All you need to know about the cy pres doctrine

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March 11, 2022

This article has been written by Oishika Banerji of Amity Law School, Kolkata. It discusses the cy pres doctrine which is applied by the courts to rescue a legal document difficult to impose. This is done by changing the document ‘as close as feasible’ to the original intent of the same. The article also discusses the doctrine with respect to the United States, the United Kingdom, and India.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

The cy pres doctrine is a legal notion that empowers courts to interpret the provisions of a will, gift, inheritance, or charitable trust. If there are problems carrying out the original document’s intended desires or conditions, or if they can’t be lawfully constructed or legally implemented, this doctrine kicks in. Once in force, it allows the court to interpret the donor’s or testator’s intent and carry out their desires. This article helps the readers understand the doctrine of cy pres in light of the United States, the United Kingdom, and India.

What is the cy pres doctrine

The term ‘cy pres’ comes from the old French phrase ‘cy pres comme possible’, which means “as near as possible.” In the legal sphere, the phrase refers to ensuring that a donor’s or testator’s desires are followed out as nearly as possible, whether in a will or as part of a charitable trust or estate. When legal complications occur that make it impossible to distribute cash for any reason, the instrument or trust may become null and invalid. For example, if a charity goes bankrupt and is unable to function or meet its goals, legal action may be required. The cy pres doctrine can be used by courts to prevent it from ‘failing.’ The cy pres concept allows courts to develop their own interpretations to guarantee that a donor’s, charity trust’s, estate’s, or will’s wishes are followed out as precisely as possible, even if some revisions are required. In the case of a charity, for example, the Internal Revenue Service (IRS) specifies that a court might “substitute another benevolent aim that is judged to approximate the original charitable purpose as nearly as practicable.”

An illustrative example of the doctrine’s application

The Massachusetts Supreme Judicial Court decision in Jackson vs. Phillips (1967) is a notable example of the application of the cy pres doctrine. In this case, the testator, Francis Jackson, had established a trust to “generate a public feeling that would put an end to dark-skinned slavery in this nation”. The Thirteenth Amendment of the United States Constitution ended slaver, rendering the trust’s declared purpose null and void. The Court disagreed, using cy-près and holding that Jackson’s objective would be best achieved by utilizing the trust “to promote the education, support, and interests of the freedmen, recently slaves, in those states in which slavery had been thus abolished.”

Purpose of the cy pres doctrine

The cy pres doctrine is a legal theory that courts use to prevent a charity trust from failing when a philanthropic purpose is impossible or impractical to achieve at the outset or afterwards.
Rather than nullifying the charitable donation, the court might choose a new beneficiary who closely matches the donor’s original purpose. For example, if a deceased formed a trust with the purpose that the remaining trust funds must go to a specific charity that no longer exists after the death of their last living relative, the court may transfer the funds to a similar organisation that satisfies the decedent’s general philanthropic aim.
The cy pres concept has also been used in the distribution of class action settlement awards if the money goes unclaimed or it is not cost-effective to distribute the cash to each individual class member. A beneficiary, such as a charity organisation, may be approved by the court in such instances.

Conditions for the doctrine of cy pres

The following are the requirements for the Cypres Doctrine:-

It must be difficult to actually carry out a donor’s goal with the literal meaning.
The donor must have had a strong desire to help others.
The new goal with which the property will be attached must be as close in nature as feasible to the settler’s specific goal, but it must be impossible to implement.

Understanding the cy pres doctrine in light of the United Kingdom

The cy-pres doctrine is a part of English trusts law that deals with charitable trusts. The doctrine states that if a trust fails because its aims are impossible or cannot be met, the High Court of Justice or the Charity Commission can issue an order allocating the trust’s money to the next best use. The trustees (by a two-thirds majority) may decide to redirect the trust’s finances towards charity with a value of less than £5,000 and no land. The idea originated in ecclesiastical law, derived from the Norman French cy près comme possible (as near as possible), although similar and potentially ancestor principles have been discovered in Roman law, both in the Corpus Juris Civilis and subsequent Byzantine law.

English laws governing the cy pres doctrine

Prior to the Charities Act of 1960, the cy-pres concept only applied in instances when the trust’s aim was either unattainable or impractical. However, Section 13(1) of the 1960 Act (part of the now-repealed Charities Act 1993) states that cy-près can apply if certain original intentions are present. The Charities Act of 2006 changed this phrase to “the appropriate reasons,” which are described as “(on the one hand) the spirit of the donation concerned, and (on the other hand) the social and economic conditions existing at the time of the proposed revision of the original aims.”

In the event of extremely small charitable trusts (those with annual revenue of less than £5,000 and no land), the trustees can agree to transfer the property to another charity with a two-thirds majority vote, bypassing the High Court and the Commission. Sections 74 and 75 of the 1993 Act lays down this information. Once a decision has been made, the public must be notified along with the Commission. Currently, the Charities Act of 2011 deals with the cy-près doctrine.

Cy pres doctrine in the United States

A Uniform Trust Code (UTC exists in the United States, which is a model code that various jurisdictions (e.g., states) may adopt by statute. According to the UTC, cy-près only applies to charity trusts if the trust’s original specific purpose has become impractical or unworkable, and the trust’s articles do not indicate what should happen in such a case. According to the UTC, if a specific charity objective becomes illegal, unworkable, impossible to fulfil, or wasteful, the court may use cy-près to alter or terminate the trust in a way compatible with the settlor’s philanthropic goals. The UTC further states that the court may not utilise cy-près if “a provision in the provisions of a charity trust would result in distribution of the trust property to a non-charitable beneficiary.” Along with this, cy-près may not be used to circumvent the rule against perpetuities. For non-charitable trusts, the UTC states that the court may alter or terminate the administrative or dispositive conditions of a trust if, due to circumstances not foreseen by the settlor, change or termination will serve the trust’s aims.

The take of American courts on cy pres doctrine

American courts followed the California Supr eme Court’s endorsement of cy-près processes in class action settlements in 1986. Instead of reverting to a defendant, cy-près procedures allow money to be utilised to promote the interests of class members, which might be perceived as a windfall for a defendant accused of breaching the law. The word is a misnomer in the context of class actions, according to Judge Richard Posner, because cy-près judgments have a punitive consequence. The American Law Institute’s Draft of the Principles of the Law of Aggregate Litigation proposed limiting cy-près to “circumstances in which direct distribution to individual class members is not economically feasible, or where funds remain after class members are given a full opportunity to make a claim“.

The US Supreme Court decided in 2014 to hear an appeal of the Ninth Circuit decision in Google Referrer Header Privacy Litigation, 10-cv-04809, U.S. District Court, Northern District of California (San Jose), which allowed a class action settlement that awarded $2 million to the plaintiffs’ attorneys, $5,000 to each of the handful of named plaintiffs, and no monetary award to an estimated 129 million class members, citing the cy-près doctrine to give a handful of privacy groups (including all three plaintiffs’ attorneys’ alma maters and several groups already supported by defendant Google) a share of $6 million rather than any monetary award to class members who would receive approximately four cents each. The case of Frank vs. Gaos (2018) had allegedly claimed that the award was not “fair, reasonable, and sufficient” as required by Rule 23(e)(2) of the Federal Rules of Civil Procedure. The Supreme Court did not rule on the case’s merits, instead remanding it to the Ninth Circuit for a determination of the plaintiffs’ standing.

Cy pres doctrine in India : an insight

Under Section 92 of the Code of Civil Procedure, 1908, the Court of the District Judge has the power to administer public charities. Sub-section (3) of Section 92 embodies the doctrine of cy pres. This provision was taken from Section 13 of the Charities Act of England of 1960. Even before the adoption of sub-section (3), Indian courts had the authority to apply the cy pres concept to public trusts under England’s law. Sub-section (3) effectively broadens the scope of when the property can be used by pres. This establishes the conditions under which a charity or religious trust’s ‘original intentions’ can be changed and the property utilised cy pres. Mergers of many organisations are also allowed under sub-section (3). This provision provides the most significant modification of the old cy pres norm, and will likely be of the most practical utility in allowing money to be used for the greatest public advantage.

Before the addition of sub-section (3), the cy pres doctrine could only be used if carrying out the trust’s aim was ‘difficult or impracticable.’ This requirement, despite the fact that the word ‘impossible’ was widely interpreted, created a number of problems; for example, nothing could be done in cases where the continued administration of the trust was highly inconvenient but not ‘impossible’, or where an old charity served no useful purpose in modern times, perhaps due to changes in societal needs or the value of money. The Chantries Act of 1960 (parts 13 and 14 in England) and Section 92(3) in India modernised the whole matter surrounding the cy pres doctrine.

All you need to know about Section 92 of the Civil Procedure Code, 1908

Section 92 of the Code of Civil Procedure, 1908 provides that in one or more of the following circumstances, the court may alter an express or constructive trust created for a public purpose of a charitable or religious nature and allow the trust’s property or income, or any portion thereof, to be applied cy pres:

Where the original purpose of the trust has been accomplished in whole or in part, or where the original purpose of the trust cannot be carried out at all or according to the guidelines given in the trust instrument.
When the trust’s original purpose is used for a portion made available by virtue of the trust.
Where the original intention was put out in whole or in part.

Have been well-provided for by other means.
Stopped being a waste of time or a danger to the community.
Stop providing an appropriate and effective technique of exploiting the property in any other way.

Indian judiciary’s take on the cy pres doctrine

Over the years, the Indian judiciary has been of the clarified view that since the notion of cy-pres has its origins in equity, it has a broad scope and is applied liberally, however, there are certain limitations. Courts have opined that the doctrine of cy pres is resorted not only for the initial use of the sum given to charity but also for the continuing application of any surplus of capital or revenue. The cy-pres rule is in line with Hindu Shastra principles and has been applied to charitable offerings by Hindus. These thoughts and opinions are very well reflected in precedent judgments discussed hereunder.

State v. Man Singh and Others (1974)

Tara Chand Saraf who lived in Peshawar many years ago had a jeweller’s shop, as it appeared before the Delhi High Court in the present case of State v. Man Singh and Others (1974). He didn’t have any children. He had created a will and had it recorded on December 20, 1927. The original will has been lost or is no longer traceable or procurable. Mr. Partap Singh, one of the current trustees of the trust established by that bequest, has approved the aforementioned facts before the High Court. He claimed that he had travelled to Peshawar in 1964 and attempted unsuccessfully to locate the original will. He further claimed that he was informed that the will’s records in the Peshawar Sub-office Registrar’s had been burned.

Delhi High Court’s decision

The Delhi High Court had noted that in light of the present case, there is no question that the testator had a broad benevolent aim that extended beyond the specific forms of application that he established. Everything in the will, with the exception of the statement that he has no children, leads to it. A performance like this was thought to indicate a desire to give to the general public. The key guideline to follow while applying the notion of cy-pres is that the donor’s purpose must be followed as closely as feasible. The trustees must therefore follow the concept of cy-pres and accomplish what is as near as possible to the intention of the testator. In light of this observation, the Court ordered that the funds in the hands of the trustees must be allotted to public welfare purposes.

Abid Hatim Merchant v. Janab Salebhai Saheb Shaifuddin (2000)

The question before the Apex Court in the current Civil Appeal against the Bombay High Court judgment is whether the avowed object with which Sir Adamji Peerbhoy, the great Philanthropist, founded the trust for the Dawoodi Bohra Community in 1883 A.D. requires a change of object under cypres doctrine with regard to constitutional parameters in order to make the Trust truly secular in nature, since the situation in the early nineteenth century may not suit the purpose in the 21st century. The respondent Trust argued that the Constitution’s Preamble declares India to be secular and that what was possible in 1883 may not be proper or in line with the Indian Constitution’s lofty ideas, because the constitutional mandate is to be obeyed in its observance rather than in its violation, and it is this concept that prompted the Trustees of Sir Adamji Peerbhoy Sanatorium Trust to petition the High Court for variation and amendment to the scheme of the Trust as sanctioned by the Court in 1931.

Apex Court’s opinions

It is to be noted that the use of the courts’ ordinary jurisdiction to manage a charitable trust whose particular form of application has not been indicted by the donor, results in a cy-pres application. Where he has prescribed a particular mode of application that is incapable of being carried out, but he had a charitable intention that was greater than the particular mode of application prescribed, the court can carry out the charitable intention as if the particular direction had not been expressed at all.

Further, the most important thing to remember while using the cy-pres concept is to follow the donor’s purpose as closely as possible. As a result, if the donor selects a specific item capable of taking effect, any subsequent application for cy-pres must be limited to the scope of that object, and the manner of application must, as much as possible, correspond to his intentions. If no other object with a closer link can be located, a charity may cy-pres to the original object, even if it appears to have no similarity to it, however things closer to the donors purpose will always be picked in preference to those more distant. The Apex Court in light to the facts of the present case has opined that necessary changes in the object of the Trust should be carried out to eliminate hindrance in its application.

Kaliamurthy v. Thangamani and Others (2011)

In the present case of Kaliamurthy v. Thangamani and Others (2011), the appellant, Kuppammal, gifted an immovable property consisting of two mahs of wetland located at Akaraivatham to her son Veerappa Vanniyar in an authentic deed with the condition that the donee must feed 50 pilgrims in the Tamil months of Chitrai and Karthikai at the Madam consecrated by her in Tiruvannamalai, and her daughter, Veerayee, had also agreed to the above-mentioned condition. According to the appellant (Veerappa Vanniyar), he has no knowledge of whether the above-mentioned arrangement has been finalised or not. He also claims that after Veerappa Vanniyar died, his son Arunachala Vanniyar stepped into his shoes and conducted the Annathanam, and that one Ganapathi Vanniar filed a suit in Karaikal against Arunachala Vanniyar, claiming that the charity established by Kuppammal had been in existence and demanded the partition of his half share in the property set aside for the charity as Kuppammal’s legal heir.

The above-mentioned suit was dismissed by the lower court on April 26, 1957, and Ganapathi Vanniar filed an appeal challenging it. It is stated that the appeal filed by him was dismissed, confirming the lower court’s judgment and decree, and it is also stated that by way of the judgment rendered, the appellate court expressly removed the element of trust or endowment in the donation of Kuppammal and further admitted that Arunachala Vanniar was the donor. It is stated that Arunachala Vanniar left a Notarial will dated 18.12.1968 and the will stipulates that Arunachala Vanniar’s daughter Kunjammal shall take possession of the house with limited right of enjoyment during her lifetime and allow free entry to the other daughters, and Kunjammal’s sons Thangamani Vanniar and Narayana Vanniar shall continue to have the enjoyment of the property by executing certain charities.

The Madras High Court’s decision

In this notable case, the Madras High Court had opined that it’s interfering with the trial court’s verdict and the decree has been proposed for no good cause. The trial court was deemed to have appropriately analysed and appreciated the information on record in the right context, both factually and legally, and correctly denied the appellant’s relief while correctly granting the respondent’s relief. In view of the foregoing, the Court held that the appellant was not entitled to a declaration of administration of the suit properties on the doctrine of cy pres pursuant to Arunachala Vanniar’s will dated 18.12.1968. The Court also believed that the respondent has the right to split and separate ownership of half of the action.

V. G. Bhoopathi v. Adhi Lakshmi Ammal Dharma Chathiram (2017)

During her lifetime, one Adhilakshmi Ammal built a free Choultry called ‘Adilakshmi Ammal Dharma Chathiram’ in Thirukazhukundram Village, which has offered free lodging for the poor since 1890. She spent around Rs.10,000 renovating it during her lifetime and also had put Rs.1,500 in M/s Arbuthnot and Co, Madras. On 02.10.1900, she signed a trust deed and had it registered. The Trustees were required by the Trust Deed to maintain the Choultry, keep it lighted with lamps (Deepam), give shelter, and provide water to pilgrims from the interest earned on the fixed deposit. Devaraja Mudaliar, Adilakshmi Ammal’s foster son, was named the first Trustee by Adilakshmi Ammal.

To keep the Choultry going after his death, he named his son-in-law Gajaraja Mudaliar as Executor of the Will and gave him permission to rent out a section of the Choultry to generate cash and continue the charity. As a result, Gajaraja Mudaliar was in charge of the property till his death. Padmavathi Ammal, the wife of Gajaraja Mudalia, died before her husband, leaving her son Srinivasan and daughter Kamalabai Ammal. Srinivasan had gone missing and had not been heard from since. Kamalabai Ammal died on January 5, 2004, leaving behind two boys and two daughters. Dhanalakshmi Ammal, Gajaraja Mudliar’s junior wife, bore him two sons and three daughters. The present conflict was between his daughter from his first marriage and his sons from his second marriage.

Observation by the Madras High Court

In the circumstances, it is clear that the trust’s objective cannot be carried out in accordance with the orders set forth in document Ex.A-2 that established the trust. As “parens patriae,” the Court has the responsibility to protect trust property that has been caught between persons who have illegally transferred trust property and persons who are not truly interested in the trust and have never discharged the trust’s responsibility or relinquished the right of trusteeship by implication. As a result, it is critical to follow the Cypres Doctrine as outlined in Section 92 (3) of the Code of Civil Procedure, 1908.

M. Murali Krishna Goud v. the State Of Andhra Pradesh (2020)

The petitioners (M. Murali Krishna Goud) in the present case of M. Murali Krishna Goud v. the State of Andhra Pradesh (2020) seek a writ of mandamus declaring the respondents’ actions in not relocating the office of the Sub-Registrar, Dhone, Kurnool District from an old and dilapidated building to a new building constructed on the plots gifted by the petitioners in S.No.321 and, on the other hand, proposing to use the new building for a purpose other than that for which the plots were gifted as illegal, arbitrary, contrary to law.

Observations by the Andhra Pradesh High Court

The Andhra Pradesh High Court in light to the present case had observed the following two instances in which the cy pres doctrine is applicable:

When a testator had a broad philanthropic purpose, but the goal of charity turned out to be impossible or there remained extra money after the trust was fulfilled, the cy pres doctrine applies. In such cases, the court may order that the entire fund or the excess, as the case may be, be applied to another charity in a manner that is as close to the testator’s purpose as possible. For example, a person may write a will specifying that the assets left over after his death be used to establish a trust for the eradication of a disease that was prevalent at the time of the will’s execution. However, if that disease has already become extinct by the time he dies and the will comes into effect, the trustees may apply to the appropriate court for the direction that the legacy be used for any other purpose that is closer to the original intention of the testator, and the court, having regard to the fact that the object of the trust has already been fulfilled in its natural course, may apply the doctrine of cy pres and treat the testator’s general intention as if he died today.
Another scenario in which this doctrine might be used is if, after eliminating the sickness by spending the legacy, the trustees petition to the court for appropriate directions, and the court can use this doctrine to direct them to use the rest of the funds for any other charitable purpose. It is important to remember that this idea only applies to wills, not deeds.

Thus the jurisprudence above demonstrates that the theory of cy pres applies to universal charitable donations for public purposes. However, it appears that its applicability is restricted in the situation of conditional donations provided for a specified purpose. In such circumstances, the theory applies if excess remains after the condition is met. This theory, however, does not apply where the donee has breached an antecedent or subsequent condition. The facts must be examined in light of the preceding legislation. The Court opined that it is also worth noting that, because the gifts in question are conditional, the notion of cy pres does not apply to them. Authorization to use the concerned building for any purpose other than housing the Sub-office Registrar’s and its affiliated enterprises is not allowed. The counterclaims that the Sub-Registrar Office was not relocated because authorization had not yet been granted are nothing more than truancy on the part of the respondents. When the public is suffering due to a lack of quality and safe premises in which to undertake registration transactions, the authorities cannot behave carelessly and deprive the public of their constitutional right.

