All you need to know about order fulfilment agreement

By

-

December 7, 2021

msp-contract-agreement-big (1) — Image Source: https://rb.gy/pkobnt

This article is written by Arushi Agarwal, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. The article has been edited by Ruchika Mohapatra (Associate, LawSikho).

Introduction

Have you ever ordered any products online? Would you like to know how the process works, who are the parties involved from the beginning of ordering the product to the supply of the ordered product? To make this whole chain of the procedure work, various parties get involved in this by entering into an agreement termed as an order fulfilment agreement (“OFA”).

An OFA is a legal contract entered between a product distribution business and a manufacturer or supplier of products to fulfil the demand of orders placed by the customers through an e-commerce website.

There are various steps involved in this process, such as receiving, processing, delivery and returns of the orders placed by the end customers through e-commerce websites.

Parties to an OFA

There are 3 parties involved in an OFA namely;

The supplier, i.e., the entity which sells/manufactures the products.
The retailer i.e., the e-commerce websites which take the order.
The service provider, i.e., the party who provided services to fulfil orders such as Ekart or Delhivery.

The service provider needs to be compensated for the costs incurred for shipping and packaging. The OFA captures these details after the order is placed with the website i.e., the retailer in such agreement. Order fulfilment could be a third-party, such as Delhivery or Ekart, or the process could be company-owned. Websites such as Amazon.com engage third-party logistics providers for the entire process of order fulfilment. They need to enter an OFA clearly demarcating the rights and responsibilities of the parties. The cost and pricing for order fulfilment need to be mentioned under the agreement.

Websites like OLX, Quicker which provide a platform between buyers and sellers do not engage in the logistics of the transactions and hence, they do not need to enter OFAs. In such cases, sellers and buyers need to enter the shipping arrangement themselves. You must have noticed that when you book some furniture on OLX, you have to go and pick up the furniture from the seller’s house. Websites like eBay provide larger sellers with the option of order fulfilment services. The same is not extended to their smaller sellers.

When do parties enter an OFA?

This is a tripartite agreement i.e., an agreement or contract between three parties. An OFA is entered among the three parties to fulfil the needs of the customers. As soon as the customer’s order the product all the 3 parties, i.e., supplier, retailer and service provider get into work.

As a supplier, we need to enter an OFA with the retailer to showcase our products to e-commerce websites and give customers an option to order those products.
As a service provider, we need to enter an OFA with the retailer for taking the products from the supplier/s by setting out the terms of the agreement about the damage, risk of the product etc. and finally delivering it to the ned customer and to return the product/s to the supplier/s in case of default of product/s through a retailer.

Essential clauses to an OFA

The essential clauses to an order fulfilment agreement are discussed below:

Scope of the agreement

This clause ensures that the supplier, the retailer, and the service provider have agreed to establish an online store to carry out the transactions of the products ordered by the customer

Functions of the three parties

The supplier will manufacture the product which is ordered by customers and make it available for customers. These products will be listed on the retailer’s website.
The retailer will be responsible for running the website and will also be involved in marketing, order collection, and transmission of orders to the service provider.
The service provider must collect the product, pack, and ship it to the customers.

Sample clause-

“The Parties hereby have entered into this agreement for the purpose of conducting valid prescription medication transactions via an online telemedicine physician/patient consultation.”

Term clause

The term of the agreement should begin on the date of the agreement, The expiry date of the agreement or a renewal period should be mentioned under this clause. Usually, e-commerce entities enter short-term 1–2-year agreements with suppliers and service providers on a renewable basis.

Sample clause-

“This Agreement commences on __ for a period of _____ years and is to be renewed for a further period of 1 year based on mutual consent.

Branding clause

The retailer may insist that the service provider should be the exclusive supplier for all order fulfilment services of the retailer. If exclusivity is not possible, the retailer will insist on ‘white-labelling’ i.e., specifying the branding of the retailer on the packaging with little or no mention of the order fulfilment service provider’s name on the packaging.

Sample clause-

“X will be the exclusive supplier for medication and related product fulfilment services for Y.”

Shipping clause

This clause includes mainly 3 things:

Risk loss,
Choice of the carrier,
Shipping costs.

Title and risk concerning all orders and products shipped by the service provider or supplier should pass to the retailer or its customers upon the delivery of the products to the carrier at the point of shipment. The service provider must ship the products with the carrier chosen by the retailer to the customer. The retailer should have the option to re-transmit such order by an alternative service provider supported carrier. The retailer should pay the service provider shipping costs as agreed between the parties.

Sample clause-

“Service Provider shall be responsible for risks of loss, theft, destruction or damage to the product until it gets delivered to customers.”

License grant clause

The service provider grants a license to the retailer to use its database for an annual fee

Sample clause-

“X, hereby grants to Y a limited, revocable, non-exclusive license to use the database for an annual fee of INR_____ payable on ___.”

Product pricing clause

The service provider will deliver the product at the prices mentioned in an exhibit, subject to the exceptions provided in the agreement.

Sample clause-

“Suppliers shall have the sole authority to set pricing for the products.”

Guaranteed fees clause

The retailer under the agreement should agree to meet the minimum annual sales volume as promised to the service provider.

Sample clause-

“The responsibility shall lie with the retailer to meet minimum annual sales agreed with the service provider as decided in the agreement.”

Invoice preparation clause

The service provider is required to create a customer invoice with the retailer’s logo. Product return and customer service information are printed on the same under this clause.

Sample clause-

“Service providers shall submit the invoice of the payment, before the payment can be made, under the agreement for the supplies delivered, which would contain the retailer’s logo and customer information.”

Order placement clause

The retailer is responsible to collect orders and sending such orders to the service provider.

Sample clause-

“Retailers will be responsible to collect the orders from the Supplier and further send it to the Service Provider, who can do the delivery of the Product.”

Order fulfilment clause

This clause can have multiple kinds of order fulfilment practices like priority, standard and peak period. Priority orders are usually shipped overnight or delivered through second-day air freight across a country. Standard orders are usually shipped over a period of one week. During the peak period, the inability to adhere to the policies laid down will not be considered as a default under the agreement.

Sample clause-

“Orders shall be delivered to the customers as per the requirements of the customer, inability to fulfil the demand of customers n delivery orders during peak period won’t render the agreement void.”

A good fulfilment agreement may include these features:

99% of all orders will be shipped the same business day.
100% of rush orders received by___will ship that day.
There should be a picking accuracy greater than 99%.
100% of all returns should be processed within 48 hours.
100% of all inventories should be received within 48 hours.
80% of all calls received should be answered within 1 minute.
100% of all incoming calls must be answered.

Fulfilment fees clause

The retailer is required to pay the packaging and handling fees to the service provider. The surcharge can be applied as follows:

International shipment surcharge.
USPS priority mail insured surcharge.
Manual processing surcharge.

Sample clause-

“Retailers will pay the cost incurred from packaging along with handling fees to the Service Provider arising under this Agreement.”

Product return clause

This clause provides different situations in the case of the return policy such as;

Rejected returns.
Opened product.
Defective product.

Sample clause-

“Within ten days following termination of this Agreement and payment in full of outstanding amounts of due and payable to the Supplier. Hereunder, the Supplier shall provide the remaining balance to the Customer.”

Optional service clause

This clause comes into the picture, whenever any extra service is asked by any of the parties to the order fulfilment agreement. Extra Services can include Paper Inserts, Merchandise Inserts, Exclusive merchandise, Inner barcodes, Custom price stickers.

Sample clause-

“Supplier/Retailer/Service Provider enters into the agreement with the other party to fulfil the demand of the other party according to the terms and condition of the agreement.”

Representation and warranty clause

These are the following representations usually given by the Service Provider:
The service provider and retailer have the right and authority to enter into the agreement and must adhere to the terms and conditions of the agreement. The service provider represents that the products delivered by it will be substantially in the same condition as they were received by it from the suppliers.

This is the main representation given by the retailer:

The retailer represents that any content on the website will not infringe any intellectual property rights including the copyright marks of any third party.

Sample clause-

“With the knowledge that X is relying upon, thereon, entering into this Agreement, Y hereby represents, warrants and covenants as follows:

Y is a duly organised corporation and in good standing under the laws of India.
This Agreement constitutes the legal, valid, and binding obligation on the Y enforceable against X in accordance with the terms under this Agreement.
Neither the execution and delivery of this Agreement nor the consummation or performance of any obligations hereunder shall, directly or indirectly with or without notice or lapse of time in any material respect, contravene, conflict with or result in a violation or breach of any provision of, or give any person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any material contact to which Y is a party.
Y during this whole Agreement will adhere to the laws, rules, and regulations of India.”

Intellectual property clause

There should be a copyright and trademark notice along with the product and all promotional, packaging and advertising material indicating to the customers that all intellectual property rights are owned by the supplier. It is an obligation of the service provider to include through the product packaging.

Insurance clause

This clause will have the details of who will obtain insurance for goods in transit and up to what value must be specified; a formula for the same can also be created.

Retailers are required to obtain and maintain a license from a qualified insurance company at its own cost and expense.

Sample clause-

“Insurance of the products picked from the Supplier till the delivery of products to the customers and back to the supplier themselves, Retailers are responsible to obtain and maintain a license at its own cost and expense.”

Conclusion

An OFA is a legal contract entered between a product distribution business and a manufacturer or supplier of products to fulfil the demand of orders placed by the customers through an e-commerce website. The commercial incentive to enter into this agreement is that the parties are protected from future damages which may arise due to miscommunication between parties regarding their duties. The OFA covers the procedure to be followed right from the order placed by the customer to the e-commerce website to the delivery of the ordered product at the doorstep of the customer and by entering into the agreement, the parties to the contract ensure that their rights and liabilities are detailed properly and that the risk of any dispute that might arise in the future in either minimised or its resolution process is laid down properly.

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.

Micromax Informatics Limited v. Telefonaktiebolaget LM Ericsson (Publ)

By

Oishika Banerji

-

December 6, 2021

0

This article is written by Vishakha Singh, from Faculty of Law, Jamia Millia Islamia and the article is edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Table of Contents

Introduction

Each industry depends on norms and they are one of the significant wellsprings of productivity, advancement/innovation, and public welfare in an economy. Norms or standards are essential prerequisites that require specialized, quality, or security benchmarks for accomplishing network impacts in an industry. They likewise fulfill the capacity of setting down the least rule for manufacturing of products. Standards are especially required in ventures, like broadcast communications, computing, and different enterprises which influence the advanced economy, and are by and large set by Standard Setting Organizations (SSOs) or then again industry consortia in a community way or potentially shut way.

Notwithstanding, the course of standard-setting progressively includes licensed advances and may enlarge the degree against cutthroat anti-competition behavior. At the point when such standards require the utilization of a specific patent, it delivers the protected development as crucial for the modern norm and appears to intensify the power in the possession of the patent proprietor. Post standardization and after the incorporation of the patent, it becomes obligatory for a maker to get a permit from the patent proprietor to utilize the SEP.

The particulars of the case

The brief material facts

Ericsson sued Micromax Informatics Ltd. also, Mercury Electronics Ltd., a couple of months prior for supposedly infringing 8 of its telecom licenses for a scope of remote advancements, including 3G, AMR, and Edge. Ericsson as an individual from European Telecommunications Standards Institute (ETSI), a standard-setting association had resolved to allow irreversible licenses in regards to its SEPs in 2G, 3G, and EDGE innovation based on FRAND conditions.

The Delhi High Court had allowed an ex-parte interim injunction on the absolute first day even before Micromax could get a lawful notification that it had been sued. The witness Micromax Informatics Ltd. (Micromax) affirmed that Ericsson had mishandled its prevailing situation on the dominant position for GSM technology by:

Requesting unnecessary eminence depends on the deal worth of the whole phone rather than the worth of the licensed innovation and technology utilized in the telephone.
Filing the injunction before the court of law and taking steps to threaten Micromax’s inability to pay the royalty to the Securities Exchange Board of India, before it’s listing.

Issue raised

Ericsson challenged the order of CCI because it seemed to be arbitrary in nature, and that it didn’t have the jurisdiction handling this dispute. The jurisdiction was tested because the question was at that point a topic of pending suits, and was identified with patent encroachment, and not competition law. Also, it was contended that the issue of patent abuse privileges should be settled under the Patents Act.

Contentions (arguments) advanced on behalf of

Ericsson:

The nubs of petitioner’s claims were that:

On the allegation by Micromax on demanding royalty for entire mobile rather than just the patented technology, and for filing an injunction and threatening to release the report to SEBI, as an outcome of neglecting to pay the eminence.

