided into 37 articles. 

Important provisions

As per Article 1, the high seas are defined by the convention as all areas of the sea that are not part of a state’s territorial sea or internal waters.

 “The high seas being open to all nations, no State may validly purport to subject any part of them to its sovereignty. Freedom of the high seas is exercised under the conditions laid down by these articles and by the other rules of international law. It comprises, inter alia, both for coastal and non-coastal States: (1) Freedom of navigation; (2) Freedom of fishing; (3) Freedom to lay submarine cables and pipelines; (4) Freedom to fly over the high seas. These freedoms, and others which are recognized by the general principles of international law, shall be exercised by all States with reasonable regard to the interests of other States in their exercise of the freedom of the high seas” (Article 2)

“1. In order to enjoy the freedom of the seas on equal terms with coastal States, States having no sea coast should have free access to the sea. To this end States situated between the sea and a State having no sea coast shall by common agreement with the latter, and in conformity with existing international conventions, accord: (a) To the State having no sea coast, on a basis of reciprocity, free transit through their territory; and (b) To ships flying the flag of that State treatment equal to that accorded to their own ships, or to the ships of any other States, as regards access to seaports and the use of such ports. 

2. States situated between the sea and a State having no sea coast shall settle, by mutual agreement with the latter, and taking into account the rights of the coastal State or State of transit and the special conditions of the State having no sea coast, all matters relating to freedom of transit and equal treatment in ports, in case such States are not already parties to existing international conventions”. (Article 3)

Article 4 deals with the “flag state”. It declares that any state, whether coastal or not, has the right to sail ships on the high seas under its flag.

The practice of registering a merchant ship in a state other than the ship’s owners and flying that state’s civil ensign on the ship is known as “Flag of convenience.” Ships may be registered under convenience flags to save money on fuel, dodge regulations, and avoid scrutiny, inspection, and examination by the owner’s country.

“1. Warships on the high seas have complete immunity from the jurisdiction of any State other than the flag State. 

2. For the purposes of these articles, the term “warship” means a ship belonging to the naval forces of a State and bearing the external marks distinguishing warships of its nationality, under the command of an officer duly commissioned by the government and whose name appears in the Navy List, and manned by a crew who are under regular naval discipline” (Article 8)

“1. Every State shall require the master of a ship sailing under its flag, insofar as he can do so without serious danger to the ship, the crew or the passengers: (a) To render assistance to any person found at sea in danger of being lost; (b) To proceed with all possible speed to the rescue of persons in distress if informed of their need of assistance, insofar as such action may reasonably be expected of him; (c) After a collision, to render assistance to the other ship, her crew and her passengers and, where possible, to inform the other ship of the name of his own ship, her port of registry and the nearest port at which she will call. 

2. Every coastal State shall promote the establishment and maintenance of an adequate and effective search and rescue service regarding safety on and over the sea and — where circumstances so require — by way of mutual regional arrangements cooperate with neighboring States for this purpose”. (Article 12)

According to Article 14, “All States shall cooperate to the fullest possible extent in the repression of piracy on the high seas or in any other place outside the jurisdiction of any State” and Article 15 enounces that “Piracy consists of any of the following acts: (1) Any illegal acts of violence, detention or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed: (a) On the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft; (b) Against a ship, aircraft, persons or property in a place outside the jurisdiction of any State;

 (2) Any act of voluntary participation in the operation of a ship or of an aircraft with knowledge of facts making it a pirate ship or aircraft;

 (3) Any act of inciting or of intentionally facilitating an act described in subparagraph 1 or subparagraph 2 of this article”.

States agree to develop legislation to prevent pollution of the sea from oil spilled from ships and pipelines, as well as from seabed exploration and exploitation. As Article 24 states, every State must develop laws to avoid contamination of the waters caused by oil spills from ships or pipelines, or by the exploitation and exploration of the seabed and its subsoil, taking into consideration existing treaty obligations and provisions on the subject.

They also agree to take steps to prevent radioactive waste from being dumped in the sea, as well as to work with international authorities to prevent pollution of the oceans or airspace above them caused by radioactive materials or other dangerous agents. As per Article 25, every State must take measures to prevent pollution of the waters caused by the disposal of radioactive waste, taking into consideration any rules and regulations developed by relevant international organizations. It also states that all States should work with the relevant international organizations to prevent pollution of the waters or the air space above due to any operations involving radioactive materials or other dangerous agents.

Convention on Fishing and Conservation of Living Resources of The High Seas

The objective of this convention was to tackle the difficulties associated with the conservation and preservation of the high seas’ living resources through international cooperation, given that some of these resources are at risk of being depleted and over-exploited as a result of the development of modern techniques. It lays out the ideas and techniques for rational high-seas fisheries management. It calls for cooperation between states participating in the same fisheries, recognizes the coastal state’s special interest when fisheries are conducted in the high seas adjacent to its territorial sea, and mandates the settlement of any major disputes. Some of the restrictions are identical to those that were supposed to be implemented in the UN Fish Stocks Agreement in 1995. The Convention on Fishing & Conservation of Living Resources of the High Seas was controversial at the time, as evidenced by the low no. of accession and ratifications. On one hand, many States wanted to develop and expand their exclusive fishery rights beyond the territorial sea. On the other hand the central role given to compulsory dispute settlement was something that States were not prepared for at the time.

Important provisions

According to Article 1,“1. All States have the right for their nationals to engage in fishing on the high seas, subject (a) to their treaty obligations, (b) to the interests and rights of coastal States as provided for in this Convention, and (c) to the provisions contained in the following articles concerning conservation of the living resources of the high seas. 2. All States have the duty to adopt, or to cooperate with other States in adopting, such measures for their respective nationals as may be necessary for the conservation of the living resources of the high seas.” 

As stated in Article 2, such measures should be established with the goal of ensuring a supply of food for human use.