Conclusion

As we come to the end of this article, it is worth noting that the legal doctrine of cy pres comes as a saviour for unenforceable legal documents by showering relief on them thereby making it feasible for them to function and fulfil their purpose.

References

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Rightfully claiming copyright : legal remedies available in case of infringement

By

Sneha Mahawar

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March 11, 2022

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This article is written by Yashaswi Srivastava and pursuing a Diploma in US Intellectual Property Law and Paralegal Studies. This article has been edited by Prashant Baviskar (Associate, Lawsikho).

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Copyright is the legal heart and soul of any creative person. Influencers, content creators, YouTubers, innovators, IT professionals, entrepreneurs, artists, designers, writers, filmmakers, producers, music composers, singers- you name it, you have it- all of them need to understand the rights conferred upon them by Copyright Law. This article talks all about it in detail. It also discusses what is an infringement and the enforcement norms.

What is copyright

Intellectual Property is simply defined as the creations of your mind. This discipline is broadly categorized into two forms-

Industrial property

IPs that relate to industrial use and know-how fall under industrial property- e.g., trademarks, service marks, patents, trade secrets, geographical indications, designs, etc.

Copyright

IPs that relate to specifically creative forms of the brain which have no industrial use are categorized under the copyrights. Various countries in their domestic legislation have tried to define copyright but we will look at the definition stated under the Berne Convention, 1971 as it is precise, absolute, and definitive in nature.

Article I of the Convention stated that the countries to which this Convention applies constitute a Union for the protection of the rights of authors in their literary and artistic works. Article II defines the ambit of ‘literary and artistic work’. It states:

The expression “literary and artistic works” shall include every production in the-

literary, scientific, and artistic domain, whatever may be the mode or form of its expressions, such as books, pamphlets, and other writings;
lectures, addresses, sermons, and other works of the same nature;
dramatic or dramatico-musical works;
choreographic works and entertainments in dumb show;
musical compositions with or without words;
cinematographic works to which are assimilated works expressed by a process analogous to cinematography;
works of drawing, painting, architecture, sculpture, engraving, and lithography;
photographic works to which are assimilated works expressed by a process analogous to photography;
works of applied art;
illustrations, maps, plans, sketches, and three-dimensional works relative to geography, topography, architecture, or science

A computer Programme is a list of instructions given to a computer telling it what to do. These programs presently are widely used to create online businesses through websites and mobile applications. Since creating websites and mobile applications involved plenty of creativity, it was important to protect this aspect of Intellectual Property.

The Berne Convention has no mention of computer programs. However, it qualifies as a part of production in the literary, scientific, and artistic domains within the meaning of article 4. They are protected by the copyright law of various countries as well as under the WIPO Copyright Treaty (1996). Article 10.1 of Part II of AGREEMENT ON TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS also protects computer programs. It states, ‘Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention (1971)’.

It is pertinent to note here that copyrights do not protect ideas, procedures, methods of operation, or mathematical concepts as such. You must express your idea in some form or the other so that it becomes protectable by law. The idea need not necessarily be original however the expression must be original for it to be protected. E.g., My brother is an IT professional. Photography is his hobby. So, he clicks pictures and posts them online with his name written at the right bottom side of the picture. This is called a Watermark. He is conferred with copyright protection simply by applying this watermark to each of his clicked pictures.

What can be copyrighted

Literary work

Any idea expressed in written or print form falls under the ambit of literary work. Tables, computer programs, books, lectures, pamphlets, speeches, addresses, novels, manuscripts, poems, articles, biographies, histories, academic thesis, working notes, private diaries are protectable. This includes medical records, legal contracts,s and forms, telegraph codes, product warranty forms, business route letters, examination papers.

Things that are not protected are- small phrases, single words or combinations of words, etc. These are protected by Trademark law. E.g., ‘Mountain Dew- Darr ke aage jeet hai’- is not copyrightable, it will be protected under the Trademark law. Also, general instructions are not protected.

Artistic work

Drawings, paintings, scripts, sculptures, architectures, engravings, lithographic work, photographic work, illustrations, maps, plans, sketches, 3D work related to geography, topography, or science are all covered under artistic work.

It is pertinent to note here that historical works, defined national boundaries, and scientific facts are not protectable. E.g., a person cannot claim his/her copyright to the Taj Mahal located in Agra. However, if an artist drew a picture of it on a sheet of paper or made a tiny sculpture with sand, it is protected by copyright law.

Musical work

The definition of musical work varies across countries. For instance, in India, it is stated as a work consisting of music and includes any graphical notation of such work but does not include any words or any action intended to be sung, spoken or performed with music. These lyrics fall under the scope of literary work. However, in many other jurisdictions, musical work contains everything written, sung, composed in producing such a work.

Dramatic work

Any work that stirs the emotions of the audience through its act is called dramatic work. It includes plays, screenplays, choreographic work, entertainment in a dumb show, recitation, cinematographic film, etc.

In India, the Copyright Act, of 1957 does not recognize cinematographic film under the ambit of dramatic work. However, a broader definition of a term does include the stated term under its scope.

Derivative works

Works based on prior art are called derivation work. Prior art is work that is pre-existing in the world. The United States legislation has given a definition for the term.

‘A work based upon one or more pre-existing works such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship is a “derivative work”.’

How is it protected under the law

There are two ways of protecting work under copyright law-

Through creation
Through registration

You will be happy to know that once you wrote an article on a piece of paper or typed on your computer system, copyright protection is conferred. The other method is through registration of your work. Registration is not compulsory but it is always good to get a registration done. The process of protecting copyright work is different in various countries. The UK has no defined process for registration of your work under copyright law. There isn’t a register of copyright works in the UK. You can mark your work with the copyright symbol (©), your name, and the year of creation. Whether you mark the work or not doesn’t affect the level of protection you have.

How is it protected internationally

The Berne Convention governs the law of copyright on the international level. It is based on three principles which are:

Principle of natural treatment

When a work originates in one contracting state, the work shall automatically be protected in all the other contracting states. A Contracting state is a name given to a country that is a party to any international treaty.

Principle of automatic protection

Such protection must not be dependent on the compliance of any formality. This means that registration of your work is not necessary.

Principle of independence of protection

Protection is independent of the existence of protection in the country of origin of the work (principle of “independence” of protection). If, however, a Contracting State provides for a longer term of protection than the minimum prescribed by the Convention and the work ceases to be protected in the country of origin, protection may be denied once protection in the country of origin ceases.

What are the rights conferred by copyright law

The owner of the copyright has the exclusive right to reproduce, distribute, translate or perform his/her work for commercial purposes with any formal permission. J K Rowling’s Harry Potter series has been distributed for adaptation in films, for merchandise, toys, and other purposes. Further, copyrights confer two types of rights:

Economic Rights
Moral Rights

Economic Rights

Copyright Law states that the owner of the copyright has an exclusive right to allow third-party use of his/her work. They can authorize or prohibit:

Reproduction of work in various forms;
Distribution of work;
Rental of work;
Importation of work;
Public performance of the work (It is pertinent to note that a private performance does not infringe copyright work);
Broadcasting or another way of communicating the work;
Translation of the work;
Adaptation of the work.

Moral Rights

These are conferred on authors and are independent of their economic rights. The Berne Convention states that a copyright owner should have the right to claim the authorship of his/her (also called Right of Paternity or Right of Attribution) and also have the right to object to any modification or distortion of his/her work without prior permission (also called Right of Integrity). These rights remain with the author even after transferring economic rights. Also, moral rights are non-transferrable in nature but can be expressly or impliedly waived.

What are the limitations and exceptions to these rights

The aforementioned rights will not be applicable if the expression of the idea is absent in tangible form. There are two basic types of exceptions:

Free use
Compulsory licenses

Free use

Article 9(2) of the Berne Convention states that-

‘It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author.’

Using a particular work for quoting (provided that the source and name of the author is duly mentioned), for teaching purposes, for illustrations, for news reporting is categorized as fair use.

Compulsory licenses

These are special situations where you do not require the permission of the owner to use her/his work. It is an exception that is conferred to serve the national interest. When copyright owners become a hindrance in the development of technology or serve the greater interest of the masses by refusing to grant use of their work, the government may authorize distribution of their work by using this exception.

In June 2013, the WIPO (World Intellectual Property Organization) and its members adopted a treaty called the ‘Marrakesh Treaty. It requires the member nations to adopt limitations and exceptions for the creation and cross-border transfer of certain published works in formats accessible to persons who are blind, visually impaired, or otherwise print disabled.

How long does copyright protection last

The moment a work is created, the duration for copyright begins. Some countries recognize it when the work is available in tangible form. (Tangible form means something that can be touched or seen. For example- a choreographer’s copyright will not be recognized unless he/she notes it down on a choreography sheet or videotapes it). Copyright protection continues even after the death of the owner. The purpose of it was to help the descendants of the owner benefit economically. Some countries provide perpetual moral rights to copyright owners.

Duration for copyright protection according to the Berne Convention is the lifetime of the creator plus 50 years after the owner’s death. Some countries provide for additional 70 years and others for 60 years. India provides for additional 60 years i.e., the creator’s lifetime plus 60 years. Once this time period is over, the work becomes subject to the public domain.

Who is the owner of the copyright

The general rule of copyright law states that the author is the first copyright owner of the work created. Here are a few other interesting facts about it:

The propounder of the idea is not the owner but the one who gives expression to this idea is the true owner.
‘A’ is a professional photographer but in 2020, a photograph clicked through his camera by his friend ‘B’ won the award for the Best Shot 2020. ‘A’ claims to be the author of the picture as it was his camera that was used to click it. ‘B’, however, states that since he was the one who clicked it, he should have the copyright over that picture. In such a situation, ‘B’ is correct. It does not matter whether this person is a professional photographer or not, if he took the picture, he is the owner.
A person who delegates part of an expression of work and executes it is also an author.
If a person relies completely on another person for the expression of work then that person is not an author.

There are also a few exceptions to this general rule. They are as follows:

Work created by employees: Few countries recognize employees to be the first owner of their work even though it was created during their course of employment. Other countries recognize the employer to the owner of the work is created by an employee during the course of employment. These countries include the United States.
Freelancers: Even freelancers cannot claim the ownership of the work created if they sign a ‘made for hire’ agreement with their clients
Ghostwriters: Ghostwriters are also people who cannot claim copyright of the work created

An employee owns the copyright of his work only when:

i. He is not obligated to produce the work he created under his service contract agreement

ii. He has expressly or impliedly stated that the copyright ownership vests with him

What are the ways to let others publish my work

There are two major ways of transferring and licensing rights:

Assignment
Licensing

Assignment

It’s the process of transferring the ownership of copyright to a third party. It is preferable to have it in writing. In countries like the U.S. & U.K., assignments must be in writing to be valid under the law.

Licensing

It’s the process of transfer of an interest in copyright. The third party is restricted on the usage of the work licensed. It is merely consent or permission to use your intellectual property on your terms and conditions.

There are repercussions of not having an assignment or license agreement in writing across different countries. There are:

The transaction may be held void and no interest or ownership passes
In the U.K., the transferee or licensee (person to who the interest or the ownership is granted) may ask the court to compel the transferor or licensor to sign an agreement to validate the transaction
In the U.S., the transaction is not valid under the law. However, it may take effect as a non-exclusive license (A non-exclusive license is not a written agreement of transfer of an interest in copyright. The licensee cannot sue for infringement of the copyright).

What to do if somebody publishes my work without my permission

The act of publishing, reproducing, translating, adapting, publicly performing and distributing somebody else’s work without permission or in absence of an agreement for assignment or licensing is called an infringement of that work. Again, like ideas are not protected under copyright law, similarly, infringement of ideas is also not protected under copyright law. To prove infringement, the owner must prove that:

He/she is the owner of the stated work
The act by the defendant has a substantial part of the owner’s work
The defendant did not have any express or implied authority granted by the owner to commit the act

The defendant needs to prove a valid defense i.e., ‘fair dealing’ or ‘fair use’.

A ‘substantial part’ is both quantitative and qualitative in nature. Even a small part of the copyright can be a ‘substantial part’ of it. Justice Reed in the famous case of Hager v ECW considered the following factors in assessing whether there has been a substantial taking or not:

the quality and quantity of the material taken;
the extent to which the defendant’s use adversely affects the plaintiff’s activities and diminishes the value of the plaintiff’s copyright;
whether the material taken is the proper subject matter of copyright;
whether the defendant intentionally appropriated the plaintiff’s work to save time and effort; and
whether the material taken is used in the same or a similar fashion as the plaintiff’s

What are the enforcement norms

Berne Convention requires seizure of infringing material in any country which is a party to it. The nations have taken a much stricter measure to combat people infringing on the copyright of other people. This is due to two reasons:

Growth in digital technology
Growth in trade and services between countries

The usual remedies available in case of copyright infringement are given as follows. They may differ from one country to another:

Provisional Measures

These are court orders issued before the final determination of rights of parties. The injunction is one of the provisional measures in India.

Final Remedies

It seeks to restore the injured right holder to his or her former position and prevent any recurrence of the infringing activities. The court may make an award of damages – that is to say, order the infringing party to pay a sum of money – to compensate the right holder for the economic or moral injury suffered through the infringement. As an alternative to damages, the plaintiff may be entitled to recover any profits made by the defendant through the infringing activities.

Criminal Sanctions

It is intended to put those who carry out infringement at a commercial scale. Penalties may differ from region to region. In India, the minimum punishment for infringement is imprisonment for six months with a minimum fine of Rs. 50,000/-. Minimum imprisonment is of one year and Rs. 1,00,000/- in case of a second and subsequent conviction.

Border Measures

It lets the owners request the customs authorities to suspend the release of circulation of suspected infringed work. In the US, CBP (Customs Border Protection) is responsible for ensuring that your IP is safe and protected.

Technological protection measures (TPM)

It includes software, devices, or other technologies which are used to block an infringed work. Your password is a type of TPM.

Conclusion

Copyright is an interesting aspect of Intellectual Property. The primary objective for implementing these regulations was to make sure that people feel free and safe to express their creative thoughts. That they are given due credit for their work, that they can commercialize it and that it pushes them to create more such work which contributes to the intellectual sphere of the country, and the world as a whole.

References

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

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

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All about Section 307 of IPC

By

Rachit Garg

-

March 10, 2022

0

This article is written by Sarthak Kulshrestha, a student at Jagran Lakecity University, Bhopal. This article deals with Section 307 of IPC i.e attempt to murder in the light of relevant case laws related to it.

It has been published by Rachit Garg.

Table of Contents

Introduction

Every criminal offence is composed of two essential elements predominantly, i.e. mens rea and actus reus. The former is the mental element that poses the intention to commit a crime and the latter is the actual physical act which is an offence. If a person is ever caught committing an offence, the very first concern that will be raised is “was his act of committing the offence accompanied by mala fide (bad faith) intention?”. Generally, the intention of committing an offence is determined once it has been committed, but it is noteworthy that the intention plays a very crucial role throughout the series of acts that ultimately results in the commission of the offence.

The series of acts begins right from the mental stage at which the intention of committing an offence is formed in the mind. It follows the second stage of preparation in which the offender seriously plans the commission of the offence and collects all means of committing it. The third stage is the attempt under which the plan is executed. It may result in the fourth stage of accomplishment of the crime or it may fail due to some intervention or wrong execution. At the third stage, the plan of committing the offence is executed which evidently proves the intention behind it, thus attracting criminal liability at this stage.

In this article, we will deal with the provision of “attempt to murder” given in the Indian Penal Code, 1860. This article lays down a thorough explanation of the offence of attempt to murder, its nature and punishment with the help of some relevant case laws.

Explanation to Section 307 of IPC

Murder is one of the gravest offences and that’s why even an attempt to cause murder is considered to be as serious as the actual offence of committing murder. Section 307 of IPC defines the offence of attempt to murder. It states that whoever does any act with the intention or knowledge, that such act would cause the death of any person, he would be guilty of murder, and shall be punished with imprisonment for a term up to ten years, and shall also be liable to fine. In addition, this Section states that if hurt is caused to any person by such an act, the offender shall be liable either to imprisonment for life or to the punishment mentioned above.

Section 307 further states the penal provision for the offence of attempt to murder committed by the life-convicts. A life-convict is a person who is already undergoing the sentence of imprisonment for life in some other case. And if such a person commits an offence under Section 307 of IPC and causes hurt, he ‘may’ be punished with death, as prescribed under the Section.

In simpler words, the offence of attempt to murder is a failed attempt of committing an offence under Section 302 of IPC. Under Section 302, the offender intentionally accomplishes the task of causing the death of any person whereas, under Section 307, the offender fails at causing the death of any person and it becomes merely a failed attempt of murder, provided that the offender possesses the intention to kill or knowledge that the act might cause death.

Ingredients of Section 307 IPC

A person is said to commit an offence under this Section if his act fulfils the conditions constituting essential ingredients for the said offence. The ingredients of Section 307 are listed hereunder as:

Intention or knowledge to commit the offence

The foremost ingredient of Section 307 is the intention to kill. The doctrine of mens rea has its significant application to decide whether a person is guilty under this Section or not. As we know an attempt to murder does not result in the death of any person but there is an intention of killing the person in the first place. Also, the knowledge possessed by the offender at the time of committing the offence that his act or use of the weapon in such a way might kill the other person forms the major ingredient under this Section. Therefore, it is necessary for the Court to determine the intention or knowledge of the offender to hold him guilty under this Section.

Nature of the act

The nature of the act should be such that, if it went as planned by the offender and did not get hindered due to any interruption, it would have caused the death of the person targeted by the offender. In fact, often it becomes a deciding factor of determining the intention. The question of intention can be decided by looking upon the nature of the act, which weapon was used to kill, or how grave was it overall in those circumstances.

Execution of the act

As mentioned before, an offence under Section 307 is just a failed attempt of committing murder. This means that the performance or execution of the act of killing takes place but it does not succeed. The initial two stages are of forming intention and preparation of offence but the third stage is of execution which is punishable as it is a full-fledged attempt.

The act by the offender would cause death in its ordinary course

The act must be done with the knowledge that it is likely to cause the death of a person or the intention should be such that it would cause such a serious bodily injury that will inevitably lead to the death of a person.

Let us go through a few illustrations and apply the above-mentioned ingredients to understand the offence of attempt to murder more exhaustively.

Illustrations explaining the ingredients of Section 307 IPC

Mr. A had a small stationery shop in a locality and Mr. B opened his own stationery shop in the same locality facilitated with many more commodities. Mr. A, being jealous of Mr. B, decides to kill him. One night he broke into the house of Mr. B, carrying an axe with the intention to sever his head from the rest of the body. But in those circumstances, he could not do as planned and instead inflicted serious injury on Mr. B’s leg. He did not die but Mr. A was held guilty of attempt to murder under Section 307 of IPC.
Mr. X intended to kill Mr. Y for having illicit relations with his wife. To murder him, Mr. X bought a gun and loaded it. After setting the target, Mr. X fired a shot at Mr. Y. As soon as he fired the shot that did not result in Mr. Y’s death, but it wounded him badly, Mr. X is said to commit an offence under Section 307 because he had made an attempt to murder which is sufficient to prove the guilt under this Section.
Miss P was the house maid of Mrs. R. Miss P was very distressed due to the rude behaviour and harassing comments that Mrs. R passed on her. So, she decided to kill Mrs. R and with the intention of causing her death, she mixed poison in the bottle of her syrup that Mrs. R used to consume daily. Miss P did not commit any offence until she gave the syrup to Mrs. R. But as soon as she delivers it to her and is sure that she will consume it, she committed an offence under this Section as Miss P has made the attempt to murder Mrs. R.
Mr. M had a young daughter N. When she was 6 years old, Mr. M took her away from her school and dropped her in a deserted place where there was no other source of communication with anyone. Also, he did not give her any other means to survive like food, water, etc. Mr. M never returned there and presumed N to be dead. The Court observed that Mr. M had the knowledge that his act of leaving the young girl in such a deserted place would result in her death. So, he was held guilty under Section 307 as he fulfilled the ingredient of having the knowledge that the act might cause the death of the person.