[A] Ericsson claims that it was qualified for doing as such, under the Fair, Reasonable and Non-Discriminatory (FRAND) terms, by prudence of it being a piece of the European Telecommunications Standards Institute (ETSI), that granted licenses for the previously mentioned advances.

Ericsson asserted that it was an instance of a patent dispute, wherein, CCI couldn’t practice its purview. At the point when the CCI proceeded with the DG to research the matter, the move was challenged in the Delhi High Court.

Competition Commission of India:

The CCI set forward two convincing contentions to restore its jurisdictional power, by demonstrating that these two laws were not incongruous in nature-

[A] That the Patent Law in itself guarantees that there is no abuse of patent by accommodating obligatory authorizing as a remedy in personam.

[B] Fixing fines, issuing orders to cease to shut everything down is a portion of the remedies given as remedies in rem.

Observation of the court

In the meantime, Ericsson filed a writ petition by challenging this order battling that the Patent Act gave the cure of compulsory licensing in such cases and would supersede the Competition Act, 2002 (‘the Act’). Subsequently, the court managed whether or not there was any irreconcilable irregularity between the Patent Act and the Act.

It might give the idea that IPR and the competition law are incongruous on the grounds that while the previous monopoly, the last option looks to forestall against anti-competitive approaches emerging from something very similar. Anyway, as indicated by the court, the solutions for abuse of patent rights given by the two laws are very unique. The Patent Act gives the cure of compulsory licensing for abuse of patents for example a remedy in personam, while Section 27 of the Act gives different remedies that incorporate demanding penalties, order to stop all activities for example remedies in rem. In view of this examination, the court presumed that there was no beyond irreconcilable inconsistency between the two systems and the CCI could practice the jurisdiction despite the fact that there was a looming common suit for encroachment/infringement.

The second significant complaint raised was that there was no by all appearances abuse of predominance as Ericsson was just practicing their right as a genuine patent holder. The court broadly alluded to US cases like Rambus Inc. (FTC 2006) and EU cases like Motorola v. Apple, Huawei Ltd. v. ZTE. These choices broadly managed the topic of abuse of dominance by SEP holders by their inability to reveal patents during standard-setting interaction or looking for injunctions in court.

In view of these choices, the court inferred that there was plausible that recording order or requesting excessive royalty by Ericsson could lead to abuse of dominance. This is on the grounds that the strain of judicial proceedings could constrain the consumer to indulge in a forceful or one-sided licensing arrangement which would antagonistically influence the consumer by improving the probability of a hike in prices in the downstream market. The court likewise held that a forthcoming licensee like Micromax could likewise go into FRAND arrangements/record an antitrust suit while claiming its authority to challenge the patent privileges of the licensor under the watchful eye of a civil court.

Analysis of the judgment

Through this exemplary decision the court has explained that the system of IPR and Competition law are both significant for promoting innovation as they give various remedies and are consequently corresponding in nature. In any case, the order additionally experiences seeing the issue too shortsightedly on the grounds that whether or not CCI can likewise allow compulsory license as a remedy is still left open. This is on the grounds that Section 27 of the Act gives ample residuary power of conceding remedy for ‘passing some other orders as CCI considers fit.’ This inquiry becomes important in light of the fact that a simple penalty/cease to shut everything down by CCI may not be the best solution for implementers. Conversely, it could likewise be contended that CCI should shun assuming control as a royalty setter passing on FRAND negotiations to showcase members, yet deflecting abusive practices through stop/cease order.

One more huge contribution by this choice is that through its examination of global antitrust decisions it has depicted developing concerns in the SEP-FRAND law. These issues will turn out to be progressively applicable in India where the key part is implementers and not SEP holders. This incorporate abuse of predominance:

Because of refusal to permit license on FRAND Conditions or charging excessive license expense, after SEP holder gives such obligation to the Standard Setting Organization.
By virtue of initiation/danger of commencement of injunction/different procedures by SEP holder looking to drive implementer to finish up licensing arrangement.
Due to the inability to uncover by SEP holders as for the patents held opposite the norm during the course of standard turn of events and standard adoption.
The capacity of the implementer to bring abuse of predominance claims corresponding to challenging the validity of the patents under the steady gaze of the civil court.

Numerous implementers/SEP holders are hanging tight eagerly for the CCI’s choice on the benefits and the remedy it grants. Yet, this case is just the tip of the ice on antitrust issues in the SEP-FRAND worldview in India and CCI plays an immense part in explaining the particular issues enrolled above, yet this jurisdictional thumbs up by Delhi high court is a decent beginning.

How might the judgment affect India’s local brands?

The judgment is a lift for India’s local producers/manufacturers in their fight against worldwide patent holders. Be that as it may, while it surely approves the job and powers of India’s young market controller, it will most likely be pursued.

What is the stand of the government?

The Department of Industrial Policy and Promotion has as of late delivered a conversation paper on these issues, welcoming remarks from partners. It would be obvious assuming the government plans to direct this space, given the solid ramifications for not simply its flagship ‘Make in India’ and ‘Digital India’ programs, yet in addition its international strategy story on securing IPRs and encouraging development.

Quick invite ventures from the government would be a last word on the National IPR Policy and the reception of the National Competition Policy anticipated starting around 2014 and 2011 separately.

The legitimacy of Ericsson’s patents from the view of the grievance of Intex

The Delhi High Court in the case of Ericsson v. Intex, tracked down that, albeit the topic of the licenses in a suit ‘can’t be analyzed minutely or be deciphered in microscopically way at the break stage in a suit for encroachment of patent’, at first sight ‘the suit patents have all the earmarks of being valid’.In arriving at its decision, the court alluded to Intex’s assertions in its complaint to the CCI that Ericsson’s SEPs, ‘which structure a piece of the 2G/3G innovation, is fundamental to be applied/utilized by any Indian telecom/cell phone administrator’, leaving Intex and different organizations with no option other ‘than to carry out the SEPs claimed by Ericsson in the area of 2G/3G innovation, including the suit patents’. The court saw that the reason for Intex’s grievance was that Ericsson possesses SEPs that are indeed vital for media transmission devices. The court likewise featured Intex’s assertion in its protest before the IPAB, in which Intex conceded that the licenses in suit were straightforwardly identified with Intex’s business. The court observed that Intex had obviously conceded that Ericsson licenses were truth be told to SEPs. The court said that ‘unless the suit licenses are proclaimed as invalid in denial petitions recorded by (Intex), the equivalent can’t be permitted to be encroached by (Intex), who is additionally reluctant to execute a FRAND license’.The court in this manner reasoned that Ericsson’s licenses in the suit were valid and infringed.

Conclusion

The Delhi High Court perceived the jurisdiction of the CCI in this. The appellant and the respondent entered a Global Patent License Agreement, outside of the court, in this manner stopping the since a long time ago drawn question. Micromax likewise pulled out its complaint filed against Ericsson in the CCI, subsequent to consenting to a non-disclosure agreement, which keeps them from unveiling the terms and nature of the settlement. It can be deciphered with sureness from the court’s point of view, that statutes can’t be managed in outright confinement from each other. The soul of any legislation is to ensure the common interests perceived by the lawmakers. This can be reflected in the court’s emphasis on keeping a harmonious connection between The Patents Act and The Competition Act. The two laws might appear to be problematic to a layman’s eye, yet in the center of their plan, the two of them try to secure normal interests and accordingly don’t abrogate or go against one another.

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.

Effects of NIA Act on federal system in case of Unlawful Activities (Prevention) Act cases

By

Rachit Garg

-

December 6, 2021

0

This article is written by Divyanshi Singh, from Symbiosis Law School, Noida. This article discusses the Unlawful Activities (Prevention) Act and whether the NIA Act affects the federal system.

Table of Contents

Introduction

The National Investigation Agency (NIA) was established through the National Investigation Agency Act, 2008 as an aftermath of the 2008 terrorist attacks in Mumbai. The aim was to develop a national police force to investigate a selected class of criminal offences that constitute a direct threat to national safety. The erstwhile United Progressive Alliance Government launched the NIA to fight against terrorism.

UAPA or the Unlawful Activities (Prevention) Act, 1967 is one of the Acts introduced to the NIA Act schedule. The Agency has jurisdiction over all crimes covered by the statutes of India. Legal and political opinions disagree as to whether law permitting the Central Government to delegate an inquiry to any agency without the agreement of the State Government is permissible.

It is because public order and police are institutionally deemed to be the responsibility of the State government. Both governments have simultaneous authority in the realm of criminal legislation and criminal proceedings.

Investigations rerouted through NIA

The NIA Act gives the Central Government the right to take over an investigation under Section 6. It states that if a case of scheduled offences is lodged at a police station in India, the officer-in-charge of the station must submit the matter to the State Government. That state, in turn, will send it to the federal government as soon as possible, and the latter will determine whether the offence is a scheduled offence or not within 15 days of receiving it, based on information provided by the former or information obtained from other sources. It must also decide if the case is one that the Agency should investigate.

If the Central Government believes it should be investigated by the Agency, it must direct the Agency to conduct the investigation. Apart from that, if the Central Government believes a listed offence has been committed that requires investigation under the NIA Act, it may direct the Agency to investigate it suo motu.

After the Central Government has made its judgement, the State Government and the police officers investigating the crime must immediately forward all relevant documents and data to the Agency.

The officer-in-charge of the police station will be responsible for continuing the investigation until the Agency takes over. The Central Government may ask the NIA to register a case and conduct an investigation as if the offence had been committed in India for offences covered by the NIA Act. As a result, it is clear that State Governments have no influence on whether or not the NIA investigates the charges brought by the federal government.

The federal system and the separation of powers

The federal system of government was created to bring the country together as a political union made up of various independent, distinct, separate, and diverse political entities or administrative bodies.

The division of legislative powers between the Central Government and the states is the most essential, if not the most important, feature of every federal government. The three lists that make up the Constitution’s Seventh Schedule: the Union List, State List, and Concurrent List, reveal this crucial characteristic of the federal structure. Infringing on the jurisdiction assigned to one by the other would have a negative impact on the federal system’s smooth operation.

When it comes to investigating crimes committed in a state, the Supreme Court decided that given the many provisions in List I of the Constitution’s Seventh Schedule, there can be no dispute that the Central Government’s authority is limited in such circumstances.

Petitions challenging the UAPA’s constitutionality

In 2019, in order to declare it unlawful in that it breaches basic fundamental rights, Sajal Awasthi launched a Public Interest Litigation (PIL) against UAPA. He stated that implicitly restricting the right of dissent was in contradiction with Article 14 (the right to equality),19 of the Indian Constitution (the right to freedom of expression), and 21(the right to life). Moreover, it does not offer the so-called terrorist any chance to justify his case prior to his arrest.

The APCR (Association for Protection of Civil Rights) also submitted a petition stating that new Section 35 enables the center to identify a person as a terrorist and add his/her identity under Schedule 4 of the Act, whereas previously only terrorist organisations, groups may be notified. The amendment does not set forth the reasoning of a person being considered a terrorist; “conferring of such discretionary, unfettered and unbound power upon the Central Government is an antithesis to Article 14.”

Another instance of the draconian UAPA being used was when the Delhi Police arrested Umar Khalid (JNU student leader) and Meeran Haider and Safoora Zargar (two other Jamia Millia Islamia (JMI) University students) under UAPA. The JMI students were arrested for allegedly plotting to instigate community unrest over the CAA, which the police described as a “premeditated conspiracy.”

NIA Act’s constitutional validity

In Pragya Singh Thakur vs. State of Maharashtra (2011), the constitutional validity of the NIA Act was challenged before the Bombay High Court. The argument in the case was that because police are listed in the State List of the Constitution’s Seventh Schedule, the parliament lacks the authority to establish an agency for investigating crimes.

By taking note of the entries in Lists I and III and reading them together, the court dismissed the argument. It was decided that the NIA Act should be enacted by the parliament.

The court also stated that it has the authority to establish an agency to investigate the offences listed in it. The court also looked at Entry 8 of List I (Union List), which was titled “Central Bureau of Intelligence and Investigation.”

It was observed that if the parliament could establish such a Central Bureau of Investigation, then its powers could not be limited when it decides to enact legislation to establish a national investigating agency to investigate and prosecute offences affecting India’s sovereignty, security, and integrity, the security of states, and friendly relations with other countries.

