Arrest shouldn’t be done as a routine : the Supreme Court perspective

By

-

December 15, 2021

arrest-2-12 — Image source: https://bit.ly/2Qn9RAx

This article is written by Nidhi Bajaj, of Guru Nanak Dev University, Punjab. The article aims to highlight the stance of the Supreme Court of India in the matter of arrests made in a routine manner including the safeguards evolved by the court to curtail the abuse of power by police.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Arrest brings humiliation, curtails freedom, and casts scars forever.

The Right to Life and Personal Liberty is the most cherished and sacred right of a human being. The Supreme Court of India through its various judgments has widened the scope of this right so as to bring a plethora of rights under the shed of Article 21. Right to Life includes the right to live a life of dignity and not a mere animal existence. However, it is often seen that unjustified arrests are made by the police and innocent people are maliciously prosecuted. Such abuse of power by the police causes irreparable damage to the life, liberty, reputation, and self-esteem of a person. It is trite that just because the police can arrest doesn’t mean that it must arrest.

In this article, the author will be dealing with the provisions relating to arrest and the stance of the Hon’ble Supreme Court of India on the issue of routine arrests and the safeguards provided against such arrests.

Meaning of Arrest

In simple terms, arrest means depriving a person of his freedom of movement by use of legal authority. According to Black’s law dictionary, ‘Arrest’ means ‘To deprive a person of his liberty by a legal authority or taking, under real or assumed authority, custody of another for the purpose of holding or detaining him to answer a criminal charge or civil demand’.

Provisions relating to arrest

The law relating to arrests in India is provided under the Code of Criminal Procedure 1973. Chapter V (comprising Sections 41 to 60A) provides for the procedure to be followed by the police while making the ‘Arrest of persons’. For instance, Section 41B of the Code provides for the procedure of arrest and duties of police officers while making the arrest, and Section 60A of the Code lays down that the arrest has to be made strictly in accordance with the provisions of the Code. Some important provisions relating to arrests provided under the Code are as follows:

Section 41: Circumstances when police may arrest without a warrant

Section 41(1) enumerates the circumstances wherein a police officer can arrest a person without warrant or without any order from a Magistrate, which are given as follows:

Commission of a cognizable offence in the presence of a police officer.
Receipt of a reasonable complaint or credible information against any person by the police officer or the existence of a reasonable suspicion that any person has committed a cognizable offence punishable with imprisonment of less than 7 years or which may extend to 7 years.

In this case, the following conditions are also required to be fulfilled:

Based on such complaint, information, or suspicion, the police officer has some reason to believe that such person has committed a cognizable offence
A police officer is satisfied that the arrest is necessary-
- for prevention of the commission of any further offence by such person or
- for proper investigation of the offence or
- to prevent such person from causing disappearance of any evidence or tampering with it
- to prevent him from making any inducement, threat, or promise to any person who is acquainted with the facts of the case to dissuade him from disclosing such facts to the court or the police officer or
- his presence in the court, whenever required, cannot be ensured except by arresting him

Also, the police officer must record his reasons in writing for making such an arrest.

A police officer has received credible information against any person pertaining to the commission of a cognizable offence by him and such offence is punishable with imprisonment which may extend to more than 7 years or punishable with the death penalty and the police officer has reason to believe on the basis of the information that such person has committed the offence;
Proclamation as an offender;
Possession of something which may reasonably be suspected to be stolen property and such person (who is found in possession of the thing) may reasonably be suspected of commission of an offence concerning such thing; or
Obstructing a police officer in the execution of his duty, or escaping or attempting to escape, from lawful custody; or
One who is reasonably suspected of being a deserter from Armed Forces of the Union; or
A police officer has received a reasonable complaint or credible information against any person, or a reasonable suspicion exists, that such person is concerned in, any act committed at any place out of India which, if committed in India, would have been punishable as an offence, and for which he is liable to be apprehended or detained in custody in India; or
When a released convict commits a breach of any rule made under Section 356(5); or
The police officer has received a requisition(whether oral or written) for the arrest of any person from another police officer. It is necessary that the requisition specifies the person who is to be arrested and the offence for which the arrest is to be made. It must appear from the requisition that the officer issuing it can lawfully arrest such a person without a warrant.

Section 41(2) provides that no arrest can be made without a warrant or order of a magistrate in case of a non-cognizable offence.

Section 41A: Notice of appearance before a police officer

Section 41A provides for the issue of notice of appearance to the person against whom a reasonable complaint has been made or credible information is received or a reasonable suspicion exists of the commission by him of a cognizable offence in all those cases where the arrest of a person is not required under Section 41(1). Where such a person (to whom the notice of appearance is issued) complies with such notice and continues to do so, he cannot be arrested in respect of the offence referred to in the notice except where the police officer, for reasons to be recorded, is of the opinion that he ought to be arrested.

Other relevant provisions

Section 50 provides that every person arrested without a warrant has to be informed of grounds of arrest and of the Right to Bail.
Section 57 provides that a person arrested without a warrant shall not be detained in custody for more than 24 hours. In calculating such a time period, the time necessary for the journey from the place of arrest to the Magistrate’s court is excluded.
Section 58 provides that the Officers in charge of police stations are to report the cases of all persons arrested without a warrant to the District Magistrate or the Sub-divisional Magistrate, whether or not such persons have been admitted to bail.

The point of view of the Supreme Court

The Hon’ble Supreme Court through its various pronouncements has evolved sufficient safeguards to curtail as well as regulate the wide discretionary power of the police to make arrests. Various guidelines have been laid down to prevent the abuse of power by police. Some of the notable judgments in this regard are as follows:

Joginder Kumar v. the State of U.P. (1994)

In this case, the Supreme Court extensively dealt with the power of arrests and its exercise. This case is also known as ‘guidelines for arrest case’. The Supreme Court endeavoured to create a balance between the rights of an individual and the rights of collective individuals as a society in light of the increasing crime rate and complaints of human rights violations due to indiscriminate arrests over the years.

Facts of the Case

A 28-year-old lawyer, Joginder Kumar (petitioner) was summoned for enquiries by the SSP, Ghaziabad. The petitioner appeared before the SSP and was accompanied by his brothers. The Petitioner’s brothers were informed that he would be released by evening. However, the petitioner was not released on that day. On the next day, it was informed that the petitioner has to be detained further for enquiries in connection with some case. The petitioner was not produced before any Magistrate. On the third day, the brothers found out that the petitioner had been taken to an undisclosed location. A habeas corpus petition was filed under Article 32 for the release of the petitioner. The Supreme Court issued notices to the Government of Uttar Pradesh and the SSP, Ghaziabad to produce the petitioner and give an answer as to why the petitioner was detained in custody for 5 days without any valid reason.

Judgment

The Supreme Court in its landmark judgement held that no arrest can be made in a routine manner on a mere allegation of commission of an offence made against a person. A police officer cannot arrest a person just because it is lawful for him to do so as arrest and detention in police lock-up can cause incalculable harm to the reputation and self-esteem of a person. The Court observed that it is both in the interest of protection of constitutional rights and of the police officer himself that no arrest should be made unless the police officer is reasonably satisfied after some investigation that the complaint is genuine and bonafide. The opinion of the Officer effecting the arrest must be based on some reasonable justification that such arrest is necessary and justified. Except in case of heinous crimes, an arrest must be avoided where a police officer has issued a notice to the person to attend the Station House and that he is not to leave the station without permission.

In order to uphold and protect the fundamental rights enshrined in Articles 21 and Article 22(1) of the Constitution and for their effective enforcement, the Supreme Court laid down comprehensive guidelines, some of which are as follows:

An arrested person being held in custody has a right to have one friend, relative or other person informed of the arrest and the place of detention. The arrested person shall be informed of this right when he is brought into the police station.
An entry shall be made in the Diary as to who was informed of the arrest.
The reasons for making an arrest have to be recorded in the case diary.
It is the duty of the Magistrate, before whom the arrested person is produced, to satisfy himself that the above requirements have been complied with.

Siddharth v. the State of Uttar Pradesh & Anr. (2021)

In this case, while dealing with the issue that whether the anticipatory bail application of the appellant ought to have been allowed, the Supreme Court analysed Section 170 of Cr.P.C. and laid down that, ‘Merely because an arrest can be made because it is lawful does not mandate that arrest must be made’.

Facts of the Case

The Appellant (claimed to be a supplier of stone) along with 83 others was sought to be roped in an FIR that was registered seven years ago. The Appellant had joined the investigation process and a charge sheet was also stated to be ready to be filed. Since an arrest memo was issued, the Appellant filed an application before the High Court seeking anticipatory bail. After the High Court rejected his bail plea, the Appellant approached the Hon’ble Supreme Court. The Learned Counsel for the respondent submitted that the trial court takes the view that, unless the person is taken into custody the charge sheet will not be taken on record in view of Section 170 of Cr.P.C.

Issue

Whether it is mandatory to put an accused in custody before the charge sheet can be taken on record under Section 170 of the Cr.P.C.?

Judgment

While allowing the appeal, the Supreme Court held that Section 170 of the Cr.P.C. does not impose an obligation on the Officer-in-charge to arrest each and every accused at the time of filing of the charge sheet. Where the accused has cooperated with the investigation and the investigating officer does not believe that the accused will abscond or disobey the summons, the officer is under no compulsion to arrest such accused or produce him in custody. The Court also laid down that the word ‘custody’ appearing in Section 170 of Cr.P.C. does not contemplate either police custody or judicial custody but merely connotes the presentation of the accused before the court by the investigating officer at the time of filing the charge sheet. The Hon’ble court reiterated that if an arrest is made routine, it can cause incalculable harm to the reputation and self-esteem of a person.

While acknowledging that personal liberty constitutes an important aspect of our constitutional mandate, the Court held that the occasion to arrest an accused during investigation arises in the following circumstances:

When the custodial investigation becomes necessary or
It is a heinous crime or
Where there is a possibility that the accused might influence the witnesses or
Accused may abscond

Other relevant case laws

Arnesh Kumar v. State of Bihar (2014)

In this case, the Supreme Court of India imposed certain checks and balances on the power of police to arrest an accused under Section 498A of the Indian Penal Code, 1860. The Court held that:

An arrest should not be made for the sole reason that the offence is non-bailable and cognizable and that it is lawful for the police officer to do so.
The existence of the power to arrest and the justification for its exercise are two very different things. The police officers must be able to justify the reasons for the exercise of such power.
No arrest can be made in a routine manner on a mere allegation of commission of an offence made against a person.
While interpreting Section 41 of Cr.P.C., the Court held that before an arrest is done by a police officer, he should have reason to believe based on information and material that the accused has committed the offence and the police officer has to be satisfied that the arrest is necessary for one or the more purposes as provided under sub-clauses (a) to (e) of clause (1) of Section 41 of Cr. PC.
The Court also dealt with Section 167 of the Cr.P.C. and held that before authorizing detention under the said Section, a Magistrate has to be satisfied that the arrest made is legal and is in accordance with the law, and all the constitutional rights of the person. If such arrest does not satisfy the requirements of Section 41 of Cr. P.C, the Magistrate cannot order further detention and must release the accused.
The Court also gave the following directions to ensure that the police officers do not make unnecessary arrests and the Magistrates do not authorise detention in a casual manner:

State Governments to instruct the police officers not to automatically arrest on registering a case under Section 498-A of the IPC. They should first satisfy themselves about the necessity for arrest in accordance with the parameters laid down.
A checklist containing specified sub-clauses under Section 41(1)(b)(ii) is to be provided to all the police officers. The police officer has to forward the checklist duly filed and furnish the reasons and materials which necessitated the arrest while producing the accused before the Magistrate for further detention.
Magistrate to carefully peruse the report furnished by the police officer and thereafter record his own satisfaction as to whether further detention is to be authorised.
The notice of appearance under Section 41A of Cr.PC has to be served on the accused within two weeks from the date of institution of the case, subject to extension of such a time period by the Superintendent of Police of the District for the reasons to be recorded in writing.
If the concerned police officers fail to comply with the directions as laid down, they shall be liable for departmental action and for contempt of court.
The Magistrate who authorizes detention without recording reasons thereof shall be liable for departmental action by the appropriate High Court.

The Court added that the aforesaid directions shall also apply to all such cases where the offence is punishable with imprisonment which may be less than seven years or which may extend to seven years.

M.C. Abraham v. the State of Maharashtra(2002)

In this case, the Supreme Court of India held that as the power to arrest is discretionary, the police officer is not always bound to arrest an accused even if the allegation against him is of having committed a cognizable offence. The court also held that as arrest is an encroachment on the personal liberty of a person and affects his status and reputation, the power to arrest has to be exercised with caution and circumspection.

Conclusion

The Supreme Court has laid down, in unequivocal terms, that no arrest can be made in a routine manner. An arrest made in a routine manner violates the fundamental rights of citizens and consequently is against the very fabric of our constitution. Apart from the various Supreme Court judgments, the Code of Criminal Procedure (Amendment) Act, 2008 has also introduced sufficient safeguards to ensure the lawful and cautious exercise of the power to arrest (For instance, Insertion of Section 41A as mentioned above). However, the only lacking aspect is stringent implementation. It is essential that the police be made aware of the confines within which they can exercise their power to arrest and arbitrary exercise of such power should be met with severe consequences.

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/joinchat/L9vr7LmS9pJjYTQ9

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

An analysis of types of mergers

By

Sneha Mahawar

-

December 15, 2021

0

corporate inversions — Image source - https://bit.ly/3oSl8sC

This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It discusses in detail the different types of mergers, their advantages and disadvantages and case studies for each type of merger.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Before delving into the different types of mergers, we must try and understand what are the reasons for which companies prefer mergers. This brings us to the principle of synergy, i.e., the principle that the whole is greater than the sum of the parts. In merger transactions, it is believed that when two entities come together and merge into a single entity, the net worth and profitability of the merged entity will be greater than the sum of both the entities pre-merger.

The primary goals of mergers are to increase the growth of the merged entity, enter new markets, maximise shareholder value and earnings per share, replace inefficient management with efficient managers, gain access to new products and technologies etc. Another key objective sought to be achieved by mergers is to gain economies of scale, i.e., to achieve the best possible/lowest cost of production. This occurs when entities in the manufacturing industry merge with entities engaging in the activity of supply of raw materials.

Theories of mergers

There are several theories that discuss the reasons behind mergers. Some of these theories have been enumerated below:

Efficiency theory

Mergers occur so that the merging entities can generate synergy and make mutual profits.

Monopoly theory

Mergers occur so that the entities can increase their market power and create a monopoly in their respective industry.

Disturbance theory

Mergers occur because of external disturbances like fall or rise in economy, loss due to natural disasters etc. The entities that remain unaffected by these factors merge with the affected entities to increase their market share.

Diversification theory

Mergers occur because entities want to diversify into different markets to avoid losses and for generating capital from different markets.

Strategic alignment theory

Mergers occur so that entities can adapt to changing technologies and business environments.

Now that we have understood the primary reasons behind mergers, let us move on to understand the different types of mergers.

Types of mergers

Conglomerate mergers

A conglomerate merger can be defined as a merger that occurs between entities that engage in totally unrelated business activities. Conglomerate mergers are further divided into two parts:

Pure conglomerate mergers

These mergers occur between entities that engage in completely unrelated business activities. For example, if a textile manufacturing company merges with a mobile phone manufacturing company, it would be deemed to be a pure conglomerate merger.

Mixed conglomerate mergers

These mergers occur between entities that engage in unrelated business activities but could be deemed as a market extension or product extension strategy of the merging entities. For example, if a mobile phone manufacturing company merges with a laptop manufacturing company, even though they are unrelated businesses, the intent of the merger is product and market expansion. Thus, it would be deemed to be a mixed conglomerate merger.

Advantages of conglomerate mergers

Diversification

Since the merged entity has business operations in different industries and different markets, they are free from industry-specific risks that may affect their investments and result in losses. Even if there is economic uncertainty in one industry, the merged entity can be assured that their entire business operation is not at risk.