According to Article 6 and Article 7, the high seas adjacent to the territorial seas are of special importance to the coastal states, and they may unilaterally adopt conservation measures for these areas that are applicable to all other States if there is a pressing need for them, and the measures are scientifically sound and do not discriminate against foreign fishermen. 

According to Article 9 and Article 11, disputes will be resolved by a five-member special panel, whose judgment will be binding on the parties involved. 

“1. Any dispute which may arise between States under articles 4, 5, 6, 7 and 8 shall, at the request of any of the parties, be submitted for settlement to a special commission of five members, unless the parties agree to seek a solution by another method of peaceful settlement, as provided for in Article 33 of the Charter of the United Nations.

 2. The members of the commission, one of whom shall be designated as chairman, shall be named by agreement between the States in dispute within three months of the request for settlement in accordance with the provisions of this article. Failing agreement they shall, upon the request of any State party, be named by the Secretary-General of the United Nations, within a further three-month period, in consultation with the States in dispute and with the President of the International Court of Justice and the Director-General of the Food and Agriculture Organization of the United Nations, from amongst well-qualified persons being nationals of States not involved in the dispute and specializing in legal, administrative or scientific questions relating to fisheries, depending upon the nature of the dispute to be settled. Any vacancy arising after the original appointment shall be filled in the same manner as provided for the initial selection

3. Any State party to proceedings under these articles shall have the right to name one of its nationals to the special commission, with the right to participate fully in the proceedings on the same footing as a member of the commission, but without the right to vote or to take part in the writing of the commission’s decision. 

4. The commission shall determine its own procedure, assuring each party to the proceedings a full opportunity to be heard and to present its case. It shall also determine how the costs and expenses shall be divided between the parties to the dispute, failing agreement by the parties on this matter.

 5. The special commission shall render its decision within a period of five months from the time it is appointed unless it decides, in case of necessity, to extend the time limit for a period not exceeding three months. 

6. The special commission shall, in reaching its decisions, adhere to these articles and to any special agreements between the disputing parties regarding settlement of the dispute.

 7. Decisions of the commission shall be by majority vote” (Article 9)

United Nation Convention on the Law of the Sea (UNCLOS)

Although UNCLOS I was deemed a success, it left unresolved the critical issue of the territorial sea’s breadth. It was because all of the States could not agree on a single territorial sea limit. In order to resolve this issue, a second conference on the Law of the Sea was conducted in 1960 (UNCLOS II), which introduced no significant changes. It became clear that the Geneva conference’s laws were inadequate in light of the undiscovered large quantities of minerals, oil, and gas resources in the sea, as well as the increasing efficiency and capacity of some states to exploit them. 

The Geneva Conventions are primarily historical in nature, as they are an expression of “traditional law of the sea,” that is, the law that prevailed prior to the changes in the international community and its assessment and evaluation on the uses of the seas that resulted in the Third UN Conference on the Law of the Sea.

In 1967, Maltese delegate to the United Nations, Arvid Pardo, stepped up urging U.N. members to utilize their combined influence to reach an agreement on the equitable and responsible use of the world’s oceans. He presented a survey of the seabed’s mineral resources before the United Nations General Assembly’s First Committee. His survey revealed in great detail the abundance of minerals such as iron, manganese, titanium, copper, and so on that exist in vast amounts beneath the ocean. He also declared that the ocean floor and the seabed should be treated as the “common heritage of mankind”. Furthermore, thanks to tremendous advancements in technology and science, it was possible to investigate, explore and exploit these minerals to a large extent. This investigation of the seabed’s mineral resources, undertaken by Arvid Pardo, and the acute and urgent demand for minerals, as well as other considerations such as military and strategic issues, made it necessary to enact legislation that could potentially manage and regulate the sea in a more effective manner.

After a nine-year conference that resulted in the UN Convention on the Law of the Sea, it took 15 years for an agreement to be reached. The conference, which drew more than 160 countries, lasted until 1982. The resulting convention went into effect on November 16, 1994. It superseded the four Geneva Conventions of April 1958, which dealt with the territorial sea and contiguous zone, fisheries, the high seas, the continental shelf, and the conservation of living resources on the high seas, resulting in the establishment of three new institutions. The three newly formed institutions retained various parts and ideas of the previous four conventions. The institutions are, namely –

  1. the International Tribunal for the Law of the Sea,
  2. the International Seabed Authority, and
  3. the Commission on the Limits of the Continental Shelf.

According to Article 311, paragraph 1, the UN Convention on the Law of the Sea of 1982 supersedes the Geneva Conventions on the Law of the Sea of 29 April 1958 as between States Parties. The majority of the Geneva Conventions’ signatories are among the 155 countries that signed the 1982 Convention. The latter Conventions bind only the few States that are parties to the applicable Geneva Convention but not to the 1982 Convention, or in their connections with them. In the examples of the United States, Colombia, Israel, and Venezuela, this is especially true.

International Tribunal for the Law of the Sea (ITLOS)

There are 4 mechanisms provided by UNCLOS for the settlement of disputes, namely, the International Court of Justice, International Tribunal for the Law of the Sea (ITLOS), an arbitral tribunal constituted as per Annex VII of UNCLOS, and a special arbitral tribunal constituted as per Annex VIII of UNCLOS. Article 287 of the UNCLOS lists it as one of four dispute resolution mechanisms.

ITLOS is an independent judicial organization created by the UN Convention on the Law of the Sea (UNCLOS) to resolve disputes arising from the Convention’s interpretation and application on the Law of the Sea, and for rendering advisory opinions. ITLOS works to protect and preserve the numerous maritime resources and species. It also aids in the advancement and transfer of maritime technology by promoting and leveraging scientific research.

The Tribunal is made up of 21 independent members chosen from among those with the best reputation for fairness and integrity, as well as recognized expertise in the field of maritime law. The Tribunal’s composition must ensure adequate representation of the world’s major legal systems, as well as an equal geographic distribution. The States Parties have decided to elect five judges from Africa and Asia, four from Latin American and Caribbean States, four from Western European and Other States, and three from the Group of Eastern European States during their annual meetings in New York. In comparison to the International Court of Justice, where judges from the five permanent members of the UN Security Council occupy one-third of the fifteen seats, the Tribunal’s makeup plainly suggests that developing countries have been given more weight. The Tribunal is also more reflective of the various legal systems and regions of the world due to its larger size. If the Tribunal does not have a judge of a party’s country on the bench, that party may choose a person of its choice to sit as an ad hoc judge.