Furthermore, the court stated that even if the state has the right to make a law relating to police, the broad wording of Entry-1 and Entry-2 of List-III, the Concurrent List, clearly shows that the parliament has the authority to implement the NIA Act, 2008.

The UAPA and Human Rights guarantees

The Executive Director of Amnesty International responded to the news that the Jammu and Kashmir police had invoked UAPA against journalist Masrat Zahra under Section 13 for ‘uploading anti-national posts on Facebook with criminal intentions to induce the youth and glorifying anti-national activities’ and Peerzada Ashiq for stories on ‘diversion of COVID testing kits’ by saying that it “signals the authority”. This intimidation of journalists jeopardises efforts to combat the COVID-19 outbreak. The police verified the journalists’ charges, stating that Masrat Zahra’s post may “provoke the public to break law and order” and Peerzada Ashiq’s tale “could cause fear or alarm in the minds of the public.” He also said that UAPA was used to “target journalists and human rights defenders who criticise government policies.”

The Jammu and Kashmir police had also used Section 13 of the UAPA against persons who were using VPNs to avoid the government’s longest-ever internet ban, which was enforced when it repealed Article 370 of the Indian Constitution, which divided the state into two centrally governed UTs. The government stated that it was done “to curb the misuse of the sites by miscreants for propagating false information/rumours.” If a person is charged under this Section, there must be a serious threat to India’s security, and any remark on social media should not be considered one “which causes or is intended to cause disaffection against India.”

Reasons for the problematic nature of UAPA

As a form of ‘security legislation,’ UAPA authorises the government to arrest citizens who may commit the crimes listed in it. For a variety of reasons, this legislation is problematic.

To begin, it prohibits disagreement. It criminalises even the most innocuous beliefs and political protests that produce “disaffection” with the state. It is a violation of citizens’ right to express themselves, as well as the collective right of groups and unions to broadcast their opinions, and UAPA primarily targets this right.
Secondly, it can simply be utilised to circumvent basic rights and procedures. Those apprehended under UAPA, for example, can be imprisoned for up to 180 days without being charged. As a result, it is a direct violation of Article 21 of the Constitution.
Thirdly, it grants the government vast discretionary powers and enables the establishment of “special courts with the ability to use secret witnesses and to hold closed-door hearings.”
It is being used to repress dissent through intimidation and harassment, endangering public discussion and press freedom and criminalising the exercise of civil liberties.
The UAPA authorises the parliament to limit individuals’ rights and freedoms in order to maintain India’s “sovereignty and integrity.” The government said that the amendment was introduced because it is individuals who perform terrorist acts and having just the authority to designate organisations as terrorist organisations would be useless because those persons might continue their operations under a different name. However, the question remains whether the parliament can ever categorise an individual as a terrorist simply because it feels he is implicated in terrorism without conducting any sort of investigation or trial.

Allegations of political affability

The NIA has already been accused of political prejudice, despite the fact that it is still in its early stages. Rohini Salian, the Special Public Prosecutor, was the first to make a surprising announcement. She has testified against Hindu radicals in the 2008 Malegaon bombing case. She claimed that once the new administration assumed power at the Centre, the Agency directed her to go light on the case on June 25, 2016.

In another case involving individuals with substantial ties to the RSS (the Ajmir Dargah bombing case), the majority of the key defendants were acquitted. It was alleged that the public prosecutor, in this case, was also dissatisfied with the NIA’s lack of attention during the trial.

In other cases, including the bombing of the Samjhauta Express and the bombing of the Mecca Masjid in Hyderabad, the NIA’s actions have been questioned. It’s worth noting that various state investigators and the CBI have conducted thorough investigations into terror-related crimes. The investigation of the Bombay assault (Ajmal Kasab’s case) and the parliament attack cases were done by state investigative agencies before the foundation of the NIA.

Conclusion

To crush opposition, the government has often invoked severe laws such as sedition and criminal defamation. These rules are ambiguous and unduly broad, and they have been used as political tools against critics, indicating a shift toward “thought-crimes.” In order to achieve the aim of this Act, the legislature has degraded human rights. The Amendment also runs counter to the mandates of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights. The preceding arguments have demonstrated how the amendment jeopardises its citizens’ fundamental rights and threatens the very existence of opposition.

When such heinous legislation breaches and deprives citizens of their rights, it is the Supreme Court’s responsibility to intervene and restore faith in democracy. This Amendment demonstrates the goal with which laws were enacted during the colonial administration in order to stifle various liberation movements under the guise of maintaining public order. The Act primarily criminalises activities based on ‘ideology’ and ‘association.’ As can be observed, the aforementioned are symptoms of a shift from democracy to dictatorship.

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.

Analyzing whether prior consent of the Central Government is mandatory to enforce an arbitral award under Section 86(3) of CPC against a foreign state

By

Rachit Garg

-

December 6, 2021

0

This article is written by Preksha Bothra. The article analyzes whether prior consent of the Union Government is necessary in accordance with the sovereign immunity and Section 86(3) of CPC.

Table of Contents

Introduction

The verdict of an arbitral tribunal, in either domestic or international arbitration, is termed as an arbitral award. Interim awards are also included in arbitral awards.

Domestic awards are governed by Part I, whereas foreign awards are governed by part II of India’s Arbitration and Conciliation Act (1996). An award passed as per the provisions of Section 2 to Section 43 of the above-mentioned Act is termed as a domestic award.

India recognizes foreign awards under the New York Convention(1958) and the Geneva Convention(1949) as it is a signatory to the conventions above. If a party in India receives a binding award from a country that is a signatory to the New York or the Geneva Convention and the award is made in a territory that has been notified as one of the convention countries by India in its official gazette, the award would be enforceable in India.

According to Section 47 of the Arbitration and Conciliation Act, any party seeking to impose a foreign arbitral award, also known as an arbitration award, must make an application to any High Court having jurisdiction and provide the following:

The original award or a copy certified by the country of origin.
The original agreement or a certified copy.
Any other evidence to prove that the particular award is not domestic but foreign.

If the award or agreement happens to be in a language not known or foreign dialect, the party must produce a translated copy that has been certified by the country of origin.

Although Foreign Arbitral awards are enforceable in India, the Central Government’s approval is not necessary.

What is sovereign immunity

When the sovereign or the State cannot commit any legal wrong and has immunity from criminal prosecution and civil suits, it is termed the doctrine of sovereign immunity.

The socio-legal structure demands an order of society free of inequalities, prejudice, and bigotry. The contribution of the educated and politically strong class is necessary to develop a nation that upholds these ideals and, therefore, the sanctity of the Indian Constitution. If practised appropriately, the doctrine of sovereign immunity would take a massive step towards forming such a society.

It is derived from the common law principle of the Britishers, i.e., ‘rex non potest peccare,’ which means that ‘the king can do no harm.’ A few reasons which make the doctrine appear truthful are:

The state cannot be sued by its courts without its consent,
The treasury of the crown would be affected by the award of compensation.

This concept promotes the theory that the king (of England in this context) cannot do any wrong because the king rules by the idea of divine right. The Indian law obtained the doctrine of sovereign immunity through the Britishers who ruled India for a little less than two centuries and brought this concept with them.

India has embraced the concept of sovereign immunity but only in a restricted sense. Under the Code of Civil Procedure of India, with the prior written consent of the Union, the foreign states, their organs, and instrumentalities can be prosecuted. Nonetheless, it is irrelevant when special laws hegemonize the matter (E.g., the Hindu Marriage Act(1955), the Muslim Women Act (1896)) or where the legal proceedings do not follow the nature of a suit, for example, an industrial dispute under the Industrial Disputes Act (1947). The Supreme Court of India, in the case of Ethiopian Airlines vs. Ganesh Narain Saboo (2011), restated the repetitive view that the doctrine of sovereign immunity was not absolute in India. It also stated that foreign states do not have immunity from legal proceedings involving trading and commercial activities and contractual obligations assumed by the foreign states in India.

What does Section 86(3) of CPC impart

Section 86(3) of the Criminal Procedure Code, 1882, states that “Except with the consent of the Central Government, certified in writing by a Secretary to that Government, no decree shall be executed against the property of any foreign State.” According to Section 86(3) of the CPC, no legislation shall be enforced against the property of any foreign state, except with the government’s consent. Subject to the declaration of the approval of the government, an order may be administered against a state.

Prior consent could not be brought in the ambit of the Arbitration and Conciliation Act for a binding and final arbitral award as it would defeat the sole purpose to enact the Act as mentioned earlier, which was to ease the procedural aspect of litigation less inconvenient for people with certain expectations.

With the increase in the significance and promotion of foreign investment in India, many agencies are being set up to deregulate and liberalize the Indian economy; multiple advancements have come to the forefront. The government is taking various routes to promote and broaden Foreign Direct Investment inflows into India. India has emerged as an alluring destination in so far as foreign investors are concerned. However, an increasing concern among the host country recipients is their recourse against these investors. When the investors are foreign-state-controlled, the situation becomes a lot more pressing because a thick veil of sovereign immunity safeguards them from Indian laws and statutes.

An arbitral award arising out of a commercial transaction can’t be enforced by a foreign state

With respect to KLA Const. Technologies Pvt. Ltd. v. The Embassy of the Islamic Republic of Afghanistan (“KLA Const”) (2021), the Delhi High Court, ruled that initial consent of the Central Government is not a definite requirement for the enforcement of the arbitral award against a foreign as specified under Section 86 of CPC. Furthermore, a foreign sovereign state is incapable of claiming sovereign immunity under Section 86 of CPC against executing an arbitral award vis-à-vis a commercial transaction. The Delhi High Court delivered this judgment while focusing on foundational doctrines of arbitration:

Effectiveness,
Impartiality,
Liberty of the party
Legal character

The Court propounded that as soon as the foreign state prefers to be a commercial entity, it is bound by the rules of the legal commercial ecosystem. It cannot be allowed to seek any kind of immunity which it would otherwise be allowed only if it were acting in its sovereign capacity. There were two enforcement appeals in the discussion, wherein the petitioners sought the implementation of arbitral awards against the foreign state entities, in the first petition, KLA Const. Technologies Pvt. Ltd., sought enforcement of an award against the Embassy of the Islamic Republic of Afghanistan. In the second petition, Matrix Global Pvt. Ltd. (“Matrix”), against the Federal Democratic Republic of Ethiopia’s Ministry of Education, attempted implementation of an award. The respondent foreign nations or states that failed to participate in the arbitral proceedings were the point of commonality between both petitions, due to which arbitral awards were passed without the consent of the respondents in both cases.

The Delhi High Court concluded with two primary issues:

Whether the consent of the Central Government under Section 86(3), CPC was a mandate to implement an arbitral award against a foreign state
Whether such an entity against the award could claim sovereign immunity passed vis-à-vis a commercial transaction.

The necessity of prior consent to enforce an arbitral award

According to the Supreme Court, Section 86(1) of the CPC is applicable only to suits as under Nawab Usman Ali Khan v. Sagarmal(1965). Both KLA and Matrix contested that there was no express provision under Section 86(3) to have the prior consent of the Central Government. Such a decree for passing a concluding and obligatory award would not be in accordance with arbitration law’s very principles, and tenets were derived under Union of India v. U.P. State Bridge Corporation Ltd.(2012) They are as follows:

Expeditious, efficient, and just trial,
Party autonomy, and
The restricted intervention of courts,

Moreover, an award enacted in international commercial arbitration in India under the Arbitration and Conciliation Act, Section 36 would de facto be regarded as a domestic award, which would additionally direct its enforceability. The ‘legal fiction’ produced under Section 36 of the Arbitration Act was primarily provided for the execution of the award as a law or decree and to present it with efficiency and legally; it did not indefinite terms change it into an order under the CPC. While raising these contentions, KLA and Matrix relied on Bharat Aluminum Company v. Kaiser Aluminum Technical Services Ltd.(2012) and Paramjeet Singh Patheja v. ICDS Ltd.(2006) The High Court of Delhi agreed with the position of KLA and Matrix, and the Hon’ble Court also instructed the Union of India to verify whether, under Section 86(3), the Central Government’s prior consent is a requirement. The Central Government replied via email, confirming that prior concurrence is not required since the process vis-à-vis passing an ultimate and binding arbitral award cannot be viewed as a suit for Section 86 of the CPC. The Delhi High Court additionally mentioned Indian Metals & Ferro Alloys Ltd., Cuttack v. Collector of Central Excise, Bhubaneshwar(1990). It applied the doctrine of contemporanea expositio, under which the court while interpreting a statute or provision gives a lot more importance to the interpretation put upon it by those whose duty is to analyze, administer and implement it. In layman’s terms, the Central Government’s approval was a fundamental factor that the Court kept in mind while interpreting the requirement of prior consent.