Synergy

Once the two entities merge, they generate synergy and this results in an increase in the net value of the company.

Human capital

Experience is shared across the employees of the merged entities resulting in the generation of a positive workforce.

Cross-selling

The merged entities can cross-sell their products in the markets of each other using the existing supply and distribution channels thereby increasing the market share and reach of the merged entity.

Disadvantages of conglomerate mergers

Management costs

The merged entity will have a large workforce and therefore the cost of managing the workforce will increase substantially.

Tax advantage

As an individual entity, a company may receive certain tax benefits on the products it deals with because of the group structure of taxation. However, once the merger is completed, due to the variety of products falling under the same group, there will be a reduction in the tax advantages.

Cultural barriers

The culture of every organisation is different. The merger of two entities is also the merger of human values and diverse business expertise of the employees and the employees may face difficulties in adjusting to the work culture and values of each other.

The America Online-Time Warner merger

America Online (AOL) and Time Warner had announced their merger in January 2000. AOL was a leading company in the dial-up internet connection market. Time Warner on the other hand was a company that owned several media and publishing houses and had ownership rights over several movies and cable programs. Thus, it can be concluded that both these companies were engaged in completely unrelated businesses and the merger of these two companies was a conglomerate merger.

The intention behind the merger was that Time Warner would utilise the internet services of AOL and screen its content online. The expected synergy of the merger was $350 billion. However, post-merger, AOL could not keep up with the change in technology and soon the broadband connections which provided a higher speed and stability took over the internet world. Also, there were several cultural clashes between the employees of AOL and Time Warner. All these factors resulted in the failure of the merger and AOL that was valued at $226 billion at the time of the merger soon perished and its value came down to $20 billion.

Horizontal merger

A horizontal merger can be defined as a merger that occurs between entities that render the same products or services and thereby engage in business activities in the same industry. These mergers usually occur in industries having high competition. Higher competition results in firms looking for ways to increase their market share and generate maximum synergy. For example, Coca-Cola and PepsiCo are two companies that engage in business activities in the beverage industry and a merger between these two companies would be termed a horizontal merger.

Advantages of horizontal merger

Economies of scale

Since the same raw materials and machinery is used during the manufacturing process, a lower cost of manufacturing the product can be achieved.

Synergy

Once the two entities merge, they generate synergy and this results in an increase in the net value of the company.

Lower competition

Since the merging entities belong to the same industry, the individual competition of each merging entity is reduced post-merger.

Customer base

Since the merging entities cater to the same customer base and each customer has a preference for one product over the other, the merged entity will have an increased customer base.

Market share and profits

Due to the increased customer base of the merged entity and lower competition in the industry, the market share and profits of the merged entity automatically increase.

Disadvantages of horizontal mergers

Antitrust regulations

There are strict regulations in place in all countries that regulate unfair competition in the market. If a merger will result in the capture of a substantial amount of market share so as to create a monopoly in that industry, such a merger will not be allowed.

Cultural barriers

The culture of every organisation is different. The merger of two entities is also the merger of human values and diverse business expertise of the employees and the employees may face difficulties in adjusting to the work culture and values of each other.

Management issues

The large and versatile workforce of the merged entity could be difficult to manage. Also, there is a probability of a lack of coordination between the top and middle-level management for the implementation of new ideas or the launching of new products.

The Dow DuPont merger

Dow was a chemical company engaging in the business of agricultural sciences and performance materials and chemicals. DuPont also was a chemical company engaging in the business of agricultural sciences and performance materials and chemicals. They announced their merger in December 2015. Since both these companies engage in the same industry and are competing with each other in the same industry, the merger between the companies can be termed as a horizontal merger.

The intention behind the merger was to increase the net capital value of the company and cater to a larger customer base by increasing the market share. At the time of the merger, the merged company, i.e., DowDuPont had a combined net worth of $130 billion. Within 2 years of the merger, i.e., by 2017, DowDuPont had increased its net worth to over $150 billion. However, the company submitted for dissolution in 2019.

Vertical mergers

A vertical merger can be defined as a merger between two or more entities that form part of the same supply chain i.e., the entities are involved in different stages of production or different stages of distribution of the same product. It is pertinent to note that, unlike horizontal mergers where competition in the industry is one of the prominent reasons for the merger, in vertical mergers, the merging entities are not competing with each other but are only complementary to each other. For example, if an automobile manufacturing company merges with a company that engages in the manufacture of automobile engines it would be deemed to be a vertical merger because both companies are not competing with each other but are complementary to each other and form part of the same supply chain.

Vertical mergers are divided into two categories i.e., Forward vertical merger and Backward vertical merger. The distinction between the two categories have been enumerated below:

Forward vertical merger

This occurs when an upstream company merges with a downstream company on the supply chain i.e., a manufacturing company merges with a distributing company. For example, a company engaging in the production of milk merges with a company engaging in the business of supply and distribution of milk.

Backward vertical merger

This occurs when a downstream company merges with an upstream company on the supply chain i.e., a distributing company merges with a manufacturing company. For example, a company engaging in the distribution of mobile phones and laptops merges with a company engaging in the business of manufacturing mobile phones or laptops.

Advantages of vertical mergers

Economies of scale

Since the merger is between different entities in the same supply chain, the cost of production of the final good will be reduced and thus economies of scale can be achieved.

Technology

The involvement of different entities in the same supply chain can lead to the introduction of new technology that could be used to improve the quality of the end product.

Assurance

If a manufacturing company is merging with a company supplying raw materials, it can be assured of timely and continuous supplies and therefore can assure that the production of goods continues at a uniform speed.

Disadvantages of vertical mergers

Monopoly

Mergers in the same supply chain can result in entities having a monopoly over the price, quality and distribution of the manufactured goods.

Diseconomies of scale

In the merged entity, there could be a disparity in the profits generated by the supplier of raw materials and the manufacturer resulting in diseconomies of scale.

Discourages entry

New companies might find it difficult to enter into a market where there are vertical mergers because the new companies will not be able to compete with the reduced prices as offered by the merged entity.

The eBay-PayPal merger

eBay is a company that offers products for sale through an online platform. PayPal is a company that allows customers to perform online transactions. The merger between these two companies was announced in 2002. The intention of the merger was to introduce a user-friendly online payment system through which customers can pay for the products being purchased on eBay. It is pertinent to note that these two companies were neither operating in the same industry nor competing with each other. Accepting and processing payments was a part of the business of eBay and to facilitate the same it merged with a specialised entity that offered such services. Both these companies form part of the same supply chain and thus the merger can be termed as a vertical merger.

Market extension mergers

A market extension merger can be defined as a merger between two or more entities that render the same product or services but in different markets. For example, Tesla and Maruti Suzuki are two companies that engage in the business of automobiles but prominently operate in different markets i.e., USA and India. If these two companies merge together it would be deemed to be a market extension merger.

Advantages of market extension merger

Technology

Merging with entities in different markets will allow the companies to exchange and develop new technology and use the existing technology to modify their products and make them suitable for each other’s markets.

Market share and profits

Due to the increased customer base of the merged entity, the market share and profits of the merged entity automatically increase.

Synergy

Once the two entities merge, they generate synergy and this results in an increase in the net value of the company.

Customer base

Since the merging entities cater to the same customer base in different markets, the merged entity will cater to a large customer base in both markets and thus will have an increased customer base.

Disadvantages of market extension merger

Cultural barriers

The culture of every organisation is different. The merger of two entities is also the merger of human values and diverse business expertise of the employees and the employees may face difficulties in adjusting to the work culture and values of each other.

Management issues

The large and versatile workforce of the merged entity could be difficult to manage. Also, there is a probability of a lack of coordination between the top and middle-level management for the implementation of new ideas or the launching of new products.

Diseconomies of scale

In the merged entity, there could be a disparity in the profits generated in one market over the other resulting in diseconomies of scale.

The Eagle Bancshares – RBC Centura merger

Eagle Bancshares is a company engaged in providing financial services in the Northern American regions. RBC Centura is a company that provides financial services in Canada. These two companies merged in 2002. Since both companies are dealing in the same business activities but in different markets, the merger of these two companies can be termed as a Market extension merger. Post-merger, RBC Centura had the opportunity to introduce and grow its operations in the Northern American markets and Eagle Bancshares had set its footprint in the Canadian market.

Product extension merger

A product extension merger can be defined as a merger between two or more entities that render products or services in the same market that are either related to each other or are co-consumed together. For example, if a laptop manufacturing company merges with a company that manufactures laptop bags, it would be deemed to be a product extension merger.

Advantages of product extension merger

Market share and profits

Due to the increased customer base of the merged entity, the market share and profits of the merged entity automatically increase.

Synergy

Once the two entities merge, they generate synergy and this results in an increase in the net value of the company.

Customer base

Since the merging entities cater to the same customer base in the same market, the merged entity will cater to a large customer base in the market and thus will have an increased customer base.

Disadvantages of product extension merger

Cultural barriers

The culture of every organisation is different. The merger of two entities is also the merger of human values and diverse business expertise of the employees and the employees may face difficulties in adjusting to the work culture and values of each other.

Management issues

The large and versatile workforce of the merged entity could be difficult to manage. Also, there is a probability of a lack of coordination between the top and middle-level management for the implementation of new ideas or the launching of new products.

Diseconomies of scale

In the merged entity, there could be a disparity in the profits generated by one product over the other resulting in diseconomies of scale.

The PepsiCo – Pizza Hut merger

PepsiCo is a company that engages in the business of beverages and on the other hand Pizza Hut is an enterprise rendering service of food and food delivery. These two companies merged in 1977. The intention behind the merger was that both products should be co-consumed, i.e., at every Pizza Hut store, only the beverages manufactured by PepsiCo should be sold. Since consumers prefer to have a beverage along with pizzas, the objective behind the merger was achieved. It is pertinent to note that since the products sold by both the companies complement each other and are co-consumed, the merger can be termed as a Product extension merger.

Congeneric or Concentric merger

A congeneric merger can be defined as a merger wherein two or more entities are operating in the same market but are engaging in the business of different products or services that are complementary to each other. For example, if two companies operating in the financial services industry i.e., a bank and an insurance company merge, it would be deemed to be a congeneric merger because the products/services offered by a bank and insurance company are different yet complementary to one another.

Advantages of product extension merger

Customer base

Since the merging entities cater to a similar customer base in the same market, the merged entity will cater to a large customer in the market and thus will have an increased customer base.

Market share and profits

Due to the increased customer base of the merged entity, the market share and profits of the merged entity automatically increase.

Synergy

Once the two entities merge, they generate synergy and this results in an increase in the net value of the company.

Disadvantages of product extension merger

Cultural barriers

The culture of every organisation is different. The merger of two entities is also the merger of human values and diverse business expertise of the employees and the employees may face difficulties in adjusting to the work culture and values of each other.

Management issues

The large and versatile workforce of the merged entity could be difficult to manage. Also, there is a probability of a lack of coordination between the top and middle-level management for the implementation of new ideas or the launching of new products.

Diversification

Since both the merging entities engage in similar businesses, there is a threat as to diversification of the business to different sectors or different industries.

The Citicorp-Travellers Group merger

Citicorp is a company that provided banking services to its consumers and on the other hand Travellers group provided insurance and brokerage services. Both the companies were dealing with different products in the financial services industry. These two companies merged in 1998 to create Citigroup Inc. The intention of the merger was to combine the services being offered by these companies and cater to a large customer base in the financial services industry. Since both the companies were offering different products and services within the same market, the merger can be termed as a Congeneric merger.

Conclusion

The types of mergers discussed above have both advantages and disadvantages. A particular form of merger might not be suitable for a particular company. Therefore, the management should take utmost care while deciding which form of the merger they wish to undertake. Apart from deciding the type of merger, there are several other factors like due diligence, effect on shareholder value, earnings per share, synergy levels, cultural clashes etc. that need to be taken into consideration while making an informed decision.

The managers should compare both internal growth options like organic growth (expansion strategies, developing new products etc), inorganic growth (asset acquisitions) and external revenue growth opportunities like franchising, joint ventures etc to the growth being offered by a merger transaction so as to properly evaluate whether or not to go forward with a merger.

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/joinchat/L9vr7LmS9pJjYTQ9

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

Best evidence rule : an overview

By

Diganth Raj Sehgal

-

December 15, 2021

0

This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides an in-depth analysis of the concept of best evidence rule under the Indian Evidence Act, 1872.

This article has been published by Diganth Raj Sehgal.

Table of Contents

Introduction

Originated from the doctrine of profert in curia which meant if a party could not present the original documents in written form before the concerned court of law, then he or she would have lost his or her rights that were created by the documents, the best evidence rule is also familiar by the name of “original document rule”. Justice Hardwicke’s decision, in the case of Ford v. Hopkins (1700) and Omychund v. Barker (1745) is a noteworthy one as he mentioned that “no evidence will be admissible unless it is the best evidence that nature will allow”. The best evidence rule originated because during the 16th-century copying of documents was carried out by the court clerks manually, keeping room for significant error in the item copied. In India, the best evidence rule is embodied in Sections 91 to 100 of the Indian Evidence Act, 1872 that aims towards deciding the genuineness of the documents presented in the court. This article provides a deep understanding of the concept of best evidence rule in light of the Indian Evidence Act, 1872, and precedent judgments delivered by the Indian and international courts.

Best evidence rule under the Indian Evidence Act, 1872

Sections 91 to 100 of the Indian Evidence Act, 1872 deal with the concept of the best evidence rule. Providing importance to documentary evidence over the oral ones, the provisions of the Evidence Act establish the fact that it is the documentary evidence that qualifies the ambit of the best evidence rule in the majority of the cases, leaving behind the oral evidence.

Exclusion of oral evidence by the documentary evidence

Chapter 6 of the Indian Evidence Act, 1872 provides provisions that concern the exclusion of oral evidence by that of the documentary ones. Encircling Sections 91 to 100, this chapter enforces the concept of best evidence rule in the Indian evidence law. Section 91 of the Indian Evidence Act, 1872 lays down the provision for evidence of terms of contracts, grants, and other dispositions of property reduced to the form of documents. The Delhi High Court in the well-known case of Chandrawati v. Lakhmi Chand (1988) upheld that Section 91 of the Act of 1872 incorporates the legal maxim that whatever is available in writing, must be proved by means of writing only. Taking this into account, the Hon’ble High Court rejected the admissibility of oral evidence in case of the contents of a partition deed as the same was not registered. The Allahabad High Court did not permit the presentation of oral evidence in order to prove the contents of a partition deed that was not registered. Observing that neither oral evidence nor the unregistered deed would be allowed as evidence before the Court, the Hon’ble High Court dismissed the oral evidence presented before it in the notable case of Ratan Lal v. Hari Shanker (1980).

The Supreme Court’s decision in the case of Taburi Sahai v. Jhunjhunwala (1967) clarified the ambit of Section 91 by observing that a document or a deed which cannot be described as a contract, grant, or disposition of a property will not be affected by the best evidence rule as established under the provision. In the present case where the issue was whether a deed of child adoption will be considered as a contract or not. The Apex Court held that the same will not be taken as a deed and therefore would not be bound by Section 91 and its underlying principle. The judgment delivered by the Apex Court, in the case of Bakhtawar Singh v. Gurdev Singh (1996) is interesting to note as the top Court observed that when both oral as well as documentary evidence, are admissible in the Court of law on the basis of their merits, the Court may go by the evidence which it thinks to be much more reliable, not necessarily documentary over oral evidence always.

The Supreme Court of India in the 2003 case of Roop Kumar v. Mohan Thedani observed that Section 91 of the Indian Evidence Act, 1872 prohibits proof of the contents of any writing in any other mode other than writing itself, embodying the best evidence rule declaring a doctrine of substantive law. The Court went further to observe that Section 91 and 92 of the Act though differ in material particulars, supplements each other to establish the best evidence rule.