Nature of Section 307 IPC

The nature of the offence under this Section is similar to that of murder. A criminal offence is either cognizable or non-cognizable in nature. The offence under Section 307 of IPC is of cognizable nature. The police are bound by law to register and investigate an offence cognizable in nature. The offence of attempt to murder is a non-bailable crime which means that in a complaint filed under Section 307, the judge is empowered to refuse bail and remand a person to judicial or police custody. Also, an attempt to murder is a non-compoundable offence and the case cannot be withdrawn by the petitioner at his/her will.

Theories of attempt

In the given context, an attempt basically means an actual try to commit an offence that ultimately does not result in the accomplishment, as originally intended. The offence of attempt is nowhere defined but is classified in the category of inchoate crimes under the Indian Penal Code. An inchoate crime is the one that has no effect of attracting the guilt of a full-fledged crime but is an incomplete offence. If a person is attempting to commit any offence, the moment he attempts it, he becomes guilty of the inchoate offence i.e. attempt. It begins with a guilty intention but it is left unsuccessful in the end.

Section 511 of IPC deals with the punishment for attempting an offence. The punishment provided under section 511 is also half of the punishment awarded because the attempt is not as injurious as it had been after it would have been committed.

There are certain tests that the courts have used at times in order to determine when the attempt begins and till when the act remains at the stage of preparation. These are termed as the theories of attempt. Let us understand the theories of attempt briefly.

Factual impossibility test

According to the theory of the factual impossibility test, the offender will not get the defence of impossibility of accomplishing the offence by the means which he used to effectuate the crime. For example, if Mr. X intended to murder Mr. Y and he served a soup to person Mr. Y, which was poisoned with a substance that could not cause the death of Y due to its incapability, Mr. X will not be acquitted only by the reason that it was impractical to kill Mr. Y with that particular poison. This is because the intention to kill stands intact, no matter which means did Mr. X used to kill Mr. Y.

Theory of repentance test

Under this theory, the question of whether the stage of attempt took place or not is decided. The circumstances show that whether the acts of the accused would be completely harmless if he abandoned or changed his mind at the moment before attempting or if he has time to repent and whatever he has done till that particular time is not a criminal act. For example, if person A intends to kill a child who is walking on a deserted street, and person A drives his car towards speeding up the accelerator, but within a few seconds, he changes his mind and avoids hitting the child by tilting the steering away from the child to the other direction. This is the abandonment of the criminal act that he was going to commit.

The overt act or acts which have already been done by a person are completely harmless. It would only amount to preparation but if the overt act is such that if it went uninterrupted then it was only because of circumstances that disabled it to commence into the commission of the offence. It would amount to an attempt under the test of repentance.

Social danger test

As the name itself suggests, the social danger test is the only case of punishing for an attempt when no harm is done. When an offender has attempted an offence that has endangered the entire society as a whole, it is construed that the offender’s moral guilt is the same as if he were successful in accomplishing the offence. The general apprehension in the mind of society is taken into consideration so as to evaluate whether an act would be classified as an attempt or not, and any act which may lead to social repercussion can be best looked at through the lens of the social danger test.

Equivocality test

This test emphasises mainly the intention of committing an offence. In order to prove a person guilty of an attempt, his clear and unequivocal intention must be determined. If a person performs any act by virtue of which a criminal offence would have been effectuated, the intention of such person has to be checked first and if it is found that intention was there to commit such an offence, only then the person will be held guilty for its attempt.

Difference between Section 307 IPC and Section 308 IPC

In Section 307, we have seen that the offence of attempt to murder has been addressed with its punishment. The subsequent Section that follows in the code is Section 308 and it deals with the offence of attempt to culpable homicide. According to Section 308, if a person does an act with the intention or knowledge and in those circumstances, if he caused the death of the other person, he would be guilty of culpable homicide.

For example, X shoots Y because he got provoked by the words of Z. If Y dies, then X will be held for culpable homicide. And If Y does not die then X will be held guilty for an attempt to commit culpable homicide under this Section.

Section 308 states the punishment for the said offence under which the offender is sentenced to imprisonment for a term of three years or fine or with both. Further, If the person has been injured in the attempt to commit culpable homicide, then the offender will be sentenced to imprisonment for a term up to seven years, or fine, or with both.

The gravity of committing the offence under Section 307 is more than that under Section 308 because under 307 the intention or knowledge is intensified to a greater extent coupled with the execution of the act of committing murder. But under Section 308, though the ingredients of intention or knowledge exist, it includes the element that such an act would likely to cause the death of any person, making the accused guilty of culpable homicide not amounting to murder.

Procedure for the trial of a case filed under Section 307 IPC

If an offence has been committed under Section 307, the procedure for its trial is not different from any other criminal offence listed in the IPC. Beginning right from filing an FIR under Section 307 to the final verdict of the Court, there are several stages of the procedure for the trial of an offence committed under this Section. Let us understand through the steps discussed below with respect to how a case filed under this Section proceeds in the Court.

First Information Report (FIR)

First Information Report (FIR) brings a criminal case into motion as it is the first step to initiate the proceeding of the trial. According to Section 154 of the Criminal Procedure Code (CrPC), an FIR can be registered in cognizable cases only. As we have seen that the attempt to murder is an offence of cognizable nature, its FIR has to be filed. Once the police arrest the accused, an FIR is supposed to be registered and the accused person is made to be produced before the Court of Magistrate within 24 hours of the arrest.

Investigation and the final report by police

Under Section 173 of the CrPC, the police is bound to file a final report in the concerned Court after completing the investigation of the case. This report is considered to be the final submission of the investigation undertaken by the police or investigation agency. If any case is filed under Section 307 of IPC, all the relevant evidence collected by the police will be included in the final report that substantially helps the Court to determine whether the ingredients of the offence have been fulfilled or not.

On the basis of the evidence collected by the investigation agency, the police file a charge sheet and produce it before the Judge, containing all the criminal charges framed against the accused.

Arguments before the court

On the date of hearing, the Judge hears the arguments put forth by both the parties. After analysing the arguments based on the charges framed by the parties, the court finally frames the charges to proceed with the trial under Section 307.

Plea of guilt

Section 241 of CrPC contains the provision of the plea of guilt. As per this provision, after framing the charges, the accused is given an opportunity to plead guilty, and the responsibility lies with the judge to ensure that the plea of guilt was voluntarily made by the accused and not under any external influence, pressure or force. If the accused pleads his guilt and admits that he had the intention to kill the victim, the judge may convict the accused.

Evidence by prosecution

After the charges are framed and the accused pleading ‘not guilty’, the evidence is first given by the prosecution, upon whom the burden of proof lies at the initial stage. Both oral and documentary evidence can be produced in court. The judge has the power to issue summons to any person as a witness or order him to produce any document.

Cross-examination of witnesses by both the parties

The prosecution produces its witnesses in court against the accused. The prosecution produces its witnesses before the court and it follows the cross-examination exercise conducted by the accused or his counsel. Sometimes, there are cases in which the accused also has some evidence against the prosecution and in order to strengthen his case, that evidence can be presented by the accused before the court at this stage. This opportunity is given to the accused to make his/her side in the case stronger.

The burden of proof lies with the prosecution but if any witness is available with the accused, it can be produced in the Court to strengthen its case. The witness produced by the defence can be cross-examined by the prosecution.

Final arguments

Section 314 of CrPC states that after the close of the evidence, any party in a proceeding may address concise and crisp oral arguments and before he concludes the stated arguments, he may submit a memorandum to the Court that would clearly under distinct headings mention the arguments in support of his case and every such memorandum shall be considered to the part of the record. A copy of the same shall be furnished to the opposite party with immediate effect.

Judgement

After analysing the arguments advanced by both the parties, the judge decides the case and passes the decree of conviction or acquittal, depending upon the case. In the case of Section 307, if the judge feels that the accused intended to kill the victim following a strong motive or circumstantially the intention appears on the face of it by the use of weapon or force, the judge may hold the person guilty under Section 307 and pass the conviction order in the judgement.

Quantum of sentence

If the judge holds the accused guilty under this Section and passes the conviction order in the judgement, a hearing will take place to decide the quantum or extent of the sentence or jail time. The sentence can be reduced by the judge in accordance with the punishment prescribed under the Section, if he feels appropriate to do so by looking into the circumstances of the case and the background of the convict.

Relevant case laws with respect to Section 307 IPC

Liyakat Mian and Others v. State of Bihar (1973)

In Liyakat Mian and Others v. State of Bihar, 1973, there were four appellants who were held guilty of committing dacoity under Section 395 of the IPC by the Sessions Court. Therefore, he was charged under Section 307. While the appellants were committing dacoity, appellant No. 2 fired a gun at Burhan Mahton (victim) which injured him gravely.

It was held by the Sessions Court that the death of Burhan Mahton was caused due to the injuries inflicted upon him by the accused No. 2 and thus, he would be held guilty of attempt to murder under Section 307. The Trial Court convicted the accused under Section 395 for the offence of dacoity and under Section 307. He punished all the accused of dacoity and punished them with imprisonment for a term of nine years. The accused charged under Section 307 was sentenced to nine years of rigorous imprisonment. It was held that accused no. 2 will serve both the punishments parallel to each other.

The four convicts filed an appeal before the High Court. The High Court dismissed the appeal and upheld the decision of the Trial Court and rejected their plea. The Apex Court also considered all the evidence and dismissed their appeals.

Jai Narain Mishra v. State of Bihar, 1971

In Jai Narain Mishra v. State of Bihar (1971), Suraj (the appellant), according to the evidence, had forcefully rammed a spear into the chest of Shyamdutt and he had fallen as a result of the blow given by Mandeo with the Farsa on his head. The patient developed surgical emphysema on the right side of the chest, as reported by the doctor. It turned out to be a wound of grievous nature. According to the Medical Officer, the condition of the patient at the time of the admission was serious. Out of a total of four injuries received, this injury was of a grievous nature while the other three injuries were simple. Where four or five persons attack a man with deadly weapons it may be well understood from the scenario that the intention to cause death prevails. In the present case, though, three injuries are simple in nature, deadly weapons were used and the fourth injury that was caused by Suraj is endangering life, but it could not be deemed to be an injury that would have necessarily caused the death.

The Court decided to give the benefit of doubt to Suraj with regard to the injury intended to be caused and held that the offence is not covered under Section 307 but it is a case of Section 326 of IPC. The Court decided to reduce his 5 years of imprisonment to 3 years imprisonment of rigorous nature.

State of Maharashtra v. Balram Bama Patil and Others, 1983

In the case of State of Maharashtra v. Bairam Bama Patel and others (1983), the Court laid down that it is not necessary that bodily injury capable of causing death should be inflicted to hold the accused guilty under Section 307. Although the nature of injury actually caused may be helpful in determining the intention of the accused, such intention may also be determined from other circumstances too.

The action makes a distinction between an act of the accused and its result, if any. Such an act may not have resulted in the death of the person, but still, there may be cases in which the accused would be held guilty under Section 307. What has to be given importance is whether the act irrespective of its effect was taken place with the intention or knowledge and under circumstances mentioned in that section. An attempt in order to be criminal, need not be the per ultimate act. It is sufficient if the intention is present combined with some overt act in execution thereof.

Sarju Prasad v. State of Bihar, 1965

The facts of Sarju Prasad v. State of Bihar, 1965, were that on 23 February 1961, Madan Mohan Saha and Shankar Prasad Shrivastava were attacked by Sunil Prasad while they were passing through the Dhaime chowk at about 1 PM. They sustained grievous hurts and these injuries were inflicted upon them by Sushil with such intention or knowledge and under such circumstances that if they had resulted in death the offence would have been that of murder. In this case, the Supreme Court held that the state of mind of the accused has to be deduced from the circumstances and the motive would be relevant to consider in those circumstances. Thus, the accused was held guilty under Section 307.

Vasant V. Jadhav v. State of Maharashtra, 2004

In Vasant Vithu Jadhav v. State of Maharashtra (2004), the Supreme Court had observed the same as that in State of Maharashtra v. Balram Bama Patil, 1983, that Section 307 does not say that bodily injury capable of causing death should be inflicted. However, the nature of the injury may assist the Court in finding the intention of the accused. A conviction under Section 307 is easy to justify if the intent is coupled with some overt act in its execution. Hence, the accused should not be acquitted of the charge under Section 307 merely because the injuries on the victim were in the form of a simple hurt.

Ram Babu v. State of Madhya Pradesh, 2019

In the case of Ram Babu v. State of Madhya Pradesh, 2019, the Court declared the sentence of 5 years of imprisonment and imposed a fine of 5000/- rupees. The Court held the accused guilty under Section 307 and the bail was not granted. It was held that any injuries that were caused to the other person despite their severity, attract the punishment as prescribed under this Section. All injuries were considered as an offence and the accused person was punished with a monetary penalty imposed on him.

Devanand v. State

In this case, the accused was the husband of the victim, but they were not having good relations between them. One fine day, the husband threw acid on his wife just because she refused to cohabit with him. Following this incident, his wife got permanently disabled by losing one eye. The Court observed that his act of throwing acid constituted the ingredient of knowledge that it might cause her death, thus convicted the accused under Section 307 and gave the punishment for a term of 7 years of imprisonment.

Conclusion

So far, we have seen that when the element of mens rea i.e. intention to commit or knowledge that the act might cause death is met with the stages of crime, the offender is held guilty of that offence. In the case of an attempt to murder, along with the intention or knowledge and actus reus, the means of attempting it is of high relevance too. For example, if a person shoots another with a toy pop gun with the intention to kill him, the person will not be held guilty under Section 307 because there were no proper means of attempting murder.

The punishment for the offence can be decided considering the extent to which the offence has been committed. In the case of murder, if the offence could not result in the death of the targeted person then the offender will be held guilty, but only for the offence of attempt to murder under Section 307. This Section sets the provision of punishment even for the attempt to murder and treats it as seriously as an accomplished offence of murder.

References

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

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

https://t.me/lawyerscommunity

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

Financial frauds in India : all you need to know

By

Rachit Garg

-

March 10, 2022

0

This article is authored by Nidhi Bajaj, of Guru Nanak Dev University, Punjab. The article deals with the important aspects relating to financial frauds in India including its meaning, types, punishment, and the ‘Top 10 biggest financial frauds in India’.

It has been published by Rachit Garg.

Table of Contents

Introduction

Financial fraud is a white-collar crime that affects the general public and has a negative impact on the whole economy. Often, these frauds involve misuse or manipulation of public funds by the fraudsters to make huge profits for themselves. With the advancement in space of technology, cases of financial fraud are on the rise. We have witnessed big financial frauds perpetrated by fraudsters like Vijay Mallya, Harshad Mehta, and Nirav Modi. The cases of financial fraud committed in cyberspace are no less daunting. Fraudsters use the anonymity offered by the internet to commit online scams such as KYC frauds, identity fraud etc. Of late, technology has become the weapon of choice for fraudsters. This article deals with the crucial aspects relating to financial fraud including its meaning, types, punishment, and the 10 biggest financial frauds in India. Towards the end of the article, you will also find some tips to protect yourself from these types of fraud.

What is fraud

Fraud is the wrongful or criminal deception intended to result in financial or personal gain. It can also be defined as deceit, trickery, intentional perversion of truth aimed at inducing another person to part with something of value or to surrender a legal right.

What is financial fraud

It is difficult to give one exhaustive definition of financial fraud. One may define financial fraud as an illegal act intended to deprive you of your money for personal gains. Financial fraud means:

The intentional act of deception involving financial transactions for personal gains.
Taking money/other assets from someone through deception.
Illegal and unethical management of financial resources.
Manipulation, falsification alteration of accounting records.
Misrepresentation or intentional omission of amounts, misapplication of accounting principles, and marking misleading or false disclosures.

Typically, there exists an element of deceit, subterfuge, or abuse of a position of trust in cases of financial fraud.

Common types of financial frauds

Ponzi schemes

A Ponzi scheme is an investment fraud that generates returns for earlier investors with money taken from later investors. In this type of fraud, the clients are promised huge profits with little to no risk. The focus of the fraudster companies is on attracting new clients whose investments are then used to pay off earlier investors. Once the flow of money by way of investments from new clients stops, the whole scheme falls apart.

For instance, in 1920, Charles Ponzi made approximately $15 million in about 8 months by convincing lenders that he could make them rich with investments in international postal reply coupons.

Pyramid schemes

Also known as a chain referral scheme, a pyramid scheme is a fraudulent business model wherein members are recruited with their payments tied to their ability to enrol new members. As the membership expands, there comes a point where further recruitment becomes impossible which consequently makes the whole thing unsustainable. A pyramid scheme might appear as legitimate multi-level marketing (MLM) practice. But the scheme involves no legitimate sales as the earlier investors are paid from the funds received from new investors. There is no product sold and there are no true profits.

The SpeakAsia Scam is one example of the fraud committed through a pyramid scheme. A Singapore based company SpeakAsia Online Ltd. asked investors to pay Rs. 11,000 and fill up online surveys to earn Rs. 52,000 a year. The company promised additional rewards for those who enrolled other people into the scheme. The fraudsters made away with Rs. 2,276 crores from 24 lakh investors.

Identity theft and identity fraud

In simple terms, identity theft is the use of someone’s identifying information without their permission. Identity theft occurs when someone steals your personal financial information such as your bank account number by way of deception and uses that information for economic gain. This can happen in a number of ways, say in a public place via shoulder-surfing wherein a fraudster catches you typing your CVV code into your phone, etc., or when you opt to reply to a spam email that promises you a reward but first asks for identifying information and personal details. Identity theft can be committed simply by guessing your passwords or accessing your details from your social media or it might involve complex methods such as installing malware, etc. Your personal data such as bank account number or credit card number is then used to make fraudulent withdrawals from your account. Fraudsters might use your information to open a credit account in your name leaving you liable for the charges. Identity theft leads to identity fraud when the fraudster impersonates you using your stolen information in order to access accounts and obtain financial services.

Examples of identity theft include theft of ATM card, stealing your bank information and example of identity fraud includes making fake ID, passport, false credit card etc. and using it for personal unlawful gains.

Embezzlement

Embezzlement refers to the act of stealing, misappropriation, or retention of funds by a person who has been entrusted with those funds by an employer or an organisation. Typically, the person who embezzles money is the one who has legal access to another person’s money or funds such as an employee. This white-collar crime is seen as a form of property theft. Examples of embezzlement can be overbilling of customers, forging of cheques, refusal of the conductor to issue tickets to customers after collecting the fare etc.

Tax fraud

Tax fraud refers to the falsification of tax returns in order to evade the payment of tax to the government. For example, claiming false deductions by classifying personal expenditure as business expenditure or non-disclosure of income. When you pay less tax than what is due by hiding or understating or false reporting of your income, you are committing tax fraud.