Jurisdiction of the tribunal

According to Article 21 of ANNEX VI, any issue involving the interpretation or implementation of the Convention, as well as other topics specifically provided for in any other agreement conferring jurisdiction on the Tribunal, is subject to the Tribunal’s jurisdiction. Article 288 of UNCLOS refers to the jurisdiction of all possible compulsory dispute resolution bodies, stating that each shall have jurisdiction over any dispute submitted to it in line  with this Part concerning the interpretation or application of this Convention, as well as any dispute submitted to it as per the agreement concerning the application and interpretation of an international agreement regarding the purposes of the Convention. Both provisions give parties the option of referring any issue relating to the UNCLOS and related international treaties to the Tribunal. Article 288(2), on the other hand, purports to limit the Tribunal’s consensual jurisdiction to the interpretation and application of any international agreement relevant to the Convention’s purposes whereas, Annex VI, Article 21 refers to any additional agreement that grants the Tribunal jurisdiction. Furthermore, whereas Article 21 refers merely to “agreements,” Article 288(2) the Tribunal’s consensual jurisdiction is limited to “international agreements”.  A broad approach based on Annex VI’s Article 21 appears to support claims to use the Tribunal to decide any dispute, regardless of whether it relates to law of the sea or is based on an international agreement. All that is required is an agreement to bring the matter before the Tribunal.

States Parties to UNCLOS are eligible to participate in the Tribunal. Entities other than States Parties are also welcome to participate, that is, States or intergovernmental organizations that are not parties to UNCLOS, as well as private entities and state enterprises in any matter specifically provided for in Part XI, or in any case brought pursuant to any other agreement conferring jurisdiction on the Tribunal that is agreed by all parties to the case. (Article 20). 

ITLOS members are elected for a nine-year term and are eligible for re-election. One-third of the members’ terms expire every three years. In addition, the United Nations General Assembly mandates that each geographical group have at least three members. No two members may be citizens of the same country, and the Tribunal as a whole must ensure that the major legal systems of the globe are represented, as well as an equitable geographical distribution.

The Chamber for Marine Environment Disputes, the Chamber for Fisheries Disputes, the Chamber of Summary Procedure and the Chamber for Maritime Delimitation Disputes have all been established by the Tribunal. The Tribunal’s Seabed Disputes Chamber, which consists of 11 judges, hears disputes involving activity in the International Seabed Area. Any party to a case or a dispute over which the Seabed Disputes Chamber has authority can request the formation of an ad hoc chamber made up of three Seabed Disputes Chamber members. The Tribunal is open to all States Parties to the Convention, as well as, in some situations, non-State Parties including international organizations and legal or natural persons.

The Tribunal’s jurisdiction extends to all matters brought before it in conformity with the Convention. It also applies to all matters specifically addressed in any other agreement granting the Tribunal jurisdiction. Unless the parties agree otherwise, the Tribunal’s jurisdiction is necessary in situations involving the immediate release of vessels and sailors under UNCLOS Article 292 and provisional measures until the formation of an arbitral tribunal under UNCLOS Article 290, paragraph 5.

The Seabed Disputes Chamber has the authority to provide legal advice on issues that arise as a result of the International Seabed Authority’s activity. In some situations, the Tribunal may issue advisory opinions under international agreements relevant to the Convention’s goals. Disputes are brought before the Tribunal either through a written application or through the notification of a special agreement. The Tribunal’s Statute and Rules specify the method to be followed while dealing with cases brought before it.

Enrica Lexie Case

Italian Republic vs. Republic of India, took place in 2012 when Salvatore Girone and Massimiliano Latore, two Italian marines, were aboard the “Enrica Lexie,” an Italian oil tanker. Two fishermen on the Indian sailboat “St.Antony” were shot and killed off the coast of Kerala. India claims that two marines on board the oil ship killed two civilians. The tanker was stopped by the Indian Navy, and the marines were captured. This prompted diplomatic tensions between the two countries over a conflict of interest over legal jurisdiction and functional immunity. They were held in India for 2-4 years with no formal charges brought against them. In 2014, the National Investigation Agency (NIA) charged marines with murder, attempted murder, mischief, and common intent under the IPC section.

Proceeding

According to the Supreme Court’s order, India established a special court to determine the pertinence of jurisdiction. The European Parliament claimed in January 2015 that “they were detained with no charge by the Indian authorities, which is a violation of human rights”. Italy petitioned the International Tribunal for the Law of the Sea (ITLOS) in 2015, requesting that seamen be allowed to remain in their home country during the trial process. Italy requested provisional measures against India in this case, requiring India to stop criminal prosecutions against the marines (which the India Supreme Court had already done until the issue of jurisdiction was resolved) and release the marines until the Annex VII Arbitral Tribunal could resolve the issues of which state could claim jurisdiction over the incident and whether the marines in acting as security against piracy for an Italian flagged vessel possessed functional Sovereign immunity for their actions.

Held

ITLOS denied both their requests. Allowing India to pursue criminal proceedings before the Arbitral Tribunal has determined jurisdiction would be an unjustifiable interference with Italy’s rights, according to ITLOS, which ordered temporary remedies requiring India to suspend the proceedings. ITLOS further determined that ordering India to release the marines while the issue of jurisdiction was being settled would be an unjustifiable interference with India’s rights as the state whose citizens were slain in the incident, and hence denied Italy’s request.

The Permanent Court of Arbitration issued its decision in July 2020. It held the following:

  • India lacks the legal authority to try the marines. An Indian court will not be able to try the Italian marines. Because the marines were on a mission for the Italian government, the Court granted them functional immunity.
  • Italy should pay the families of the fishermen who were killed. The amount of compensation will be determined jointly by both countries.
  • Italy’s appeal for compensation for the marines’ detention by India was denied by the court.