Section 92 and its underlying principle

Section 92 of the Indian Evidence Act, 1872 is the provision dealing with the exclusion of evidence of oral agreement. It is said that Section 92 serves as a supplement for Section 91. The former provides that once any contract, grant, or disposition is proved by means of writing, then no evidence of oral agreement to contradict the contents of the writing already given, can be provided. Thus the principle that underlines Section 92 is that no oral evidence can be given in order to qualify the terms of the document already presented. The Supreme Court of India observed that Section 92 precludes only the parties and their representatives to provide oral evidence in support of the contents of the document thereby leaving it open for the third parties to give such evidence, in the case of Vishwa Nathan v. Abdul Wajid (1986).

The decision of the Calcutta High Court in the case of Nabin Chandra v. Shuna Mala (1932) is a notable one as the Hon’ble High Court dissented to the proposition that the consideration in the document presented could not be contradicted by proving that some other consideration was supposed to be passed. Thus one cannot blindly believe the intention behind the provided provision, instead of positive modifications to avoid the provision losing its meaning shall be resorted to depending on the merits of the case.

Both Section 91 and 92 recognize nine exceptions to the general rule that they lay down. These exceptions, therefore, allow oral evidence in concern with a document. The exceptions have been presented hereunder;

Validity of documents (Section 92 proviso 1): Oral evidence of any fact which renders that the document presented is invalid, can be given.
Matters on which document is silent (Section 92 proviso 2): If a written agreement is silent during the time of a price payment, then in such case oral agreement may be proved at that time.
Condition precedent (Section 92 proviso 3): If there exists any separate oral agreement that constitutes conditions precedent to attaching the obligations under the document presented, then the same may be proved.
Rescission or modification (Section 92 proviso 4): Any oral agreement that modifies or rescinds the document in question, maybe proved.
Usages or customs (Section 92 proviso 5): Whenever incidents in a contract are attached to a particular type of custom or usage, the same may be proved by means of the oral agreement.
Relation of language to facts (Section 92 proviso 6): Any fact may be proved by means of oral agreement which shows the manner in which the document language is associated with the existing facts.
Appointment of a public officer (Section 91, exception 1): If the law states that appointment of a public officer is to be made by writing then such shall be carried out.
Wills (Section 91, exception 2): Wills that are admitted to probate in India are to be proved by means of probate only.
Extraneous facts (Section 91, explanation 1): Whenever a fact is referred to by the document presented which is in addition to the facts of the case, then oral evidence as to that fact is always allowed.

Ambiguous documents: Section 93 to 100

Section 93 to 100 of the Indian Evidence Act, 1872 lays down provisions for the ambiguous documents. The meaning of the term ambiguous documents is that the documents that are presented before the court are either not clear in their language or when the same is applied to the facts, it creates doubts. The Indian Evidence Act, 1872 recognizes two kinds of ambiguity namely;

Patent ambiguity (Section 93 and 94); and
Latent Ambiguity (Sections 95-97).

Section 98, 99, and 100 deal with evidence as to the meaning of illegible characters, who may give evidence of agreement to varying terms of the document, and saving of provisions of Indian Succession Act, 1925 in relation to wills respectively.

Patent ambiguity

A patent ambiguity symbolizes a defect in the document that is apparent on the very face of the document which means that any person going through the document with ordinary intelligence can observe the defect. While Section 93 of the Act covers exclusion of evidence to explain or amend ambiguous documents, Section 94 of the Act deals with exclusion of evidence against application of documents to existing fact. The Supreme Court of India in the well-known case of Keshav Lal v. Lal Bhai Tea Mills Ltd (1958) observed that no extrinsic evidence can be provided to remove patent defects in a document. Instead, the Court may in cases of defect take the help of other documentary contents to fill such defects.

Latent ambiguity

Any defect which is not apparent on the face of the document is considered a latent defect. While the document with latent defects will not showcase defects by a plain reading, it is only when the document is applied to the facts, the defect becomes visible. This is why the latent defect is also familiar with the name of the hidden defect. Sections 95 to 97 of the Indian Evidence Act, 1872 deal with latent ambiguity and lay down three principles of the same.

Section 95 of the Indian Evidence Act, 1872 talks about evidence to document unmeaning in reference to existing facts. Put simply, when the language of a concerned document is plain and clear but while applying the same to the existing facts, the outcome becomes meaningless, then in such cases, evidence can be given to adding meaning to the meaningless. Another kind of latent ambiguity is vested in Section 96 of the Act of 1872 which lays down the provision for evidence as to the application of language which can apply to one only of several persons. Section 97 of the Evidence Act, 1872 talks about evidence as to the application of language to one of two sets of facts to neither of which the whole correctly applies. This symbolizes that where the language of a document partially applies to one party and partly to the other, evidence can be presented to show on which facts the documents provided apply.

Other than these three situations where extrinsic evidence can be presented in concern with a document, Section 98 should also be referred to which deals with evidence as to the meaning of illegible characters. The Privy Council in the notable case of Canadian-General Electric W. v. Fatda Radio Ltd. (1930) observed that oral evidence is admissible for the purpose of providing an explanation to artistic words and symbols that are used in a document.

Landmark judgments

Let us have a look into some of the landmark decisions delivered by the Indian courts which explain the concept of the best evidence rule when applied in its true nature.

Mohan Lal Shamlal Soni v. Union Of India And Another (1991)

The Supreme Court of India in the notable case of Mohan Lal Shamlal Soni vs Union Of India And Another (1991) had observed that the cardinal rule in the law of evidence states that only the best available evidence should be brought before the court of law to prove a fact or the points in issue. The Apex Court in this case defined the best evidence rule to symbolize that “so long as the higher or superior evidence is within your possession or may be reached by you, you shall give no inferior proof in relation to it.” The Court by this decision ensured that evidence that was to be obtained should have appeared to the Court essential to a just decision of the concerned case by getting at the truth of the matter by all lawful means thereby ensuring that the rival side does not take unfair advantage causing prejudice to the aggrieved party.

Musauddin Ahmed v. State of Assam (2009)

A bench of Justices Mukundakam Sharma, B.S. Chauhan of the Supreme Court of India while deciding the case of Musauddin Ahmed vs State Of Assam (2009) took a note of illustration (g) of Section 114 of the Indian Evidence Act, 1872 which states that “evidence which could be and is not produced would, if produced, be unfavorable to the person who withholds it”. The top Court viewed that it has always been the duty of the prosecution to lead the Court with the best evidence and to draw adverse inference whenever the best evidence is not produced before the Court of law. Therefore it can be said that the illustration clearly explains the legislature’s intention and behaves as a guiding tool for the courts. It has thus become a settled principle of law that if the prosecution fails to produce the best evidence before the court of law then the same would raise serious doubts on the prosecution’s case.

Tomaso Bruno & Anr v. State of U.P (2015)

A bench of Justices Anil R. Dave, Kurian Joseph, R. Banumathi of the Supreme Court of India delivered a relevant dictum while hearing the case of Tomaso Bruno & Anr vs State Of U.P (2015). Observing that CCTV footage was to be considered as the best piece of evidence in order to prove the presence of the accused at the crime scene and it was for the prosecution to produce such evidence. In cases of failure, serious doubts about the case of the prosecution could be welcomed. The arguments that were advanced by the prosecution, in this case, was that the onus to prove that the accused was not at the crime scene was on the accused in accordance with Section 106 of the Indian Evidence Act, 1872 which therefore placed the burden of proving a fact within the knowledge of a person upon such person. Duly acknowledging the same, the Apex Court held that in order to invoke Section 106 of the Act of 1872 against the accused to prove his alibi, the prosecution had to establish the presence of the accused first and since the witnesses themselves had made a reference to the CCTV footage in this present case, a failure to produce the same did raise serious doubts about the prosecution’s case.

Jitendra And Anr v. State Of M.P (2003)

The top court with a bench of Justices K.G. Balakrishnan, B.N. Srikrishna observed that the application of the best evidence rule holds immense relevance in cases based on seizures such as those under the Narcotic Drugs & Psychotropic Substances (NDPS) Act, 1985, in the 2003 case of Jitendra And Anr vs State Of M.P. The Apex Court held that whenever a case is based on seizure, the goods that are seized serve as the best evidence that is available to the prosecution to present before the Court of law. If the prosecution fails to do the same then in such circumstances, the prosecution’s case before the Magistrate becomes doubtful.

Digamber Vaishnav v. the State Of Chhattisgarh (2009)

A three-judge bench of the Hon’ble Supreme Court of India in a recent case of Digamber Vaishnav. vs The State Of Chhattisgarh (2009) observed that as there had been no attempt made in the present case from the prosecution’s end to examine the witnesses who were present at the incident’s scenario at the relevant time and were the first one to see the deceased persons, the best evidence had been withheld.

Shivu And Anr v. R.G. High Court Of Karnataka (2007)

In the 2007 case of Shivu And Anr vs R.G. High Court Of Karnataka, the Supreme Court of India based its judgment on the reliance of Wills’ Circumstantial Evidence by Sir Alfred Wills who had opined that the rule of best evidence applied as “a fortiori to circumstantial evidence’” as the circumstantial evidence has been “inherently inferior to direct and positive testimony”. The Apex Court noted that whenever the best evidence has shown its capability being adduced, the attempt to substitute a description of evidence not of the same degree of force necessarily has created a suspicion that it has been withheld from corrupt and sinister motives.

Mohd. Aman, Babu Khan And Another v. State Of Rajasthan (1997)

A bench of Justices M Mukharji and K Venkataswamy of the Supreme Court of India had disregarded evidence that was presented otherwise than in support of seizure and matching of fingerprints, in the case of Mohd. Aman, Babu Khan And Another vs State Of Rajasthan (1997). The Apex Court held that a crucial circumstance to the present case which the prosecution had failed to establish was that the articles which were seized for the purposes of fingerprints of the accused had not been distorted before reaching the forensic laboratory. The Court observed that production of the concerned seized article would have been the best evidence of proof of the seizure and examination for fingerprints and the non-production of the same became a missing link in the chain of evidence in the present case.

Conclusion

As we come to the end of this article, it is evident to mention that the best evidence rule plays a significant role in the functioning of the Indian Evidence Act, 1872. The rule has played a relevant character in framing the criminal law jurisprudence in India and globally as well. Not only has it helped the judges while deciding whether evidence will be admissible before it or not, but also has behaved as a check and balance for the court to determine whether an accused can be held guilty on the basis of the evidence produced or not. To state summarily, the best evidence rule is a catalyst for the evidence law in India and across the world.

References

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/joinchat/L9vr7LmS9pJjYTQ9

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

Community service as a valid bail condition : a legal analysis

By

Diganth Raj Sehgal

-

December 15, 2021

0

31799361247_64d7c0015f_b-1024x768 — Image source - https://bit.ly/30P6ZFf

This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides a legal analysis of why community service cannot be considered a valid bail condition.

This article has been published by Diganth Raj Sehgal.

Table of Contents

Introduction

In criminal cases, sentencing has two purposes, namely, punitive and rehabilitative. Community service, unpaid work conducted in the community is one of the sentencing alternatives available to judges. Community service can be ordered in addition to or instead of other sentence alternatives such as jail, fines, probation, or restitution by a court. It is not uncommon for a judge to order community service as part of a defendant’s sentence after a criminal conviction. In fact, in recent years, it has become increasingly widespread. Community service may be included in a defendant’s sentence in a variety of ways and for a variety of charges. But can community service be termed as a valid condition for grant of bail? This question has remained a heated topic of debate for many years as the judiciary have time and again lend their shoulders in support of community services as a bail condition thereby laying down guidelines to be allowed in executing the same. The present article highlights the aforementioned question and tries to analyze it from different judgments by the Indian courts, intending to reach a logical conclusion.

What is the issue with community service as a bail condition

In the past, courts in India have often sentenced an accused or offender to community service as a condition of bail or as a penalty for minor offences. As a penalty for attempting to commit murder at the age of 16, the Supreme Court ordered a doctor to plant 100 trees in a year. The Delhi High Court ordered Swan Telecom founder Shahid Usman Balwa and four others to plant 15,000 trees in February, citing their failure to respond to an ED appeal challenging their acquittal in the 2G case. Despite the fact that there have been several cases of courts ordering offenders to perform community service, there is no statute or even standards in place to simplify such orders, which are generally handled at the judge’s discretion.

According to a study, while some Indian states have specific laws for habitual offenders and, in particular, the process of deinstitutionalization, India has also developed several innovations, including a phased program from maximum security to free-living conditions and open-air prisons that employ all types of offenders as paid agricultural workers. Chapter VIII, Sections 106 to 124 of the Criminal Procedure Code, 1973 (CrPC) allows alternatives to prison sentences. These laws will apply either before conviction, when a suspect is asked to explain why they should not be sentenced or after conviction, as a condition for bail or for the offenders’ release on the basis of good behavior and not as a punishment while they are in prison.

Judiciary’s view on community service as a valid bail condition

The Supreme Court of India while deciding on the case of Gudikanti Narasimhulu And Ors vs Public Prosecutor, High Court of Andhra Pradesh (1977) has observed that social defence and individual correction in an anti-criminal orientation legitimize any deprivations of liberty. Public justice must be integral for the entire bail legislation, but punitive severity should be minimized. Playing havoc with the public peace by tampering with evidence, intimidating witnesses, or committing crimes while on judicially sanctioned “free enterprise” should be prohibited, and restorative devices to redeem the man, whether through community service, meditating drill, study classes, or other means, should be developed. No one who seeks justice should betray the court or the community’s trust. Bail orders may have conditions attached to them, not to cripple but to protect. The judicial discretion associated with the ideals of the Indian Constitution invokes such a comprehensive jurisdiction and humanistic perspective. Very comprehensive and effective decision-making by the Apex Court, in this case, enforces the importance behind community service to be eligible as a valid bail condition.

While deciding on the case of Sunita Gandharva v. State of M.P (2020), the Madhya Pradesh High Court discussed the scope and extent of bail conditions under Section 437(3) of the CrPC, stating that it has a wider scope to cover community service and other reformative measures, without being “excessive, freakish, and onerous” in nature. The Law Commission of India’s Report Nos. 36, 47, 156, 268 and the Supreme Court’s specific ruling in the matter of Munish Bhasin v. State (NCT of Delhi) (2009) were consulted in reaching this conclusion.

Justice Anand Pathak of the Madhya Pradesh High Court has issued an unusual sequence of bail decisions in which he has imposed unique criteria for the grant of bail in several criminal cases. For the issuance of bail, the judge issued four orders between September and December 2020, requiring the planting of trees, the installation of water collection facilities, and community work at a primary health center. The cases in which bail has been granted involve charges of rape, gang rape of a minor, attempt to murder, abetment of suicide, outraging the modesty of a woman, house trespass under the Indian Penal Code, 1860 and offences under the Protection of Children from Sexual Offences (POCSO) Act. The orders have been laid down hereunder:

In Shiv Kumar v. State of MP (2005), the bail applicant was ordered to plant 10 saplings (either fruit yielding trees of Neem/ Peepal) as an additional condition of bail, as well as take measures for their care and nurturing.
In Banti Jatav v. State of MP (2020), the bail applicant was ordered to volunteer every Monday and Tuesday from 9 a.m. to 1 p.m. at a Primary Health Centre in the Morena area for a year.
In Jitendra Paribar v State of Madhya Pradesh (2020), bail was granted on the condition that the aggrieved party’s residence is fitted with a water harvesting system or a water recharge system within two months of the order’s date.
The bail petitioner in Rishi Ahirwar v. State of Madhya Pradesh & Anr (2017) was a Patwari (government officer who handles land records) who had been arrested in connection with a case including charges under Sections 354, 457 of the IPC and Sections 7 and 8 of the POCSO Act. The applicant told the court that the lawsuit was unjustly brought against him as a result of a personal feud. Bail was granted in exchange for a Rs 2 lakh personal bond and two similar sureties. In addition, Justice Pathak noted that the applicant wanted to donate blood as part of his community service commitment and the same was allowed.