Credit card fraud

Credit card fraud is the unauthorised use of someone’s credit card. Credit card numbers can be obtained through credit card theft or unsecured internet connections or by hacking into your system etc. It is advised that in case you lose your credit card or debit card, you should get your card cancelled immediately. Examples of credit card fraud include counterfeit and skimming frauds, card not received frauds, lost and stolen credit card fraud and incorrect card application fraud etc.

Insurance fraud

Insurance fraud occurs when a claimant wrongfully tries to obtain a claim from the insurance company that he is not entitled to or when the insurance company deliberately denies the claim legally due to the claimant. Insurance fraud can also occur in other forms such as selling policies from fake insurance companies, falsifying the medical history, impersonating other people for claims, cause of death being changed for accidental claims, etc.

KYC fraud

In this type of fraud, fraudsters usually send you an unsolicited SMS saying that your card or account will be blocked. The customer in a state of panic ends up responding to the message without considering its legitimacy. Now when you/customer calls that number given in the message, the fraudster pretends to be speaking from your bank and entices you to give your personal details such as debit card information, bank account details, OTP, etc. under the pretext of KYC verification. Sometimes, the fraudster might ask you to install some app on your phone which will give him full access to your phone. Before you know, withdrawals are made from your account and you will get a message that such and such amount has been debited from your account.

Phishing

This is an online scam wherein the users/customers receive tricky emails or pop-ups that appear to be from a legitimate source, say a bank or an insurance company or an internet service provider, etc. The fraudster will ask for your personal information through these emails and thereafter use that information for their unlawful gains. Phishing attacks include phishing emails, link manipulation, session hijacking, smishing, vishing, installing malware etc.

Advance fee scams

In advance fee scams, the fraudster will ask you to make an advance payment or upfront payment for goods and services that do not materialise. This includes career opportunity fraud, loan scams, lottery scams, work-from-home opportunity scams, etc.

Mortgage fraud

Mortgage fraud is any sort of material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan. For example, intentionally falsifying the particulars on mortgage applications.

Mass marketing fraud

In this, mass mailing, calls, spam emails are resorted to for stealing the personal financial information of the target. This type of fraud targets multiple victims from different jurisdictions. Mass marketing fraud schemes typically fall into two classes, schemes that defraud numerous victims out of comparatively small amounts, and schemes that defraud comparatively less numerous victims out of large amounts. One example of mass marketing fraud can be ‘too good to be true payment schemes’.

Bank fraud

Banking fraud is an attempt to syphon or take funds or other assets from a financial institution. RBI defines fraud as, “A deliberate act of omission or commission by any person, carried out in the course of a banking transaction or the books of accounts maintained manually or under computer system in banks, resulting into wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank”. Some of the famous bank fraud cases are the PNB-Nirav Modi Scam, ABG Shipyard Fraud, Vijay Mallya scam etc.

UPI-related frauds

About 80,000 UPI frauds occur in India, every month. Fraudsters send you a ‘request money’ link and once you click on it and authorise the transaction, money gets deducted from your account. Also, sometimes the fraudsters will send you a fake URL and once you click on it, it infects your phone with malware designed to steal all your financial information. UPI-related frauds can occur in forms of phishing attacks, screen mirroring tools and through deceptive UPI handles.

SIM swap fraud

Sim swapping is when you make a request to your service provider to swap your sim, who deactivates your old sim and gives you a new one. For example, when you want to upgrade your 3G sim card to a 4G one. This is a legitimate sim swap transaction.

However, in the case of sim swap frauds, the fraudster makes a sim swap request to the service provider using fake papers and pretends to be a genuine cardholder. The service provider deactivates your old sim and the fraudster gets a new sim card. He is then able to access all your financial information such as OTPS, card alerts, etc., and can manipulate the same in innumerable ways. For instance, in August 2021, a man lost Rs. 84 lakhs due to SIM swap fraud committed by some unidentified cyber criminals who cloned the victim’s sim card to get his bank details.

Corporate fraud

Corporate fraud involves falsification or misrepresentation or hiding of a company’s financial information and accounts to make profits illegally and to mislead the public. For example, insider trading, falsification of accounts to show a healthy picture in order to attract lenders and investors, misappropriation of assets, etc.

As per Section 447 of the Companies Act, 2013, fraud, in relation to affairs to a company includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.

Legal provisions relating to financial fraud under various laws and punishment prescribed for such frauds

Indian Penal Code, 1860

Section 405: Criminal breach of trust	Section 405 defines criminal breach of trust as, “Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”.
Section 406: Punishment for criminal breach of trust	Imprisonment of either description for a term which may extend to 3 years or with fine or with both.
Section 409: Criminal breach of trust by public servant or by banker, merchant or agent.	Section 409 provides that the criminal breach of trust committed by banker, merchant, factor, broker, attorney or agent shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.
Section 415: Cheating	Section 415 defines the offence of Cheating as, “Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.”
Section 416: Cheating by personation	Section 416 defines Cheating by personation in the following terms: “A person is said to “cheat by personation” if he cheats by pretending to be some other person, or by knowingly substituting one person for or another, or representing that he or any other person is a person other than he or such other person really is.”
Section 417: Punishment for Cheating	Section 417 provides punishment for the commission of offence of Cheating under Section 415 to be imprisonment of either description for a term which may extend to one year, or with fine, or with both.
Section 418: Cheating with knowledge that wrongful loss may ensue to a person whose interest the offender is bound to protect.	Section 418 provides that, “Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a person whose interest in the transaction to which the cheating relates, he was bound, either by law, or by a legal contract, to protect, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.”
Section 420: Cheating and dishonestly inducing delivery of property	Imprisonment of either description for a term which may extend to 7 years and shall also be liable to fine.
Section 467: Forgery of valuable security, will, etc.	Imprisonment for life, or with imprisonment of either description for a term which may extend to 10 years and shall also be liable to fine.
Section 468: Forgery for purpose of cheating	Imprisonment of either description for a term which may extend to 7 years, and shall also be liable to fine.
Section 471: Using as genuine a forged document or electronic document	Punishable in the same manner as if the person had forged such a document or electronic record.

Companies Act, 2013

The Companies Act, 2013 contains provisions dealing with corporate frauds, which are provided as follows:

Punishment for fraud (Section 447)

Section 447 of the Companies Act, 2013 provides that any person who is found guilty of fraud, involving an amount of at least 10 lakh rupees or 1% of the turnover of the company, whichever is lower shall be punishable with:

Imprisonment for a term which shall not be less than 6 months but which may extend to 10 years, and
Fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud.

The first proviso to the Section lays down that in case the fraud in question involves public interest, then the term of imprisonment shall not be less than 3 years.

The second proviso to the Section states that where the fraud involves an amount less than 10 lakh rupees or 1% of the company’s turnover, whichever is lower, and does not involve public interest, then the maximum punishment that can be awarded to the person found guilty of such fraud shall be 5 years imprisonment or a fine which may extend to 50 lakh rupees or both.

It is pertinent to note that the Companies Act, 2013 empowers the Serious Fraud Investigation Office (SFIO) with powers to probe companies suspected of fraud. Also, the Act authorises the auditor to report fraud to the central government.

Other Sections under the Companies Act dealing with fraud

Section 36	Punishment for fraudulently inducing persons to invest money.
Section 38	Punishment for personation for acquisition, etc., of securities.
Section 229	Penalty for furnishing false statements, mutilation, destruction of documents.
Section 251	Fraudulent application for removal of name.
Section 448	Punishment for false statements.

Punishment for money laundering

Section 4 of the Prevention of Money Laundering Act, 2002 provides for a punishment of rigorous imprisonment which shall not be less than 3 years but which may extend to 7 years, and a fine for the offence of money laundering.

Information Technology Act, 2000

The Information Technology Act, 2000 contains provisions dealing with cyber fraud and financial frauds committed using computer resource.

Section 43A: Compensation for failure to protect data	This section makes a body corporate liable for wrongful loss caused to a person due to the negligence of such authority in maintaining reasonable security practices. It provides that, “ Where a body corporate, possessing, dealing or handling any sensitive personal data or information in a computer resource which it owns, controls or operates, is negligent in implementing and maintaining reasonable security practices and procedures and thereby causes wrongful loss or wrongful gain to any person, such body corporate shall be liable to pay damages by way of compensation to the person so affected.”
Section 66C: Punishment for identity theft	This section provides for punishment for identity theft. It states that any person who fraudulently or dishonestly makes use of the electronic signature, password, or any other unique identification feature of any other person, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to rupees one lakh.
Section 66D: Punishment for cheating by personation by using computer resource	This section states that, “Whoever, by means of any communication device or computer resource cheats by personation, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to one lakh rupees.”

Tips to protect yourself from financial frauds

Beware of shoulder surfing

Shoulder surfing refers to watching over someone’s shoulder while they are using an ATM or filling in personal details in the phone etc. to steal their data. It is the most common danger associated with using ATMs. While you are using the ATM, ensure that no one is trying to shoulder surf you by standing too close to you. The fraudsters attempt to see your identification number(PIN) and once that PIN reaches into the hands of a fraudster, they can use it in numerous illegal ways. So the next time, you go to an ATM, make sure to cover your hand while punching your PIN.

Robust passwords, safe clicking

The most basic thing that you must do to avoid being a victim of financial fraud is to use a strong password with multi-factor authentication. Also, do not click on every pop-up or link. Practice safe clicking.

Other simple tips to keep yourself safe

Avail of the facility of setting and modifying your transaction limits on your cards and account.

Create a separate user account when you are using a personal laptop for work.
Keep your systems and software updated.
Do Not share personal information relating to your finances on social media.
Do Not respond to calls that ask for sensitive information. Don’t give them your details.
Keep your PINs secret.
Don’t give your account details to a person or fill them on some website unless their identity can be verified.
Place your money in an authorised financial institution. Don’t give your money to someone who offers to place it in the bank on your behalf in return for a higher rate of interest.
Be vigilant. Read about the newer and most common types of fraud happening around you.
If you noticed some suspicious activity in your bank account or while using your card, report it.
Check your monthly credit card statements carefully.
Be careful while you make payments on the internet. Enter your Card Verification Value(CVV) only on secure payment websites.
Be careful when signing any financial contract and always read the small print carefully.
Do not reply to spam or unsolicited emails that promise you some reward.
Don’t fall into the trap of fake lotteries scams. No one can win a lottery in which they have not participated.
Install a trusted antivirus on all your devices.
Do Not share your OTP with anyone. Make sure that the OTP generated is for the transaction initiated by you.

Top 10 biggest financial frauds in India

Satyam Computers Scam (2006-2008)	Satyam Computer Services Ltd. was founded in the year 1987 by Ramalinga Raju and his brother Rama Raju and soon the company became a significant IT player.Also called the mother of all scams, Satyam Computers Scam broke in the year 2009 when the founder and CEO of Satyam Computers, Ramalinga Raju confessed that the company has been falsifying its accounts and overstating its revenues for years. On January 7, 2009, Ramalinga Raju sent a 5-page letter to the SEBI and stock exchanges admitting a fraud of Rs. 7000 crores.The company committed fraud by overstating its revenues, forging bank statements, and manipulating the books by non-inclusion of certain receipts.Over the period of 5-6 years, the company’s revenue was overstated by Rs. 4783 crores and as per the SEBI’s probe, misstatements to the tune of Rs. 12,320 crores were found.On April 9, 2015, the CBI Special Court sentenced Ramalinga Raju and 9 others to imprisonment for 7 years. A fine of Rs. 5.5 crores was imposed on the Raju brothers.
Harshad Mehta Scam/ Securities Scam 1992	The man behind the massive Securities Scam in 1992 was the well-known and experienced stockbroker, Mr. Harshad Shantilal Mehta.Being a skilled broker, Harshad Mehta misused his knowledge of the stock market to cause manipulations and made huge profits. The scam involved the diversion of bank funds worth Rs 3,500 crore to a group of stockbrokers, led by none other than Harshad Mehta. These funds were then put into the stock market selectively, causing it to surge to over 4,500 points. The scam was first exposed by journalist Sucheta Dalal in April 1992.Thereafter, the banks realised that they were holding on to worthless bank receipts and the stock market too came crashing down.Harshad Mehta was charged with about 72 criminal offences including cheating, bribery, forgery, criminal conspiracy, falsification of accounts, etc., and over 600 civil suits were initiated against him.In September 1999, the Bombay High Court convicted Harshad Mehta and three others in an Rs. 380.97 million MUL fraud case (one of the many cases within the larger scam) and they were sentenced to rigorous imprisonment of 5 years.Harshad Mehta was out on bail in all cases including his conviction in the MUL case. But later, he was again arrested in 2001 for misappropriating Rs 2.5 billion from 2.7 million “missing shares” of 90 blue-chip companies. This time bail was denied to him.On 31st December 2001, Harshad Mehta passed away in Tihar Jail. His appeal against conviction in the MUL case was dismissed in 2003 and the rest of the criminal cases against him abated on his death.
Kingfisher Airlines/Vijay Mallya case	Kingfisher Airlines was launched by Vijay Mallya in 2005. Soon, the airline became the 2nd largest airline after Jet Airways. Mallya wanted to expand his company and hence he acquired ‘Air Deccan’.Mallya resorted to borrowings by over-valuation of his brand value. The mounting debts kept on increasing and eventually the company shut down. Even the government cancelled the licence of Kingfisher Airlines in December 2012.Mallya took huge loans from various PSU banks. The SBI issued a 1600 crore loan to Kingfisher airlines. He had taken similar loans from 17 different banks.He defaulted on the payment of loans worth Rs. 9000 crores from more than a dozen Indian banks around the year 2013.On March 2, 2016, Vijay Mallya left the country and in January 2019 he was declared a fugitive offender under the Fugitive Economic Offenders Act, 2018. Since then, efforts are being made to extradite him from the UK to India.In January 2017, the Debt Recovery Tribunal held Kingfisher Airlines, UB Group, and Vijay Mallya jointly and severally liable for Rs. 6,963 crores and interest at the rate of 11.5%.Offences with which Mallya was charged include Section 120B read with Section 420 I.P.C., Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.
PNB Bank scam (2018)	PNB Scam is dubbed as the biggest fraud in the Indian Banking Industry. The main accused in the Punjab National Bank Scam was Nirav Modi(Indian businessman in the business of luxury diamond jewellery), his uncle Mehul Chowksi and other relatives, and some employees of the Punjab National Bank.Fraudulent letters of undertaking(LoUs) worth 11,000 crores(approx.) were issued by the Brady House branch of PNB, Mumbai in connivance with Nirav Modi, his relatives, and some PNB employees.The aforesaid LoUs were apparently issued for overseas payments by firms linked to Nirav Modi and Mehul Chowksi.Some employees of the PNB bypassed the bank’s core system to issue LoUs to the overseas branches of Indian banks, using the international financial communication system, SWIFT.The accused in the case were charged with the offence of criminal conspiracy, criminal breach of trust, cheating, corruption, money laundering, fraud, embezzlement, and breach of contract.In January 2018, PNB filed a complaint against the accused for commission for fraud and the CBI started an investigation into the matter.Both Nirav Modi and Mehul Chowksi fled India before the news of the scandal broke in public. Presently, the Indian government is attempting to extradite Nirav Modi from the UK who is currently lodged in UK prison and his extradition request was allowed by a UK Court on 25 February 2021.
Ketan Parekh and the Stock Market Scam of 2001	Ketan Parekh, a CA by profession, managed his family’s brokerage business.Like Harshad Mehta, Ketan Parekh also manipulated the stock market through unlawful means. He syphoned off public funds to the tune of Rs.1200 crores.The fraud unravelled when the Bank of India alleged that Ketan Parekh had defrauded them to the tune of Rs.137 crores.CBI arrested Parekh and he was accused of insider trading. He was sentenced to rigorous imprisonment of 1 year and was prohibited from trading in the Bombay Stock Exchange for 15 years.
ICICI-Videocon Scam	Loans worth Rs. 1875 crores were given by the ICICI Bank to the Videocon group(controlled by industrialist Venugopal Dhoot). Ms. Chanda Kochhar was the CEO and MD of the bank at that time. Videocon group had made 258 proposals to the bank and 8 of them were accepted by the bank. In 4 such proposals, Chanda Kochhar was part of the sanctioning and recommending committee.The bank had granted loan to the Videocon group and its associated companies from 2009 to 2011 and most of these loans were granted in gross violations of the banking regulations and the policies of the ICICI bank.Within months of the sanctioning of the loan, Dhoot’s Supreme Energy granted a loan of Rs. 64 crores to NuPower Renewables, in which a 50% stake is held by Deepak Kocchar(Chanda Kocchar’s husband). There were allegations that the loan given was a part of a quid pro quo deal.The Enforcement Directorate investigated this multi-crore scam and Chanda Kochhar had to step down as the CEO.
Telgi Stamp paper scam	A fruit seller who later became a travel agent, Abdul Karim Telgi was arrested by police for forging immigration certificates. In jail, Telgi met Ratan Soni, and they became partners in coning the world by selling fake stamp papers.Telgi committed fraud worth crores by counterfeiting stamp papers, judicial court fee stamps, revenue stamps, foreign bills, brokers notes, share transfer certificates, etc.It was alleged that Telgi bribed a few officials of the Indian Security Press so that he could do his business on a large scale.The estimated value of the scam was Rs.20000 crores. Telgi was convicted for printing counterfeit stamp paper and was sentenced to imprisonment for 30 years and a fine of Rs.202 crores was imposed on him.
Saradha Scam(2013)	An umbrella company named Saradha Group in West Bengal defrauded millions of investors by running Ponzi schemes.The scam worth Rs.10000 crores came to light in 2013. Chairman and MD of the company Sudipta Sen and others were arrested on April 23, 2013.Sen wrote to CBI and confessed to the fraud and money laundering and also alleged that several prominent personalities including MPs and MLAs were involved in the scam.Since many investors belonged to the low income strata, the state government set up a relief fund to prevent the small investors from getting bankrupt.
ABG Shipyard Fraud	ABG Shipyard is perhaps the biggest known bank fraud case. In early February, the top officials of ABG Shipyard were charged with causing wrongful losses worth Rs.22,842 crores to an ICICI bank-led consortium of banks that included SBI.The fraud was unravelled after the submission of an audit report in January 2019. As per the report, the top officials of ABG committed illegal activities including diversion of funds, criminal misappropriation of funds, and criminal breach of trust.
SBI-Canara bank fraud	CBI had registered cases filed by Canara Bank and the State Bank of India regarding fraud to the extent of Rs.7,926.01 crore and Rs.313.79 crores respectively.The first case was filed against a Hyderabad-based private firm and some unknown public servants. There were allegations that the firm had availed multiple credit facilities from Canara Bank and has committed various financial crimes including falsification of accounts, tampering with balance sheets, misappropriation of funds, diversion of the loan amount, etc. The account became NPA and was declared a fraud.The second case was registered against a private company based in Chennai on the complaint filed by SBI. It was alleged that the said company availed a credit limit of Rs. 310 crores from the bank and diverted the funds to related parties. The account became NPA and was declared a fraud.

Top global trends to watch in 2022 in the fraud landscape

Digital transformation

Digital transactions have increased to an unprecedented extent due to the impact of the COVID-19 pandemic. Now the customers have become more comfortable and confident in consuming digital services and are rather preferring the digital mode over the traditional one. It is true that even before the pandemic, the consumers were already moving towards digital but the pandemic has brought an upsurge in the number of new/inexperienced digital consumers that have become the target of the fraudsters. Globally, the average share of digital customer interactions has increased by 22%.