Applicability of sovereign immunity for enforcement of the arbitral award

Verification and implementation of arbitral awards against sovereign lands are not administered by any definite rules. In any event, Section 86 of the Civil Procedure Code (which governs the issue of foreign state immunity) stipulates that the central government must consent before the commencement of any legal action against a foreign state; enforcement proceedings are not excluded from this entitlement. Indian courts have given the word ‘suit’ a restricted meaning in relation to the fulfilment of arbitral awards. In a decision on a law governing arbitral awards (Nawab Usmanali Khan v. Sagarmal 1965), it was held that the court’s decision would not begin with a plaint or a petition of that nature. Therefore, an arbitral award execution proceeding cannot be characterized as a suit for purposes of Section 86 of the CPC. According to the Hon’ble Supreme Court of India, in Ethiopian Airlines v. Ganesh Narain Saboo (2011), sovereign immunity doesn’t apply to commercial transactions between foreign states. Contracting parties should be held accountable for their contractual and commercial activities.

KLA and Matrix relied on the United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004, to which India is a signatory but has not enacted as of now. The Delhi High Court, while agreeing with this position, used Articles 10, 17, and 19 that reduce the scope of foreign states from using sovereign immunity as a defence in disputes resulting in relation to commercial transactions as the basis of its discussion. Article 17 states that if a State enters into an arbitration agreement with a foreign natural or juridical person and submits the differences relating to a commercial transaction to arbitration, that State cannot request immunity from jurisdiction before a court of a different state which is otherwise qualified to deal with the procedures. This belief is also repeated in Ethiopian Airlines v. Ganesh Narain Saboo(2011). The Supreme Court is of the opinion that the international law doctrine of ‘restrictive immunity’ increasingly prohibits states from exacting sovereign immunity vis-à-vis a commercial transaction. Moreover, Uttam Singh Duggal & Co. Pvt. Ltd. v. The United States of America, Agency of International Development(1982) has also upheld that if a transaction in question is a private commercial activity and not an explicitly sovereign action, a foreign state cannot demand immunity from Indian courts. The Delhi High Court, given the above deliberations, held that both pleas seeking implementation of arbitral awards were maintainable.

Findings of the Court

The Hon’ble Court cited the provisions of Section 36 of the Arbitration and Conciliation Act and Section 86(3) of CPC along with various relevant judgments to make out the following summary based on principles of law-

The Central Government does not need to have given prior consent under Section 86(3) of the CPC if it is not essential to execute an arbitral award against a Foreign State.
A foreign state cannot claim sovereign immunity against implementing an arbitral award stemming from a commercial transaction.
Section 36 of the Arbitration and Conciliation Act treats an arbitral award as a “decree” of a Court for the restricted purpose of implementation of an award under CPC, which cannot be read in a method that would destroy the very underlying explanation of the Arbitration and Conciliation Act namely, expeditious, binding and legally enforceable interpretation of disputes between the parties.
Section 86 of the Code of Civil Procedure is limited in scope, and implied waivers would not be covered by its protections. With respect to a commercial contract between 2 parties, one being a foreign state in an arbitration agreement is an implied waiver by the Foreign State to preclude it from raising a defence against an enforcement action premised upon the principle of Sovereign Immunity.
When a contract between a foreign state and a party is in place, the foreign state cannot request sovereign immunity for delaying the execution of an arbitral award declared against it. On opting to become a commercial entity, the foreign state will have to be bound by the rules of the commercial legal ecosystem. While acting as a sovereign state, it is entitled to immunity but in the case of it becoming a commercial entity, it cannot be permitted to seek any immunity.

Applying the above-mentioned proved principles of law, the Hon’ble Court held that prior permission of the Central Government under Section 86(3) CPC is not required to enforce the two arbitral awards in question against the respondents. Holding that both the petitions are maintainable, the Court ordered the respondents to deposit the corresponding award amounts with the Registrar General of this Court within four weeks.

Conclusion

In my opinion, KLA Const. Technologies Pvt. Ltd. v. The Embassy of the Islamic Republic of Afghanistan judgment is highly commendable since it establishes a different standard for sovereign immunity and the requirement of prior consent in arbitration than in suits brought under the CPC. According to the Court, the foundational principle of arbitration is that if a foreign commercial entity is permitted by the courts to hinder the fulfilment of any arbitral award, it would lead to this pro-enforcement approach as the founding system of the international commercial arbitration to prove dysfunctional. It is therefore deemed to have been necessary to enforce this principle against the foreign entities whose main purpose is in relation to trade, carrying on business, etc. with India.

Finally, the High Court concluded that both appeals, in this case, were maintainable. The respondents were given four weeks to transfer to the Court’s Registrar their award sums. The petitioners were free to pursue attachment of the respondents’ assets if the respondents failed to deposit the money.

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.

Analysing confessions under Section 67 of NDPS Act, 1985

By

Diva Rai

-

December 6, 2021

0

e7998afc-22fa-11ec-af35-856765b9d9af_1633122759186 — Image source - https://bit.ly/3xWPqiV

This article is written by Rishabh Shukla, pursuing B.A.LL.B (Hons) from the Maharaja Sayajirao University of Baroda, Faculty of Law. The article discusses and examines in detail the provisions of Section 67 under the NDPS Act. Furthermore, it digs into one of the most disputed questions of law involved in the cases of the NDPS Act.

Table of Contents

Introduction

The Narcotic Drugs and Psychotropic Substances Act, 1985, commonly referred to as the NDPS Act, is an Act passed by the Indian Parliament that prohibits an individual from producing/manufacturing/cultivating, possessing, selling, purchasing, transporting, storing, and/or consuming any narcotic drug or psychotropic substance. Indians are possibly at high risk of illicit drug use inferable from propinquity with the significant poppy-growing regions, with the golden triangle lying in the northeast and the Golden crescent lying in the North-west. The area’s amicable climate with the medications makes India one of the largest consumer bases of various substance abusers. To maintain the normality amongst the people, the Narcotic Drugs and Psychotropic Substance Act, 1985 was introduced for the illicit drug use control in the nation, and the peculiarity of the same was fixed in the Narcotic Drugs and Psychotropic Substance (Amendment) Bill, 2011.

This article is a preliminary analysis of Section 67 of the NDPS Act, a provision that inter alia, by the virtue of Section 53 of the Act empowers an officer, during the course of any probe in connection with the Act, to be authorised to summon and examine any individual, including an accused, who is well versed with the facts and circumstances of the case, and to summon and call for information/records concerning with the contravention of any provision of the Act. It is pertinent to note that if a statement made by an accused to an officer empowered under Section 67 of the Act, then such statement will be admissible as evidence. It must also be noted that the provision is silent on the aspect of questions tending to expose the person to criminal charges and on statements amounting to confessions.

Scope of the article

This article does not discuss and examine all the provisions of the said Act, but it digs into one of the most disputed questions of law involved in the NDPS cases. These questions are as follows:

Whether or not the powers that are granted to an empowered officer under Section 67 of the NDPS Act are connected, and in pari materia with the powers that are granted under Section 161 of the Code of Criminal Procedure, 1973?
Whether or not the empowered officer is competent to record the confession of the accused under Section 67 NDPS Act?
Whether or not the confessional statement that is made by the accused before the empowered officer under Section 42 of the NDPS Act is admissible as evidence? If yes, then whether or not can it be used against the accused himself along with the co-accused?

Whether empowered officers Under NDPS Act can be termed as police officers

A “police officer” does not necessarily have to be an officer of police in the narrow view of being a person who is a designated police officer, attached to a police station. The question as to who is referred to as a ‘police officer’ has been an irksome issue that has been subject to litigation because of the fact that it is not clearly defined under any statute. The Apex court, over the years, has been dealing with this issue on a case-by-case basis. Different benches of the Apex Court of coordinate strength have often swung like a pendulum in determining this question. In a series of judgments, a broader view has been accepted and till date, never contradicted.

Relevant case laws

In the case of Toofan Singh v. State of Tamil Nadu, (2020), it was held that “Where an individual who is not a police officer appropriately so-called is vested with all the powers of investigation, which lead to the filing of a police report, such officials can be referred as police officers within the definition of Section 25 of the Evidence Act, 1872 as when they detect and prevent crime, they are in a position to forcefully extract confessions, and thus are able to accomplish their goal through an alternate strategy of drawing out involuntary confessions.” It was additionally held that in order to draw out the conclusion that the confessional statement made before an officer who is designated under Section 42 or Section 53 can be the sufficient ground to detain a person under the NDPS Act, without any non-obstante provision doing away with Section 25 of the Evidence Act, and without any safeguards, this would be a direct infringement of the constitutional guarantees laid down under Article 14, Article 20(3), and Article 21 of the Indian Constitution.

In the case of Raja Ram Jaiswal v. State of Bihar, (1963) it was held by the Hon’ble Supreme Court that under the Bihar and Orissa Excise Act, 1915, the excise officers are considered to be ‘police officers’, thus resulting in confessions statements made to them inadmissible in light of Section 25 of the Evidence Act. In the case of Badku Joti Savant v. State of Mysore, (1966) it was held by a constitution bench of the Apex Court that central excise officers were not considered to be police officers under the Central Excise and Salt Act, 1944. In the case of Raj Kumar Karwal v. Union of India, (1990) while deciding the question of a police officer in the context of the NDPS Act, 1985, the Supreme Court held that officers of Department of Revenue Intelligence cannot be considered to be police officers for the purpose of Section 25 of the Evidence Act. In the case of Kanhaiyalal v. Union of India, (2008) the ratio of the Karwal case regarding confessions by virtue of powers mentioned under Section 67 of the NDPS Act was made applicable to officers as well. This judicial disbalance continued in the case of Noor Aga v. State of Punjab, (2008) wherein it was held that officers of NCB are in fact considered to be ‘police officers’.

Admissibility of the confessional statement under Section 67 of the NDPS Act

September 16th, 1985, was the date when the legislature of India effectively laid down the Narcotic Drugs and Psychotropic Substances Act, 1985, in order to make severe provisions for the control of activities concerning narcotic drugs and psychotropic substances, to execute the provisions of the International Conventions on Narcotic Drugs and Psychotropic Substances, and to accommodate the relinquishment of property derived from, or used in illegal trafficking under the narcotic drugs and psychotropic substances. Till date, certain numbers of amendments have been incorporated in the Act with the purpose of making it more efficient and achieving the object of the Act.

Section 67 of the Act deals with the power to call for information, etc. According to the Section, any officer referred to in Section 42 of the Act, who is competent to be authorised on this behalf by a State Government or the Central Government, during the course of any enquiry in connection with the contravention of any provision of the Act, may:

(a) For the purpose of assuring himself, call for information from any person, to know whether or not there has been any contravention of the provisions of the Act, or any rule or order made thereunder.

(b) Require any person to deliver or produce any document or material that might be relevant or useful to the enquiry.

(c) Examine any individual who is well acquainted with the facts and circumstances of the case.

From the analysis of Section 67 in affinity with the whole provisions of the Act, it is evident that there is no power authorized to the empowered officer to record the confession of the accused, and if recorded, then, in that case, its admissibility is questionable. Unlike the Terrorist and Disruptive Activities Act, 1987, the NDPS Act is completely silent on the recording of confession or making such confession admissible according to the law. Yet, the said Section 67(c) empowers the officer authorised under Section 42 to examine or inquire any person who is well acquainted with the facts and circumstances of the case. Now the question that arises is, does the word ‘any person’ express the term accused as well? Also, why did the Indian legislature insert the word ‘enquiry’ in Section 67 of the Act instead of the term ‘investigation’?

The NDPS Act nowhere explains the word ‘enquiry’. The literal meaning of the word enquiry is an act of asking for information in the process of conducting an official investigation. However, the officer who is empowered under Section 42 of the NDPS Act has no authority to investigate the offences under the NDPS Act. Officers empowered under Section 42 only have the authority to enter and search the premises, seize the contrabands and arrest the person who is believed to have committed the offence under the NDPS Act. Such power of investigation or examination of an offence can only be handled by the officer-in-charge of the police station under whose jurisdiction the offence is committed under Section 156 of the Criminal Procedure Code.