Significant role of the legislature

As we have sailed through a few judgments delivered by the Indian courts citing community service as a bail condition, it is evident for us to take a look at the question which was asked beforehand. The question of whether community services can be a valid and justified condition for bail remains fresh each time the courts of law grant it. In 2019, a local court in Ranchi had made a controversial order when it directed a 19-year old student, who was arrested for allegedly hurting religious sentiments, to distribute five copies of the Quran to five institutions in the city as a bail condition. The decision was subjected to grave criticism as well. While the judgments discussed above and the present one, are few among the plethora of decisions of courts across the nation citing community service as a bail condition, it is extremely concerning as India lacks a definite law governing community services as a bail condition. What is alarming in this scenario is the arbitrariness and ambiguity exercised by different judges in the process of delivering justice.

There should be some community work alongside stringent deterrents, but they should be streamlined with a suitable procedure. Legislation should be enacted to regulate this. No judgment could be handed down based on the judicial officials’ whims and preferences. The legislature is in charge of making the fundamental law. Though there are certain temporary directives that can be issued, such as the Vishakha rules, which were issued by the Supreme Court and have to be observed by employers until new legislation is enacted, the same is for a specific period. Alternatives to incarceration are unquestionably needed. But that should only happen after great debate and the passage of formal legislation.

Aparna Bhat & Ors v. State of Madhya Pradesh & Anr : an analysis

Justices A.M. Khanwilkar and S. Ravindra Bhat while deciding on the recent case of Aparna Bhat & Ors vs. State of Madhya Pradesh & Anr (2021), have taken a dig on’ community services’ being preferred by courts across India as a bail condition, specifically in gender-related crimes. A notable and liberal judgment indeed, the Apex Court highlighted that judges have an important role as educators and thought leaders at all levels. It is their responsibility to maintain objectivity in their words and actions at all times. If they falter, especially in crimes involving women, they jeopardize fairness and inflict great cruelty in their casual indifference to the survivors’ despair.

Facts of the case

On April 20, 2020, at around 2.30 a.m., the accused applicant, a complainant’s neighbor, entered her home and grabbed the complainant’s hand, reportedly attempting to sexually harass her. A charge sheet was submitted once the case was investigated. The accused applied for pre-arrest bail under Section 438 of the Code of Criminal Procedure, 1973. Even though granted bail to the applicant, the Madhya Pradesh High Court set conditions in an impugned decision, which the appellant appealed before the Supreme Court in the present case. The conditions are provided hereunder:

On the 3rd of August, 2020, at 11:00 a.m, the applicant and his wife would visit the complainant’s residence with Rakhi thread/band and a box of sweets and beg the complainant, Sarda Bai, to tie the Rakhi band to him with the pledge to protect her to the best of his abilities for all times to come. He would also give the plaintiff Rs. 11,000/- as a traditional ritual provided by brothers to sisters on such occasions, and he will ask for her blessings. The applicant would also give Rs. 5,000 to the complainant’s son, Vishal, for the purchase of clothing and sweets.
The applicant must gather pictures and receipts of payments made to the complainant and her son, and file them through counsel in order for them to be added to the case file before the High Court’s Registry. The above-mentioned monetary deposit will have no bearing on the ongoing trial and will only be used to increase the applicant’s bail amount.

Contentions of the appellants

The appellants argued that the expressions “in the interest of justice,” “such other conditions as the court considers necessary,” and “as it may think fit” in the bare text of Section 437(3)(c) and Section 438(2)(iv) of the CrPC give the courts discretion to impose such other bail conditions as may be necessary in the facts of a particular case, but that those conditions must be consistent with the other conditions in the provisions with the only consideration being the purpose of granting bail.
The appellants had relied on the Supreme Court’s decision in the case of Kunal Kumar Tiwari v. State of Bihar (2017) where the latter had viewed that bail conditions under Section 437(3) of the aforementioned Code cannot be arbitrary, fanciful, or extend beyond the ends of the provision.
The appellants pointed out that the impugned decision while granting bail, included a requirement that the applicant would visit the complainant’s home. The appellants contend that this is inappropriate and that no observation or condition allowing the accused to meet/have contact with the survivor and her family members should be made.

Contentions of the respondents

The right to impose restrictions has been articulated in broad terms under Sections 437(2) and 438 of CrPC. The Intervenors have appended about twenty-three orders imposing similar bail restrictions. They contend that the Supreme Court outlined the criteria that can be imposed under the law in Munish Bhasin v. State (2009) and restated in Parvez Noordin Lokhandwalla v. State of Maharashtra (2020). As a result, it is apparent that imposing requirements such as community work in COVID-19 hospitals or any other facility, tree planting, or contributions to a specific charity relief fund, among others, is impermissible under law.
The intervenors further contend that the accused are assumed innocent during the course of the trial and that the Court has yet to determine their guilt. Imposing restrictions such as mandatory community work, for example, violates the right to equality and personal liberty, as well as the method set by law in the Indian Constitution.
It was also prayed that the Apex Court should intervene and give bail and anticipatory bail instructions or guidelines to ensure that courts only impose bail conditions that are legal.

Supreme Court’s observation

By court decree, tying a rakhi as a condition for bail converts a molester into a brother. This is completely inappropriate because it dilutes and weakens the crime of sexual harassment. The act committed against the survivor is a legal offence, not a minor transgression that may be repaired by an apology, community service, tying a rakhi or giving a gift to the survivor, or even vowing to marry her, depending on the circumstances. Outraging a woman’s modesty is illegal under Section 354 of the Indian Penal Code, 1860. Granting bail with such terms exposes the court to charges of re-negotiating and mediating justice between opposing parties in a criminal case, as well as reinforcing gender stereotypes.
Imposing conditions that have the effect of potentially exposing the survivor to secondary trauma, such as mandating mediation processes in non-compoundable offences, mandating community service as part of bail conditions (in a manner similar to the so-called reformative approach to the perpetrator of sexual offence), or requiring tendering of apology once or repeatedly, or in any other way, should be avoided. The law does not allow or condone such activity, in which the victim may be traumatized several times or be led into some form of non-voluntary acceptance, or be forced by the circumstances to accept and condone action that is a major violation.

Judicial stereotyping : a major disgrace to the Indian judiciary

The practice of judges attributing specific features, characteristics, or duties to an individual only because of their membership in a particular social group (e.g. women) is known as “judicial stereotyping”. It’s also used to describe the habit of judges maintaining damaging stereotypes by refusing to dispute them when challenged by lower courts or parties to legal processes. Stereotyping may jeopardize the impartiality of a judge’s judgment and influence the judge’s opinions on witness reliability and the accused’s responsibility.

When community services such as ‘being a brother to the victim’, ‘fitting a water reservoir in the victim’s house’, ‘offering sweets and clothes to the victim’ are allowed to the defendant as a condition for bail, judicial stereotyping is reflected. Although the Madhya Pradesh High Court had ordered the accused, who was held guilty of sexually harassing the plaintiff, to tie rakhi as a bail condition, presuming that tying a thread would change the relationship between the plaintiff and the defendant, the same was overturned by the Apex Court in the present case on the ground that grave offences should not be subjected to community service, like the one discussed, specifically if the offence is against a woman. Therefore, the valid and effective community service that judges can undertake while delivering a judgment on cases such as rape, molestation, outraging of female modesty, sexual harassment, offences under the POCSO Act, 2012, etc, is by having a liberal and reformative mindset which can take the society forward and not let me sail down the drains.

Conclusion

Community service is not a detrimental direction, given by the court as a condition to be followed by the defendant while granting them bail. But does that community service benefit the public at large? Or do they help society develop better? Or do they just remain a formal dictation by the court that never sees an effective implementation? These issues can only be addressed by formal legislation governing community services as a valid bail condition. If the lawmakers do not come up with the same, community services cannot be a valid bail condition as it fails to counter the harm that the defendant has already caused to the plaintiff and the community as a whole.

References

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/joinchat/L9vr7LmS9pJjYTQ9

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

The different compliances to be followed by businesses in India under the E-Waste Management Rules, 2016

By

Abanti Bose

-

December 15, 2021

0

E-Waste — Image Source: https://rb.gy/bkan06

This article is written by Shreya Kasale, pursuing a Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho.

This article has been published by Abanti Bose.

Table of Contents

Introduction

Electronic garbage is abbreviated as “e-waste.” That is, electronic waste created by damaged, old, and excess gadgets. It’s also known as e-scraps by certain people. Toxic chemicals and dangerous compounds are commonly found in these electronics. In addition, improper disposal of these gadgets might result in the discharge of harmful compounds into our environment. The reprocessing and re-use of these electronic wastes are referred to as e-waste recycling. It’s straightforward. It’s a method for recovering materials from electronic trash. You may use them in new electronic items this way. Home equipment such as air conditioners, televisions, electric stoves, air conditioners, heaters, DVDs, fans, microwaves, and radios may all contribute to electrical waste. Computers, laptops, mobile phones, batteries, hard drives, circuit boards, and displays are examples of information technology equipment.

E-waste is, however, becoming more of a problem, and there has been a significant rise in health risks as a result of harmful compounds being released into the environment. E-waste recycling companies aim to assist businesses and organisations in getting rid of outmoded devices while also protecting the environment. As more organizations choose electronic recycling providers that are familiar with effective e-waste management processes, the E-waste management industry is growing at an exponential rate. Electronic recycling may help preserve landfills and dumps, as well as minimise greenhouse gas emissions and save natural resources. In order to provide refurbished items, such as mobile phones and laptops, it is necessary to give up obsolete gadgets.

Benefits of e-waste recycling

Recycling e-waste contributes to the conservation of natural resources

E-waste recycling aids in the recovery of valuable materials from obsolete or no longer in use electronic equipment. As a result, natural resources are saved and conserved. This is due to the fact that recycled garbage may now be used as a source of raw materials for businesses. As a result, going to Earth for raw resources is no longer necessary. So, certainly, getting copper, lead, or metal from nature is less necessary. To appreciate how much good this symbolises, keep in mind that these materials are not infinite.

It places an emphasis on environmental protection

E-waste recycling places an emphasis on environmental protection. It aims to make safe handling, processing, and management of hazardous and toxic compounds including lead, mercury, and cadmium a priority. All compounds are found in your electronic waste stream. Any shredded-particle dust must be disposed of in an environmentally acceptable way. Thanks to e-waste recycling, the threats that these substances generally bring to our environment are greatly decreased.

Creates jobs opportunities

E-waste recycling generates new employment opportunities for people such as professional recyclers. Furthermore, it has developed a secondary market where recycled materials are the principal commodity by doing so. The Environmental Protection Agency has released results that demonstrate the enormous economic benefits of e-waste recycling. This outperforms the REI Study’s findings from earlier in 2016. Recycling operations in the United States generated 757,000 employment, $6.7 billion in tax income, and $36.6 billion in compensation in a single year. By implication, recycling creates 1.57 jobs, pays $76,000 in salaries, and generates $14,101 in tax income for every thousand tonnes recycled. Isn’t there a lot of good that comes from trash? There’s more, though. You would have saved enough electricity to power 3657 families for a year if you recycle a million computers.

Minimizes global warming and saves landfills

Uncollected e-waste is often disposed of in landfills and incinerators. We can reduce the quantity of e-waste piling up at these locations by recycling it. This is because two-thirds of the garbage in landfills is biodegradable, meaning it may break down and return to its original state. As these pollutants degrade and disintegrate, they release hazardous gases (methane and CO2), which contribute significantly to global warming. Because landfills harm our local environment’s water and soil, initiatives like e-waste recycling that strive to alleviate these environmental problems are not only useful but also lifesaving.

E-waste Management Rules in India

On March 23, 2016, the Ministry of Environment, Forest and Climate Change published the E-Waste Management Rules, 2016, which replaced the e-waste (Management & Handling) Rules, 2011. Businesses must make provisions for the safe disposal of destroyed electronic goods, according to the guidelines. The Ministry of Environment, Forestry, and Climate Change are in charge of enforcing the restrictions.

Companies are being requested to segregate the trash at the source since the degradation of electronic devices would take longer and require a different process. The Extended Producer Responsibility Plan, which is part of the E-Waste Management Rules, was created by the Indian government to solve the problem. Companies should commit to recycling a minimum amount of the electronic devices they make under the proposal.

The E-Waste Management Rules provide a maximum limit for hazardous substances used in electronic device manufacture. The guidelines also outline the process for obtaining permission to handle e-waste from the Pollution Control Board.

Manufacturers, distributors, and retailers dealing in any of the following products are subject to these rules:

Mainframes, Minicomputers, Central Processing Units (CPUs), Input and output devices used in conjunction with CPUs, Laptop Computers, Notebook Computers, and Notepad Computers
Copiers, printers, and printer cartridges
Typewriters (electrical and electronic), teleprompter terminals, facsimiles, and telex machines
Cell phones, cordless phones, cellular phones, and answering machines
Televisions [including those with Liquid Crystal Display (LCD) or Light Emitting Diode (LED) technology]
Fridges, washers and dryers, and air conditioners are all examples of appliances (excluding centralised air conditioning plants)
Fluorescent lights, mercury-containing bulbs, and other electrical and electronic consumer goods.
E-retailers and stockists are likewise subject to these restrictions.
The following situations are exempt from these rules:

If the assessee is a micro, small, or medium-sized business (MSME),
If the assessee produces e-waste that contains radioactive.

Rules

The organization must guarantee that the concentrations of the following substances do not exceed the following limits:

Lead, mercury, hexavalent chromium, polybrominated biphenyls, and polybrominated diphenyl ethers can be added to the product up to 0.1 per cent of the total weight.
Cadmium is a chemical that can add up to 0.1% of the total weight of a product.

The organisation should establish plans to gather electrical and electronic equipment that has outlived its usefulness. These products should be collected from customers and transferred to a dismantler’s or recycler’s warehouse. The organisation should make certain that no environmental damage occurs as a result of transferring such objects.
A sign should be attached to the product to indicate that it should not be dumped with conventional trash. The emblem might be displayed conspicuously on the product or in the user handbook.
The E-Waste Management Rules include the Extended Producer Responsibility Plan. Companies are encouraged to set up a deposit programme under the concept. The programme should state that the consumer who purchases the product must pay a deposit. When the product has reached the end of its useful life, the customer can return it to the organization and get a refund of the deposit plus interest. Customers should be able to use the scheme if the corporation creates a distinct department. The E-Waste Collection, Handling, and Disposal Department is the name of the department. This department’s responsibilities include:

providing a platform for contact with consumers who desire to return obsolete electronic products to the organization; and
collecting and preserving things in a manner that does not harm the environment.
Send the products to a dismantler or recycler.
Provide clients with a dedicated address, e-mail address, and toll-free helpline number to contact when they want to return obsolete electronic equipment.
Ensuring that any deposits paid by customers at the time of purchase are repaid when the product is returned.

Before sending mercury-containing items to a dismantler or recycler, the company should guarantee that they are properly immobilised. Mercury is transformed from its harmful form to a safer form when compounds containing mercury are immobilised. As a result, the risk of contamination to the environment is reduced.
The maximum amount of time that e-waste can be stored is 180 days. The State Pollution Control Board (SPCB) has the authority to extend the time limit to a maximum of 365 days. If the e-waste needs to be handled before being sent to a dismantler or recycler, the extension will be made.

If the organization fails to achieve the aforementioned criteria, it should discontinue producing electrical products. Only once the requirements outlined above have been satisfied will it be able to resume manufacture.

What are the filing requirements?

The organization should submit a Form-1 application to the SPCB for authorization. Within 120 days after the start of manufacturing, three copies of the form shall be provided to the SPCB. The following are the papers that should be attached to the form:

A registration certificate from the District Industries Centre (DIC).
The DIC issues a certificate of installed capacity of equipment and machinery.
A declaration asserting that:

In the production of electrical devices, the applicant employs environmentally friendly technology.
The candidate has the necessary technical skills to deal with the e-waste created.
The applicant can afford the facilities and equipment required to transport the produced e-waste to a recycler’s or dismantler’s warehouse.
The applicant agrees to follow the rules set out by the Central Pollution Control Board for the creation of electronic waste.