International Seabed Authority (ISA)

The International Seabed Authority (ISA), based in Kingston, Jamaica, has 167 members, including the European Union, which is made up of all parties to the UNCLOS. The following bodies control and govern the International Seabed Authority (ISA):

Assembly of ISA

The International Seabed Authority Is supreme authority is the assembly, which is made up of all ISA members. This body is in charge of formulating overall policies and budgets.

Executive authority 

ISA also elects the executive authority, which is a 36-member council that approves contracts with private firms and government bodies. These agreements cover the exploration and mining of specific portions of the global seabed.

The Secretary General 

The ISA secretary-general is nominated by the council and elected to a four-year term by the assembly. The current Secretary-General of the International Seabed Authority is Michael W. Lodge (ISA).

The Finance Committee is in charge of budgetary issues. The Council and Finance Committee are further overseen by a Legal and Technical Commission, which consists of 30 members. All members are professionals who have been nominated by governments and chosen to serve in their own right.

The International Seabed Authority (ISA) was established using the authority granted under Article 136 of UNCLOS. It was established to organize, regulate, and control all mineral-related operations in the international seabed area that fall outside of national authority. It regulates deep seabed mining and ensures that the marine environment is safeguarded from any negative consequences of mining activities. In July 2002, ISA held its first workshop. The main goal of this worldwide workshop was to create an environment suitable to conduct research on metallic nodule areas beneath the sea. Scientists, contractors, representatives, and members of the legal and technical commission attended the session. They chose four key themes for future study that would be carried out in collaboration with international partners to better understand the deep sea ecosystem. It also has access to deep seabed data.

Functions and Activities of Isa

The International Seabed Authority (ISA) is responsible for organizing, regulating, and controlling all mineral-related operations in the international seabed area that are outside of sovereign jurisdiction. The International Seabed Authority of India (ISA) performs the following primary functions:

  1. Deep seafloor mining is regulated.
  2. Marine environment protection from the negative consequences of mining, exploration, and exploitation.
  3. The authority also encourages maritime scientific research and holds scientific and technical training programs, seminars, conferences, and workshops.

The ISA’s most notable achievement has been the creation of laws for the exploration of poly-metallic nodules. The relevant legislation was enacted in the year 2000. Manganese, cobalt, copper, and nickel are all present in variable levels in these resources. They appear as potato-sized lumps strewn about on the ocean floor’s surface, mostly in the central Pacific Ocean but also in the Indian Ocean. In 2002, work on a new set of regulations governing the investigation of poly-metallic sulfides and cobalt-rich ferromanganese crusts, which are rich in minerals such as copper, iron, zinc, silver, and gold, as well as cobalt, began. The sulfides can be found around volcanic hot springs, particularly in the western Pacific Ocean, whereas the crusts can be found on oceanic ridges and elsewhere. In 2006, the ISA decided to create separate sets of regulations for sulfides and crusts, with sulfides taking precedence. Despite the fact that various concerns remained unsolved, it devoted the majority of its sessions in 2007 and 2008 to this work. The definition and structure of the area to be allotted to contractors for exploration, the fees to be paid to the Authority, and how to deal with any overlapping claims that could develop were among the most pressing issues. The International Seabed Authority (ISA) has been working on the “Mining Code,” a set of rules, regulations, and processes to govern the Area’s maritime mineral prospecting, exploration, utilization and exploitation. 

Regulations on Prospecting and Exploration for Poly-metallic Sulfides (adopted on May 7, 2010), Regulations on Prospecting and Exploration for Poly-metallic Nodules (adopted on July 13, 2000) and Regulations on Exploration of Cobalt Rich Ferromanganese Crusts (adopted on 27 July 2012) has been issued by the Authority till date. Environmental considerations are also at the forefront of contractors’ responsibilities when conducting exploration activities. The Authority’s current regulations include a section dedicated to the safeguarding and preserving of the marine environment in each set.

The Authority’s Regulations also include guidelines regarding pollution emergencies that pose a serious hazard to the marine environment. India is one of the top eight countries/contractors, and the Ministry of Earth Sciences is implementing a long-term programme on poly-metallic nodule discovery and exploitation. On August 18, 2017, the 23rd session of the International Seabed Authority (ISA) in Kingston, Jamaica, granted a five-year extension of India’s exclusive rights to explore poly-metallic nodules from the seabed in the Central Indian Ocean Basin (CIOB).

The Commission on the Limits of the Continental Shelf (CLCS)

According to Article 76 of UNCLOS Coastal states have the authority to define their continental shelf’s outer bounds beyond 200 nautical miles if there is topographical or geological continuity, as long as the Commission on the Limits of the Continental Shelf (CLCS) makes a recommendation that the submission be approved. Islands are significant for countries seeking an extension since demarcation of the continental shelf’s outer limits beyond 200 nautical miles can be filed using an offshore island as the baseline. They are especially important when an extension causes overlap between states with adjacent or opposite coasts as a result of disputed island claims or differing conceptions of territorial borders. In such instances, the CLCS withholds its assessment of the submitted materials in compliance with applicable clauses.

Important Provisions of CLCS

According to UNCLOS Article 76, paragraph 1, The continental shelf of a coastal state extends beyond its territorial sea and encompasses the seabed and subsoil of submerged areas throughout the natural extension of its land territory to the continental margin’s outer border, or to a distance of 200 nautical miles from baselines from which the territorial sea’s breadth is measured where the continental margin does not extend up to a distance of 200 nautical miles. After submitting the details of such limits, along with accompanying scientific and technical data, to the Commission, a coastal state may determine the outer boundaries of its continental shelf stretches for more than 200 nautical miles based on CLCS recommendations (Paragraph 8, Article 76). Furthermore, coastal states have sovereign rights to the continental shelf in order to explore, develop and exploit its natural resources (Paragraph 1, Article 77).