Nonetheless, Section 53 of the NDPS Act provides authority to the Central or State Government to delegate powers of an officer-in-charge of a police station regarding the investigation of offences under the NDPS Act, by issuing a notification in the Official Gazette. If a particular officer is not appointed by the government then, the powers of investigation must be exercised only by the officer-in-charge of the local police station.

From the discussion made hereinbefore, it can be deduced that the term ‘enquiry’ is used under Section 67 of the NDPS Act for the circumstance where enquiry is needed prior to conducting the proceedings laid down under Section 42 which permits for entry, search, seizure, and arrest, and not the investigation. Such a contention can be strengthened with the provision of Section 52(3), which requires the officer under Section 42 to take the person to the officer-in-charge of the nearest police station, or to the officer empowered under Section 53, along with the substances seized.

In this manner, it can be concluded that the word ‘any person’ used under Section 67 cannot be, in any circumstances contemplated to include an accused person as before the said procedures under Section 42 by the empowered officer, such person can never be in the custody of that respective officer. In addition to the legislature, the term ‘enquiry’ is mentioned in the said section rather than the word ‘investigation’, which additionally features the intention of the legislature to limit the use of Section for the enquiry under Section 42 only, and not for the investigation of offences under the act.

This results in the appropriate answer to another question that the power under Section 67 is not similar to the power under Section 161 of the Code of Criminal Procedure, as the power under Section 161 of the Code can be utilised over the span of an investigation by the officer-in-charge of the police station, although, the power under Section 67 of NDPS Act can be exercised only by the officer empowered under Section 42 of the NDPS Act which aims to achieve object and purpose of Section 42 only, not in any other case. It implies that no confession can be recorded under Section 67 by an empowered officer under Section 42. Although, any confession, if any, under the NDPS Act can be recorded exclusively by an officer-in-charge of the police station who is conducting the investigation or by an officer who is appointed on his behalf under Section 53 of the NDPS Act.

Section 67 of the NDPS Act vis-à-vis Sections 161 to 164 of the CrPC

The term “enquiry” mentioned in Section 67 is not the same as the term “investigation.”

Section 67 is the precursor stage to “investigation”, which happens after the concerned officer under Section 42 has enough “reason to believe”, on the basis of information gathered in an enquiry made on that behalf, that an offence has been committed.

The term “examination” mentioned in Section 67 cannot be connected to the term “statement” mentioned in Section 161 of the CrPC.

As per Section 67(c) of the NDPS Act, the term used is “examine” any person who is well acquainted with the facts and circumstances of the case. The “examination” of such a person is again only for the purpose of accumulating information so as to assure himself that there is a “reason to believe” that an offence has been committed. This can, not by any stretch of the imagination, be related to the term “statement” mentioned in Section 161 of the CrPC.

Certain safeguards are provided under Sections 161 to 164 of the CrPC to the accused

Under Section 163(1) of the Code of Criminal Procedure, no threat, inducement, or promise, as has been laid down under Section 24 of the Evidence Act, can be made to coerce such a statement from a person. Further, if the confession is supposed to be recorded, it can only be recorded according to the manner as laid down in Section 164, i.e., before the Court of Magistrate and the statement should additionally be recorded by audio-video electronic means in the due presence of the Attorney of the person accused of an offence.

The confession of an accused can exclusively be recorded once the Magistrate confirms to the person making the statement that he is, in no manner, compelled to make a confession and that, after the knowledge of the situation, it can be used as evidence against him in the court of law. The Magistrate must then make a memorandum at the foot of the record, stating that he has warned the concerned person that he is not bound to make any such confession and it may be used against him as evidence. Most significantly, the Magistrate is vested with the judicial authority to administer the oath to the person whose statement is so recorded.

Thus, ideally, a proper police officer must investigate an offence under the NDPS Act. That way, all the safeguards that are laid down in Sections 161 to 164 of the CrPC would be available to the accused. Although, if the same police officer or any other officer designated under Section 42 of the Act records confessional statements under Section 67 of the Act, these safeguards would be tossed in the winds.

Conclusion

All these contentions without any doubt state that if a person is detained or is in the custody of any of these officers or the department for the infringing of the NDPS Act, then such officers are deemed to be considered as police officers. Nonetheless, any confessional statement that is recorded by them in the due course will not be considered permissible as evidence in contradiction of the person. As of this date, it has become very rigorous for the officers to prove their case, and they have to strive harder than before.

It will not only be restricted to the matter of just confessional statements, but also the recovery of the statements of the autonomous witnesses, the testimony of the concerned department of the officers, the sample report, and the purity report. All these things will hold more significance from now onwards. There is a list of offences along with the concerned court as mentioned in the Code of Criminal Procedure, but the NDPS Act provides “Special Courts” that are governed by the judges who hold the rank of no less than an Additional Session Judge (ADJ) to supervise these cases. So no cases other than cases of narcotics are to be heard in these courts.

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.

Novelty as a criteria for patentability

By

Diva Rai

-

December 6, 2021

0

what-is-novelty — Image source - https://bit.ly/3DtESJl

This article is written by Samyak Lunia from Bennett University and the article is edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Table of Contents

Abstract

“A Patent is not a license to make money, it is a license to prevent others from making money”- Kalyan C. Kankanala. Novelty is used as a principle to find whether the invention which has been brought for being patented is new. The researcher has begun with the introduction and has further divided the article into three chapters.

The researcher in the first chapter has discussed “novelty as criteria of patentability in India” wherein he has talked in brief about the three tests and has discussed the concept of novelty in India in brief. Further in chapter two has discussed “novelty as criteria of patentability in U.K. & U.S.” wherein he has talked in brief about the concept of novelty in U.K. & U.S.”. Continuing further researcher in chapter three as discussed “similarities and dissimilarities in the patent system of INDIA, U.K., & U.S.” wherein he has talked in brief about how the patent system function in these countries in the form of similarities and dissimilarities between them. The researcher in the end has concluded the article.

Introduction

In general, a patent is a negative right that gives the patent owner an exclusive commercial use option. However, the patent does not include permission to use or commercialize the invention. Sales approval will be granted separately. Therefore, patents are a legal means of creating a monopoly for a period of time and limiting competition. The monopoly restriction period aims to provide an incentive for the inventor and at the same time to properly weigh the rights of individuals and the rights of society. It should be noted that patents are being contested to create incentives for innovation and secure the necessary investment in production, marketing, and R & D. Despite this opposition, patent law as part of the traditional IPR system has strong domestic roots and is compliant with various national laws.

Novelty and industrial applicability are the basic criteria for determining the patentability of a subject. Novelty shows the difference between invention and discovery. In the US this distinction can be seen from decades in the form of “product of nature doctrine” and other similar rhetoric elsewhere.

The patent which is granted to living matter is commonly known as “bio-patents”. Living matter can be patented to different extents in different countries. However, the traditional standards of novelty and non-obviousness also apply to living matter, so new life patents are based on differences in the properties and uses of new life and known substances. Whether it is possible to obtain a patent simply by isolating microorganisms and genes from the natural environment also varies from country to country.

For example, in the United States, a “purified and isolated” compound is considered a patentable subject if the application meets the legal standards of patentability. However, gene patents cover purified and isolated genes, but not naturally occurring genes. However, in the European Union, “biological materials isolated from the natural environment or produced by technical processes may be the subject of the invention, even if they were previously generated in nature.” This is clearly a delicate and often controversial issue, which is the standard for granting patents on living things.

Novelty as criteria of patentability in India

In India as per Patent Act, 1970 a product cannot be patented merely on the ground of a new form being formed of a known substance or on the ground that new use has been discovered of a know substance. India is one of the member countries that has signed the TRIPS Agreement and is a party to this Agreement they have enumerated “Patentable Subject Matter” within its domestic legislation under Article 27 of this Agreement which says that patent will be granted for any invention in all the technology field, whether product or processes and a proviso has been added to it which says that the invention must be novel, have an inventive step, and industrial application must be fulfilled. So, in India, these are the three requirements or tests which need to be passed in order to qualify an invention as an invention.

The term patent means the right granted to a person who invents or discovers a composition of a new and useful process, article, product, or substance, or a new and useful improvement thereof. The purpose behind introducing patent law is to facilitate new technologies, scientific research, and industrial processes. If an inventive step improves a product significantly, it is called an invention. As per Patent Act, 1970, patents are granted not only for “new inventions” but also for “inventions” which shows an inventive step in an invention.

It is always said that we should distinguish between invention and discovery. However, there are principles under the patent law that says that mere discoveries or new ideas do not make a product new and inventive and hence they can’t be patentable. On the other hand, it is said that a product will be patentable if those discoveries have technical contributions or technical aspects.

It is a well-known fact that mere ideas do not provide patent protection. The principles of patent law state that ideas and discoveries cannot be so patented. It does not form part of state-of-the-art technology or technique. Only the practical application of ideas and discoveries leads to patentability. As is often the case, the actual application of the discovery, if any, is patentable. The ability to use discoveries and ideas to convey how they can be used meaningfully can lead to patentable inventions. The concept of rocks in Ramayana is just an idea explained by a sacred epic. The actual use of it does not lead to the exclusion under section 3 of the Patent Act.

Lack of novelty is commonly referred to as “anticipation” and is determined by factors such as previous publications, commercialized products, published names and usages, and selected inventions. The term anticipation is not defined under the Patent Act but there are sections (S. 29 to 34) under Patent Act that helps us in identifying what anticipation is not. If the prior art is present in the anticipation test, then the claim is made if the prior art research permits the use of the claimed invention. Prior art testing may not need to be repeated, but expert opinion may be considered to better identify expectations using appropriate expertise. Predictable results can also be identified by what is shown as a result of what is described in the prior art, whether it is a product or method within the claims.

In India, while looking into the matter of whether the patent application is anticipated or not, the authority will look at whether that invention which has been brought before them are disclosed in a patent or they will look whether prior to applying any other document is published or not. If it satisfies that it was present, then the patent will not be granted otherwise it will. The inventor who is seeking for patent as one right which he can use when the publication related invention is published without his consent and he was able to prove the same, then in such case it cannot be said that the application is anticipated. We can refer to the judgement given in Lallubhai case, and we can see that novelty is one of the important criteria in determining the patent eligibility as it is unknown and unused information that gives a competitive advantage to the inventor.

In the case of prior disclosure by the inventor, the Patent Act provides a one-year grace period for patent applications if the invention is described in front of an association of experts or published in the business of such an association of experts. The grace period can also be used to conduct appropriate investigations, such as for data for regulatory approval. Not available if the invention is commercially sold or processed in India.

However, the use or publication of the invention after filing a provisional patent application in India is not considered anticipatory. The following ground will be considered as major consideration while determining novelty such as public working, public display, and traditional knowledge which are defined under Section 32, Section 31, and section 3 (p) respectively. Inventions, whether verbal or not, can also be expected through knowledge in local or indigenous communities in India or elsewhere.

Novelty as criteria of patentability in U.S. & U.K.

In U.S. the requirement for novelty means that something like that cannot be found (exactly) with the latest technology. The most harmful state-of-the-art technology often comes from the inventor or the owner himself. This can happen inadvertently as suggestions and presentations that are considered available only to a limited audience are published online by various host organizations. In the United States, there is a one-year grace period after publication by the inventor, during which patents can be applied for. One year later, even if this disclosure is made by the inventor, the public disclosure may be used to reject novelty or obviousness. In most countries, there is no grace period and publications are state-of-the-art from the date of publication.

In Graham v. John Deere Co. case, the US Supreme Court established certain factors to consider when determining whether an invention is obvious such as the scope and content of the prior art, the difference between the prior art and the disputed claims, and the level of the average person skilled in the related technology. The case also held that courts may also use secondary considerations for determining whether an invention is obvious by looking into the following factors such as long-term but unresolved needs, commercial success, long-term but unresolved needs, and the inability of others to resolve the issue.

In the U.K., patents cannot be granted for inventions that are not new. In the UK and most other countries, there are fairly stringent criteria for assessing novelty. Any disclosure, whether in writing or not, anywhere in the world, if the disclosure is made before the priority date of the application, may be harmful to the patent application. Prior disclosure can destroy a patent application, so it is important to keep the invention confidential until the application is filed. However, this is not all. The invention may appear to be disclosed, but in reality, it can be patented.

Similarities and dissimilarities in the patent system of india, U.K., & U.S.