The SPCB will provide the authorization after performing the field inspection. The authorization is only valid for the time and location specified in the SPCB certificate. Within 120 days, the authorization should be given or denied. Once issued, an authorization is valid for 5 years. There are no charges associated with the application. However, there are costs associated with the field examination. The amount that must be paid varies by state.
A Form-2 register should be kept by the organization. ‘Register of E-Waste Handled or Generated’ is the name of the register. This register is an internal record that the corporation should keep track of. As a result, there is no need to submit this form to the SPCB.
Before the 30th of June, the corporation must file an annual return in Form-3. The quantity of garbage recycled by the organization during the year should be included in the return.

Conclusion

For a variety of reasons, e-waste recycling is a critical worldwide problem. It has a significant impact on our immediate surroundings as people, as well as life on Earth in general. It even offers substantial economic benefits to individuals, communities, and even nations.

Many individuals have begun to take advantage of the plethora of chances that e-waste recycling has to offer. Entrepreneurs in impoverished countries are using e-recycling as a reliable business source while also achieving environmental aims.

Despite the fact that the processes are labour-intensive, they are simple to follow. There are various processes involved, from gathering and separating to preparing for sale. Of course, we may gain directly from e-waste recycling while simultaneously helping to conserve the environment.

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/joinchat/L9vr7LmS9pJjYTQ9

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

Cybersecurity guidelines for ERISA retirement plans

By

Oishika Banerji

-

December 14, 2021

0

This article has been written by Parul Chaudhary pursuing the Certificate Course In Technology Contracts from LawSikho.

This article has been published by Oishika Banerji.

Table of Contents

Introduction to ERISA

The Employee Retirement Income Security Act (ERISA) of 1974 is a federal regulation that establishes basic rules for numerous freely established retirement and health plans in the private sector in order to safeguard employees. It primarily specifies the federal income tax consequences of transactions involving employee benefit schemes. ERISA was designed to safeguard the rights of participants and beneficiaries in employee benefit plans. ERISA mandates that plans provide policy participants with information, including key details regarding scheme features and funding. It establishes minimum participation, retention, benefit accumulation, and funding requirements. ERISA specifies fiduciary obligations for people who administer and control plan assets; it mandates plans to provide a grievance and appeals procedure for individuals to receive benefits from their plans. It also allows individuals the right to prosecute payments and fiduciary duty violations. ERISA does not apply to plans developed or managed by government bodies, church authorities with respect to their employees, or plans administered only to abide by the applicable workers compensation, unemployment, or disability legislation. ERISA also excludes unfunded excess benefits packages and plans operated outside the United States principally for the welfare of non-resident foreigners. Employer-sponsored healthcare plans are subject to ERISA’s codes and procedures as well. ERISA’s major goal is to safeguard the rights of employees who engage in employee benefit plans, such as retirement and healthcare plans.

Protections are available to both retirees and plan beneficiaries

ERISA governs plan managers and sponsors, ensuring that they deliver the plan participants with information and uphold their fiduciary responsibilities. Anyone who works for a partnership, limited liability company, C-corporation, S-corporation, nonprofit organization, or even a single-employee business is covered by ERISA. Although ERISA does not mandate an employer to provide healthcare coverage to its employees or pensioners, it does govern the operation of such a plan if one is established. Employers are not required under ERISA to establish pension programs. Similarly, it is not required that plans provide a minimum amount of benefits as a general rule; instead, ERISA governs how a pension plan operates once it has been established.

New cybersecurity guidelines for Erisa retirement plans

The Department of Labor (DOL) recently released first-time retirement plan recommendations to address cybersecurity risks to businesses, plan fiduciaries, plan participants, and record keepers.

The advice comes in the form of proposed guidelines for protecting retirement benefits by providing employers and plan service providers with robust cybersecurity policies as well as web security suggestions for participants.

The Department of Labor’s cybersecurity advisory has been long overdue. The ERISA Advisory Council identified privacy and cybersecurity vulnerabilities to employee benefits in reports released in 2011 and 2016, but the department had not previously offered any recommendations on how to manage such risks or to what degree doing so was obligatory.

The issue is that, with huge sums collected in retirement and 401(k) pension plans, cybersecurity attacks might compromise participant data and plan funds if adequate safeguards are not in place. According to the Department of Labor, ERISA-regulated retirement funds have millions of members and assets totaling $9.3 trillion.

Retirement plans collect a great deal of personal and financial information. As a result, attackers are prone to target the firms and individuals who sponsor, service, and benefit from these schemes.

The DOL’s guideline is meant to supplement existing Employee Benefits Security Administration (EBSA) regulations on electronic record preservation and electronic distribution of disclosures to plan participants and beneficiaries. Electronic record-keeping systems must have appropriate controls and adequate record management practices in place, and digital disclosure systems must have safeguards to protect personally identifiable information, according to the standards. The guideline reaffirms the Department of Labor’s position that protection from cyberattacks is a fiduciary responsibility and that plan trustees must take reasonable and adequate actions to protect their retirement plans and related participant data from cyberattacks.

The advice from DOL is divided into three sections:

(1) Best practices for cybersecurity programs.

(2) Suggestions for employing service providers with suitable cybersecurity procedures.

(3) Internet security measures for policyholders to secure their accounts.

Best practices for cybersecurity programs

The first section of the DOL advice outlines a set of cybersecurity benchmarks. This section is for record-keepers and other service providers who are in charge of managing cybersecurity vulnerabilities, as well as plan fiduciaries who are determining which service providers to contract. Network operators should have a clear, officially written, well-documented cybersecurity program in place that protects IT architecture, information systems, and data from both intrinsic and extrinsic threats, according to the regulations.

The framework should include processes and controls for identifying risks, protecting assets, systems, and data, detecting, responding to, and recovering from cybersecurity incidents, and disclosing occurrences when necessary. The cybersecurity policies of service providers should also be audited by a third-party auditor and subjected to annual vulnerability assessment.

Apart from these practices, here are some other recommendations:

1) Cybersecurity awareness training on a regular basis. (minimal requirement: annually)

2) Implement a system development life cycle (SDLC) plan that is secure.

3) Implement a business sustainability plan that includes continuity of operations, catastrophe recovery, and rapid response to incidents.

4) Encrypt sensitive data in transit and at rest.

5) Strongly regulate controls over the data management systems.

6) Each and every asset or data housed in a cloud-based service or maintained by a third-party service provider should be subject to adequate security inspections and independent risk analyses, according to the Department of Labor.

Suggestions for employing service providers with suitable cybersecurity procedures

The second section of the DOL regulation is aimed at plan sponsors and other plan fiduciaries, and it explains how to assess a service provider’s cybersecurity policies as part of fiduciary duty to wisely select and manage a plan’s service providers. Plan fiduciaries should conduct due diligence by analyzing and comparing the service provider’s data security principles and requirements to known industry models and guidelines, according to the advisory.

Plan fiduciaries should think about how a service provider assesses its cybersecurity policies, such as if it hires a third-party auditor to conduct an annual audit. It also advises plan fiduciaries to assess a service provider’s cybersecurity track record, particularly details on previous security breaches and other legal processes in which the service provider is engaged. This also involves an in-depth inquiry about the service provider’s cybersecurity coverage.

A plan fiduciary should also incorporate numerous cybersecurity-related contract conditions in its relationship with service providers, according to the DOL.

These could include terms such as:

1) A right to evaluate cybersecurity audit reports; The service provider must carry insurance that covers losses caused by security lapses, including those caused not just by external threats but also by the service provider’s, its employees’, or its contractors’ malfeasance;

2) Continual adherence to cybersecurity requirements;

3) Clear guidelines for the use and sharing of personal data; prompt reporting and cooperation in the case of a data breach; and adherence to federal and state record retention and deletion policies.

The Department of Labor also urges plan fiduciaries to steer clear of contract restrictions that limit a service provider’s liability for IT security breaches.

Internet security measures for Policyholders to secure their accounts

The guidance concludes with some preliminary tips for plan members and beneficiaries who frequently check and manage their retirement accounts online in order to minimize the risk of fraud and loss. Employers should inform employees about the importance of cybersecurity, and consider including these ideas in employee communications and instructional sessions. These suggestions are:

1) Create an online account, set it up, and monitor it on a regular basis.

2) Create secure passwords.

3) Enable multi-factor verification

4) Maintain up-to-date contact details.

5) Close or delete any accounts that are no longer in use.

6) Be aware of free Wi-Fi.

7) Be on the lookout for phishing scams.

8) Use anti-malware software and keep apps and software updated.

9) Understand how to report identity theft and cybersecurity mishaps.

Fortunately for plan fiduciaries, even if the attack results in the loss of plan finances, the fact that a cyberattack has happened does not always mean that the fiduciary has violated its duty.

According to ERISA, fiduciaries must operate with substantial care, skill, discretion, and diligence, which means that a fiduciary can defend against a complaint by demonstrating that reasonable and effective cybersecurity procedures were in place to prevent a breach. The DOL’s advice can help fiduciaries determine the measures that should be implemented in such a situation.

Conclusion

Most of the ideas in the three advice materials are based on quality, widely accepted cybersecurity practices, and recommendations. As a result, operational leaders at organizations that sponsor defined benefit plans may find that EBSA’s suggestions are comparable to cybersecurity policies and processes that they have already adopted in their company operations. Other ERISA plan fiduciaries, on the other hand, who have not had a professional need to keep up with the ever-changing cybersecurity landscape may be unfamiliar with this counsel. Fiduciaries will most likely seek training from advisers who can handle the unusual overlap between ERISA fiduciary responsibilities and retirement plan compliance matters, as well as the proper cybersecurity and privacy frameworks, in such circumstances. The DOL considers cybersecurity to be a fiduciary obligation, according to its guideline. As a result, for their retirement plans, participants, and plan service providers, employers and plan fiduciaries should seriously examine these recommendations. They should examine current processes and provider contracts, and consider implementing a cybersecurity policy that incorporates the apt practice recommendations.

References

1)https://www.dwt.com/blogs/privacy–security-law-blog/2021/04/dol-erisa-cybersecurity-fiduciary-guidance

2) https://www.jdsupra.com/legalnews/new-erisa-guidance-on-retirement-plan-6865261/

3) https://www.dol.gov/general/topic/retirement/erisa

4) https://www.investopedia.com/terms/e/erisa.asp

5)https://www.bdo.com/insights/assurance/employee-benefit-plan-audits/dol-issues-cybersecurity-guidance-for-retirement.

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/joinchat/L9vr7LmS9pJjYTQ9

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

Whether admission made by defendant in his written statement can be permitted to be withdrawn by way of amendment

By

Rachit Garg

-

December 14, 2021

0

This article is authored by Nidhi Bajaj, of Guru Nanak Dev University, Punjab. The article will take you through the various judgements dealing with the question of withdrawing of admissions by way of amendment in written statements.

This article has been published by Rachit Garg.

Table of Contents

Introduction

Order VI of the Code of Civil Procedure Code, 1908 deals with ‘pleadings’. Pleadings refer to the plaint filed by the plaintiff or the written statement filed by the defendant. Many a time circumstances may arise which necessitate a party to amend his or her pleading before or during the trial, for example—

Fresh information has come to the knowledge of the party
Some document not known to be in existence has been found
The opponent has raised some well-founded objections to your pleadings

In this article, the author will be dealing with the following two questions—

What are the rules relating to the amendment of pleadings?
Whether admission made by the defendant can be permitted to be withdrawn by way of amendment of his written statement?

Amendment of the written statement

The rules relating to the amendment of written statements are included in Order VI, rule 17-18 of the Civil Procedure Code 1908.

Order 6, rule 17: amendment of pleadings

Discretionary power of the court

Rule 17 confers discretion on the court to allow either party to amend his pleadings at any stage of the proceedings in such manner and on such terms as may be just.

All such amendments that are necessary for the purpose of determining the real questions in controversy between the parties are to be allowed.

Restriction on court’s power to allow amendment

An amendment may be granted at any stage of the proceeding be it before, during or after the trial, in appeal or in revision or before the Supreme Court. However, Proviso to Rule 17 provides that no application for amendment shall be allowed after the commencement of the trial unless the Court comes to the conclusion that the party could not have raised the matter before the commencement of the trial in spite of due diligence.

When can leave to amend be granted or refused

Grounds for granting leave to amend

Leave to amend is usually allowed in the following cases:

The main test to determine if an amendment should be allowed or not is to see whether such amendment is necessary for determining the real question in issue between the parties.
Where an amendment can be allowed without doing injustice to the other party. This means that no amendment is to be allowed which causes injustice to the other party unless such injustice can be compensated by costs.
Where amendment will cause no injury to the opposite party and where such injury can be sufficiently compensated by money.
For granting consequential relief.
To avoid multiplicity of proceedings.
To clarify the pleadings.
Where such amendment is of formal nature.
For allowing misdescription of parties to be corrected etc.

When leave to amend can be refused

It is a discretionary power of the court to allow the amendment of pleadings. However, such power has to be exercised judicially and in a reasonable manner. Leave to amend is generally refused in the following cases:

Where the amendment proposed fails to pass the ‘real controversy’ test i.e. it is not necessary for determining the real question in controversy between the parties.
When an amendment introduces an altogether different or new case that is inconsistent with the suit or changes the fundamental character of the suit or defence. For example, A plaintiff’s suit was based on the premise that the suit property was non-ancestral and an issue regarding the character of property was framed and evidence was led. A finding was recorded that the property was non- ancestral. Thereafter, the plaintiff’s application for the amending of the plaint alleging that the property was ancestral at the appellate stage cannot be allowed.
Where the amendment, if allowed would take away a legal right accrued in favour of the opponent.
Where an application to amend is not in good faith and has been made with a malafide intention.

It has to be kept in mind that amendment will generally be allowed where it causes no injustice to the other party or where it can be made without prejudice to the other party. The Court may allow an amendment of a plaint or written statement in the interest of justice or to preserve the rights of both the parties.

Other considerations

Notice to the opposite party

In case an application for amendment of the plaint or written statement is filed, a notice should be given to the opposite party to file an objection against it. He should also be given an opportunity of being heard. However, where the amendment is of a purely formal or technical nature, such notice is not necessary.

Recording of reasons

The court should record its reasons for allowing or rejecting the application for amendment of pleadings.

Order VI, rule 18: Failure to amend after order

Rule 18 provides that where the order for leave to amend has been granted by the court and after obtaining such order, he fails to amend his pleading within the time specified by the court and if no time is specified, within 14 days from the date of the order, he shall not be thereafter permitted to amend his pleading on expiry of such time period, unless the time is extended by the Court.

Relevant Case Laws

Modi Spinning & Weaving Mills Co. v. Ladha Ram & Co (1976)

Brief facts

In this case, the defendants had admitted in their written statement that the plaintiff worked as their Stockist-cum-Distributor. After three years, they filed an application under Order VI, Rule 17 to amend the written statement to substitute their earlier plea with a fresh plea that the plaintiff was a mercantile agent-cum-purchaser. The trial Court rejected the application and the decision was confirmed in revision by the High Court.

Decision of the Supreme Court

The Hon’ble Supreme Court dismissed the appeal by special leave filed by the defendant and held that it is true that inconsistent pleas can be made in pleadings but the defendants cannot be allowed to completely change the case and substitute it with an entirely different and new case. The Court held that the substitution as proposed by the defendant seeks to displace the plaintiff completely from the admissions made by the defendants in the written statement. If such substitution is allowed by way of the amendment, then the plaintiff will be prejudiced by being denied the opportunity of extracting the admission from the defendants.

Usha Balashaheb Swami & Ors v. Kiran Appaso Swami & Ors (2007)

Brief Facts

The plaintiff-respondent had filed a suit for partition and separate possession of suit properties. The defendant nos. 1 to 7 who were respondents no. 2 to 8 in this appeal filed their written statement in which they supported the case of the plaintiff. The appellants i.e. Defendant No. 8-14 filed their written statement in which they admitted that the plaintiff with defendants No.1 to 7 was entitled to one-half share in the suit properties. Defendant No. 8-14 filed an application for amendment of their written statement to add that the plaintiff and defendant Nos. 2 to 7 could not acquire right, title and interest in the joint family properties, as they were the illegitimate children of the deceased Appasao. The plaintiff contested the application on the ground that the appellants have admitted in their written statement that plaintiff and defendant Nos.1 to 7 were jointly entitled to a half share of the suit properties and hence they cannot be allowed to withdraw such admission by amendment of the written statement. The application for amendment was granted by Learned Civil judge, but his order was set aside by the High Court in revision. A special leave petition was filed in the Supreme Court against the order of the High Court.