The CLCS’s responsibilities include reviewing and making recommendations on data and other materials supplied by coastal governments concerning the continental shelf’s outer limits in regions where those limits extend beyond 200 nautical miles, as stipulated in Paragraph 1, Article 3 of UNCLOS Annex II, and to provide technical and scientific advice if requested by the coastal state. The Commission, in accordance with Article 76(8), shall provide recommendations to coastal States on matters regarding the establishment of their continental shelf’s outer limits. A coastal State’s shelf limitations determined on the basis of these recommendations shall be final, conclusive and binding. At the same time, Article 76 paragraph 10, and Annex II Article 9 state that the subject of continental shelf delimitation between nations with opposite or adjacent coasts has no bearing on the Commission’s work. This is a consequence of Article 83, which says that the continental shelf’s delimitation between states with opposite or near coasts shall be accomplished through an agreement based on international law in the aim of obtaining an equitable resolution. The CLCS has created specific procedural norms, as stated below, to maintain adherence to its “fundamental duty” of not interfering with the delimitation of national borders. 

Submissions may be made and will be reviewed in line with Annex I, according to Rule 46 where there is a disagreement over the continental shelf’s delimitation between adjacent or opposite states, or in other circumstances of unresolved land or maritime disputes. In the event of a dispute, the annex offers comprehensive regulations on how the CLCS should treat any submissions. In the event of a dispute over the continental shelf’s delimitation between adjacent or opposite States, or other unsolved land or maritime issues and disputes, the Commission must be (a) informed of such conflicts or disputes by the coastal states providing such submission, and (b) assured by the coastal states providing such submission that the submission or proposal is not prejudicial to matters relating to boundary delimitation by the coastal states making the submission. The following Paragraph specifies that a coastal state may make a “partial submission” for a part of its continental shelf to avoid prejudicing questions about state boundary delimitation. According to Paragraph 4, two or more coastal States may make joint or separate submissions by agreement, without regard to the delimitation of boundaries between them, or with an indication, using geodetic coordinates, of the extent to which a submission is not prejudicial to matters regarding the delimitation of boundaries with other state parties. In circumstances where a land or marine dispute exists, the Commission will not examine a proposal made by any of the states involved in the dispute, but it may take consideration into submission if all states that are parties to the dispute give prior approval.

According to Annex III of the Rules of Procedure, countries requesting to extend the continental shelf beyond 200 nautical miles must submit an executive summary, main body (including scientific analysis), and supporting technical data, to the CLCS.

Major changes adopted y UNICLOS Convention of 1982

Breadth of territorial sea 

UNCLOS I could not prescribe the limit in view of the divergent views taken by the States. However, the convention of 1982 (UNICLOS III) has settled the controversy by providing under Article 3 that every State has the right to establish its territorial sea’s breadth up to a limit that does not exceed 12 nautical miles as measured from its baselines. The breadth of the territorial sea as provided under the convention on the Law of the Sea of 1982 is acceptable to most of the States. About 90 states including India have adopted legislation extending the maximum breath of the territorial sea to our nautical miles. The normal baseline for measuring the territorial sea’s breadth is the low waterline along the coast as marked on the large-scale charts officially recognized by the Coastal states. However, in the case of islands situated on tolls or of islands with fringing reefs, the baseline is the seaward low watermark of the reef, as indicated by the relevant symbol on charts officially recognized by the Coastal states. (Article 6) 

Article 15 of the 1982 Convention lays down that if the coasts of two states are opposite or adjacent to each other, neither State has the, failing agreement between them to the contrary, to extend its territorial sea beyond the median line every point of which is equidistant from the nearest points on the baselines from which the territorial seas’ breadth of the two States is measured. With the exception of cases of historic title or other unusual special circumstances, the above rule applies to delimit the territorial seas of the two states in a manner that is at variance therewith. This provision is identical to Article 12 paragraph one of the 1958 convention regarding the Territorial Sea and the Contiguous Zone.

Innocent passage 

The territorial sea is open to merchant vessels of all governments for navigation, as per international law. Such ships have the right of innocent passage through a state’s territorial sea. Thus, every state has the authority to make a demand that in time of peace its merchant men may inoffensively pass through the territorial sea of every other state. The above rule was incorporated in the Geneva Convention on the Territorial Sea and Contiguous Zone of 1958 under Article 14 which provided that the right of innocent passage through the territorial sea shall be enjoyed by ships of all States. The same provision has been laid down under Article 17 of the Convention of 1982 by stating that ships of all States, whether coastal or landlocked, enjoy the right of innocent passage through the territorial sea. The consequence of the above right is that no State can levy tolls for the mere passage of foreign vessels through its territorial sea. Although the littoral state may spend money on the election and maintenance of lighthouses and other facilities for safe navigation within its territorial sea, it cannot make foreign vessels merrily pass pay for such outlays or impose any requirement which have the practical effect of denying or impairing the right of innocent passage. Any attempt on the part of a Coastal state to prevent or to hamper innocent passage through the territorial sea in time of peace is unlawful.

Contiguous zone

The limit of contagious zone was provided in the Geneva Convention of 1958. It was to stretch 12 miles from the baselines from which the territorial sea’s breadth is measured. Thus, the concept of contiguous zone is meaningless for those states which had claimed the territorial sea up to 12 miles. They assimilated the limit of the contiguous zone into the territorial sea. The limit of the contiguous zone has been extended by the Convention of 1982 which provided under paragraph two of Article 33 that it may not stretch beyond 24 nautical miles from the baselines from which the measurement of territorial sea’s breadth is taken. Thus, the area of the contiguous zone would be 12 miles beyond the territorial sea. Since the Convention of 1982 has made the concept of the exclusive economic zone, the contiguous zone is no longer described as being a part of the high seas. Since Article 33 is permissive, and since the contiguous zone is entirely in the area of the exclusive economic zone where such a zone is claimed, it is perhaps doubtful whether a state is required to formally claim or proclaim a contagious zone as a precondition of the contiguous zone jurisdiction.