Increased automation

Automation is a double-edged sword. Automation streamlines customer experience by offering multiple conveniences such as auto-fill etc. However, this all comes at a price. Automation makes it easier for the fraudsters to launch attacks and in high volumes. A whopping 1.2 billion bot attacks occurred in the first half of 2021 and volume of bot attacks in financial services increased by 28%.

Adoption of new digital payments and methods

As we move forward in the digital age, new payment options have developed and are developing that allow the consumer to create accounts effortlessly and also gives them quick access to credit options. We all love the thought of ‘Buy Now, Pay later’ but these effortless and convenient options have also opened another door for fraudsters. The largest BNPL platforms have reported a significant increase in fraud, primarily from new account creation, account takeovers and repayments with stolen credit cards.

Increasing risk of payment frauds

The number and scale of digital transaction activity is increasing day by day but the data security awareness is not increasing at a similar pace. Globally, the digital payment market is projected to reach more than US $236 billion by 2028, a CAGR of 19.4%. The lack of security awareness is attracting more and more fraudsters and it is not so difficult for them to dupe naive, inexperienced users

Risk of synthetic identities

In the U.S., the creation of synthetic identities is one of the fastest growing online crimes. In synthetic Identity fraud, the fraudsters take legitimate data and combine it with fictitious and false information to create a new identity. It is one of the hardest types of identity theft to detect because there is no real person to report the fraud.

Escalating cost of fraud

Due to the increase in digital transactions, the global cost of fraud has also escalated to $5.4 trillion. In APAC, fraudulent transactions cost up to 3.87 times the value of the lost transaction, up from 3.40 in 2019.

Need for multi-layered fraud assessment

Fraudsters use complex methods and are continually coming up with new strategies to dupe people, manipulate the control systems and frameworks put in place for fraud prevention. In such circumstances, a multi-layered approach that includes physical identity, digital identity intelligence and behavioural biometrics is the best bet to mitigate the risk of fraud. Behavioural biometrics works in the following ways:

It looks at how a user-

Types on keyboard
Moves the mouse
Holds a phone
Taps on screen
Swipes in an app

The behavioural biometrics can be used to identify the good customer profiles, recognise unusual transactions and strengthen consumer trust.

Conclusion

The identification, prevention and minimisation of the incidents of financial frauds is the collective responsibility of all, including citizens, government and other key regulators (such as RBI) and investigating agencies as well. Financial institutions are working towards stringent implementation of their fraud control policies and reporting frameworks to generate information in a way that the level of fraud identified, prevented and actual losses incurred are identified. The focus is on enhancing the processes, controls, fraud risk management frameworks in order to minimise the opportunities for fraud and also reduce the time that goes by in detection of frauds. The RBI had also set up a Central Fraud Registry Portal which is a searchable database to help banks detect instances of fraud by borrowers early on. The portal can be accessed by all Indian banks.

The Hon’ble Supreme Court in its judgment State of Maharashtra Through CBI v. Vikram Anantrai Doshi and Others (2014), has held that the cases of financial frauds shall not be quashed on the ground of compromise as it is a social wrong and has immense societal impact.

Lastly, it is worth mentioning that the Central Government has launched a national helpline no. 155260 which is operated by the concerned state police. Victims of cyber fraud can call this number to report financial fraud.

References

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All you need to know about standstill agreements

By

Sneha Mahawar

-

March 10, 2022

0

This article is authored by Nidhi Bajaj, of Guru Nanak Dev University, Amritsar, Punjab. This article seeks to highlight the meaning and important elements of a standstill agreement including its form and general features. Further, it also discusses the usage and advantages of standstill agreement.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

As the term ‘standstill’ literally suggests, standstill agreements permit the parties to maintain the status quo about a particular matter. A standstill agreement is a contract that restricts or suspends the actions of one or more parties in a contractual arrangement for a specified period. Standstill agreements have become fairly common these days and can be an effective tool in matters of civil litigation as the parties may agree to suspend or extend the limitation period by entering into a standstill agreement.

With the onset of the COVID-19 pandemic, the whole world came to a temporary standstill and the post-pandemic world is still trying to adjust to the new normal which is marked by economic uncertainty. In such circumstances, companies must give serious thought to incorporating standstill agreements in their business practices.

This article will focus on explaining the meaning, general applications of the standstill agreement, and the various issues that need to be considered while drafting a standstill agreement.

What is a standstill agreement

As mentioned above, a standstill agreement is an agreement that restricts a party from doing something or from taking an action for a certain period. It requires the party(ies) to ‘stand still’ about a particular matter. However, this might mean a bunch of different things, depending upon the context and purpose:-

Parties can enter into a standstill agreement for suspending or extending a statutory or contractual limitation period for various types of claims.
In a takeover situation, a company may enter into a standstill agreement with a shareholder, restricting the shareholder’s ability to acquire further shares in the company or suspending his right to buy more shares till a certain date.
In the context of restructuring, a standstill agreement is entered into between the debtor company and the creditors whereby the right of the participating creditors to enforce their debts is suspended for a certain period on certain specified terms. The creditors agree that they will not take any action for enforcing their debts for a certain period in which information can be collected and a survival strategy can be formulated to implement a formal restructuring.

Example of a standstill agreement

A recent example of two companies entering into a standstill agreement is that of Glencore PLC and Bunge Ltd. Glencore PLC is a Swiss-based commodities trader and Bunge Ltd. is a U.S. agricultural commodities trader. In May, 2017, Glencore approached Bunge Ltd. about a takeover. Shortly after, a standstill agreement was signed between the two companies that temporarily prevented Glencore Ltd. from making a hostile bid for Bunge Ltd. until a later date.

Elements of a standstill agreement

A standstill agreement must be complete in all respects for it to have a binding effect. The important elements of a standstill agreement are mentioned below:

Parties

A standstill agreement may include two or more parties. The names and the details of the parties who have agreed to the contract must be mentioned.

Purpose

The reasons or purpose of the agreement are usually mentioned in the agreement.

Time frame

A standstill agreement must mention the date on which it takes effect and the date of its termination.

Details/terms

This constitutes the longest part of the agreement and includes all the important clauses, conditions that bind the parties, and also sets out the expectations and requirements of the parties involved.

Termination

When does the standstill agreement end? This is a crucial question as the further course of action to be taken by parties depends on it. The agreement should clearly mention the mode or ways or the event or circumstance on the happening of which the standstill agreement will come to an end. This might be on completion of a certain duration, on a certain date, or on failure by a party to fulfil obligations agreed upon.

Signature

The parties to the standstill agreement should affix their signature thereupon. This adds to the validity of the document.

Standstill agreement in context of restructuring

Standstill agreements can be an effective tool to deal with finance-related disputes, debt enforcement actions, and restructuring and insolvency activity as well. It is an agreement between the company and its creditors which restrains creditor enforcement action. It gives you (the company) the much-needed breathing space while you are exploring options for restructuring. Also, a standstill agreement allows the company to see if it has reasonable prospects to survive post-restructuring.

Typical features of a standstill agreement

Creditors agree not to take action for enforcement of their debt against the debtor company for a specified period, also called the ‘standstill period’.
The amount of debts owed to the creditors remain fixed at a particular date, also called the ‘standstill date’.
Creditors agree to keep their financing at the level of the standstill date.
The debtor company agrees not to engage in any transaction outside the ordinary course of its business. It is also usually agreed that the debtor company shall not make any changes in the ownership, control, or structure of the business without the approval of the creditors.
The company commits to implementing interim cost-cutting measures and not paying dividends to its shareholders.
The company agrees to disclose the information including its cash position, business operations to the creditors. This allows the creditors to have a complete and reliable picture of the finances of the company.

It is pertinent to note that the standstill agreement merely suspends or temporarily freezes a commercial relationship or the agreed parts of it (merely suspends the doing of something). It does not and cannot mean the release of obligations.

Form of a standstill agreement

A standstill agreement does not usually suspend the relationship in its entirety. It is flexible in form, meaning that the parties are free to negotiate and draft their own terms. Parties may agree that certain obligations or services shall continue. For example, the debtor company shall make partial payments to the creditor or that the creditor will continue to provide services. It is an important principle that no creditor should receive new security or repayment of his loan without the agreement of other creditors.

Advantages of entering into a standstill agreement

Advantages for the company

A standstill agreement offers advantages both for creditors and the debtor company. Based on the available financial information, if the directors can reasonably conclude that a standstill agreement would allow the business to continue and resolve the cash flow problem or that it would give some time and space to implement a formal restructuring, then the benefit to the company from entering into a standstill agreement is that it will be protected from the immediate threat of creditor action (especially winding up). In this way, the company can even avoid any damage that might have been caused to its reputation due to the insolvency petition of creditors.

Advantages for the creditor

For creditors, entering into a standstill agreement is beneficial as it usually permits the disclosure of relevant information which would not have been otherwise available to them in the ordinary course of business. The approach in a standstill agreement is consensual and therefore, the creditors have some control over the situation. They can make an informed decision regarding the company’s prospects for restructuring based on the information provided to them. Also, this is comparatively a more convenient course for the creditors compared to invoking collective winding up proceedings, wherein they end up losing control over the process to the court along with incurring costs, time delay, etc.

Standstill agreement in context of limitation period

A claim must be issued within the limitation period and the limitation period depends on the type of claim. For example, in India, a claim for breach of contract has to be filed within 3 years. On the expiry of the limitation period, the claim becomes time-barred. Now, what can a standstill agreement do in such a scenario?

A standstill agreement operates to ‘stop the clock’ on the running period of limitation and prevents the party from initiating proceedings during the course of that agreement. It is a voluntary contractual arrangement made between the parties to pause the limitation period for an agreed length of time, usually 3 to 6 months.

It must be noted that in the Indian context, the question as to whether the parties can agree to give up or extend or suspend the period of limitation has never been dealt with in detail. However, at the same time it has to be remembered that as per international practice, standstill agreements are routinely enforceable in the commercial world.

Why should you enter into a standstill agreement

The foremost advantage that a standstill agreement secures to the parties is that it eases the pressure of limitation deadlines.
Also, it gives time and space to a party to think clearly and arrange funds or work out a mutual solution without having to forego their right to file a claim in court. You can use the time to work out a satisfactory friendly resolution without having to spend your money by filing suits or in preparing to go down the litigation road.
Another benefit is that the parties get time to carefully consider the merits of their claim or defence.

Things to consider while entering into a standstill agreement

A standstill agreement is a contract and its terms and conditions must be carefully drafted

While entering into a standstill agreement, parties must be aware that, being a contract, the standstill agreement is governed by the same rules and principles as applied to the contracts. A standstill agreement should be in written form setting out the terms and conditions agreed upon by the parties. Special care must be taken while drafting these agreements. The terms and duration of the agreement have to be mentioned. Also, each of the potential parties should be included in the agreement.

Parties to a standstill agreement

Sometimes, it may be difficult to say with certainty as to who should be the proper parties to a standstill agreement. Sometimes, there might be talks going on about a merger or there might be a chance that a party could become insolvent. So, if in case a party becomes insolvent, would the claim be against liquidators or in the name of liquidators, and have they been included? These all are relevant considerations that need to be carefully evaluated and effort should be made to bring all the prospective parties within the scope of the agreement and their names and details must be correctly mentioned. Any loopholes might lead to invalidity of the agreement and the limitation period will not stop which will ultimately benefit the defendant.

Cause of action

The standstill agreement should set out the cause of action of the potential claim. If the cause of action is not yet clear, then it is pertinent that the agreement covers all the prospective causes of action. The subject of claim or dispute should be clearly defined in broad terms, so as to capture any claim, or all claims directly or indirectly arising out of or in any way connected with the matters referred to (or involving the parties).

Extensions

A situation may arise where parties have to extend the standstill agreement. To meet such a requirement, it would be wise to include an effective mechanism for extension of the agreement/standstill period within the agreement itself. A carefully worded clause that sets out the formalities for extension of the standstill period such as giving of notice, etc. should be inserted.

Ending the standstill

Parties who have entered into a standstill agreement must be aware of the date when the standstill agreement is likely to end and how much time is left in terms of limitation following the expiry. This will help in further extending the standstill or in preparing for litigation.

Whether the agreement suspends or extends the time

Typically, a standstill agreement is entered into by the parties to suspend time. On the expiry of the standstill, a party is left with the same amount of time to issue a claim as they did on the date of the agreement. However, a standstill agreement may be entered into for the purpose of extending the period of limitation. It must be mentioned as to whether the agreement merely suspends time or extends it. In case of a standstill agreement for extending the period of limitation, a claimant must issue proceedings on the expiry of the standstill period. Here, a final date should be mentioned in the agreement by which the party must commence proceedings.

What if there are multiple defendants

In case there are multiple defendants, the claimant should think about entering into similar standstill agreements with all of them.

Application or usage of standstill agreements

A lender and a borrower may enter into a standstill agreement to give the borrower some time to restructure its liabilities. A bank may enter into a standstill agreement with a stressed borrower and suspend the contractual repayment schedule for a certain duration and in turn impose some conditions on the borrower.
A standstill agreement may be used to pause the production of a product.
A standstill agreement might operate to postpone scheduled payments for a customer.
A standstill agreement can be made between governments for better governance.
A standstill agreement can be entered into between countries to maintain the status quo or sustain the present state of affairs whereby the liability owed by one nation to another is suspended for a specified duration.
Sometimes, a company wants to restrict a shareholder from buying enough shares to influence the decision-making at the company. In such a case, the company may enter into a standstill agreement with him whereby he agrees to suspend the buying of further shares or promises not to buy beyond a certain level in return for some benefit.

Sample of a standstill agreement

Note: The draft given below merely provides an outline of the important clauses of a standstill agreement. To find out what a complete standstill agreement looks like, you can refer to this link.

STANDSTILL AGREEMENT

This Standstill Agreement (this “Agreement”) is made and entered into as of (Date,Year) between ABC Pvt. Ltd. (the “Company”), XYZ Company, PQR Management and RM, XYZ Co. and PQR Management are collectively hereinafter referred to as the “Stockholder”). The Company and the Stockholder are referred to herein as the “Parties.”

WITNESSETH

(Add witnessing clauses here)

WHEREAS, the Stockholder has filed a Schedule 13G, as amended, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission indicating the Stockholder’s Beneficial Ownership (as defined below) of 4,281,610 shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), and subsequently acquired 106,800, giving it Beneficial Ownership of a total of 4,388,410 shares of Common Stock representing approximately 9.7% of the total outstanding Common Shares (as defined below) as of the date hereof;

WHEREAS, the Stockholder has stated to the Company that the Stockholder is obligated to purchase an additional 3,730,000 shares of Common Stock (the “Additional Shares”) pursuant to put options it entered into if those put options are exercised on January 14, 2009, thereby increasing the Stockholder’s total Beneficial Ownership interest up to seventeen point ninety-five percent (17.95%) of the total outstanding Common Shares;

WHEREAS, the Stockholder has entered into total return equity swap agreements (the “Swaps”) with certain counterparties relating to 3,894,023 shares of Common Stock in the aggregate (the “Reference Shares”), that provide that (i) the Stockholder will be obligated to pay to the broker any capital depreciation of the Reference Shares as of maturity, plus interest, and (ii) the broker will be obligated to pay to the Stockholder any capital appreciation of the Reference Shares as of maturity, and (iii) all balances under the Swaps will be cash-settled at maturity and there will be no transfer of voting or dispositive power over the Reference Shares;

WHEREAS, the Company is a party to that certain rights agreement, dated as of July 30, 2004, by and between the Company and U.S. Stock Transfer Corporation (the “Rights Plan”) that is triggered in the event any one person or group acquires a Beneficial Ownership interest of fifteen percent (15%) or more of the then outstanding Common Shares (subject to certain exceptions as set forth in the Rights Plan);

WHEREAS, the Stockholder has asked the Company to amend the Rights Plan to allow it to purchase the Additional Shares without triggering the Rights Plan; and

WHEREAS, the Company is willing to amend the Rights Plan but only if the Stockholder agrees to enter into this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the Parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

(Define terms such as Affiliate, Agreement, Beneficial owner, common shares, company acquisition transaction and other terms relevant to your agreement)

ARTICLE 2

STANDSTILL

(All the provisions regarding the standstill to be added here in a detailed form)

2.1 Standstill Provisions.

2.2 Termination of Standstill Provisions.

2.3 Voting.

2.4 Sales of Shares of Common Stock.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

ARTICLE 4

MISCELLANEOUS

4.1 Severability

4.2 Specific Enforcement.

4.3 Further Assurances.

4.4 Entire Agreement; Amendments.

4.5 Notices.

4.6 Waivers.

4.7 Headings.

4.8 Successors and Assigns.

4.9 No Third Party Beneficiaries.

4.10 Governing Law; Venue.

4.11 Counterparts.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first written above.

(Signature and details of parties)

Conclusion

A standstill agreement may allow one party to lessen concerns held by another party by promising to avoid potential actions they could otherwise take. A standstill agreement drafted in haste might have severe consequences for the parties involved, for example, the agreement will be declared invalid if it covers the wrong claim or terms are not clear, etc. Hence, it is important that the agreement is drafted carefully in accordance with the intention of the parties and effort should be made to cover and clarify all the prospective issues that might lead to any confusion later on.

References

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AI in smart contracts: the magic combo

By

Sneha Mahawar

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March 10, 2022

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This article is written by Shivam Sharma studying at SLS Pune and pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

With the advent of the new age of technology, the data from various silos has grown in its complexities and their management has become a cumbersome and time-consuming task. For the proper management of the data, it is imperative that teams of Data Scientists aggregate data from multiple sources and reconcile any inconsistency in the said data. From such ‘purified versions’ of the data, we attain the clean repository of ‘information’. This is easier said than done, especially in the ever-increasing requirement of compliances and regulatory overlook.

In contemporary times the most efficient and effective method of streamlining such data management is via a smart contract. But the potential of smart contracts in managing complex data can be boosted exponentially when it is combined with Artificial Intelligence (AI) and Machine Learning (ML). This article attempts to explain what a smart contract is and how its inculcation with AI and Machine Learning could be the next evolutionary step towards a new industrial age.

What is a Blockchain

In simple words, a blockchain is a system that records information and makes it either difficult or impossible to change, hack or cheat such information. It is a digital ledger that keeps a record of transactions. These records of transactions are duplicated and distributed with a number of computers in a network. A block in the blockchain will contain a number of transactions. Every time a new transaction is added, the same is recorded to every ledger on the numerous computers. This distributed data (i.e., a record of information about the transactions) is managed via a Distributed Ledger Technology (DLT).

Why is Blockchain so important

The aspect of Blockchain that makes it so secure is that if one block in the chain was tempered with, it will not tally out with the rest of the entries on the network of computers. The only way to get away with tampering with the date is to alter every block in the chain across all the computers. As the Blockchain keeps growing, the security of the same is significantly enhanced. With the most common types of databases (like SQL), someone has the power to change the entries (i.e., there is a person in charge). But in the case of a Blockchain, there is no one in charge. It is being run by the computers in the network supporting the Blockchain. Thus, no single person is in charge as it is being run by the people who use it.

What are smart contracts

A smart contract is a program on the blockchain which will only run when some predetermined conditions are met. Once these predetermined conditions are met, the contract will be executed automatically. Due to such automation, all the participants can be certain of the outcome and there is an elimination of any intermediary’s participation.