The Indian, US, and UK patent systems appear to be essentially similar in a way that they give all inventors specific rights for a specific period of time in exchange for disclosure of the method of the invention. In addition, the approach to patentability in these three countries plays an important role in facilitating innovation, and it varies slightly from region to region but is fundamentally similar. However, this does not give a complete picture of international patentability. Well-known scholars claim that the European patent system is about the same as the US patent system, but I think there is a big difference between the two patent systems.

So, when we compare and analyse the English patent law and the patent law of the signatories of the European Patent Convention, we can see that the substantive patent law of these countries remains the same, but there is a difference in the patent law when we see legal traditions and procedural law of those countries. We can see the difference in the patent law of these two countries in one of the famous cases of patent law which is Remington v the Improver, where British and German courts have been shown to be different in terms of infringement.

The test of evidence that a British court considers when deciding whether to revoke a patent is a test of probability. However, in the United States, clear and compelling evidence is required to invalidate a granted patent. The UK courts have some disclosure requirements between the comprehensive and strict US disclosure requirements and the European approach, which does not require disclosure unless specifically required. Therefore, the UK Disclosure Rules are to disclose the document you are calling and the document that harms your case or the case of another party or supports the case of another party.

Other similarities and dissimilarities can be seen from the point of who will get a patent for their invention first. U.K. and India follow the similar method where the patent is granted to the person who has first filed for it that means a first-to-file system, whereas the same is not the case in the U.S. where the patent is granted to the person who has first invented it that means first-to-invent system and under this if they two people are claiming for the same invention, then in such USPTO will decide the matter and see who has the first idea for the invention.

Other similarities and dissimilarities can be seen from the point of the grace period. India and the U.S. follow the grace period policy, which is of 12 months or 1 year, whereas the same is not followed by the U.K.

The main differences between the U.S., U.K., and Indian patent systems are related to business method patents. Business method patents have been patented in the U.K. or other European countries. Business method patents are granted in the U.S. as long as they are more than just an implementation of a known business process. In India, the business method itself is not patentable, but it can be patented if the new method is aimed at solving technical problems and is systematic in nature. The first-to-file novelty and priority provisions of the India and U.K. are very different from the first-to-file novelty and priority provisions of the U.S. The latter is because it is novelty and priority considering the first date of invention, not the date of first-to-file. This leads to a complex definition of state-of-the-art technology under US patent law.

Conclusion

To conclude we can see novelty as one of the major competencies which is being looked at while determining whether the particular invention will be patentable or not. We can also see the similarities and dissimilarities in patents which are prevalent and being followed in India, U.S., and U.K. Also, we can see in India that a product cannot be patented merely on the ground of a new form being formed of a known substance or on the ground that new use has been discovered of a known substance. For an invention to be patentable they will have to pass the three tests of patent such as novelty, industrial application, and inventive step.

References

Acts/ Regulations/ Rules Referred

1. Patent Act, 1970

Articles

1. A comparative analysis of patentability threshold in India, United States and United Kingdom, by Disha Adhikary, Amogh C. & Shweta Mallya.

2. Novelty: An Indian Perspective, by Pankaj Musyuni (18 December 2017).

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.

Framework for protection of investors in securities market

By

Shoronya Banerjee

-

December 6, 2021

0

Public offer on securities — Image Source - https://rb.gy/epipn9

This article is written by Rahul Kumar, from the Central University of South Bihar and the article is edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Table of Contents

Introduction

The concept of Joint Stock Companies had its origin in the middle of the nineteenth century. This concept helped to pull small savings from the general public into the company’s treasury and to issue shares to the investors in lieu of that. The investors control the management group through their representatives at the Board meetings and other company meetings where the affairs of the company are managed by professionals. The close contact and association which are present in a partnership firm amongst the investing partners do not exist in a Joint Stock Company between the management and the investors. It is often said that after the invention of the railroad engine, the most important innovation of the nineteenth century was the Joint Stock company with limited liability for the investors also with separation of ownership from the management in the conduct of the business of the company.

Need for protection the investors

However, the nature of company management requires establishing some mechanisms for the protection of the investors. The need for investors protection arises due to the following reasons:

To instil confidence in the investor’s mind

An investor’s confidence is very essential for the smooth and success of the capital market. When their confidence is shaken or when they lose their confidence in the market there will be a severe jolt in the capital market. Generally, most investors invest their money with an expectation of marketing out of their market. If it does not happen then they generally come away from the market. Such a situation is not at all desirable so it is most important to build up investor confidence by creating a conducive environment for investment through investment protection measures.

To create a conducive measure for investment

A proper and sound investment climate is very essential for industrial development. The corporate customers will find it easy to raise capital at affordable minimum cost only when there is a sufficient and secured investment climate. In fact, a strong investment protection measure will create a healthy investment climate.

To ensure transparency in dealing

The investors would be able to secure their prospective investment only when there is transparency in dealings of companies and all the intermediaries connected with the stock market. The investment decision will be taken on the basis of full disclosures made by companies in various areas. Investor’s protection measures will help in bringing transparency in various important areas.

To create a vibrant capital market

Investors will freely enter into the capital market in large numbers only when their interest is fully protected from all angles. This increased participation would develop the market and once the market gets developed, it would again attract more and more investors. So, investor protection would indirectly promote a vibrant capital market.

To regulate the market on sound lines

Investors’ protection measures in the form of regulations would make all market players work within the ambit of regulations. It would lead to the smooth and stable functioning of the capital market on desired lines.

To create discipline in the market

All investors’ protection measures aim at minimising unhealthy practices, undue speculation, unnecessary malpractices in the market. It would go a long way in creating a good discipline among market players.

To create accountability among market players

A sense of accountability is created among all players in the market by means of laying down strict disclosure norms and taking stringent investors protection measures. This accountability makes them comply with all requirements failing which they’re answerable to the regulatory bodies.

To create awareness among investors

Above all investors must be aware of their own rights and liabilities, grey areas of frauds, the type of frauds that can take place, etc. So investor protection measures also aim at educating the prospective and present investors on these aspects this would enable them to protect themselves from all unhealthy and fraudulent practices by becoming saviours of their own protection

Factors affecting investor’s interest

There are many factors that affect investors’ interest and thereby cause dissatisfaction among them. The prominent causes are as below:

Price rigging

It is nothing but the artificial manipulation of prices of securities by forming cartels by bulls and bears. They don’t allow the market forces of demand and supply to play their due role. These artificial prices create a market wind in either direction to which innocent investors become victims.

Insider trading

It refers to the purchase and sale of securities by persons who hold sensitive information about the company due to their fiduciary relationship with that company. In other words, insiders get regular profits at the expense of the majority of uninformed investors.

Excessive speculation

Speculation, if it exceeds its limit, would affect the interest of investors to a greater extent. If brokers, in order to earn more and more profits due to a probable rise in price may engage themselves in a buying spree that is beyond their capacity. It would result in the non-fulfillment of their settlement promises which may lead to a market crash. Finally, the innocent investor suffers as a result of that.

Lack of transparency

In order to attract investors, some companies may present a rosy picture of their financial position by manipulating their system of accounting. The accounts are not at all transparent in their disclosures again the stock market dealings are also not transparent.

Short selling

Short selling refers to selling scripts without owning them by bear cartels with the anticipation that these shares could be purchased at a much lesser price in the future when delivery would be actually made. It leads to extreme volatility in the market.

Restricted trading

One of the serious grievances of the investors is restricted trading in stock exchanges. Though there is an increase in the turnover of stock exchanges it is restricted to a few shares only with the top ten shares accounting for about eighty percent of the turn-over and top hundred shares ninety percent of the turnover.

The dominance of few stock exchanges

Though many stock exchanges are functioning in the Indian alliance, shares of the dealings are held in the Bombay Stock exchange and National stock exchange only. The regional stock exchanges gradually lost their importance.

The dominance of institutional and foreign institutional investors

The institutional investors particularly the foreign institutional investor dominance is greater in the Indian capital market. They dictate the terms in the market. They account for nearly eighty percent of the new issues. The ownership of equities by individuals and households is gradually coming down.

Grievances against listed companies

Moreover, the investor’s complaint against listed companies in various ways. Some of these are as below:

Non receipt of share certificates,
Non receipt of refund orders,
Non receipt of duplicate securities,
Non receipt of certificates after,
Non receipt of certificates after splitting,
Non receipt of interest on listed debentures etc.
Grievances against members of stock exchanges

Investors have many grievances against the members of stock exchanges. Some of these are given below:

Non receipt of delivery of shares,
Non receipt of dividend,
Non receipt of right shares,
Non receipt of bonus shares,
Non receipt of sell proceeds,
Disputes relating to non-settlement of accounts.

Investor’s protection measures

Many measures have been taken by different agencies. They can be studied under the following heads:

Measures taken by stock exchanges,
Measures taken by Company Law Board (Now NCLT),
Measures Taken by SEBI,
Measures taken by the Court,
Measures taken by the Central Government,
Measures taken by the Department of Company Affairs.

Measures taken by stock exchanges

An investor service sale has been established in Bombay stock exchange to deal with all matters involving complaints against listed companies and also against the members of the exchange. A similar cell investor’s grievances has been set up in the NSE.
An investors protection fund has been set up in the national stock exchange as a trust to compensate investors’ claims which may arise due to non-settlement of obligations by the defaulting trading members. In Bombay Stock Exchange also a stock exchange customers protection fund has been created in the interest of the investors.
A trade guarantee fund has been introduced in the BSE to guarantee the settlement of trades so that there may not be any default by members in payment. This will protect the interest of the investors.
To remove the existence of excessive speculation many reform measures have been taken and strictly implemented. For example, Introduction of Strict Transparency and disclosure norms, abolition of Badla system, carry forward of schemes, and adoption of rolling settlement etc.
SEBI has taken many positive steps to remove the various unhealthy practices that are commonly found in stock exchanges. The common unhealthy practices are insider trading, price rigging, circular trading and trading in fake shares etc. The SEBI has laid down various rules and regulations to curb such practices and these rules and regulations are subject to review and revision from time to time.

Measures taken by the Company Law Board (Now NCLT)

Wide powers have been given to the Company Law Board of NCLT to protect the interest of investors as well as depositors under the Companies Act. However, some of the important steps are as below:

Under the Company Act, Every Investor has a right to get any extract or copy of the documents of the company or inspect any documents of the Company. This right should be exercised through the company law board and tribunal only. It facilitates complete transparency of all documents of the company.
Company At has also given the right to any person to inspect minutes books of all general meetings and the Company Law Board or Tribunal may direct that a copy of such minutes shall be sent to that person.
To prevent oppression and mismanagement, the Central Government may appoint such a number of persons as the Board specifies on the basis of a written order of the Company Law Board or Tribunal to safeguard the interest of the shareholders under Section 408 of the old Companies Act.
To safeguard the interest of shareholders and also in public interest the Company Law Board may prevent any change in the Board of Directors which might affect the company prejudicially as per Section 409 of the Old Companies Act.

Measures taken by SEBI

A company comes into existence only out of the shareholder’s willingness to invest a part of its resources at risk. A shareholder cannot leave the company unless some other investor steps into his shoes. So, investors’ confidence is very essential for capital formation. However, SEBI has taken a number of steps to safeguard the number of investors by framing many rules and regulations. However, some of the important measures by SEBI are as below:

The SEBI has issued and published detailed guidelines on rights and responsibilities of investors and also various aspects of capital market dealings and operations. It enables the investors to be aware of their rights and responsibilities.
SEBI has also formed a separate investors grievances and guidance division at its head office.
An automated complaint handling system has been introduced to deal with all types of investors’ complaints.
The disclosure norms for public issues have been made more stringent and to simply the issue process and abridged prospectus has been permitted.
The promoter’s contribution for each public issue has been fixed by SEBI. The minimum contribution should be 20% of the total issue of the shares.
All risk factors involved in an issue should be disclosed prominently in the prospectus so that an investor can evaluate that issue before taking any investment decision.
To avoid all malpractices connected with allotment of shares a representative of the SEBI supervises the allotment process. He must be present at the time of finalisation of the basis of allotment.
It has been made mandatory for the brokers to disclose the transaction price as well as their brokerage in the contract notes issued by them to their clients.
To prevent the fraudulent practices in physical handling of shares, dematerialisation has been introduced. Separate guidelines have been issued with regard to the depository services and also for various intermediaries associated with it.