Continental shelf

The Convention of 1982 has defined the term continental shelf under paragraph one of Article 76 as, “The continental shelf of a coastal State comprises the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance.” The definition has laid down one criterion for fixing the limit of the continental shelf, that is, it shall stretch to the continental margin’s outer border throughout the natural prolongation of its land territory. Where The continental margin’s outer edge extends beyond 200 nautical miles from the baselines from which territorial waters’ breadth is measured, the coastal state, in accordance with paragraph seven of Article 76 shall delineate the self’s outer limits by straight lines not exceeding 60 nautical miles in length, connecting fixed points, defined by coordinates of latitudes and longitude.

“For the purposes of this Convention, the coastal State shall establish the outer edge of the continental margin wherever the margin extends beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured, by either: (i) a line delineated in accordance with paragraph 7 by reference to the outermost fixed points at each of which the thickness of sedimentary rocks is at least 1 percent of the shortest distance from such point to the foot of the continental slope; or (ii) a line delineated in accordance with paragraph 7 by reference to fixed points not more than 60 nautical miles from the foot of the continental slope. (b) In the absence of evidence to the contrary, the foot of the continental slope shall be determined as the point of maximum change in the gradient at its base” (Article 76, Para 4)

According to Para 5 of Article 76, “The fixed points comprising the line of the outer limits of the continental shelf on the seabed, drawn in accordance with paragraph 4 (a)(i) and (ii), either shall not exceed 350 nautical miles from the baselines from which the breadth of the territorial sea is measured or shall not exceed 100 nautical miles from the 2,500 meter isobath, which is a line connecting the depth of 2,500 meters.”

The continental shelf’s outer boundary shall not exceed 350 nautical miles from the baselines from which the territorial sea’s breadth is measured, notwithstanding the provisions of paragraph 5. Submarine elevations which are natural components of the continental edge, such as plateaux, rises, caps, banks, and spurs, are not included in this paragraph. 

Exclusive Economic Zone

The EEZ was defined by the 1982 United Nations Convention on the Law of the Sea (UNCLOS) as a zone in the sea over which a sovereign nation has certain special rights with respect to the exploration and use of marine resources, including wind and water energy generation, as well as oil and natural gas extraction. The exclusive economic zone (EEZ) is the area close to and beyond the territorial sea. It can reach a maximum distance of 200 nautical miles from the baseline. The EEZ does not cover the territorial sea, nor does it extend beyond 200 nautical miles to include the continental shelf. The low-water line along the coast, as represented on large-scale charts officially certified by the coastal state, is usually used as the baseline. The contiguous zone is included in the EEZ. The country possesses natural resource rights within the EEZ. For a variety of reasons, including environmental protection, the country has jurisdiction over some activities. It must also respect the rights of other countries in the EEZ, such as navigational freedom. The territorial sea differs from the EEZ in that the former grants full sovereignty over the waters, whereas the latter is just a “sovereign right” that refers to the coastal nation’s rights beneath the sea’s surface. The surface waters are international waters.

In the EEZ, the coastal state has the following rights:

  1. Explore and exploit natural resources, as well as conserve and manage them (living or nonliving).
  2. Wind, currents, and water can all be used to generate energy.
  3. Establish and utilize man-made islands, structures, and installations.
  4. Conduct scientific research in the ocean.
  5. Protect and preserve the aquatic ecosystem.

Waters of Archipelagic State

Convention of 1982 has for the first time created a regime for Archipelagic States and waters of such states. The term ‘island’ means a naturally formed area of land, surrounded by water which is above water at high tide. Archipelago means a group of many islands. The Convention of 1982 defines the term archipelago a group of islands, including sections of islands, interconnecting seas, and other natural features that are so intimately linked that the islands, quarters, and other natural features form an essential geographical, economic, and political unit, or have been historically recognized as such. The Convention of 1982 under Article 47 provides that straight archipelagic baselines can be drawn between the outermost points of the archipelago’s outermost islands and the archipelago’s drying reefs by an Archipelagic State. The consequence of the above provision is that the archipelagic state’s sovereignty extends to the waters thus enclosed, to the superjacent airspace, the bed and subsoil thereof and the resources therein contained. However, the following conditions are required to be met –

“1. An archipelagic State may draw straight archipelagic baselines joining the outermost points of the outermost islands and drying reefs of the archipelago provided that within such baselines are included the main islands and an area in which the ratio of the area of the water to the area of the land, including atolls, is between 1 to 1 and 9 to 1. 

2. The length of such baselines shall not exceed 100 nautical miles, except that up to 3 percent of the total number of baselines enclosing any archipelago may exceed that length, up to a maximum length of 125 nautical miles. 

3. The drawing of such baselines shall not depart to any appreciable extent from the general configuration of the archipelago.

4. Such baselines shall not be drawn to and from low-tide elevations, unless lighthouses or similar installations which are permanently above sea level have been built on them or where a low-tide elevation is situated wholly or partly at a distance not exceeding the breadth of the territorial sea from the nearest island. 

5. The system of such baselines shall not be applied by an archipelagic State in such a manner as to cut off from the high seas or the exclusive economic zone the territorial sea of another State. 

6. If a part of the archipelagic waters of an archipelagic State lies between two parts of an immediately adjacent neighboring State, existing rights and all other legitimate interests which the latter State has traditionally exercised in such waters and all rights stipulated by agreement between those States shall continue and be respected.” (Article 47)

The archipelagic states’ sovereignty extends to all waters encircled by archipelagic waters, regardless of depth or distance from the coast. The sovereignty extends to the airspace over the archipelagic waters, as well as their subsoil, seabed, and the resources contained therein.

However, archipelagic states shall exercise sovereignty subject to certain restrictions laid down in the convention. To begin with, archipelagic governments must adhere to existing agreements with other nations. Second, in certain places falling within archipelagic waters, it shall acknowledge traditional fishing rights and other legal activities of the directly adjacent bordering states. Third, an archipelagic state must respect existing submarine cables laid by other countries that traverse across its waters. Fourth, all ships from all countries have the right to innocent passage through archipelagic waters.