How do smart contracts work

The basic tenet behind the operating of a smart contract is the execution of an ‘if/when…then’ statement. These statements are written in the Blockchains themselves. Thus, we know that it is almost impossible to alter or hack them. Once the predetermined conditions are met and verified, all the computers in the network execute the contract. Executing the contracts means taking an action such as:

Make a payment towards the electricity bill;
Registration of a vehicle;
Send a notice to the opposite party in the contract;
Issue a plane ticket once the payment for the same has been received.

Once the action is completed, the same is recorded in the Blockchain. Again, this new information cannot be altered or hacked. In addition, even though the information is stored on a number of computers in the network, only the parties granted permission can view the results.

Benefits of smart contracts

The list of advantages of using smart contracts is never-ending. Yet, here is a glimpse of some of the most practical benefits of a smart contract:

Complete or major elimination of Intermediaries including, but not limited to the fields of Finance, Legal, Professional Services, and Human Resources.
A drastic reduction of paperwork.
Reduction of costs and resource utilization.
Enhanced security and speed.
A distributed verification and accuracy.

The current status of smart contracts

Smart contract technology is spreading everywhere and includes the popular Ethereum platform. The platform allows smart contracts to be executed on network nodes. As a bonus, in this network, the smart contract can deal with the financial aspects using the Ether Coins. But Ethereum is not the sole player in this field. Others include

POA Network,
Etherparty is a smart contract creation system, and
Agrello Foundation has the exclusive aim of making legally binding smart contracts that are powered by Artificial Intelligence.

One important legal change in the recent corporate law landscape is in the context of the blockchain. There is an attempt to use more smart contracts in Delaware Blockchain Initiative and for the furtherance of the same, there have been amendments introduced to the Delaware General Corporation Law. The amendment now allows the issuance of distributed ledger shares.

Despite their sophistication and convoluted nature, Smart contracts are deployed in a number of industries including:

Automation of sharing, rentals, and payments;
Provision of flight insurance;
The general insurance industry;
For generating and executing the bills of lading;
The energy industry
Sale of real estate.

How do smart contracts work with traditional agreements

There are two ways in which Smart Contracts can interplay with traditional text agreements:

There are no traditional agreements involved: In such a case, there is a smart contract being created but there is no traditional agreement to back up the same. The parties to the agreement come to an understanding about what they want out of the transaction and then put it down in an executable contract. These are called the ‘code-only smart contracts.’
Both traditional agreements and smart contracts are involved: The other way to go about the same is to use the Smart Contract as a vehicle to effectuate certain provisions as captured under the traditional contract. The text-based contract will itself contain Clauses that will explain the working of the Smart Contract. These are called ‘ancillary smart contracts.’

Artificial Intelligence

The term Artificial Intelligence was first used in the year 1955. It is defined commonly as, “a branch of computer science dealing with the simulation of intelligent behaviour in computers and the capability of a machine to imitate intelligent human behaviour.”

AI can be very simple or very complex. In its range of complexity, it can go from rule-based systems where it is designed to make decisions based on rules and inputs; and can go up to more adaptive systems such as:

Neural Networks;
Natural Language Processing;
Knowledge graphs;
Expert Systems;
Search;
Mini-max algorithm;
Logic.

Natural Language Processing (NLP) is the most important area for smart contracts. NLP further includes the following manners of the construction of smart contracts:

Shallow semantic parsing;
Named entity recognition;
Coreference resolution, and others.

As a demonstration of how AI will work with the smart contract consider the following example of a text agreement and in turn how it will be executed in a Shallow Semantic Parsing:

Text Agreement: On the second day of every month, Jack Ryan, the lessee, shall pay Ethan Hunt, the lessor an amount of INR 10,000 (ten thousand).
Shallow Semantic Parsing:

Due Date: On the second day of every month

Payor: Jack Ryan, lessee

Payee: Ethan Hunt, Lessor

Fee: INR 10,000.00

AI and smart contract: the combo

AI is the next logical evolutionary step for smart contracts. Currently, Smart Contracts are based on the decision based on the inputs and rules. AI can further the effectiveness of Smart Contracts by making them more adaptive. Such adaptive systems will include logic, neural graphs, and neural networks. The AI can generate and execute the Smart Contracts based on powering vital analysis i.e., the AI will be making the predictions whether or not the contract will be executed.

This can be explained with the following example: Mr. Ryan enters into a smart contract with the Insurance company. As per the terms of the contract, Mr. Ryan is obligated to pay a premium at the end of the month. The AI can read into the bank accounts of Mr. Ryan and also predict the income sources in the coming future. If the AI comes to the conclusion that Mr. Ryan will not be able to discharge his obligation, the AI will notify the Insurance Company and the company can be ready with its legal team to tackle the situation. Thus, saving them on the metric of both money and time.

In crux, AI along with smart contracts can be used in two manners:

In the negotiation of the terms of the agreement on behalf of the party; and/or
Controlling the self-executing nature of smart contracts.

Complexities with Artificial Intelligence

Currently, the author is unaware of any AI being used in combination with smart contracts. This is mostly because of the challenges of contract languages and the intelligence required to interpret the agreement. The AI must be able to tell that the term ‘execute’ in the contract refers to enforcing the agreement and not killing someone. This task of making interpretation is called the disambiguation task and is seen to be one of the most prominent hurdles in making and executing smart contracts with an AI. Still, there are great developments afoot, as the research in Natural Language Processing progresses, it will become easier for AI to conduct a contract analysis and to automatically draft the contract as well. In the near future, AI might be able to partially self-execute code.

Complexities that form part and parcel of smart contracts

It is much easier to come up with the terms of a simple contract for any digital transaction. The problem arises when the digital arenas come in contact with the real physical world. The combination of the digital and the physical world will demand a much smarter and more stable intelligence to make expedite decisions. AI can take over this process with much ease, translating the data from various sources and converting them into precise terms over which the smart contracts can act on.

On the other hand, as AI and machine learning take over more and more aspects of our lives, we require smart contracts to be able to interfere with robotic agents and human beings.

For example, a company running the business of clean green energy will require insurance coverage that includes both the traditional threats (bad climate) and the new (cyber-threats). To accommodate this, the smart contract can ascertain what shall be the pay-out event under the terms of the insurance agreement.

Conclusion

The addition of AI to the well-established smart contracts makes their efficiency increase exponentially. Especially with Blockchains, there is an unprecedented development in the effectiveness of the workflow of smart contracts. For the most part, this effectiveness stems from the elimination of human intervention in terms of verification of the contracts. This renders the negotiation process to become simpler and expedited. Thus, it becomes easier to form complex agreements. The introduction of AI in the arena of smart contracts will launch us into a new era and this era will bear witness to the prosperity and perish of many businesses and legal professionals.

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Doctrine of laches : a comprehensive analysis

By

Rachit Garg

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March 9, 2022

0

This article is written by Kanisha Goswami, a law student of Guru Gobind Singh Indraprastha University, Delhi. This article talks about the doctrine of laches in India. The doctrine is based on the Latin maxim “Vigilantibus Et Non Dormientibus Jura Subveniunt” which means that the equity avails to the vigilant, not the person who sleeps over their rights.

It has been published by Rachit Garg.

Table of Contents

Introduction

Every person has rights and obligations that he or she enjoys while living in a state. A doctrine is a principle, set of rules, or position usually used and upheld by the courts of law. The doctrine of laches is a legal maxim that supports the person who is aware of their legal right, pointing to denying access to those who are careless in filing a suit in due time. It will not provide any help to the applicants who delayed their filing unreasonably.

The maxim clearly defines that the law would only help the court in the fast delivery of justice and not those who forget to claim their rights at the right time.

Meaning of the doctrine of laches

The doctrine of laches is used by the courts to deal with an inordinate delay that is occurring in filing a petition or complaint. It means if you have any legal claim, you have to approach the court promptly. Laches is a fair doctrine or an equitable defense. The courts will not help the person who sleeps over their rights but help those who are aware of their rights. A person is said to be liable for laches when he comes to the court to affirm their rights after a reasonable delay in that respect. The person who is asserting laches has the burden of proving that it is applicable. In many matters, a delay in filing a case has the effect of blocking the opposing party from putting on a fair defense. Because of that delay, evidence disappears, memories scruple, and witnesses go their ways. The person who wants to claim the doctrine or think of it as help opens the door of hope, but in legal terms, the word laches is an opportunity that is now lost.

In civil court, it offers legal remedies in the way of damages that is monetary relief or offers equitable relief in the forms of specific performance.

Elements of the doctrine of laches

Some elements must be satisfied to consider this doctrine to bar the petitioner from the cause of action:

Delay must be unreasonable at the time of bringing the matter;
Negligence in asserting a claim or right;
Knowledge of a claim by the petitioners in advance

Example

Y and Z were farmers. Their lands were right next to each other. Y starts extending his property by cultivating crops at the land of Z. Z was well aware of that but never raised this issue with Y. After 18 years, Z filed a case against Y. In this case, it will be said that Z has taken an exuberant amount of time to file a suit even though Z was well aware of the matter and decided not to take any action. Thus, the defendant can take support of the doctrine of laches and prove that Z has slept over his rights.
Anjali claimed sexual harassement against her office colleague, but she waits seven years to file a case. During that time, she has changed her job, the colleague has moved to another city, other colleagues who were witnesses have scattered, and the office management has even seen major changes. Both the management and the guilty colleague can claim the doctrine of laches here. The court stated that Anjali spent too much time filing a suit. It will be difficult for the judge to entertain this case. He may dismiss her claim because of this doctrine.

Here, the doctrine of laches explains that an unreasonable delay cannot be justified. The court will look up to the circumstances and facts of the matter and find possible reasons behind the delay in filing a lawsuit.

Purpose of the doctrine of laches

In most cases, the delay in filing a lawsuit by the petitioner is an advantage for the opposite party. Because of the delay, witnesses depart, memories vanish, and evidence disappears. It helps the defendant to put this doctrine on defense and it shifts the burden of proof upon the petitioner. The petitioner has to give a reasonable statement for the delay. Article 32 ensures the right to approach the court but it does not restrict the decision of the judge to grant relief.

Case laws related to doctrine of laches

In Haryana State Handloom & v. Jain Shool Society on 29 October (2003), a notification under Section 17 of the Land Acquisition Act, 1894 was issued on 26th October 1976 where possession of land was taken and vested to the government. The respondent filed a writ petition challenging that ground. It was submitted by the respondents that they had waited for all these years patiently to observe whether the land was put to use for the purpose for which it was acquired. It was agreed that the order of the high court is fair and equitable. The court said the respondent did not need to wait for 22 years to challenge the order as a writ petition was filed after 17 years of issue of an order. The respondent waited to challenge the ground because of an ulterior motive. Here, the writ petition filed by the party stands dismissed. It was held that the doctrine of laches on the part of the respondent was not reasonable here or the delay made by the party was not justified.

In Dr. Karan Singh v. State Of Jammu & Kashmir & Anr (1986), the appellant is the son of Maharaja Hari Singh, who was the ex-ruler of Jammu and Kashmir. He filed an application for the ‘Toshakhna’(treasure of the state) which he declared as his private property and said abolition of his father’s rulership did not affect the ownership of their private property which is distinct from the state property. The appellant claimed all the articles which were lying in the toshkhana i.e. gold, silver utensils, carpets, heirlooms, etc. The court rejected the application and stated that Maharaja Hari Singh gave the list of his private properties and in his letter dated 1-06-1949, he addressed all his private properties. The list was accepted by the Government of India. The High Court rejected the request of the appellant. The appellant amended his application and added the writ petition. The Court held that appellant has no right to reopen the issue after 30 years and it cannot be reopened without any exceptional or reasonable grounds that are none in the current case.

In Ved Prakash Goel v. S.D. Singh(2020), the petitioner has challenged the order related to the seniority list which was finalized in May 2005. There is no such reason which explains any circumstances which stopped the petitioner from raising this issue within a reasonable time. The issue raised by the petitioner would affect the others also, and if the reopening of an issue affects the settled rights of the other parties, then that claim will not be considered. If the issue was related to the payment or any fixation related to pension, it can be entertained as it will not affect the rights of the third party. The doctrine of laches will not be guarded here as there is no fair reason given by the petitioner for the delay.

In Marico Limited v. Mr. Mukesh Kumar & Ors.(2018), the plaintiff was a company who is engaged in the manufacturing, distribution, and sale of products in a wide range which includes oils, beauty products, hair oil, personal care products, etc. He stated in the lawsuit the defendant adopted their company’s trademark, colour of the bottle with the green coconut tree and the alphabets in white colour, and got registered in 1999. The plaintiff had to desist notice to the defendant also but he ignored the notice. In this case, the Court held that the defense of laches is a defense of equity. The court further added, if anything which misled the general public into buying the goods manufactured by any person or company, then an injunction must be issued at that point as the interest of the general public is more important than the interest of the individual.

Difference between doctrine of laches and statute of limitation

When a person comes across the doctrine of laches, a sudden question pops up in mind that the statute of limitation and doctrine of laches are alike. The genesis of both statutes is to ensure that the claims should be brought within a reasonable period so that witnesses and evidence can be found easily. Statute of limitation is a law that provides maximum time to the parties who are involved in a dispute to initiate legal proceedings from the date of an offense committed. The purpose of laches is to ensure that the claims are brought in a reasonable or appropriate time as that will also help to contact witnesses and find evidence easily.

Doctrine of Laches	Statute of Limitation
1. Laches limits a person who sleeps over their rights or is aware of their rights but didn’t take action within a reasonable period.	1. It bars a person to file suit beyond a prescribed amount of time, depending upon its jurisdiction.
2. Strict adherence to the law is mandatory.	2. It is discretion of the judge whether he finds the delay reasonable or unreasonable.
3. This doctrine is based upon the principle of equity.	3. This statute is based upon public policy.
4. It is a fact based defense.	4. It is a legal defense.
5. If a wife claims her part from her husband’s will after eight years of his demise, it is the discretion of the judge whether he finds the reason justified or not.	5. In New York, the limitation is 6 years for disputes related to any kind of contract.

Example

Z is the owner of a certain plot of land. A portion of Z’s land has been included in the sale deed of Y by mistake which was purchased by W. W thinking that he is the owner of the whole property which he purchased and he paid money for that whole part, started construction there. Z was aware of everything and knew the fact that his plot has been mistakenly included in the sale deed of W. It is the duty of Z to inform W about his ownership. Here, Z indirectly allows W to complete the construction. Z would be barred by laches here but the period of limitation to file a case is still available. Here, it explains that the remedy of the doctrine of laches may become barred before the time period prescribed by law has expired.

Conclusion

This doctrine is a relief to the respondent in cases where the petitioner spent way too much time filing a lawsuit. It is a defense for the respondent to escape his liability from any charges. The inherent part of this doctrine relies upon the good faith of the judge. It is accepted without any doubt that doctrine has played a crucial role in maintaining equity in the judicial process. However, the lack of education and laziness of the petitioner in exercising his legal rights at a particular time is an advantage for the respondent to issue this doctrine and the burden of proof will lie on the petitioner. The application of the doctrine of laches is uncodified as it depends upon the judge to make decisions on limiting the matters based on the conditions revolving around the case.

Therefore, it can be said that this doctrine is a watchdog in a legal system of justice, which guarantees only the right cases should be entertained and any unreasonable delay in filing a suit is a reprimand for the petitioner.

Reference

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Countries where prostitution is legal

By

Rachit Garg

-

March 9, 2022

0

This article is authored by Ms. Kishita Gupta, a student of United world School of Law, Karnavati University, Gandhinagar. The article has discussed various different approaches followed by varied legislation around the globe with respect to prostitution. The article will also cover the debate surrounding the legalisation of prostitution.

This article has been published by Rachit Garg.

Table of Contents

Introduction

Why is it immoral to be paid for an act that is perfectly legal if done for free? – Gloria Allred

Prostitution is the act of engaging in generally indiscriminate sexual contact with someone who is not a spouse or friend in exchange for immediate monetary or other valuable remuneration. Prostitutes can be female, male, or transgender, and prostitution can be heterosexual or homosexual, although traditionally, the majority of prostitutes have been female, and the majority of clients have been men. Because so much of what we know about prostitutes comes from studies of poor and less-privileged people, persons who are more likely to come into touch with courts and government agencies, it’s impossible to make broad generalisations about their backgrounds or conditions.

While the act of prostitution is considered immoral and illegal in some countries, it is actually considered legal in others. In this article, the author will be dealing with the different prostitution policies of various countries.

Percentage of the legality of prostitution

Fig 1 : Percentage of Countries with Legal, Illegal, and Limitedly Legal Prostitution

(of the 100 countries)

Fig 2 : Population (total # and % of total) of Countries with Legal, Illegal, and Limitedly Legal Prostitution (of the 100 countries)

Images source : *Countries and Their Prostitution Policies*

Out of 100 countries that were covered in the above-mentioned study, 53 countries have laws that legalise prostitution which makes it a total population of 2.93 billion (51%) of population, while there are 12 countries where the act of prostitution is limitedly legal which makes it a population of 698.87 million (12%), whereas, there are in total 35 countries where the act of prostitution is considered as an illegal act, constituting the population of 2.13 billion (37%).

Different legislative approaches towards prostitution

Criminalisation

Prostitution becomes illegal under the terms of a national Criminal Code when it is criminalised. Criminalization aims to make prostitution less accessible by outlawing the activity of some or all participants participating in the trade. Prohibitionism, abolitionism, and neo-abolitionism are the three sub-categories of criminalization.

Prohibitionism

Prohibitionism uses criminal law and law enforcement to eradicate all types of prostitution. Prostitution is viewed as a humiliating occupation that goes against the basics of human dignity in this perspective. The majority of states in the United States, as well as countries in the Middle East, have accepted prohibition.

Abolitionism

Abolitionism tries to reduce prostitution by criminalising any connected activities that are not prostitution, such as pimping, brothel-keeping and procuring. This technique calls for a prohibition on public solicitation, recognising the harmful social consequences of practising the profession openly.

Neo – abolitionism

Neo-abolitionism, often known as the Nordic/Swedish model, is akin to abolitionism. By criminalising the purchase of sex services, the neo-abolitionist stance departs from abolitionism. The premise behind neo-abolitionism is to reduce prostitution demand by focusing on the customer. This strategy, which has been applied in Martinique, Belize, Canada, Iceland, Northern Ireland, and Ireland, assumes that lowering the demand for sex work will reduce the availability of sex services. Even so, a reduction in demand can force women to lower their fees or enlist the help of third parties to expand their clientele. Also, under this paradigm, a prostitute’s client is reduced to those ready to break the law, potentially resulting in high-risk or violent interactions between the buyer of the sexual activity and the seller of it.

Legalisation

Prostitution is only considered a lawful profession under state-specified parameters after legalisation. Only certain laws imposed by labour law, criminal law, and other legislation allow prostitutes to give sex services. Mandatory health checks, job licences, and adherence to licensing/tolerance zones are all common regulations. The Netherlands, Germany, Austria, Greece, Turkey, Senegal, the state of Nevada in the United States, and various Australian states have all legalised the act of prostitution.

Decriminalisation

Prostitution is treated as a lawful profession under decriminalisation, which means all laws criminalising prostitution and other parts of the trade are repealed. The absence of prostitution-specific regulations and laws is the key contrast between legalisation and decriminalisation. Prostitutes, like other workers in other industries, are subject to conventional norms and laws, such as the requirement to pay taxes. Decriminalization aims to prevent sex work from becoming illegal by giving prostitutes the same rights as other workers. In countries like New Zealand, Cape Verde, and several Australian states, decriminalisation has been introduced.