Measures taken by the Court

Generally, all regulatory bodies like SEBI, RBI, and DCA have an inbuilt system to redress the grievances of investors. In case the investors are not satisfied with the orders of the regulators, an appeal can be made to the security’s appellate tribunals against those orders. If the appellate tribunals also fail to satisfy aggrieved investors, then the judiciary is resorted to as the last destination. So, the court will interfere only as a last resort to redress the grievances of investors.

Measures taken by the Central Government

To protect the interest of investors and to promote investors’ education and awareness the Central Government has established a fund called Investor Education and Protection Fund. All amounts that remain unclaimed or unpaid at the hands of the Companies must be transferred to this fund. This Fund will be utilised to protect investors’ interest and to promote investors’ awareness through multimedia, publicity, seminars, and conferences. This fund is administered by a trust.

Measures taken by Department of Corporate affairs

The investor’s interest is protected by MCA in the following ways:

One investor grievance officer has been appointed to handle all complaints from investors.
As soon as the complaints are received from investors, they are acknowledged by giving a specific number for each complaint.
The complaint is taken to the company concerned for necessary adjustments.
The status of the complaint is also displayed on the DCA.

Guidelines to investors

Deal with the registered number of stock exchange. If you are dealing with a sub-broker, make sure that all bills and contracts are made in the name of a registered broker and sub-broker.
Insist that all your deals are done in the trading ring or through the exchange.
Give specific orders to buy or sell within the fixed price limits or within the time periods within which orders have to be executed.
Insist on Contract notes to be passed on to you at the right time when orders are executed. Make sure that your deal is registered with the stock exchange and on his computer.
In the case of a dispute this will help to trace the details of the deal very easily.
Collect a settlement table from the stock exchange mentioning the pay in/ pay out days. Each stock exchange has its own trading periods which are called settlements. All transactions done within this period are settled at the end of it. All payments for shares bought a share delivery take place on the pay in debt.
Keep separate records of dealings in specified shares and non-specified shares.
Execute periodic settlement of dues and delivery of shares to avoid accumulations of transactions.
Insist on delivery. If the company returns your papers and shares with objections, contact your broker immediately.
Ensure that shares bought are transferred in your name before the company book closure debt. This is necessary to make sure that you receive benefits like dividends, interest and bonus shares.
Complain if the broker does not deliver the shares bought in your name. Proceed to contact another broker with the bill or contract given to you by the earlier broker and the later broker will purchase the share on your behalf. In such an event the first broker will have to pay the difference in price.
Do not sell shares that are not transferred in your name after the book closure as these are not valid in the market.
Do not sell or deal in shares where even one of the holders has passed away. In cases where the holder has died, a succession certificate is necessary. In cases where one of the joint shareholders passes away, the surviving holder should send the shares along with the debt certificate to the company.
Do not expect the money for shares to come immediately. It will take at least seven to fifteen days from the date of transaction which is now made quicker in Demat form.

Do not take delays or harassment lying down. You have to complain to the grievance redressal forum or SEBI in case of delay or harassment.

Conclusion

Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future and be sold at a higher price and protect investors. Various guidelines have been framed accordingly by the virtue of laws.

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.

Analysis of pigeon-hole theory under law of torts

By

Sneha Mahawar

-

December 6, 2021

0

This article has been written by Ria Verma, a student at Symbiosis Law School, NOIDA. This article aims to critically analyze the pigeon hole theory and distinguish it from the other theories of general principles of liability.

Table of Contents

Introduction

We witness a wide range of common phenomena in our day-to-day lives- an article in a magazine or a newspaper that lowers the reputation of an individual in the eyes of others, wrongful imprisonment of an innocent to deaths caused by potholes because of the negligence of the authorities.

It is a difficult task to give one particular objective of the law of torts when a wide number of situations come into its purview. In a society, conflicts of interests arise and can threaten to cause or cause damage to others in the form of injury to reputation, conversion of property, injury to a person, etc.

The area of law penalizes individuals for ‘socially unacceptable’ behavior, or behavior that deviates from an established code of conduct, and causes harm to an individual or a group of individuals. The aggrieved party can file for damages or an injunction, as applicable in a particular case.

The primary objective of the law of torts is to give compensation to the victims or the family of the victims. Deterrence, that is, preventing other individuals from committing the same act or omission, is also one of the primary objectives of the law of torts.

Damages are awarded to the plaintiff to restore him to the position before the tort occurred. The injury caused would be inclusive of any injury to the plaintiff’s reputation, reduced earnings, mental agony, etc. Depending upon the facts and circumstances of the case, the conduct of the defendant and the injury suffered by the plaintiff is scrutinized. A proportionate amount of monetary compensation is then awarded to the plaintiff as damages.

A very recent example of the Astroworld tragedy is an excellent example of what could be considered a tort. The organizers and performers of the event have been sued for gross negligence, breaching their duty to provide a safe environment and to hire sufficient medical personnel. The lawyer representing the 125 victims of the tragedy has filed for damages as high as $750 million.

There has been a never-ending dispute on whether certain offenses and wrongful conduct come under the law of tort or law of torts. Lawyers have often used the words “tort’ and ‘torts’ interchangeably whereas some think that the difference in terminology is quite significant.

The difference in the usage of letter ‘s’ provides quite a crucial point of view. It distinguishes between the theories given by two eminent jurists John Salmond and Percy Henry Winfield.

Essentials of a Tort

An act or an omission

The very first essential for classifying wrongful conduct as a tort is the commission of an act or the omission from committing an act. There must be a duty to that which has been breached or in certain circumstances, it can be established that a reasonable man would have behaved differently.

For example, in the case of Haley vs. London Electricity Board, (1965), a pit was dug on the road by the defendant to install an electric wire. They had taken permission from the authorities to do so and also took precautions to ensure the safety of the passersby. However, the notice board was adequate for people with general eyesight. The plaintiff, in this case, a blind man, fell into the pit and suffered severe injuries as a result of the fall. It was held by the Court that the defendants were liable for committing the tort of negligence. The precautions were not in the interests of all the passerby but only the passerby with general eyesight. The plaintiff was awarded damages accordingly.

Therefore, the defendant is not judged against the criteria of what’s expected of him, but against the yardstick of a prudent and reasonable person. In this way, the idiosyncrasies of the defendant are eliminated.

On the other hand, ignoring the cries of the victim of a car accident as there exists no legal duty as such. It is merely a moral obligation to ensure the safety and well-being of all the individuals in our vicinity.

Legal damage caused

The defendant has committed an act that breached a duty owed by him. But this duty must subsequently have caused damage to the plaintiff, or the plaintiff’s legal right must have been infringed. Two legal maxims would help shed more light on what types of damage or losses could be incurred by the plaintiff.

Injuria sine damnum

“Injuria” refers to interfering with the plaintiff’s enjoyment of his legal rights without any competent authority to do so and “damnum” refers to the losses suffered by the plaintiff, for example, discomfort, injury, monetary loss, etc. Even if no harm is caused to the plaintiff, the mere violation of their legal right is sufficient as a cause of action.

In the landmark judgment of Ashby v White (1703), the plaintiff went to vote for the parliamentary elections but was wrongfully detained by a returning officer. As a consequence, his right to vote was violated. For every right, there is a remedy. The plaintiff initiated a lawsuit against the defendant for violating his legal right.

In a similar case, an MLA was wrongfully detained by a police officer. The plaintiff was unable to attend the assembly. The Court accordingly observed exemplary damages of Rs 50,000 to the plaintiff.

Damnum sine injuria

This legal maxim refers to injury caused to the plaintiff without the injury infringing on his legal right. For example, a defendant sets up a restaurant in front of the restaurant of the plaintiff. The plaintiff suffers monetary damage as there is a decrease in the customers that buy the products. Even if the act is considered morally wrong, the defendant has not violated any right of the plaintiff therefore, the plaintiff is not entitled to receive any remedy.

Theories of general principles of liability

The basic principle of ascertaining the liability of the wrongdoer is based upon two major theories:

Pigeon Hole Theory- According to this theory, several unidentified offences and wrongful conduct would not come under the purview of liability in tort law.
Wider and Narrower Theory- According to this theory, the wrongs committed by the party which is not in the interests or injure the other party would come under the purview of tort law without the requirement of a legal justification.

Pigeon hole theory

According to Salmond, “Tort is a civil wrong for which the remedy is a common-law action for unliquidated damages, and which is not exclusively the breach of contract, or, the breach of trust, or, other merely equitable obligation.”

The entire pigeon-hole theory laid down by Salmond seeks to answer two questions-

Should the law of torts be restricted to the torts that strictly fall within its purview?
Should every act deemed wrongful and committed without any justification, be classified as a tort?

According to Salmond, no single principle can be applied to ascertain the liability of the wrongdoer. Only well-defined wrongs should be considered as tort and confined within a small box known as a pigeon hole. He compared the domain of tort to that of a pigeon hole with a number of smaller holes. These smaller holes would represent assault, slander, battery, malicious prosecution, and all the recognized wrongs. He was against having a general approach to the law of tort. A remedy would be available for only those wrongs which would fall under the established torts and the burden of proof would be on the plaintiff to establish that the wrong would come under the ambit of a specific, identified tort. If a wrong would not be a part of any of these holes, no claim could arise.

Supporters of the pigeon hole theory

Dr. Jenks supported this theory and explained that it would not restrict the courts from creating new torts; rather, the new torts would need to bear similarity to the already existing ones.

A similar view was held by Heuston. He believed that there was an error in interpreting the theory. Salmond never intended to classify the law of torts as a closed and expansible system. It does not mean that the pigeon holes are not abundant and they may not be added to.

Dr Glanville Williams supported the theory and stated that classifying torts into pigeon holes should not be interpreted as pigeon holes not having enough space for all the wrongs or not being expandable.

Criticism of the theory

The theory was heavily criticised on the grounds that many new torts existed that had not been legally recognized and were not in any way similar to those already in existence. It has also been criticized due to confining the scope of the law of torts. In the modern-day world, the number of wrongs is increasing at an exponential rate. In the case of Chapman v Pickersgill (1762), Pratt C.J. held that torts are infinitely many and are not confined or limited to any extent. In Pasley v Freeman (1789), the tort of deceit was legally recognized. The doctrine of strict liability was established in Rylands v Fletcher (1868) and the tort was not substantially similar to any tort in existence

The case of Donoghue v Stevenson (1932) is self-explanatory. A complaint was lodged by the plaintiff after finding a snail at the bottom of the ginger beer she had purchased. Being an injury that could not be reasonably foreseen, the owner was not held liable; rather, it was the manufacturer who was liable for his negligent conduct. The neighbour rule and laws on the rights of the consumers were formulated after the case. The tort of negligence was shaped because of the landmark judgment. In Furniss v. Fitchett (1958), Barrow C.J. stated that the well-known traditional torts do not emanate from an all-embracing general principle ascertaining tortious liability. In Rookes v Barnard (1964), the tort of intimidation was identified. Most importantly, the landmark judgment of MC Mehta v Union of India (1986) wherein the Supreme Court of India propounded the concept of ‘absolute liability.’

The courts have explicitly or implicitly, set aside the pigeon hole theory propounded by Salmond due to its confining nature. There is no scope to incorporate or create new torts. The plaintiff would further suffer as he would be stripped of having a right to take action against the wrongdoer in a court of law.

If we go by the pigeon hole theory, it would be difficult to address the needs of the people and the legislative framework that needs to be formulated on an urgent basis would be dismissed on the ground that the wrong has not been recognized previously. Would the injury cease to exist because there is no established wrong? The answer to this question would be no.

Winfield’s take on tortious liability- opposing pigeon hole theory

Winfield, an influential legal scholar referred to torts as “tortious liability arises from the breach of a duty primarily fixed by law, this duty is towards persons generally and its breach is redressable by an action for unliquidated damages.” In simpler words, he considered tort as a breach of duty the remedy to which would be given in the form of unliquidated damages, that is, damages awarded for breach of contract that arises from causes that are not reasonably foreseeable.

He interpreted a tort as an injury caused to another individual with no justification by the pre-existing laws of the land. He believed in a single category of tort which would accommodate newer torts as well unlike Salmond’s theory and establish a general principle of liability. The remedy would be given to the unidentified wrongs as well.

As opposed to Salmond, Winfield’s theory also supported the creation of new torts by the courts of law. In Ashby v White (1703), Holt CJ stated that if a man has multiple injuries, the actions that can be taken must be multiplied as well since every injured man has the right to compensation. Justice Bhagwati in MC Mehta v Union of India (1986) opined that there is a need to evolve the existing principles and lay down norms addressing newer issues arising from a heavily industrialized economy. The understanding and thinking of the courts must not be restrained and new jurisprudence must be created.