Conclusion 

The UN Convention on the law of the sea is based on a consensus of the contracting states. Often called the constitution for the oceans, it reflects customary international law and is one of the most significant and visionary international instruments of our time. The new text has a broader scope in that it addresses all aspects of maritime areas, as well as their actions and repercussions (various kinds of pollution, for example). While developing new regulations, it embraced all of the proven facts in the four previous conventions within a wider global perspective. Its introduction expresses the global view that has been taken that the ocean space challenges are inextricably linked and must be handled as a whole. As a result, the Convention confirms pre-existing maritime zones, from the shore to the open sea, and from the surface to the bottom, or, in the case of Exclusive Economic Zones, from the surface to the seabed. From legal freedom at sea through the free seas to the legal order for the seas and oceans today, we have come a long way. But, the challenges facing legal order for the seas and oceans are constantly changing. The law of the sea has to be further developed continuously to promote peaceful usage of the seas and oceans, equitable and efficient resource utilization, conservation of living resources, and research, protection, and preservation of the maritime environment.

References 


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Difference between the dissolution of a partnership and dissolution of a firm

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This article has been written by Meera Patel, a B.A. L.L.B student from the Maharaja Sayajirao University, Faculty of Law, Vadodara. This article defines and differentiates the meaning of dissolution of a firm and a partnership.

This article has been published by Sneha Mahawar.

Introduction

The most basic distinction between the dissolution of a partnership and the dissolution of a firm is that the former is the dissolution of an operation of a business and the latter one is the dissolution of a business relationship among the partners. What this statement means is that the dissolution of a partnership is not the same as the dissolution of a firm. This is because when the legally justifiable relation present among the partners ceases, it is known as the dissolution of a firm whereas when a partner becomes unfit for the firm the partnership of that particular partner comes to an end with the firm but that does not mean the firm ceases to operate. The firm may function very well on its own as per the desire of other partners.

One of the radical differences between the dissolution of a firm and the dissolution of a partnership is that in a situation where a partnership dissolves, no other dissolution takes place but when a firm is dissolved, all the partnerships come to an end as well. 

As per Section 39 of the Indian Partnership Act, 1932, the dissolution of a partnership refers to the process of terminating the professional relationship between the partners involved in the business due to various circumstances. This termination also puts an end to and divides all the assets, liabilities, debts, accounts, and shares related to the partnership among the partners in the form of a settlement deed. The main thing that highlights this Section is that even though the process of dissolving a firm and dissolving a partnership looks similar, they are completely different. Read this article to know the difference between a partnership and a firm and how dissolution differs in both.

Definition of a partnership

As per Section 4 of the Indian Partnership Act, 1932, “a partnership is the relation between persons who have agreed to share the profits of a business on by all or any of them acting for all”. Listed below are all the essential elements required to form a partnership as per the Indian Partnership Act, 1932:

  • The existence of an agreement between partners is necessary.
  • The main motive behind forming a partnership is to earn profit and split it among the partners.
  • As per the agreement, it is necessary to abide by the fact that the agreement must be to carry out the business jointly or in situations where that is not possible, other partners must act on behalf of all.

Illustration: Ashish and Anish buy 200 bags together after they enter an agreement where they will sell customized bags for their joint account. This is a perfect example of forming a partnership and here, Ashish and Anish are considered partners.

In a different situation, Ashish and Anish buy 200 bags and they agree to share them among themselves. This situation will not be counted as a partnership as they have no intention to carry out a business

In the case of N. Gurava Reddy v. the District Registrar (1976), the applicants and 6 other people along with their legal heirs of P. Sri Devamma were partners in a business. The legal representatives along with the five other partners wanted to retire from the partnership therefore they decided to dissolve the partnership. The dissolution was executed on stamp papers and the decision was made in the favor of the partners who wanted to dissolve the partnership.

Dissolution of a partnership

The abstract relationship that is legally binding between 2 or more partners is known as a partnership. That is the reason why dissolving a partnership is like terminating the legal relationship between partners. 

There are various reasons why partners might want to dissolve a partnership such as a retirement, incapacity of a partner due to death, insanity, or any other cause that might cause the incapacitating role in the partnership and that is how a partnership might come to an end voluntarily or involuntarily. 

Even if one or more partners decide to dissolve a partnership, the remaining partners have it under their discretion if they want to continue the firm, so that the firm does not lose its existence. The only difference is that when the remaining partners decide to not continue the firm and undertake the business further, the firm is dissolved automatically. Another important thing to keep in mind is that when a partnership is dissolved, the old agreement is automatically terminated and a new agreement is used as a replacement. 

Listed below is a list of ways a partnership can be dissolved:

  • Admitting another partner as a replacement
  • Insolvency of a partner
  • Revising the profit share ratio 
  • Expiration of the partnership term
  • After completing the goal/ venture decided while forming a partnership
  • Death of a partner
  • Retirement of a partner
  • Dissolving the partnership via an agreement

Modes of dissolving a partnership

By operation of law

Being the consequence of an agreement, the partnership is governed by the law. This reason alone should justify that if any unlawful activity takes place, the partnership shall be deemed dissolved.

Illustration: A and B decide to form a partnership and sell liquor in Gujarat which is a dry state. This partnership is valid but the object is illegal therefore this partnership shall be considered dissolved by the law.

By the decree of a court

Using this mode of dissolving a partnership, a partner can dissolve a partnership by approaching the court. The court can allow the dissolution of a partnership under certain circumstances. These conditions are: 

  • If the partner is not capable of working.
  • Insanity and mental instability 
  • Breach in an agreement
  • Bad behavior of a partnership results in bad image issues for the firm or other partners

Illustration: A, B, C, and D were partners in a firm. Due to a freak accident, B was handicapped and was unable to carry out his duties therefore all the other partners approached the court so that they could get the necessary help which will help them end their partnership with B.