Prostitution policies in different countries

In the current article, the author has attempted to cover the prostitution policies of some countries. This section of the article will cover the countries where prostitution is illegal, legal and partly legal.

Countries where prostitution is illegal

In this section, the author has discussed some of the countries where prostitution is illegal.

China

Both administrative and criminal law apply to sex work in China. Buying and selling the act of prostitution, as well as enticing, sheltering, or initiating a person to prostitution, are all illegal under the Law on Penalties for Administration of Public Security 2005 (Article 66) of China. It is prohibited to organise, force, or induce prostitution.

Croatia

In Croatia, the Misdemeanors against Public Peace and Order Act was passed in 1977 and incorporated into Croatian law with minor changes in 1990. As per the Act, there are majorly two types of offences: allowing for the use of one’s premises for prostitution or enabling or helping a person to engage in prostitution (Article 7), and engaging in or falling into the act of prostitution (Article 12).

Egypt

According to Article 9 (c ) of Law No. 10/1961 on the Combating of Prostitution, prostitution is considered illegal in Egypt. The same statute makes purchasing sexual activity unlawful, but lower court convictions have been reversed by higher courts.

Iran

Sex work was tolerated in limited red-light districts until 1979. These were razed following the Islamic revolution, when laws were enacted prohibiting brothels, procuring prostitutes, and selling sexual activities, as well as harsh punishments such as imprisonment, flogging, and execution. Thus, making prostitution illegal under Articles 637 and 638 of the Penal Code.

Iraq

1988 Combating Prostitution Law No. 8 (Arabic) of Iraq made it illegal to organise male or female prostitutes and established, in theory, a system for prostitute rehabilitation. The Revolutionary Command Council enhanced the penalty for individuals guilty of organising or indulging in prostitution. Article 2 of the above-mentioned Act makes the act of prostitution illegal in Iraq.

South Korea

Article 4 of Act No. 7196 of 2004 on the Punishment of Procuring Prostitution and Associated Acts makes prostitution illegal in South Korea. Human trafficking is defined by this Statute as any sexual activity conducted in return for money or goods. Sex workers in South Korea must establish that they were pressured into giving sexual services in order to avoid punishment.

South Africa

In South Africa, the Sexual Offenses Act of 1957 makes it illegal to engage in unlawful carnal intercourse with another person or perform an act of indecency for monetary gain. It also makes it illegal to keep a brothel, to recruit someone to work as a sex worker or in a brothel, to facilitate sex work, to knowingly live off the revenues of sex work, to solicit in public areas for immoral purposes, and to engage in public indecency. Paying or otherwise rewarding someone above the age of 18 for a sexual act, whether such act is committed, is illegal under the Criminal Law Amendment Act of 2007.

United Arab Emirates

Articles 363-368 of Federal Law No. (3) of 1987 on the Issuance of the Penal Code make prostitution illegal in the United Arab Emirates.

Countries where prostitution is limitedly legal

In this section, the author has discussed some of the countries where prostitution is limitedly legal.

Australia

In Australia, depending on the state, the law on prostitution ranges from decriminalised to legally regulated to criminal. The Coalition Against Trafficking in Women Australia prepared a report where they compiled all the different laws on prostitution in Australia. The report mentions key provisions of various legislations such as Sex Work Act 1994, Summary Offences Act 1988, Restricted Premises Act 1943, Prostitution Act 1999 Amended 2010, Prostitution Act 2000, Summary Offences Act 1953, Sex Industry Offences Act 2005, Prostitution Act 1992, Prostitution Regulation Act 2004.

Canada

In Canada selling sex is considered to be a legal activity, but buying sex is illegal following the implementation of House Government Bill C-36 of 2014. The Protection of Communities and Exploited Persons Act superseded Canada’s previous prostitution regulations in December 2014. Purchasing sex, benefiting materially from another’s prostitution (unless there is a legitimate relationship, which was undefined in early 2015), and anyone other than sex workers advertising sex businesses and communicating for the purposes of prostitution near schools, playgrounds, and community centres are all prohibited under the new law.

France

The adoption of Law No. 2016-444 Aiming to Strengthen the Fight Against the Prostitution System and to Assist Prostituted Persons made selling sex a legal activity, but buying sex is illegal in France. Sex workers can be penalised with public order and traffic violations, and anti-trafficking and immigration laws are strictly enforced for migrant sex workers. Across the country, law enforcement varies, and discreet brothels are recognized in towns and cities. Police brutality and a lack of enforcement of legislation that may protect sex workers, particularly against transwomen, have been reported by sex workers.

Japan

The Prostitution Prevention Law of 1956 makes it illegal to conduct “unnamed intercourse for payment with an unspecified person.” ‘No one may either practise prostitution or become a customer of it,’ according to Article 3 of the above-mentioned Act. However, only prostitute solicitation, arranging prostitution, operating brothels, soliciting or inducing an individual for prostitution, coercing a person into prostitution, and profiting from the sex activity of others is punishable as per the Statute. As a result, buying sex isn’t absolutely unlawful. While other forms of commercial sex, such as massage parlours and ‘soaplands,’ which are known as ‘fuzoku’, are allowed because the concept of prostitution is limited to vaginal intercourse. The Businesses Affecting Public Morals Regulation Law of 1948 governs these businesses in Japan.

United Kingdom

In North Ireland, buying sex is completely illegal but selling sex is legal as per Article 15 of the Human Trafficking and Exploitation (Criminal Justice and Support for Victims) Act (Northern Ireland) 2015. Further, the following activities are illegal in the UK:

Using phone booths to promote your business.
Crawl the kerbs (approach people in public to ask them for sex)
Rent or allow a brothel to operate on your land.
Use of force, threats, fraud, or other forms of compulsion to get access to someone selling sex.
Trafficking people to the UK or around the UK for sex.

According to the House of Commons Home Affairs Committee, “Prostitution: Third Report of Session 2016–17,” published on July 1, 2016, The sale and purchase of sexual services are allowed in England and Wales, but various related actions are illegal. This covers exploitation-related activities like controlling prostitution or maintaining a brothel, as well as public nuisance activities like purchasing or selling sex in public.

United States of America

The United States is a federal system in which each state has its own sex work legislation. All parts of buying, selling, and organising sexual services are prohibited in most states. For example, pandering, procuring, promoting prostitution, soliciting, and agreeing to engage in a prostitute act. The act of prostitution is considered illegal in the USA with an exception of the state of Nevada, which legalises licensed brothels and is subject to strict regulations that include mandatory HIV and STI testing along with curfews for employees.

The Mann Act of 1910, as revised in 1986, makes interstate or international transportation for sexual activity illegal. Despite the permission of the claimed victim, many state and federal anti-trafficking rules make prostitution-related actions illegal.

Despite the fact that buying sex is not illegal everywhere in the country, gender-neutral rules against soliciting for prostitutes, as well as other laws and policies, are utilised to criminalise and/or deter males who buy sex. This involves violations of public order and decency regulations, as well as embarrassing clients in public.

Countries where prostitution is legal

In this section, the author has discussed some of the countries where prostitution is legal.

Germany

Germany is a federal system in which each state has its own interpretation, enactment, and enforcement of federal legislation. Prostitution in Germany is legal, organised, and taxed, making it one of the most progressive systems in the world. Germany also permits brothels, ads, and the use of HR companies to process prostitution jobs. In 2017, Germany introduced the Prostitutes Protection Act, which aimed to protect prostitutes’ legal rights. All prostitution trades must have permission, and all prostitutes must have a registration certificate, according to the Act.

Mexico

Prostitution is permitted in Mexico under federal law. Each of the country’s 31 states has its own prostitution legislation, with 13 of them allowing and regulating prostitution. There are “tolerance zones” in several cities that operate as red-light districts and allow for regulated prostitution. In most places of Mexico, pimping (the practice of controlling prostitutes and arranging clients for them, taking part of their earnings in return) is prohibited.

India

The Immoral Traffic (Prevention) Act of 1956 (ITPA) does not criminalise prostitution in India per se, rather it makes it illegal to keep a brothel as per Section 3, live off a prostitute’s earnings as per Section 4, procure, induct, or detain a person for sex work as per Section 5 and 6, prostitution near public places and notified areas as per Section 7, and solicit prostitution as per Section 8.

Sex workers are arrested and detained for public order violations. They routinely accuse police and detention centre guards of brutality, rape, and extortion, claiming that law enforcement is corrupt or inconsistent. Although HIV and STI testing is often voluntary and with informed permission, there have been reports of violations. Although it is not unlawful to buy sex, clients who engage in prostitution-related activity in public areas may face penalties.

The Indian Penal Code, 1860, also addresses prostitution, however, it focuses on kidnapping and child prostitution. Under Sections 372 and 373, it is illegal to buy, sell, or import minors for the purpose of prostitution.

Under Article 23(1) of the Indian Constitution, trafficking of human beings, beggars, and other similar forms of forced labour are prohibited, and any violation of this provision is a crime punishable according to Article 23 (2).

Indonesia

The Indonesian Penal Code makes it illegal to profit from others’ obscenity (Article 296), trade-in women (Article 297), and live off the revenues of a female sex worker (Article 298). (Article 506). These statutes are rarely invoked. In practise, a variety of sub-national, local laws, ordinances, and by-laws govern the sex industry. These range from outright bans on all forms of sex labour to legally sanctioned brothel complexes known as ‘lokalisasi’. Tolerated brothels are on the decline, with ‘Dolly’, one of the most well-known lokalisasis, being shut down by police in 2013.

New Zealand

The Prostitution Reform Act of 2003 repealed prior laws that prohibited the operation of brothels, escort agencies, and solicitation in favour of a mix of rules and criminal penalties aimed at reducing unsafe sex and the involvement of minors, migrants, and non-consenting persons. Thus making prostitution a legalised act in New Zealand. However, the Summary Offenses Act 1981 is still in effect, allowing sex workers who act rudely in public areas to be punished with a crime.

Singapore

While offering sexual services in exchange for money is not illegal in and of itself, many sex work-related actions are punishable. These are as follows:

According to the Miscellaneous Offences Act, Article 19, it is illegal to solicit sex work in a public location.
Article 146 of the Women’s Charter prohibits people from living on or trading in prostitution. Two additional changes to Article 146 were adopted in 2016, making it illegal to use “remote communication services” to advertise sex work. Independent sex workers who run their own websites are basically criminalised as a result of this.
Owning a brothel is also punishable in Singapore as per the Women’s Charter, Article 148.
Furthermore, migrant sex workers are classified as “prohibited migrants” under Article 8(e) of the Immigration Act.

Convention on the Suppression of Traffic in Persons and the Exploitation of the Prostitution of Others

The UN General Assembly passed the Convention on the Suppression of Traffic in Persons and the Exploitation of the Prostitution of Others, which states that “trafficking in persons for prostitution is incompatible with the dignity and worth of the human person.” The General Assembly adopted it on December 2, 1949, and it went into force on July 25, 1951. There were 74 states parties to the convention in 2007, and the convention applied to 74 countries.

Member States that have signed, ratified and implemented the Convention are preventing prostitution through moral education and civics training, both in and out of school, increasing the number of women among the State’s personnel who have direct contact with the populations concerned, eliminating discrimination that isolates prostitutes and makes their reintegration into society more difficult, limiting the pornography industry and trade in pornography, and penalising them verifiably.

Debate on legalisation of prostitution

As people’s access to health care becomes more dependent on their working status (or lack thereof), it’s critical to examine conflicting perspectives on ‘sex work.’ If prostitution is simply an immoral activity, healthcare benefits management should discourage it completely. However, if prostitution is a freely chosen line of employment motivated by economic incentives and individual choice, disability insurance and the healthcare system should include prostitutes. Finally, policy choices will be drastically different if prostitution is a sign of subordination that cannot be freely ‘chosen.’

The conventional morality view

Regardless of the beliefs and desires of people who participate, a prevalent and enduring perspective of prostitution is that it is a societal evil that should be condemned for the good of society. These traditional concerns are frequently implicated in the stated governmental interest in regulating prostitution, whether it is to prevent the commercialization of sex, defend the sanctity of marriage, or protect prostitutes from degradation. Even less moral explanations, such as reducing the transmission of sexually transmitted illness, deterring prostitution-related criminality, or eliminating a “public nuisance,” are motivated by a desire to eradicate prostitution.

Although the vast majority of the population does not express this conservative viewpoint overtly nowadays, it is crucial to understand that conventional, moralistic social attitudes and ideas frequently impact public policy in the area of prostitution. When politicians explore proposals to enhance the lives of prostitutes by extending public benefits, legalising or decriminalising the practise, opponents argue that it will encourage women to participate in ‘immoral’ behaviour. Traditional moralists oppose reform efforts that may legalise the ‘immoral’ act of prostitution, even if the end goal is to prevent secondary crime, the spread of illness, or community ‘blight.’

Diverging views of the feminist debate

Feminist scholars have been at the forefront of the most outspoken and detailed debates about prostitution in recent years. As a result, it’s useful to divide various perspectives on prostitution into two ‘strands’ of feminism: radical feminism and liberal feminism.

Radical feminist approach

Prostitution, according to radical feminists, is nothing more than a disguised form of female subjugation. They compare prostitution to other forms of subordination such as rape, domestic violence, and sexual harassment, and contend that prostitution is a human rights violation even when there is no physical violence. Men have promoted the cultural myth that women actively seek prostitution as a pleasurable economic alternative to low-paying, low-skilled, monotonous labour, conveniently ignoring the conditions that ensure women’s inequality and the preconditions that make women vulnerable to prostitution, according to those who follow the radical feminist approach.

Radical feminists debunk this myth, claiming that within a system of subordination, ‘choice’ is never truly available: women “choose” to engage in prostitution only because they are forced to do so, either coercively or due to economic circumstances. Those prostitutes who assert that they selected their employment freely are misled by a false consciousness that assures their subjugation if this viewpoint is correct.

Prostitution should not be legalised, according to radical feminists, because state regulation, taxation, and licencing would legitimise women’s subjugation and objectification. Some radical feminists, on the other hand, see partial decriminalisation as a necessary step toward completely abolishing prostitution, rather than an opportunity to legitimise prostitution as a respectable occupation. As a result, they advocate for the removal of laws prohibiting the sale of sexual services but feel that other related acts such as pimping, advertising, and recruitment should remain illegal.

Liberal feminist approach

Liberal feminists, prostitutes’ rights organisations, and many prostitutes content, on the other hand, that labelling prostitution as servitude ignores women’s ability to choose whether or not this line of work is in their best social, personal, and economic interests. They believe that women should be able to utilise their bodies for whatever reason they see fit. They argue that prostitution strengthens women rather than denigrates them, claiming that women can freely select this line of work after assessing the costs and rewards. Prostitution, in this view, is not an intrinsically coercive system of subordination, but rather a legal and respectable occupation.

The liberal feminist approach acknowledges the systemic undervaluation of women’s contributions to the labour market but contends that prostitution is one of the few occupations in which a woman can earn an equal wage to a male, work on her own schedule, and choose her clients. As a result, liberal feminists advocate for the full legalisation of prostitution so that women can freely express their sexual and economic liberty.

Debate related to health hazards

We should be concerned as a society about every woman’s access to decent health care. All women are susceptible to a wide range of physical and mental illnesses. Prostitutes, on the other hand, have significant health-care concerns. The work environment of a lower-tier prostitute constantly exposes her to health dangers that many other women do not, such as violence, emotional stress, communicable disease, and exposure to the elements.

Encounter to violence

Prostitutes, particularly those on the street, face abuse and harassment from pimps, customers, and police, who “take advantage of the prostitutes’ fear of authority, low social position, and financial fragility.” Unfortunately, regulations intended to protect women from physical and sexual assault do not often protect prostitutes. The most typical example is when pimps, disgruntled customers, police, and even strangers rape prostitutes, which is trivialised by law enforcement officials or the criminal justice system itself.

Risk of infections

Prostitutes are exposed to a variety of viruses and bacteria as a result of their close contact with customers. While this may raise the risk of tuberculosis, influenza, and other respiratory illnesses, venereal disease is the most common occupational hazard for prostitutes. Even though prostitutes use condoms at a higher rate than any other category of sexually active women, this is true. While recurring infections with some sexually transmitted diseases (“STDs”) may cause only little discomfort, infections like syphilis, hepatitis, gonorrhoea, and herpes have far more serious health implications. More concerning is the fact that, as heterosexual intercourse becomes a more common route of HIV transmission, female prostitutes are at an increased risk of death as a result of their employment.

Conclusion

The act of prostitution is prevalent throughout the globe, whether legal or illegal. While some arguments speak in favour of legalising prostitution which would further provide various rights and remedies to the persons involved in the act. Further, if the act is legalised and taxed it may even help a country’s economy. The conventional feminist argument against legalising prostitution is that it will exploit women by increasing sexual inequity. The human rights argument for it is that it will improve and protect people’s lives. The sex worker’s rights movement is a protest against punishment and humiliation in this conflict over whose voices to listen to, who speaks for whom, and when to utilise the authority of criminal law. It demands respect for a group that has rarely received it, emphasising that respect is the only way to truly help people.

References

https://www.theguardian.com/global-development-professionals-network/2015/sep/15/laws-against-sex-workers-can-a-map-help-to-move-the-discussion-forward
https://prostitution.procon.org/countries-and-their-prostitution-policies/#uk
https://worldpopulationreview.com/country-rankings/countries-where-prostitution-is-legal
https://www.europarl.europa.eu/RegData/etudes/STUD/2021/695394/IPOL_STU(2021)695394_EN.pdf
https://www.politics.co.uk/reference/prostitution/
https://blog.ipleaders.in/legal-aspects-related-to-prostitution-in-india/
Oleksandr Eduardovich Radutniy, ‘Legalization of Prostitution and Decriminalization of Related Activities in Ukraine’ (2016) 133 Probs Legality 152
Anannya Bera and Krishna Bhattacharya, ‘Legalization of Prostitution in India’ (2018) 3 Supremo Amicus 84

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Overview on the concept of Waqf

By

Rachit Garg

-

March 9, 2022

0

This article has been written by Saurav Narayan, Practicing Advocate, Delhi High Court. The article has been evaluated by Yashprada (Associate, Lawsikho).

This article has been published by Rachit Garg.

Table of Contents

Introduction

The institution of waqf is a unique aspect of Mohommadan law’s socio-economic system. Waqfing a property entails dedicating both movable and immovable property in Allah’s name for religious, pious, and philanthropic reasons. The institution of waqf is significant because it fulfils a dual purpose: on the one hand, it satisfies the human desire for charity, and on the other, it provides for the weaker members of society.

It is important to remember that waqf is the unconditional and everlasting devotion of properties in the ownership of God. The owner’s rights are lost because of this permanent dedication of land. Because the waqf property is no longer transferable, it cannot be sold, donated, or given to charity. It is just managed, and the manager is merely the custodian, not the owner or trustee.

The word waqf comes from the Arabic verb WAQAFA, which means to retain, hold, or bind. Thus, it may be traced back to the Prophet Mohammad’s tradition, habis al-asl -wa Sabbil al-thamara, which means “tie up the substance and give out the fruit.”

According to Imam Abu Hanifa, the tying-up of the substance of a property in the ownership of the wakif and the devotion of its usufruct, equal to an ariya, or financial loan, for some charitable purpose”.