Decision of the Supreme Court

The Hon’ble Court set aside the order of the High Court of rejecting the application for amendment and allowed the amendment of a written statement. The Court held that a prayer for amendment of plaint and amendment of the written statement stands on a different footing and the Courts have to be more liberal while dealing with the application for amendment of a written statement. The general principle that amendment of pleadings cannot be allowed to materially alter or substitute the cause of action applies to plaints and not to written statements. The Court observed that adding a new cause of action or substituting it may be objectionable in case of plaint but adding a new ground or taking inconsistent pleas or new defence in a written statement would not be objectionable. The Court also held that it was not a case of withdrawing of admissions by the defendant but only adding additional facts. By proposing amendment of written statement appellants were not withdrawing admission but only added that the plaintiff and defendant nos. 3 to 8 could be entitled to half a share in the property if they proved to be the legitimate children of Appasao.

B.K-Narayana Pillai v. Pararneswaran Pillai & Anr (1999)

Brief Facts

In this case, the respondent-plaintiff filed a suit for the grant of mandatory and prohibitory injunction against the appellant-defendant seeking his eviction on the ground that he was a licensee. The appellant-defendant in his written statement pleaded that he was a lessee and not a licensee. The defendant filed an application for amendment of the written statement:

For adding an alternative plea that in case the Court found that the defendant was a licensee, he was not liable to be evicted as according to him the license was irrevocable.
For adding that the first and second prayers in the plaint are barred by limitation and that acting upon the license he has executed works of permanent nature and incurred expenses in execution of the same so his license cannot be revoked by the grantor under Section 60(b) of the Indian Easements Act. 1882

The application of the defendant was rejected by the trial Court and the High Court as being mutually destructive and on the ground that it would amount to permitting the defendant to withdraw admission made by him in the main written statement. The appeal was filed before Supreme Court.

Decision of the Supreme Court

The Court allowed the appeal and held that the principles applicable to the amendment of the plaint are equally applicable to the amendment of the written statement. The Court held that the pleas sought to be raised by amendment of written statement are neither inconsistent nor repugnant to the pleas already raised in defence. The alternative plea sought to be incorporated is only an extension of the plea already raised and the mere fact that there was a prolonged delay in filing the application cannot be a ground for rejecting it particularly when the respondent-plaintiff could be compensated by costs. The Court also held that:

The defendant has a right to take an alternative plea by amending his written statement except where such amendment would cause injustice to the other party and would amount to withdrawing any admission made in favour of the plaintiff.
Amendments necessary to determine the real controversy in the suit must be allowed provided that the proposed amendment does not alter or substitute an entirely new cause of action in the suit as originally filed or defence originally taken.
Allegations that are inconsistent or contrary to the admitted position of facts or mutually destructive allegations of facts should not be allowed by way of amendment of pleadings.
Amendment proposed by a party should not cause any such prejudice to the opponent which cannot be compensated by costs.
No amendment should be allowed which amounts to defeating a legal right accruing to the opposite party on account of lapse of time. Delay in filing applications for amendment of pleadings should be properly compensated by costs.

Muhamed Ashraf v. Fasalu Rahman(2021)

Facts

In this case, a suit was filed seeking the cancellation of two assignment deeds registered by the respondent in favour of the petitioner. After filing of written statement by the petitioner-defendant, respondent-plaintiff amended the plaint. Then the petitioner filed an additional written statement. Later, when the case was listed for trial, the petitioner filed an interlocutory application seeking to amend the written statement. The Trial Court dismissed the application for amendment holding that the petitioner was trying to withdraw his admissions and incorporate new contentions. Thereafter, this original petition was filed before High Court.

Decision of the Kerala High Court

Dismissing the original petition, the High Court held that the trial Court was right in rejecting the application for amendment. It was observed by the Court that a written statement cannot completely displace the former admissions made before the amendment. The Court held that the proviso to Rule 17 of Order VI CPC would apply in the case as an application for amendment was filed after filing of an affidavit in lieu of chief examination was filed. As the application was filed just prior to the date fixed for trial, there was no doubt that substantial prejudice would be caused to the plaintiff.

Other Cases

Uttam Chand Kothari v. Gauri Shankar Jalan And Ors. (2006)

Following questions came for consideration in a writ petition before the Gauhati High Court:

Whether an admission made by a defendant in his written statement can be allowed to be withdrawn by way of amendment?
While allowing such amendment of a written statement, is there any difference between an ‘express admission’ and an ‘implied admission’?
Can a lawyer’s incorrect instructions, omission or failure leading to the making of an implied or express admission, in a written statement, be allowed to be withdrawn by way of amendment? If not, what is the remedy for such a defendant?

A writ petition was filed under Article 227 challenging the order of dismissal of application for leave to amend the written statement. The High Court observed that it is settled by various judgements of the Supreme Court that admissions, made in a written statement, cannot be allowed to be withdrawn by way of amendment, be the admissions express or implied. An amendment that seeks to completely displace the plaintiff from admissions made by the defendant in his written statement cannot be allowed.

Answering the first issue, the Court held that no admission made in favour of a plaintiff can be allowed to be withdrawn by amendment.
Regarding the second issue, the Court held that while allowing or refusing amendment, there is no distinction between express and implied admission. An implied admission made in a written statement is also binding on the party making the admission. Such admissions constitute waiver of proof and cannot be permitted to be withdrawn by way of amendment of the written statement.
While deciding the third issue, the Court disagreed with the views expressed in the case of Mahendra Radio and Television, Meerut v. State Bank of India(1988), that an admission made erroneously due to fault of advocate can be allowed to be withdrawn even if the effect of such an amendment is to take away the admission made. The Court held that when the counsel’s default leads to an implied or express admission, then the remedy for the defendant is to make out a case for the court to exercise its powers under the proviso to Rule 5 of Order 8 and insist upon the plaintiff to prove his case notwithstanding the admission implied or express made in the written statement.

Heeralal v. Kalyan Mal & Ors (1997)

In this case, the Supreme Court reiterated that an admission made in a written statement cannot be allowed to be withdrawn by way of amendment of the written statement on the ground that a defendant is entitled to take inconsistent or alternative pleas.

Ram Niranjan Kajaria v. Sheo Prakash Kajaria & Ors(2015)

In this case, the question involved was whether a defendant in a suit for partition can be permitted to withdraw an admission made in the written statement after a long period. The Supreme Court held that once admission is made by the defendant relinquishing his claim in joint family property, seeking withdrawal of admission after 25 years cannot be allowed but the defendants should be allowed to explain or clarify the admissions made in the written statement.

Conclusion

The law relating to the amendment of written statements and whether such amendment can be permitted to withdraw an admission made in the written statement is almost settled. The court has the power to allow amendment of a written statement, however, the power must be exercised keeping in mind the well-established principles of law and the due-diligence test as provided under the Proviso to Rule 17 of Order VI.

References

The Code of Civil Procedure, 1908, C.K. Takwani, Eighth Edition
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.livelaw.in/pdf_upload/muhamed-ashraf-v-fasalu-rahman-400619.pdf&ved=2ahUKEwic_qXM1rj0AhXnUGwGHVisCXoQFnoECBEQAQ&usg=AOvVaw2pfplta9yphwM761G4ITaa

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/joinchat/L9vr7LmS9pJjYTQ9

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

Pizzagate conspiracy, social media and incitement to violence

By

Diva Rai

-

December 14, 2021

0

Jan21_13_857739010 — Image source - https://bit.ly/3DSKQDI

This article is written by Amulya Bhatia, currently pursuing BBA.LL.B from Symbiosis Law School, NOIDA. This article discussed the legal implications of the pizzagate conspiracy theory.

This article was published by Diva Rai.

Table of Contents

Introduction

Some call it the anatomy of a fake news scandal while some say it is the revelation of the truth of a child trafficking ring, the pizzagate conspiracy which first went viral in 2016 took over the internet yet again in 2020. In June 2020, the famous singer, Justin Bieber went live on his Instagram. One of the viewers asked this singer to touch his hat if he had ever been a part of a child trafficking ring through the comments. A few moments later, Bieber adjusted his beanie, which was assumed as a consequence of the comment, even though it is highly likely that he never really saw the comment and this is merely a coincidence. What followed was the believers of the pizzagate theory concluding that Beiber was a victim of this ring. Moreover, the song, ‘Yummy’ by Justin Beiber was also assumed to be evidence of the same.

The pizzagate theory is nothing but a debunked conspiracy that has failed to attain any credit over the years, yet is continued to be talked about. According to this conspiracy which erupted in November 2016, prominent members of the Democrats led by Hilary Clinton and John Podesta are somehow involved in a global child trafficking ring, the headquarters of which are based in Comet Ping Pong, a pizzeria in Washington D.C. Irrespective of lack of any evidence, the pizzagate has gained popularity over various social media platforms like Facebook, Instagram, and mostly TikTok where posts with #Pizzagate was viewed over 82 million times in the month of June 2020. The upsurge wasn’t limited to just social media and led to violence in the US. How did a conspiracy with no basis create such a hue and cry?

What is the Pizzagate conspiracy

In the final stage of the U.S. elections, early November 2016, the email of John Podesta, who was Hilary Clinton’s campaign manager, was hacked. According to the New York Times, one of these emails was between John Podesta and James Alefantis, the owner of Comet Ping Pong, the pizzeria in Washington D.C. regarding hosting a possible fundraiser for Clinton. Later that year, these emails were posted in Wikileak, due to which the link between the pizzeria and the Democratic Party was up for speculation. It was not long after that conspiracy theorists came up with a vile connection that the pizzeria is the headquarters for a child trafficking ring led by Clinton and Podesta, and that the emails contained coded messages concerning the same.

Comet Ping Pong

Comet Ping Pong is a 120-seater restaurant located in Washington D.C which opened in 2006. The owner of this child-friendly place, James Alefantis was a Clinton supporter and was close friends with multiple Democrat leaders. When in 2016, the emails between John Podesta and James Alefantis were released, the pizzagate theory came into being, with claims that Comet Ping Pong was the headquarters for a child trafficking ring. This fake news scandal had a bearing on not just the reputation but resulted in the employees receiving threats. The Instagram feed of the restaurant was flooded with comments like, ‘I will kill you and ‘We are on to you’. Comet Ping Pong faced the consequences of the promotion of fake news which had no backing.

Infowars

The upsurge of this conspiracy theory has a lot to do with its promotion on social media platforms like Facebook, Instagram, and TikTok. One influential website which also posted about the pizzagate is Infowars which also has more than 1.8 million subscribers on youtube. InfoWars is known to be an American far-right conspiracy theory and news website owned by Alex Jones. It was founded in 1999 and has been in the news multiple times for promoting fake news, the result of which is harassment of people. Alex Jones, according to many, is considered to be more responsible than any other person for the spread of the pizzagate theory, without the backing of any evidence or basis, hurting the reputation of both Hillary Clinton as well as the family restaurant, Comet Ping Pong. While defending the theory, Jones claimed in one of his youtube videos that “Hillary Clinton has murdered and chopped up and raped children”, yet again a claim with no evidence.

One major consequence of Alex Jones promoting this baseless theory was a man entering the pizzeria with a rifle, wanting to investigate this theory himself. This man was a diligent follower and fan of Alex Jones. Eventually, soon after the threat of a potential lawsuit and the lack of proof of the existence of this child trafficking ring, Jones had no option but to apologize to James Alefantis, the owner of the Comet Ping Pong, along with all the employees of the pizzeria who also faced threats because of the promotion of this fake scandal. Alex Jones made an apology to all the viewers and followers as well who may have had any negative impact in their lives because of this incident. However, an apology is not enough to make up for the damage this fake news has caused.

Manipulation of facts

The believers of pizzagate had no backing or evidence to support this conspiracy theory which led to them manipulating and testing the facts at hand to somehow prove that this absurd idea of a child trafficking ring run by members of democrats in a pizzeria has some truth to it. According to those who believe in this theory, Comet Ping Pong is the headquarters of a while trafficking ring, and all the operations for the same are located in the basement of this restaurant. Funnily enough, there is no basement in the pizzeria which makes this entire conspiracy fall flat in one go. What is more hilarious is that according to the believers, the menu for this pizza was code language to talk about anything related to the child trafficking ring.

For example, the word ‘pizza’ was a sign for child porn and illegal child trafficking, and the word ‘cheese pizza’ i.e. C.P. meant ‘child pornography’. Additionally, the underground refrigerator in the pizzeria was a kill room where cannibalism was practiced. John Podesta and his brother were also linked to the kidnapping of a child in 2007, all as a part of this ring. If putting the word pizza in a pizzeria, or installing a refrigerator in a restaurant is conclusive of running a child trafficking establishment, then it would be safe to assume that almost all restaurants in the world are running a child trafficking ring. Facts that point to nothing but James Alefantis running a restaurant honestly are manipulated by the believers of the pizzagate conspiracy as per their convenience, to fit their idea of the truth.

Role of social media and echo chambers

Social media as we all know holds immense power over our lives in today’s time, to the extent that it has the innate ability to make or break one’s life. In the case of the pizzagate conspiracy theory, social media did more harm than good. When this conspiracy erupted, posts with #pizzagate took over, multiple videos were made on this, and this theory which has no evidence, or no victims had come forward took over the world, all because of its promotion on social media. This had real-life consequences as a result of which, social media platforms took multiple steps to boil down the effect of this theory. Whenever one would search about this theory on youtube, a label would come up explaining that this is a false conspiracy, Twitter also made attempts to stop #pizzagate from trending and Facebook made it impossible to trend hashtags about this conspiracy.

However, the Pizzagate conspiracy re-emerged in 2020. A documentary on this conspiracy called, ‘Out of Shadows’ was put up on Youtube which gained over 15 million views, following which the absurd idea that Justin Bieber was a victim of this conspiracy was flooded yet again on social media. Soon after, Rachel Mcnear came across this documentary which developed her interest in this theory. After some rudimentary research on Twitter, Instagram, and Facebook, she created a small description of this theory and posted it on TikTok. It only took a few days for young adults, who are slowly gaining interest in politics to start looking this up, which resulted in searches for ‘Hillary’, ‘pedophile’ and ‘child trafficking’ going from nil to 100 which is the highest mark on the scale of trending searches. Social media then claimed that they had done their bit to delegitimize the upsurge of pizzagate related information by eliminating hashtags on Twitter, videos on Youtube, and have even updated their child sexual assault policies to prevent harm from this conspiracy.

But the question is, why does it take pressure from journalists or society at large for these social media platforms to start acting responsibly and take accountability for what is being promoted through their platforms?

Shooting at Comet Ping Pong

The news about the pizzagate conspiracy might have been fake, but it most certainly had real-world consequences, with a barring impact on the lives of many. Things got out of hand when a man decided to take matters in his control and enter Comet Ping Pong with a gun, to investigate this entire scandal himself. Edgar Maddison Welch, a man from North Carolina fired an AR-15 rifle inside the pizzeria claiming to “investigate’ this baseless theory based on the information that he was able to collect online. Nobody was hurt through the firing as the shots were fired at the walls and other things kept inside the pizzeria. In 2017, the man pleaded guilty, admitting to him wanting to investigate a bogus theory that he read on the internet and was punished for his actions. It is so bizarre to imagine that some baseless theories off the internet could lead to potential damage to the lives and reputation of so many. The pizzagate theory was nothing but political propaganda to bring down Clinton without even realizing the cost of promoting fake news, and those who promoted it only resulted in the further incitement of violence.