Statement of dissolution

This is the simplest mode used to dissolve a partnership. The concerning party needs to fill out a statement form addressing the secretary of the State. The name of the partnership, date of filling the form, and a reason for dissolution are the most important things to be filled in the said form.

Act of partners

Using this model, when the partners want to dissolve a partnership, the remaining partner/ partners shall agree and decide a suitable time for the partnership to end. Partners have the liberty to come to an agreement for things like the time period but the remaining partner who wants to end the partnership also has the right to dissolve a partnership before the time period ends but only under certain circumstances.

Illustration: A, B, C, D, and E are in a partnership. A decides to end his partnership and after discussing his decision with his partners, they decide that he will work for another 3 weeks till they find a replacement for him. Due to a heart attack, he was asked to rest for some time, thus, he was on bed rest before the completion of his three weeks. 

Definition of a firm

Section 4 of the Indian Partnership Act, 1932 also clarifies the meaning of a partnership firm. As per the aforementioned section, “persons who have entered into a partnership with one another are called individual partners and collectively they are known as a firm”. 

As mentioned above, the dissolution of a firm is different from the dissolution of a partnership. Discontinuing all the business-related activities such as generating profit and loss within the firm is known as the dissolution of a firm. When these activities are stopped, the assets are usually used to pay off the debts if there are any. Dissolution of a partnership does not amount to the dissolution of the firm but a dissolution of a firm does amount to the dissolution of a partnership.

In the case of Malabar Fisheries and Co. v. Commissioner of Income Tax(1979), the effect as well as impact of assets and discharging the liabilities have been stated and explained by the honorable Supreme Court of India. The Court stated that, “ Dissolution of a firm must, in point of time, be anterior to the actual distribution, division or allotment of the assets that takes place after making accounts and discharging the debts and liabilities due by the firm. Upon dissolution the firm ceases to exist and then follows the making up of accounts, then the discharge of debts and liabilities and thereupon distribution, division or allotment of assets takes place between the erstwhile partners by way of mutual adjustment of rights between them. The distribution, division or allotment of assets to the erstwhile partners, is not done by the dissolved firm. It is not correct to say that the distribution of assets takes place eo instanti with the dissolution of the firm or that it is affected by the dissolved firm.”

Dissolution of a firm

As per the Indian Partnership Act, 1932, all the terms and conditions must be abided by any partner who wishes to end the partnership. Listed below are the provisions are given in this Act which states the different ways through which one can end a firm:

Section 40 : Dissolution by agreement

As per Section 40 of the Indian Partnership Act, 1932, any and all firms can be dissolved via an agreement. Legal consent from all the partners is equally necessary as is the legality of the agreement. All the partners can dissolve the firm without even involving the court in their process at all.

Section 41 : Compulsory dissolution

According to Section 41 of the Indian Partnership Act, 1932, all the partners are bound to compulsorily dissolve the firm. The compulsion factor might come in the scenario due to multiple reasons. The said reasons are:

  • Insolvent partners
  • Only one partner is not insolvent amongst all the other insolvent partners
  • The partners are a part of illegal and unlawful activities which might include illegal objects.

Section 42 : Dissolution on the happening of contingencies

According to Section 42 of the Indian Partnership Act, 1932, a firm can be dissolved by the partners only under certain circumstances. These circumstances include:

  • The partnership should be ended as per the pre-decided time and after the completion of a certain set goal/ venture.
  • A firm can be dissolved if all the partners die. Although, if a partner dies, the other partners can continue to run the firm/ business if they wish to do so that shall be classified as dissolution of a partnership and not a firm.
  • As stated above, if the partners are insolvent, then the firm can be dissolved.

Section 43: Dissolution of a firm via notice

As per Section 43 of the Indian Partnership Act, 1932, a firm can be dissolved by one of the partners via a notice. The partner that wishes to dissolve the firm must approach the firm with a request to issue a notice to all the other partners to communicate the intentions of dissolving the said firm.

Section 44 : Dissolution by court

As per Section 44 of the Indian Partnership Act, 1942, a partner can dissolve the firm by suing the other partners. Using this method, a partner can sue all the other partners when:

  • A partner can dissolve a firm if other partners are unable to perform the promised duties. There are various reasons by which a partner shall be deemed incapable to perform the promised duties and medical reasons, imprisonment for the long term, insanity, etc shall also be considered here.
  • In situations where a partner transfers the entire portion of their share/ interests to a third party or in simpler words if the partner decides to breed, the pre-decided agreement related to the firm can become the ground for the dissolution of the firm.
  • In situations where the partner hinders the reputation of the firm by their actions which are treacherous in nature, this activity can become the ground for all the other partners to dissolve the firm.
  • When one partner becomes of unsound mind or mentally unstable, that is when the other partners have the authority to sue the said partners so that the court can dissolve the firm.

Differences between dissolution of partnership and dissolution of a firm

Partnership Firm 
The process of ending a legal relationship between a partner and the rest of the partners in a company/ enterprise/ firm.
When a partnership is dissolved, other partners of the firm may or may not continue the business.
Court intervention is not needed.
There is no closure needed in the books as the business does not cease if a partnership ends.
The dissolution of a partnership does not necessarily result in the dissolution of the firm.
The process of dissolving all the partnerships of the company/ enterprise/ firm which results in dissolving the firm is known as dissolving a firm.
When a firm is dissolved, all the business-related activities are stopped.
Courts can help the partners dissolve the firm.
The books need closure as the business ceases.
The dissolution of a firm also results in the dissolution of partnerships.

Conclusion

The Indian Partnership Act, 1932 clears it out for us that there is a huge difference between the dissolution of a partnership firm and the dissolution of a partnership. As per the explanation given above, we can say that when a partnership ends, it does not necessarily mean that the firm has been dissolved too but on the other hand when a firm is dissolved, it means that all the partnerships have been dissolved too. 

References


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

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

https://t.me/lawyerscommunity

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