Conditions for a valid Waqf

The essential conditions for a valid waqf are as follow:

Permanent dedication

Waqf property must be permanently dedicated, and the Waqf must devote and grant it for any purpose authorised by Muslim law, such as religious, pious, or charitable purposes. If the waqf is only valid for a certain amount of time, it isn’t a genuine waqf, and there should be no conditions or contingencies connected, otherwise, it will become invalid. Wakf has always had a religious motivation.

The dedication of a house by a Muslim for use by all travellers irrespective of religion and status was held not to be a Wakf in Karnataka Board of Wakfs v. Mohd. Nazeer Ahmad on the basis that under Muslim law, a Wakf must have a religious motive and be solely for the

the benefit of the Muslim community, and if it is secular, the charity must be limited to the poor.

When a Wakf is established, it is assumed that a property donation has been made in God’s favour. This is accomplished by a legal fiction in which waqf property becomes God’s property.

The Waqif’s Competence

Who can establish a Waqf? The individual who establishes a waqf on his property is known as the “founder of waqf” or “Waqif.” At the moment of waqf dedication, the waqif must be a qualified individual. To be a competent waqif, a person must have both the competence and the right to establish the waqf.

There are just two prerequisites in terms of a Muslim’s ability to make waqf:

(i) Sound mind

(ii) Majority

A person of unsound mind is unable to establish a waqf because he or she is unable to comprehend the legal implications of the transaction. Waqf established by an insane individual or by a minor is null and invalid.

Non-Muslim Dedicators of Waqf: The dedicatee must profess Islam, that is, believe in the ideals of Islam; nevertheless, he does not have to be a Muslim by religion. The Madras and Nagpur High Courts have ruled that a non-Muslim can establish a legal waqf if the goal of the waqf does not violate Islamic precepts.

According to the Patna High Court, a non-Muslim waqf can only be a public waqf; a non-Muslim waqf cannot be private (e.g., an Imambara).

Right to make waqf

A person who has the ability but not the right to make waqf cannot make a lawful waqf. At the time waqf is created, the subject matter of waqf should be held by wakif. Whether or not a person has the legal authority to establish a waqf is determined by whether the dedicator has the legal right to transfer ownership of the property.

A widow cannot constitute any waqf of the property that she holds in lieu of her unpaid dower because she is not an absolute owner of that property.

The beneficiaries and the mutawalli must prove that the waqif was established by a pardanashin lady who exercised her thought and fully grasped the nature of the transaction.

Amount of property

A person can dedicate his entire estate, but more than one-third of his estate cannot be dedicated under the testamentary waqf.

Different kinds of Waqf

Public waqf: Waqfs created for public, religious, or charitable purposes are known as public Waqfs.

Private Waqf: Private waqf are also known as ‘Waqf-ulal-Aulad.’ This type of Waqf is established for the settler’s own family and successors. In the form of waqf, it is a type of family settlement.

From the standpoint of its output nature, the following are the categories of waqf:

• Waqf-istithmari: Waqf assets are meant to be invested in. These assets are managed to generate money that will be utilised to build and restore waqf properties.

• Waqf-mubashar: Waqf assets are utilised to generate services for charitable recipients or other beneficiaries. Schools, utilities, and other assets are examples of such assets.

Waqf characterstics

1. Irrevocability — In India, waqf declarations are final.

2. Inalienability – Because the waqf property belongs to God, it cannot be alienated for personal gain.

3. Perpetuity – A waqf is established in perpetuity, hence a waqf established for a certain length of time is illegitimate.

4. Usufruct for religious, pious, or charitable reasons – The waqf property’s product and advantages are used for religious, pious, or charitable purposes as defined by Muslim law.

5. Absoluteness – Waqf property settlement is absolute, and any conditional or dependent waqf is considered invalid.

Mutawalli

The Waqf’s manager or supervisor is known as the ‘Mutawalli.’ Without the prior authorization of the court, such a person designated has no power to sell, exchange, or mortgage the waqf property unless the waqf deed specifically authorises him to do so.

Who is eligible to be a mutawalli?

A mutawalli of a waqf can be appointed as a waqf who has reached the age of majority, is of sound mind, and can complete the tasks that must be performed under the waqf. In India, a foreigner cannot be named as the Trustee of a property.

Who has the authority to nominate a mutawalli?

The founder of the waqf appoints when the waqf is established, according to the general rule. However, if a waqf is established without the appointment of a mutawalli, the following individuals are qualified to serve as Mutawalli:

• Executor of the founder’s will;

• On his deathbed, the Mutawalli;

• The following rules will be followed by the Court:

1) As much as practicable, the Court should follow the settlor’s instructions.

2) A member of the settler’s family should be given preference over a stranger.

3) In the event of a dispute between a lineal descendant of the settlor and a non-lineal descendant, the court is allowed to use its discretion.

Mutawalli’s roles and responsibilities

As the waqf’s manager, he is responsible for the property’s usufruct. He is granted the following privileges:

1) He has the power to employ the usufructs in the waqf’s best interests. He is authorised to take all reasonable steps in good faith to guarantee that the waqf’s end beneficiaries get all of the waqf’s benefits. He is unable to sell the property since he is not the owner of the property. The wakif, on the other hand, might grant such rights to him by explicitly mentioning them in the waqf Nama.

2) By demonstrating the existence of acceptable circumstances or urgency, he can obtain court permission to sell or borrow money.

3) He can bring a lawsuit to safeguard the waqf’s interests.

4) He also has the authority to lease the land for fewer than three years for agricultural purposes and less than one year for non-agricultural purposes. With the proper consent from the court, he can have the term extended.

5) He is entitled to payment in accordance with the wakif’s provisions. If the payment is insufficient, he might petition the court to have it increased.

Conclusion

Waqf is a kind of confinement that is permanent, binding, and enforceable by law; anybody who is affected may seek redress in a civil court. In waqf, the office of mutawalli is highly significant; authority can be exercised when there is a clear vacancy of mutawalliship or when there is a disagreement about the competence or eligibility of the present mutawalli. A Muslim waqf differs from an English trust or a Hindu dharma endowment.

References

https://www.legalserviceindia.com/legal/article-1746-concept-and-essentials-of-a-valid waqf.html
Bailie Nell B.E., Digest of Mohummudan Law, Part First (Hanafi Law), Second Revised Edition, London, 1875, Vol. II, p. 212.
Rahim Abdur, The Principles of Muhammadan Jurisprudence, Luzac & Co. London, 1911, pp. 303-304, Ibid. Vol. I, pp. 557-8.
https://www.lawctopus.com/academike/concept-waqf-muslim-law/

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Doctrine of supervening impossibility and its exceptions

By

Sneha Mahawar

-

March 8, 2022

0

This article is written by Adhila Muhammed Arif, a student of Government Law College, Thiruvananthapuram. This article seeks to explain the doctrine of supervening impossibility, also known as frustration, which is one of the modes of discharge of a contract, along with its exceptions.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

The doctrine of supervening impossibility is also called the doctrine of frustration, which is one of the aspects of the law of contracts. It deals with the enforceability of contracts on the occurrence of some unforeseen incidents. The word ‘frustration’ means ‘efforts made ineffective’ and it is one of the modes by which a contract can be discharged as per Section 56 of the Indian Contract Act, 1872.

Doctrine of supervening impossibility: meaning

The doctrine of supervening impossibility or the doctrine of frustration becomes applicable when a contract becomes impossible to perform due to the happening of some unforeseen circumstances which were beyond the control or calculation of the parties involved. When such a contract becomes entirely impossible without the fault of the parties, the contract gets dissolved by this doctrine. This doctrine is based on the maxim ‘Lex non cogit ad impossibilia’. The maxim essentially means that “law does not compel the impossible”. This can arise when there is a war, act of god, amendment of laws, death of a party, etc. The following are the requisites for the application of this doctrine:

When an event or incident occurs that the parties were unable to contemplate when the contract was formed.
None of the parties are at fault for the occurrence of the event.
The contract if performed would turn out different from what the parties agreed to initially.

Applicability of the doctrine of supervening impossibility

The doctrine is also subject to some limitations or rules which are the following:

The doctrine is based on the presumed intention of parties. This means that no implied condition can be taken into consideration if it is in contravention with the express terms.
Where at least one of the parties is to be blamed for the occurrence of the event, the doctrine loses its force.
Commercial impossibility is not taken into consideration.
This doctrine applies only when the intentions or terms of both parties cannot be met.
Where the contract can be performed through multiple modes, the doctrine fails to apply.

The doctrine of supervening impossibility in English Law

The Law Reform (Frustrated Contracts) Act, 1943

The Law Reform (Frustrated Contracts) Act, 1943 passed in England has certain provisions that abide by this doctrine, which are as follows:

The parties to a contract do not have to perform their obligations once the contract gets discharged.
Any money paid for the purpose of fulfilling a contract can be recovered once the contract gets frustrated and no money has to be paid after a contract gets frustrated.
If any one of the parties has done some work as promised under the contract, such a party can recover compensation for the work he undertook once the contract gets frustrated.

Case laws

The case of Taylor v. Caldwell (1863) tremendously changed the law of contracts in England. In this case, an opera house was rented for the purpose of holding concerts. The opera house, however, was destroyed by fire before the night of the concert. Blackburn J held that on the frustration of a contract it gets discharged because the discharge of the contract can be considered to be an implied term that the parties agreed to on the happening of the uncertain events. This theory is called the implied term theory.

In the case of Krell v. Henry (1903), it was held that when an express condition or state of things that is essential to a contract ceases to exist, the contract becomes impossible to perform and the doctrine of frustration applies.

In the case of Ocean Tramp Tankers Corporation v. VIO Sovfracht (the Eugenia) (1964), it was held that when a fundamentally new situation occurs which makes it unreasonable and unjust to hold the parties accountable to perform their obligations, the contract becomes discharged.

In the case of Davis Contractors Ltd. v. Fareham Urban District Council (1956), when new circumstances arise which is different from what the parties anticipated for performing the contract, the doctrine of frustration applies. This theory is called the construction theory, which was developed by Lord Radcliffe.

The doctrine of supervening impossibility in Indian law

Indian Contract Act, 1872

Section 56

The doctrine of frustration or doctrine of supervening impossibility is provided in Section 56 of the Indian Contract Act, 1872 under the heading of ‘agreement to impossible act’. The section can be divided into three parts, which are the following:

As per this Section, an agreement to do an impossible act is void. This provision deals with acts that are impossible in itself such as bringing a dead person alive, discovering treasure by magic, etc. Such impossibilities can also be termed as ‘initial impossibilities’. For instance, A is a man who is already married to B. He enters into a contract promising to marry C. It is impossible for him to perform this contract as he is already married.
Once a contract to do something by reason of the happening of some event becomes impossible or unlawful to perform, it turns void. This part of the provision is what actually deals with the doctrine of supervening impossibility or doctrine of frustration.
The section also provides that in situations where the promisor knew or might have known with reasonable diligence, that his obligation would become impossible or unlawful, which the promisee did not know of, then the promisor can be made to compensate the promisee for any loss that he sustains due to the non-performance of the obligation.

The following are some examples to illustrate the doctrine of supervening impossibility:

A and B enter into a contract promising to marry each other. A becomes insane before the marriage is performed. The contract becomes void due to insanity.
If A and B enter into a contract where A promises to take in cargo for B at a foreign port. A’s government later declares war against the country in which the port is located. The contract becomes void as a result of the declaration of war.

From the above explanation and examples, it can be concluded that a contract becomes frustrated as per the Indian law of contracts on the satisfaction of the following conditions:

The performance of the contract has become impossible;
The impossibility is something which the promisor could not anticipate or prevent; and
The impossibility is not caused by any act or negligence of the promisor.

Section 65

Section 65 of the Indian Contract Act provides that once an agreement is discovered to be void, or when it subsequently becomes void, any party who has received any benefit under the agreement is bound to restore such benefit or compensate for it to the person who provided the benefit.

For instance, A and B enter into a contract where A promises that he would deliver 100 maunds of rice produced by him to B before the first of February. However, A only gets to deliver 50 maunds of rice to B because of a natural calamity that destroyed his grains. B retains the 50 maunds of rice, which means that he accepted the contract and thus, he should pay for the 50 maunds of rice.

Case laws

In the case of Satyabrata Ghose v. Mugneeram Bangur and Co. (1953), the defendant company promised the plaintiff that they would develop a plot of land by constructing roads and drains and then sell the plot to the plaintiff. Later, some portion of the land got requisitioned for military purposes. The Supreme Court decided that since only a portion of the land got requisitioned and not the whole of it, the contract had not become impossible as per Section 56.

In the case of Sushila Devi v. Hari Singh (1971), there was a contract regarding giving property on lease. Unfortunately, the property which was situated in Gujranwala and became a part of Pakistan due to partition. The Supreme Court held that the term ‘impossibility’ need not be confined to practical impossibility. It could also mean impracticability with regards to the object and purpose of the parties to the contract. For this, some supervening event must have occurred which impacts the foundation of the contract. Thus, the contract was held to be frustrated.

Types of supervening impossibility

The following are the main types of supervening impossibility or post-contractual impossibility:

Destruction of the subject matter of the contract: A contract gets discharged when its subject matter gets destroyed without the fault of the parties subsequent to its formation. The case of Taylor v. Caldwell is an example of this.
Death, illness or personal incapacity: When the performance of a contract is dependent upon the personal skills or qualification of any party, the contract becomes discharged if the party becomes ill, incapable or dead before its performance.

In the case of Robinson v. Davison (1871), an artist promised to perform at a concert for a specified remuneration. She fell ill before she could perform her obligation. This led to the frustration of the contract.

Change of law: In some cases due to unexpected subsequent changes in law, a contract may be rendered impossible by making it illegal.

In the case of Firm Bachhraj Amolakchand v. Firm Nand Lal Sitaram (1962), there was a contract regarding the export of grains from one particular state. The state government however placed some restrictions on the export of grains as a result of which the contract became discharged.

Declaration of war: When a person has entered into a contract with a citizen of another country, it becomes unlawful and void once a war is declared by the country of one of the parties against the other.

In the case of Metropolitan Water Board v. Dick Kerr & Co. Ltd. (1917), A and B had entered into a contract where A promised to build a reservoir for B in three years time. Unfortunately, a war broke out and the work had to be suspended as per government orders. As the war went on to five years, the work could not be performed. The contract became discharged.

Non-existence of a particular state of things: If a contract is made on the basis of a particular state of things, the contract becomes frustrated once the state of things changes or stops existing.

Exceptions to the doctrine

The impossibility of performance in itself is not always a valid defence to render a contract void. The impossibility must be absolute. The following are some of the factors that would not be accepted as the supervening impossibility of performance:

Commercial impossibility: A party cannot be discharged from performance just because it is non-profitable for them. During the course of performing a contract, there might be sudden rises in prices of goods and services that could make it unprofitable for any of the parties to a contract. However, such difficulties or burdens incurred while a contract is performed are not considered as a physical impossibility. Physical and legal impossibility is not the same as commercial impossibility.
Self-induced impossibility: When the impossibility is due to the fault of any of the parties, the doctrine does not apply. For instance, A, a lorry owner promises to B that he will give him his lorry for hire. However, he had to renew his lorry’s licence, which he failed to do so. He cannot avoid the contract since the licence has not been renewed due to his own actions.
Inherent or foreseeable risks: Most businesses by nature have certain inherent risks that the parties to a contract can foresee. In such cases, the parties are supposed to take due care and caution to prevent the happening of such events. This is because the parties to such a contract are consciously accepting its inherent risks.

In the case of Lucky Bharat Garage Pvt Ltd v. South Eastern Coalfields Ltd. (2011), a common carrier had the obligation to ensure the safety of goods against any risk, except against the act of god or state enemies. Unfortunately, the goods he was entrusted with was set on fire by a mob after Smt. Indira Gandhi’s assassination. However, he was held liable for the destruction as the risk was inherent in the contract.

Failure of a third party: If the promisor relied on a third party for performing his obligation, the contract does not become discharged merely due to the default of the third party. For instance, A and B enter into an agreement where A promises to sell him a specific quantity of cotton goods to be manufactured by a specific mill. The contract also had a condition regarding the time of delivery. The mill failed to produce the cotton goods. As a result, A could not perform his obligation. B can recover compensation from A for the losses incurred due to his failure.
Failure of one of the objects: Sometimes a contract can be entered into with multiple objects. In such contracts, the failure of one of the objects does not render the contract frustrated.

In the case of H.B. Steam Boat Company v. Hutton (1903), the steamboat company agreed to let out a boat to Hutton for two purposes. The first purpose was for viewing the naval inspection on the occasion of the coronation of Edward VII. The second purpose was to sail around the fleet. The king fell ill due to which the naval inspection got cancelled. However, the fleet was assembled. The boat could still be used for the second object. The contract was not frustrated.

Conclusion

To conclude, the doctrine of supervening impossibility or the doctrine of frustration is one of the modes by which a contract can be discharged or held to be void. This is enshrined in Section 56 of the Indian Contract Act, 1872. Whenever a contract becomes impossible to perform due to an unexpected subsequent physical or legal impossibility, there is no obligation on the parties to perform it. However, the impossibility should not be self-induced. It is also important to note that supervening impossibility is not the same as an initial impossibility. The Indian Contract Act also provides for compensating any party who has already performed before the frustration, which benefits the other party.

References

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All you need to know about the cy pres doctrine

Introduction

What is the cy pres doctrine

An illustrative example of the doctrine’s application

Purpose of the cy pres doctrine

Conditions for the doctrine of cy pres

Understanding the cy pres doctrine in light of the United Kingdom

English laws governing the cy pres doctrine

Cy pres doctrine in the United States

The take of American courts on cy pres doctrine

Cy pres doctrine in India : an insight

All you need to know about Section 92 of the Civil Procedure Code, 1908

Indian judiciary’s take on the cy pres doctrine

State v. Man Singh and Others (1974)

Delhi High Court’s decision

Abid Hatim Merchant v. Janab Salebhai Saheb Shaifuddin (2000)

Apex Court’s opinions

Kaliamurthy v. Thangamani and Others (2011)

The Madras High Court’s decision

V. G. Bhoopathi v. Adhi Lakshmi Ammal Dharma Chathiram (2017)

Observation by the Madras High Court

M. Murali Krishna Goud v. the State Of Andhra Pradesh (2020)

Observations by the Andhra Pradesh High Court

Conclusion

References

Rightfully claiming copyright : legal remedies available in case of infringement

Introduction

What is copyright

Industrial property

Copyright

What can be copyrighted

Literary work

Artistic work

Musical work

Dramatic work

Derivative works

How is it protected under the law

How is it protected internationally

Principle of natural treatment

Principle of automatic protection

Principle of independence of protection

What are the rights conferred by copyright law

Economic Rights

Moral Rights

What are the limitations and exceptions to these rights

Free use

Compulsory licenses

How long does copyright protection last

Who is the owner of the copyright

What are the ways to let others publish my work

Assignment

Licensing

What to do if somebody publishes my work without my permission

What are the enforcement norms

Provisional Measures

Final Remedies

Criminal Sanctions

Border Measures

Technological protection measures (TPM)

Conclusion

References

All about Section 307 of IPC

Introduction

Explanation to Section 307 of IPC

Ingredients of Section 307 IPC

Illustrations explaining the ingredients of Section 307 IPC

Nature of Section 307 IPC

Theories of attempt

Factual impossibility test

Theory of repentance test

Social danger test

Equivocality test

Difference between Section 307 IPC and Section 308 IPC

Procedure for the trial of a case filed under Section 307 IPC

First Information Report (FIR)

Investigation and the final report by police

Arguments before the court

Plea of guilt

Evidence by prosecution