Nuisance in the name of free speech

Legal implications of spreading fake news in the United States

Free speech is considered to be integral in the United States. The first amendment of the constitution guarantees one the freedom of speech. But limits to free speech have been in question time and again when this freedom has led to public nuisance. Fake news currently still falls under the ambit of free speech. However, this cannot mean that the implications and dangers of fake news should be ignored. Now, freedom of speech includes the right to impart and receive information. But when fake news is spread, it takes away from the integrity of such information. Conspiracy theories have become a prominent part of the political system and appear to be nothing but an attempt to discuss unusual and baseless ideas under the caveat of free speech. The only legal recourse available against spreading fake news is filing a suit for defamation.

However, there is a two-fold reason as to why conspiracies must not be protected under the ambit of free speech, especially when they are just ideas and not facts. First, it is important to have informed voters which is the essence of democracy. Because of the promotion of false news, voters are misled, as was seen in the pizzagate theory when the image of the democrats went down the drain and is still being pulled through the mud. Moreover, when these theories find their way into the political system, radicals and extremists may want to take matters into their own hands and things can turn violent which has been discussed in this article before. Therefore, it is quite evident, at least in the case of the pizzagate conspiracy theory, that fake news in the name of free speech only created violence and public nuisance, causing harm to those who were innocent.

Legal implications of spreading fake news in India

India on the other hand, recognising the importance that the internet holds in our lives in today’s time, has implemented certain laws to prevent the spread of fake news. Fake news has existed since time immemorial, but its effects are getting to the human race due to the evolution of technology. These laws have especially been implemented due to the emergency that Covid-19 has posed before us to avert anxiety among people due to the spread of fake news. In status quo, Section 54 of the Disaster Management Act, 2005 has also been used in order to prevent the spread of false information amid a pandemic.

Other than this, Information Technology Rules, 2021, were imposed in the month of February and put several obligations and responsibilities on online entities which include the obligation to take down content that may be false. These new rules require social media apps to file daily compliance reports and a common chief is also to be appointed who shall serve as a point of contact between online entities and law enforcement agencies.

Soon after, there were talks about these laws being unconstitutional following which a petition was also filed. The Centre has defended the legality of the new Information Technology (IT) Rules before the Delhi High Court, saying that the rules shall prevent the misuse of the freedom of the press and will protect citizens from the repercussions of spreading fake news in the digital media space. The centre has stated that they are simply providing to the citizens a grievance mechanism through which the spread of fake news can be contained.

Conclusion

Conspiracy theories are simply assumptions. This is not to say that some of these theories may not be true. However, conspiracies are still assumptions, or stories till the time they have been verified through proper fact-checking. Unfortunately, they are continued to be discussed as nothing but the ultimate truth even with the lack of any concrete evidence. Moreover, in cases where the conspiracy theory has been debunked after verification, some people continue to promote it in the name of free speech, which is not good for the larger public interest. The legal system, at some point, will have to take recognition of fake news and conspiracies resulting in nuisance and as factors inciting violence.

The pizzagate theory was unnecessarily stretched and could be settled in a much simpler manner by checking the facts and proving that the assumptions were false. However, many social media platforms kept discussing it, not realizing the impact it would have on the careers and lives of many. This callousness makes it even more important to address the issues of spread of fake news from a legal lens.

References

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/joinchat/L9vr7LmS9pJjYTQ9

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

Appointment of directors of banking companies in India

By

Shoronya Banerjee

-

December 14, 2021

0

og-istock-469932116-shadow-banking-1200x630 — Image source - https://bit.ly/2D5HXpy

This article is written by Harsha Aswani, pursuing a Diploma in Law Firm Practice: Research, Drafting, Briefing and Client Management from LawSikho.

Table of Contents

Introduction

Before 1949, the provisions of Part-XA of the Indian Companies Act, 1913 (as amended in 1936) governed the banking companies in India. However, the provisions of the company law kept the interests of shareholders on a higher pedestal and paid no heed to the interests of depositors, who are one of the major stakeholders in a banking company. To address this inadequacy as well as to ensure a sound and balanced development of the Indian banking sector, separate legislation, known as the ‘Banking Companies Act, 1949’ came into force.In 1965, this Act was renamed as ‘The Banking Regulation Act, 1949’, and was extended to include co-operative banks.

Later in 1969 and 1980, fourteen and six private sector banks, respectively, underwent nationalisation, and to govern the same, a new Act named, “The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970” (as amended in 1980) was introduced.

Both the Act of 1949 (as amended in 2020) and the Act of 1970 (as amended in 1980) became the statutory basis for supervising and regulating the banking structure in India.

The collective body of directors known as the Board of Directors in any company is responsible for its management. Along the same lines, , Section 7 read with Section 9 of the 1970 Act empowers the Central Government, after consulting with the RBI, to constitute the “Board of Directors” of the nationalized banks in India,while the directors on the Board of the private sector banks are appointed according to Section 10A of the 1949 Act

Ensuring the interest of the depositors has always been the utmost priority of these legislations, however, the rampant bank-related frauds in the banking industry tell an entirely different story. Therefore, to address this issue and to enhance corporate governance on all levels of the banking sector, the RBI on April 26, 2021, issued a Master Circular on ‘Corporate Governance in Banks− Appointment of Directors and Constitution of Committees of the Board.’ The circular focuses on increasing the involvement of independent directors in the board of directors of the banking company to ensure independent and unbiased decision-making, which would benefit the interest of all the stakeholders in the bank, but most importantly is expected to be fruitful for the depositors of the banks in India.

For a better understanding of the concept, this article shall begin by giving a brief overview of the type of directors in a banking company. It would then discuss the provisions dealing with the appointment of directors under the two Acts and the new changes introduced by RBI in 2021.

Directors in a banking company

There are broadly two categories of directors in a banking company−

The Executive Directors, such as the Whole-time Directors and the Managing Directors/CEO;
The Non-Executive Directors, such as the Independent Directors.

The executive directors are appointed in a dual capacity− firstly , as the company’s employee, and second as members of the board of directors. Their responsibility is to bring an insider’s perspective while managing the day-to-day operations of the company.

On the contrary, non-executive directors are not involved in the daily management of the company. They are appointed to the board for their experience, expertise, and personal qualities. Their responsibility is−

to bring an outsider’s perspective and objectivity while designing plans and policies for the company, separate from the management.
to independently assess the company’s overall performance;
to strategize the business policies;
to have an oversight of risk management;
to hold the executive directors and the other board members, accountable; and
to balance the needs of the stakeholders, and if required, to consider the needs of the company’s stakeholders like the depositors before that of the management.

Appointment of directors in the banking companies

Appointment of directors under the Banking Companies Act, 1970

Section 7 of the Act empowers the Central Government to constitute, in consultation with the RBI, the first board of directors of the nationalized banks, consisting of a maximum of seven persons. The board of directors shall hold the office until the Central Government prepares the scheme under the provision of Section 9 of the Banking Companies Act for the constitution of a new board of directors.

Section 9 empowers the Central Government to prepare a scheme for the constitution of a new board of directors of the Banking Company. The Companies Act, 2013 prescribes the appointment of a maximum of 15 directors on its board. On the same line, section 9 has laid down the composition of such board of directors, which is as follows−

A maximum of five whole-time directors. The whole-time Directors are appointed by the Central Government, after consultation with the RBI, on a full-time basis to manage the whole of the affairs of the banking company.
One Director being an official of the Central Government. He is nominated by the Central Government, and is prohibited from occupying the position of Director in any other corresponding bank;
One Director having expertise and experience in the regulation or supervision of commercial banks. The Central Government nominates the director on the recommendation of the RBI.
One Director from among the employees of the bank, nominated by the Central Government. He must fall within the definition of ‘workmen’ under Section 2(s) of the Industrial Disputes Act, 1947.
One Director from among the employees of the bank, nominated by the Central Government, after consultation with the RBI. Such a person must not fall within the ambit of ‘workmen’ under Section 2(s) of the Industrial Dispute Act, 1947.
One Director, being a Chartered Accountant for at least fifteen years. After consultation with the RBI, the Central Government nominates such a director for the appointment.
A maximum of six directors shall be nominated by the Central Government from the following persons, elected by the shareholders of the banking company, amongst , depending on the capital issued-

One Director, if issued not more than 16% of the total paid-up capital;
Two Directors, if issued more than 16% but less than 32% of the total paid-up capital;
Three Directors, if issued more than 32% of the total paid-up capital;

These persons must hold special knowledge or practical experience in any of the following matters−

Agriculture and rural economy;
Banking;
Co-operation;
Economics;
Finance;
Law;
Small-scale industry
Any other matters which are deemed useful in the opinion of the RBI for the management of the bank.

Apart from this, the provision also mandates such persons to be able to represent the interest of the depositors, farmers, workers, and artisans.

The directors appointed under Section 9 of the Banking Companies Act are also required to satisfy the status of “fit and proper” as specified by the RBI in its master direction on “Reserve Bank of India (‘Fit and Proper’ Criteria for Elected Directors on the Boards of PSBs) Directions, 2019 (as updated in 2020).”

It is important to note that these directions apply to public sector banks. To determine the “fit and proper” criteria, these directions prescribe the constitution of a “Nomination and Remuneration Committee” consisting of at least 3 non-executive directors from the Board of Directors so appointed, out of which one-half must be independent directors, who must include at least one member from the “Risk and Management Committee” to carry out due diligence for determining the eligibility and status of the potential candidates for directorship.

To ensure fair, unbiased, and independent decisions, any director nominated by the Central Government shall not be part of the Committee. The Committee shall be chaired by a non-executive director, who could very well be nominated by the Board from amongst its members.

Additional eligibility criteria

The master direction also prescribes the eligibility criteria for the appointment of directors on the board:

The candidate must be between 35 to 67 years of age on the cut-off date for submission of nominations;
He must at least be a graduate;
He must possess special knowledge or practical experience as laid down under section 9 of the Banking Companies, Act 1970;
Their tenure of office would be of 3 years from the date of appointment, and the director shall be eligible for re-appointment. However, it is important to note that no such director shall hold the office for a period exceeding 6 years, whether continuously or intermittently;
He must not be a member of any other bank, or financial institution, or RBI, or NOFHC.
He must not have served as an elected member of any category in any bank, financial institution, RBI, or insurance company, for 6 years, whether continuously or intermittently;
He must not be involved in stock-broking;
He must not be an MP or an MLA or a member of Municipal Corporations, Municipality or other local bodies;
He must not be involved in any activities in conflict with the business interest of a bank;
He must not be in any professional relationship either with a bank or NOHFC holding any other bank;
He must not be a defaulter of any lending institution, law enforcement agency, or regulatory/supervisory agency.

Documents required before assuming the office of director

The master directions also mandate obtaining the following documents from the director before he assumes his office:

A Deed of Covenant executed in the prescribed format.
A simple declaration, on 31^st March of every year, affirming the information provided during appointment hasn’t undergone any change;
If any change in information about the director occurs, the bank is mandated to obtain a fresh annexure in the prescribed format incorporating all the changes.

Appointment of directors under The Banking Regulation Act, 1949

Section 10A of the Banking Regulation Act, 1949 prescribes a model for the appointment of directors on the board of private sector banks. It provides that−

A minimum of at least 51% of the total number of the members of the board must possess special knowledge or practical experience in any of the following matters−

Accountancy;
Agriculture and rural economy;
Banking;
Co-operation;
Economics;
Finance;
Law;
Small-scale industry;
Any other matter deemed useful in the opinion of the RBI.

Further, the proviso to clause (2)(a) of Section 10A mandates having a minimum of two persons out of the total 51% of the members of the board who possess special knowledge or practical experience in either agriculture or rural economy, or co-operation, or small-scale industry.

Such members of the Board of directors must not possess a substantial interest in or in connection with the employee, manager, or managing agent of:

Any company.However, this provision does not apply to section 8 companies, known as Charitable Companies, under the Companies Act, 2013 (the earlier Section 25 of the Companies Act, 1956).
Any firm (excluding a small-scale industrial concern), carrying on a trade, commerce, or industry.

Such board members must also not hold any propriety in any trading, commercial or industrial concern. This shall exclude a small-scale industrial concern.
No director, except the chairman or the whole-time director, holds office for a period exceeding 8 years.
The Chairman or the whole-time director, if removed from office, shall cease to be the director of the company, and become ineligible for reappointment as the director of such banking company until a cooling period of 4 years expires from the date the directorship ceases.

If any of the above conditions are not complied with, the RBI has the power to direct the banking company for the reconstitution of a new board, as per the prescribed requirements. Further, Section 10 of the Banking Regulation Act, 1949 has prescribed certain additional prohibitions on the employment of certain persons in the banking company, which includes−

No banking company is allowed to appoint a managing agent for managing the affairs of the company;
A person adjudicated as an insolvent;
A person who has either suspended his payment or has compounded with his/her creditors;
A person convicted for the offence of moral turpitude by the criminal court;
A person whose remuneration, whether whole or in part, forms a commission or share in the profits of the company.
A person whose remuneration is in excess as per RBI;
A person who is a director of any other banking company, not being the subsidiary bank,or a Charitable company registered under Section 8 of the Companies Act, 2013 (the earlier section 25 of the Companies Act, 1956);
A person who is involved in any other business or vocation;

Control over management or directors

Section 36AA of the Banking Regulation Act empowers the Reserve Bank of India to remove any managerial or other personnel from the office, by way of a written order, if it deems fit in the interest of−

The public;
The banking company; and
The depositors.

The person so removed can appeal against the decision of the RBI before the Central Government, whose decision shall be final. Section 36 ACA also empowers the RBI, in consultation with the Central Government, to pass a written order for superseding the Board of Directors, if the RBI so desires in the interest of the banking company as well as its depositors, for 6 months, which can exceed the time period up to a total of 12 months.

Considering the objective of the statutes and the rising cases of bank frauds that have compromised the interest of the banking company as well as the interest of its depositors, the RBI prepared and published its “Annual Report for 2020-2021”, on May 27, 2021. This report disclosed that over the past three years from 2018 to 2021, India has witnessed almost 22,864 banking frauds involving an amount of INR 3.95 trillion (or its equivalent, USD 53 billion). While investigating all the cases, the report blamed the poor corporate governance at all levels of the banks− be it at the hands of the mid-level employees or the senior-most management of the banks, to be the major reason.

This forced RBI to reconsider the corporate governance guidelines issued by it, and on the format of the Corporate Principles of “Basel Committee on Banking Supervision, 2015” read with−

The 1992 RBI Guidelines on “Do’s and Don’ts for Directors”;
The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015;
The Companies Act, 2013; and
Other RBI Circulars,

The RBI released a discussion paper on “Governance of Commercial Banks”. After several discussions, and the feedback received on the paper, the RBI, on April 26, 2021, issued a new Master Circular on “Corporate Governance in Banks− Appointment of Directors and Constitution of Committees of the Board” to enhance the corporate governance in the banks by increasing the involvement of non-executive “Independent Directors” in the Board as well as on the Committees of the banks. The independent directors, as the name suggests, work independently towards the policing and strategizing of the policies of the banking companies. It is expected that the involvement of these independent directors, separate from the management of the company, would ensure holistic and unbiased decision-making, and improve the governance regime of the banking sector.

Brief highlights of the Master Circular on Corporate Governance in Banks, 2021

Applicability

This Circular shall apply to −

All private sector banks, including SFBs (Small Finance Banks);
Wholly owned subsidiaries of Foreign Banks. However, it shall not apply to foreign banks operating as branches in India;
SBI and nationalized banks, so far as it is consistent with the provisions of the special statutes governing these banks;

Applicability for the local area banks, payment banks, and regional rural banks would be notified separately.

Chairperson of the Board and meetings

The Circular has emphasized the appointment of an “Independent non-executive director” as the Chairperson of the Board, who is required to “stand apart” from all managerial influences and manipulations, to arrive at an unbiased decision to protect the interest of the stakeholders from any banking scams and frauds.

The quorum decided for the board meetings is one-third of all the members of the board, or three directors, whichever is higher. Here, also RBI has mandated the involvement of independent directors and has laid down that at least half of the directors attending the board meeting shall be independent directors.

Committees of the Board

Banks, unlike companies and corporations, are required to render protection to a broader pool of stakeholders, including internal, external as well as depositors, who typically do not have a say in the decisions of the banks. Therefore, the Board is required to deeply analyze and monitor the strategic issues and risk oversight the banks are exposed to. To ensure the effectiveness of this process, the Circular has laid down the constitution of three mandatory committees, to audit the finances, assess the risks, nominations, and remunerations, management, stakeholder relationship, etc., in the banking companies−

Audit Committee of the Board (ACB)

It shall comprise only non-executive directors having expertise in finances. The meetings of this committee shall be chaired by independent directors, and he shall neither be a member of ACB, nor any other committee of the board, whether or not having the power to sanction credit exposures, nor shall he chair any other committee. This also shows how the RBI has attempted to increase the involvement of independent directors, having authority to audit the finances of the bank, without being influenced by people in the management, or exposed to any financial threats. Risk Management Committee of the Board (RMCB) This committee shall also consist of a majority of non-executive directors having expertise in risk management. The chair of the committee would be held by an independent director, who shall not chair the board as well as the committee of the board.

Nomination and Remuneration Committee of the Board (NRC)

The circular mandates only non-executive directors to be part of this committee. It shall be chaired by an independent director, who must not hold the chair of the board. It can be seen that all these committees are mandated to have a distinct chairperson, who would be an independent director. During the meeting, if the independent director is absent, the meeting shall be presided by another independent director. The circular has mandated a higher requirement of independent directors in the quorum as well, which banks like Kotak Mahindra, HDFC, ICICI are required to follow along with the SEBI (Listed Regulations), as these banks are listed on Indian stock exchanges. The appointment of independent directors having experience and expertise in their respective fields is expected to introduce several checks in the decision-making of the board, leading to higher credibility and accountability.

Age and tenure of Directors

Higher tenure of executive directors is bound to amplify governance issues; therefore, the circular has attempted to benefit the banks by capping the age and tenure of non-executive and executive directors.

Non-Executive Directors

Age: Capped at 75 years, beyond which no person shall be allowed to hold the office;

Tenure: Capped at 8 years, with an option of re-appointment, provided the director shall serve a cooling period of three years.

Executive Directors [Managing Director or Whole-Time Director]

Age: Capped at 70 years, beyond which no person shall be allowed to continue in office.

Tenure: Capped at 15 years, with an option of re-appointment in the same bank, after serving a cooling period of three years.

Conclusion

Every company has a collective body of persons, known as the “Board of Directors”, who are responsible for managing, controlling, and directing the affairs of the company. They are expected to act towards the interest of the stakeholders of the company, which are usually the shareholders, by way of strategizing their business decisions and having an oversight towards risk management.

However, when it comes to Banking companies, the pool of stakeholders broadens to include depositors, whose protection becomes even more prominent, considering they do not generally influence the business decisions of a bank. With this perspective, the two Acts, the Banking Regulation Act, 1949 and the Banking Companies Act, 1970 were introduced. These Acts along with the RBI guidelines lay down in detail the requirements for the appointment of directors in the public as well as private sector banks.

While the objective of these legislations was to balance the interest of all the stakeholders in the bank, however, the recurring banking frauds in the country had put the most important bank-stakeholder, “the Depositors” in a compromising position. To cure the same, the Reserve Bank of India has released a Master Circular on ‘Corporate Governance in Banks” and has attempted to improve the governance of banks at all levels, from top to bottom. Though it is yet to see the efficacy of how these guidelines are implemented and enforced by RBI; however, so far, the proposed structure seems to enrich the corporate credibility and accountability of management towards its decisions, which might hopefully enable the depositors to see the light at the end of the tunnel.

References

ICSI Banking− Law & Practice, Lesson 3: Control over Organization of Banks 1, 92 (2020),
https://www.icsi.edu/media/webmodules/Banking_Law&_Practice.pdf.
RBI/2021-22/24, DOR.GOV.REC.8/29.67.001/2021-22, Corporate Governance in Banks− Appointment of Directors and Constitution of Committees of the Board, RBI.ORG (Apr. 26, 2021),
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12078&Mode=0.
RBI/DBR/2019-20/71, Master Direction DBR.Appt.No: 9/29.67.001/2019-20, Master Direction- Reserve Bank of India (‘Fit and Proper’ Criteria for Elected Directors on the Boards of PSBs) Directions, 2019 (as updated in 2020), https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11649&Mode=0.
Souvik Ganguly, Saumya Sharma, Altamash Qureshi, RBI Pushes For Massive Reforms of Banks In the Aftremath Of Recurring Bank Frauds, MONDAQ (Nov. 29, 2021, 6:11 PM), https://www.mondaq.com/india/corporate-governance/1093700/rbi-pushes-for-massive-governance-reforms-of-banks-in-the-aftermath-of-recurring-bank-frauds. See also, RBI Annual Report 2020-2021,
https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0RBIAR202021_F49F9833694E84C16AAD01BE48F53F6A2.PDF.
RBI/2021-22/24, DOR.GOV.REC.8/29.67.001/2021-22, Corporate Governance in Banks− Appointment of Directors and Constitution of Committees of the Board, RBI.ORG (Apr. 26, 2021),

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/joinchat/L9vr7LmS9pJjYTQ9

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

Global Minimum Tax and its impact on BigTech

By

Diva Rai

-

December 14, 2021

0

big-tech-mergers-international — Image source - https://bit.ly/3yqrc0T

This article is written by Adhila Muhammed Arif, a student of Government Law College Thiruvananthapuram. This article seeks to explain the agreement on the Global Minimum Tax and what it means for tech giants.

This article was published by Diva Rai.

Table of Contents

Introduction

In the modern age of globalization, multinational conglomerates dominate the global economy, with power comparable to small nation-states. This has necessitated a greater regulation, particularly in the sphere of taxation. At present, multinational companies pay taxes only where they are situated, and not where they perform their operations. As the main motive of these companies is to make a profit, it is only natural that they would avoid high tax rates.

Thus, most of these big companies would establish their headquarters in low-tax jurisdictions, while they sell their products or services and earn profits in other countries. Digital companies like Meta, Google, Apple, etc. can provide services in multiple countries without being physically present, and make huge amounts of profit, and don’t have to pay taxes in those countries. Their profits have increased enormously during the pandemic, and they never had to pay taxes in the jurisdictions they benefit from. This has created a huge concern for governments across the globe, especially due to the strains in the budget caused by the pandemic. According to the State of Tax Justice report, around 427 billion US dollars are lost on a global level every year, due to the tax avoidance practices of MNCs. The same report stated that India loses around 10.3 billion US dollars every year.

The profit-shifting tendency of large companies and the digitalization of businesses have led to the introduction of a new concept called a global minimum tax, where all countries have a uniform rate for corporate tax, preventing companies from shifting their profits to low-tax jurisdictions. It would also ensure that the companies would pay some tax in the countries where they operate.

How BigTech uses tax havens

BigTech or the major American digital giants such as Apple, Netflix, Amazon, Microsoft, Google, and Meta, have a dominating presence in the world of digital commerce. They earn enormous amounts of profits from all around the globe without being physically present, especially from India, due to its massive population. Thus, they can perform their operations in multiple countries without paying taxes, other than the country in which they are headquartered. Moreover, they set up many subsidiaries in low-tax jurisdictions like Ireland, where the current rate of corporate tax is 12.5%, to avoid tax. Only a handful of countries like India, France, Italy, etc. have introduced digital taxes. As many countries have not imposed digital tax, this calls for a globally applicable system of digital taxation. This is where the global minimum corporate tax deal can be of use.

What is the global minimum tax

Global Minimum CorporateTax Rate (GMCTR), sometimes called Global Minimum Tax (GMT) is a tax regime that arises from an international agreement, where the countries which are parties to the agreement would impose a minimum tax rate on the income of big corporations. The proposal was given by the Organization for Economic Cooperation and Development and endorsed by G7 and G20 countries. Its acceptance was announced on the 8th of October, 2021. The OECD has always been committed to its fight against tax avoidance by MNCs, ever since the London Summit in April 2009. This is a major step ever since the Base Erosion and Profit Shifting (BEPS) programme of OECD, which was a multilateral convention that sought to implement measures that decreased the opportunities for MNCs for tax avoidance.

The proposal

The main aim of the agreement is to implement a 15% minimum tax rate on the overseas profits of multinational companies if they make profits of 868 million dollars or more in their global sales. The proposal was accepted by 136 countries including India, amounting to around 90% of the global economy. The four countries that did not join the agreement are Kenya, Nigeria, Pakistan, and Sri Lanka. It compels the countries to make a law in favour of it by 2022 and to enforce it in 2023.

The agreement comes with a two-pillar solution, which would only affect those multinational companies that make profits of 868 million dollars or more globally. The implementation of the agreement would call for withdrawal of digital taxes or equalization levy imposed in countries like India and France.

The following are the two proposed solutions of the agreement :

Pillar one – fair distribution

Governments have the discretion to decide what their local corporate tax rate should be. But, if their companies are paying lower taxes in other countries, they could set their corporate tax rate at 15%. This would prevent companies from shifting to other countries for profit, and the governments would start receiving taxes from them.

Pillar two – stop competition over minimum tax

The second solution is that even the countries where these companies earn revenue can tax them for 25% of their excess profit. Excess profit of a company is defined as the profit that is in excess of 10% of its revenue. This would target digital giants like Meta, formerly known as Facebook, that offers its services globally, and profits in enormous numbers, without being present physically.

Importance and impact of the agreement

Why do we need a global minimum tax

The following are the reasons why we need a global minimum corporate tax:

Income from intangible assets like software and intellectual property rarely gets taxed at the home countries of the companies and goes to low-tax jurisdictions where the headquarters are located.
With the financial crisis brought by the pandemic, governments are seeking to prevent companies from profit-shifting and providing revenue to other countries.

What is the positive impact of the agreement

The following are the merits posed by the agreement:

This agreement would provide governments with more financial resources, especially to reverse the financial losses caused by the pandemic.
It mainly serves the purpose of stopping the financial diversion to low-tax jurisdictions, avoiding tax competitions among governments to attract foreign investment.
According to OECD, an estimated 150 billion dollars could be generated by the global minimum tax.
It would encourage companies to provide capital to their home countries.
It takes digital commerce into consideration.

What are the challenges posed by the agreement

The following are the disadvantages of the global minimum corporate tax agreement:

The first disadvantage posed by the agreement is that it causes a loss of sovereignty for countries in deciding their national tax policy. The uniform model for tax rates does not take the unique needs of every country into consideration.
It also received criticism for being beneficial only for the major developed economies, as it was first endorsed by the G7 countries, pressurising other economies into accepting the reforms.
For many countries, the rate of 15% is too low compared to their statutory rates of corporate tax.
Less developed economies heavily depend on corporate revenue. Once the corporate tax is lower, the tax imposed on individuals will increase, burdening their incomes. This would also decrease public expenditure in such countries, negatively impacting the accessibility of social services to vulnerable groups. As per Article 2(1) of the International Covenant on Economic, Social and Cultural Rights, governments have a duty to gather resources for fulfilling the human rights of their citizens.
Since all countries have not accepted the agreement, there will be a new form of competition, giving opportunities for MNCs to shift to those countries.

Implications for digital commerce in India

India’s assent to the agreement would impact digital taxes imposed by the government recently. In 2016, the Parliament of India enacted the Finance Act, 2016, which introduced the concept of equalisation levy that taxed the income by non-resident service providers through online advertisements, at the rate of 6%. It was introduced to give effect to the BEPS (Base Erosion and Profit Shifting) Action Plan. It would tax the income of foreign e-commerce platforms that profit from Indian customers. In 2020, the Finance Act, 2020 was passed which widened the scope of the imposition of equalisation levy on non-resident e-commerce platforms for providing online sales or services to Indian customers at the rate of 2%.

The terms have been widened in the 2020 Act in such a way that even foreign companies that do not fall under e-commerce could still fall under the purview of this Act, as customers usually make online payments to avail of the services of foreign companies. With the equalization levy, India collected Rs 1600 Crore in 2021, which was two times more than the previous year. The provision of equalization levy serves the purpose of providing a level playing field for local e-commerce platforms, to compete with foreign e-commerce giants.

Once the agreement comes into force, the digital tax provisions will be withdrawn, to bring the taxation system in line with the agreement. It is difficult to estimate how much revenue India would earn on the implementation of the agreement. The agreement is only applicable for countries that earn at least 868 million dollars in their global sales, and it is hard for many companies to cross that threshold. The agreement will not apply to those companies that earn revenue below the fixed limit. The agreement does not seriously threaten the sovereignty of our state in the matter of taxation, as it does not impact the local corporate tax rates. However, it is hard to predict if India will benefit more from the global minimum tax deal than under the present taxation system.

Conclusion

It is quite clear that the agreement mainly targets digital giants or BigTech, which earn enormous profits from countries all around the globe. It is important to note that this agreement does not impact the local corporate tax. This is only applicable against multinational companies that earn profits above the threshold set by the agreement. Once the agreement is enforced, the digital taxes imposed in countries like France and India will be withdrawn, bringing more uniformity and certainty in digital taxation. Thus, the digital giants have responded positively to the news of the deal. It is not fair to blame digital giants for “avoiding tax” when the taxation system in itself is flawed in most parts of the world.

Most countries are still stuck in the times when digital commerce was not born. It is only natural that companies would try to get the maximum profits and minimize the costs, which would involve shifting to low-tax jurisdictions. It is safe to say that the global minimum tax agreement has addressed this problem. The announcement of the global minimum corporate tax agreement and India’s acceptance of the deal, is a major step towards in our fight against tax avoidance due to the profit shifting of big multinational companies, particularly digital giants.

The agreement gains its relevance due to the recognition it gives to digital commerce. It does not restrict itself in its application to traditional brick and mortar industries. Though it pervades and violates the sovereignty of nation-states, it has no effect on local corporate taxation. However, it is too early to say if India will have significant benefits from the agreement, or if it is just a tactic to serve the major economies of the first world.

References

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/joinchat/L9vr7LmS9pJjYTQ9

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

iPleaders

Arrest shouldn’t be done as a routine : the Supreme Court perspective

Introduction

Meaning of Arrest

Provisions relating to arrest

Section 41: Circumstances when police may arrest without a warrant

Section 41A: Notice of appearance before a police officer

Other relevant provisions

The point of view of the Supreme Court

Joginder Kumar v. the State of U.P. (1994)

Facts of the Case

Judgment

Siddharth v. the State of Uttar Pradesh & Anr. (2021)

Facts of the Case

Issue

Judgment

Other relevant case laws

Arnesh Kumar v. State of Bihar (2014)

M.C. Abraham v. the State of Maharashtra(2002)

Conclusion

References

An analysis of types of mergers

Introduction

Theories of mergers

Efficiency theory

Monopoly theory

Disturbance theory

Diversification theory

Strategic alignment theory

Types of mergers

Conglomerate mergers

Pure conglomerate mergers

Mixed conglomerate mergers

Advantages of conglomerate mergers

Diversification

Synergy

Human capital

Cross-selling

Disadvantages of conglomerate mergers

Management costs

Tax advantage

Cultural barriers

The America Online-Time Warner merger

Horizontal merger

Advantages of horizontal merger

Economies of scale

Synergy

Lower competition

Customer base

Market share and profits

Disadvantages of horizontal mergers

Antitrust regulations

Cultural barriers

Management issues

The Dow DuPont merger

Vertical mergers

Forward vertical merger

Backward vertical merger

Advantages of vertical mergers

Economies of scale

Technology

Assurance

Disadvantages of vertical mergers

Monopoly

Diseconomies of scale

Discourages entry

The eBay-PayPal merger

Market extension mergers

Advantages of market extension merger

Technology

Market share and profits

Synergy

Customer base

Disadvantages of market extension merger

Cultural barriers

Management issues

Diseconomies of scale

The Eagle Bancshares – RBC Centura merger

Product extension merger

Advantages of product extension merger