Therefore, we can observe that Winfield’s theory was quite broad and was the total opposite of what Salmond has proposed. It was also widely accepted by the courts of law implicitly.

However, a significant observation was made by Winfield wherein he stated that Salmond’s theory would suffice to provide a narrower look in a similar manner to how a tree is treated as ‘inanimate’ for the purposes of avoiding a crash but would be classified as animate because it has grown from a sapling and continues to grow.

Prima facie tort theory

The prima facie theory was proposed by Pollock and Holmes at the later stages of the 19th century. They proposed that intentionally inflicting injury without any reasonable or legal justification would be considered as an actionable cause even if the injury does not fall under the purview of an already established wrong. This theory also opposed the main proposition of Salmond’s theory.

They classified tort into three categories. First, where intentional conduct was the cause of action. Second, negligent conduct is the cause of action, and third, cause of action emanating from the principle of strict liability.

Holmes perceived the theory as not taking another intentional tort within its ambit but a general principle for ascertaining liability in cases of intentional harm. To draw a comparison, Salmond’s theory aimed to provide remedies for those torts that have been identified whereas Winfield’s theory incorporated new torts with the passage of time.

The Supreme Court of Mexico in the case of Schmitz v Smentowski,(1990) also provided certain elements of the prima facie tort theory that must be fulfilled to ascertain liability:

Commission of an intentional lawful act by the defendant
Intentional act to cause injury
The plaintiff being injured as a result of the commission of the act
No legal or valid justification

These elements were perceived as the general requisites for ascertaining liability in tort cases. The plaintiff can plead prima facie tort on the establishment of these requisites and there is no need to analyze the traditional tort in one of the pigeon holes.

Therefore, both Winfield’s theory and the prima facie tort theory opposed Salmond’s restrictive pigeon-hole theory and encouraged the expansion of torts.

Conclusion

The law of torts is uncodified and emanates from precedents. It is heavily dependent on the facts and circumstances of each case that is brought under it. The pigeon-hole theory and the prima facie tort theory can be considered as two faces of the same coin.

The pigeon-hole theory might have been relevant in its time but with the expanding interpretation of the courts, it finds no room in the courts of law today. The debate around ‘tort’ and ‘torts’ is endless but the Supreme Court in the case of Jay Laxmi Salt Words Ltd vs State Of Gujarat (1994) stated that it is unthinkable to limit the law of torts considering that it is still in its development stages.

Today, there is no restriction to technological advancements and several issues have come up such as the applicability of autonomous systems to vicarious liability. The law of torts is expanding at an exponential rate with an increase in the number of people aware of their rights and initiating lawsuits against the wrongdoer. There exists a possibility that even more branches could be added to the tree of negligence. Therefore, it is imperative to view the domains of torts as the law of torts and resolve the new, emerging issues of the era by providing an adequate remedy to the victims.

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.

Significance of cryptocurrency : could India completely ban private cryptocurrency in India

By

Sneha Mahawar

-

December 6, 2021

0

Cryptocurrencies — Image Source - https://rb.gy/bqaz8w

This article is written by Smaranika Sen from Kolkata Police Law Institute. This article deals with the new Bill of cryptocurrency that is yet to be introduced in Parliament.

Table of Contents

Introduction

We are now at the end of 2021 and cryptocurrency is not a new word for the majority of the population all over the world. It goes without saying that the impact of cryptocurrency is distinctly visible in the world economy. There are more than two thousand cryptocurrencies worldwide as of 2020. The most important factor that is enhancing the growth of cryptocurrency is its harmonious relationship with technology. With the advancement of technology, the expansion of cryptocurrency is almost inevitable.

However, this digital money is still not the default system of financial transactions in the world. The regulation of cryptocurrency by the governments of various countries varies from each other. A lot of countries like China, Bangladesh, Russia, Qatar, Turkey, Egypt, Morocco, Nigeria, Ecuador, Bolivia, etc have explicitly banned the regulation of cryptocurrency.

Recently, it has been observed that India is going to introduce Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 which will determine the legal status of private cryptocurrency. Through this article, I will be analyzing this Bill and try to give an overview of the legal status of private cryptocurrency in India.

Cryptocurrency Bill, 2021: an analysis

India in its ongoing Winter Session in Parliament is going to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. This Bill is mainly going to create a facilitative framework for the usage of digital currency in India which has been issued by the Reserve Bank of India. The Bill is further going to ban all sorts of private cryptocurrencies in India. However, certain exceptions will be there regarding its trading.

Private cryptos: meaning

As the Bill is not yet introduced, the actual interpretation of private cryptos with regard to the Bill is quite difficult to state. If we look back at February 2021, private cryptocurrencies were defined as those cryptocurrencies which are not issued or recognised by the central government. But this definition is not yet confirmed and it is still confusing what the term “private cryptocurrency” will denote in the Bill. However, certain experts have tried to define the term “private cryptocurrency”. Let’s have a glance at one of the expert’s descriptions.

According to Vikram Subburaj co-founder and CEO of Giottus Cryptocurrency Exchange, private cryptos are basically those cryptos whose transactions are not available or are difficult to track in the public domain. Monero is a kind of private cryptocurrency. He further stated that if the Indian government defines private cryptos as those which are not issued by the central, then a lot of cryptos will come under the radar of illegality.

It can be stated that private cryptocurrencies are those whose transaction histories are not available in the public blockchain. They are kind of decentralised in a closed ecosystem.

History of legality of cryptos in India

History shows that India was never in favor of private cryptocurrency. Since 2013, the RBI has been issuing circulars and press releases that denote the potential risks of usage of cryptocurrency in the financial system of India. On the 28th of February 2019, the Inter-Ministerial Committee submitted its report regarding virtual currencies in India. The report came into the public domain on the 22nd of July, 2019. The report highlighted and recommended certain valuable information regarding cryptos and their future in India’s financial system.

Highlighted points of the report

Cryptocurrency induces market fluctuations. It was stated on the basis of the value fluctuation of Bitcoin from around USD 20,000 in December 2017 to USD 3,800 in November 2018 in less than a year.
Decentralisation of cryptos makes it difficult to regulate.
Usage of cryptocurrency can sometimes lead to phishing cyberattacks and Ponzi schemes.
Certain transactions are impossible to track.
Cryptocurrency needs a lot of storage and processing power thus a lot of energy resources will be wasted.
Use of Cryptocurrency may lead to money laundering or can be used for terrorist funding activities.

Recommendations

There should be a statutory regulatory framework for the regulation of cryptos in India.
The traditional currency system should not be replaced.
Private cryptos should be banned i.e. cryptocurrencies not issued by the central government.
Significant infrastructure is required for the implementation of digital currency.
A committee should be set up especially which looks, examines, and develops an appropriate digital currency system.

This committee has further prepared a draft Bill titled as Crypto Token and Crypto Asset (Banning, Control and Regulation) Bill, 2018, however, the legal status of this Bill is yet not decided.

In April 2018, RBI issued a circular that distinctly prohibited the usage of cryptocurrency in exchange for business or services from financial institutions in India. This enormously impacted the crypto market of India. In regard to this circular, a writ petition was filed by the Internet and Mobile Association of India. In the case of Internet and Mobile Association of India v. Reserve Bank of India(2018), the petition was filed due to the violation of Article 19(1)(g) of the Indian Constitution i.e. one’s right to carry any trade, business or profession. In regard to this point of law, the Supreme Court divided people into three categories:

Persons who buy and claim cryptocurrency as a hobby cannot file this petition under Article 19(1)(g).
Persons who trade cryptos on the basis of crypto-to-crypto can still carry on their profession, therefore they too can’t claim under the mentioned Article.
Persons whose only way of trading was from banks and due to this circular they have faced losses only they can claim under the mentioned Article.

The Supreme Court further stated that RBI had the power to issue this circular as it was issued to safeguard the public interest, interest of depositors, and banks. However, the Supreme Court held that the circular issued by RBI lacked on the ground of proportionality as the orders issued in the circular were excessive use of power by RBI. Therefore, the circular was set aside.

Impact of private crypto if ban in India

If we go by the assumption that the Central Government will follow the same definition of private cryptocurrency as laid down by the Inter-Ministerial Committee, the existing crypto investors in the country will be heavily impacted. It is, however, speculated that the ban will affect Indian crypto investors adversely. A blanket ban on cryptocurrency will increase the number of non-state players which will eventually lead to unlawful usage of this kind of currency.

Is a complete ban possible

According to various experts in the crypto market, a complete ban is not possible. The Government might put restrictions on the trading of cryptocurrency but it will not fully curb its practices. Crypto’s lying on the blockchain is not controlled by a single entity, thus totally banning its transactions, trading practices might not be possible. Furthermore, decentralized exchanges do not come under government entities, thus many legal complications may arise in regard to the complete ban. The absolute determination of whether a complete ban is possible or not is quite difficult to state as on which basis the Bill will prohibit or what it prohibits says a lot.

Present scenario of the Bill

As of 30th November 2021, the Bill has not been discussed in Parliament in its ongoing Winter Session. The Bill is yet not there on the revised ‘List of Business’ of the Lok Sabha for 30th November 2021. Finance Minister Nirmala Sitharaman has stated that the Bill will be discussed after obtaining its approval from the Cabinet. She has also answered a lot of queries regarding this Bill and has emphasized the fact that this Bill is made on a far more recent analysis of the market scenario and the issues regarding banning will be only clarified once the Bill is introduced in the Houses.

Conclusion

It is firmly to be noted that the Bill is yet to be introduced. Therefore, an analysis of whether the Bill has stated a ban or not on private cryptocurrency is not yet possible. We should also keep in mind that a lot of research, study and expert opinions have been taken into consideration while making this Bill, so let us look forward to it.

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.

Tata Motors v. GNCTD : Delhi High Court observations

By

Oishika Banerji

-

December 6, 2021

0

This article is written by Rishika Rathore, from the school of law, Jagran Lakecity University. This article explores different schemes and administrative associations of the Delhi government as well as the Central government, incorporated to tackle the growing air pollution considering the view of Tata Motors vs GNCTD case.

Table of Contents

Introduction

Air pollution is the prominent cause of premature disease and death, and the largest environmental health threat around the globe. Apart from jeopardized life and diminishing lifespan, air pollution negatively affects economic productivity. It would not be startling to know that one of the main sources of ambient particulate matter pollution in India is transport vehicles. On that account, India needs state-specific strategies that could lead to substantial benefits for public health as well as the economy, along with a successful reduction of air pollution.

The air quality of India’s Capital Delhi is the worst among all the major cities in India. Thus, reckoning this increment in air pollution, the Delhi government has introduced Delhi Electric Vehicle Policy, 2020. Following this decision of the Delhi government, many automobile manufacturing companies started producing Electric Vehicles, including India’s biggest automobile manufacturer, Tata Motors. But, soon it came out as a faux pas for the company, and the concerned matter went to the doorstep of the Delhi High Court, as opposed to the Government of National Capital Territory of Delhi (Amendment) Act, 2021. This article will answer the questions like, what is Delhi EV policy and its matter with Tata Motors, what circumstances lead Tata Motors towards the Delhi High Court, what was the Court’s decision and finally conclude all the scenarios.

Background of the case

In February, an owner of Tata Nexon EV complained to the government about the mileage issues. The matter was posted on Twitter by Kailash Gahlot, Delhi Transport Minister, announcing the delisting of the car after receiving complaints from an owner of the said model. The owner’s complaint had arguments concerning that despite the company claiming a mileage of 312 km on a single charge, he hardly got more than 200 km. Moreover, he claimed that he went to Tata dealerships multiple times to get the issue resolved but got no relief. Therefore, he eventually turned to the Delhi government by sending his complaint, as he bought the vehicle under the Delhi Electric Vehicle Policy, 2020. Consequently, the Transport Department of Delhi issued a show-cause notice to Tata Motors and sought its reply in the matter.

Before jumping on issues involved in the case, one must know about the aforementioned Act, policy, and association.

The Government of National Capital Territory of Delhi India (Amendment) Act, 2021

The Government of National Capital Territory of Delhi Act 1991 was validated to “add-on provisions of the Constitution relating to the Legislative Assembly and a Council of Ministers for the National Capital Territory of Delhi”. In previous days, the Supreme Court appreciated the 1991 developments, saying that the main idea behind the Constitution (69th Amendment) Act, 1991 is the establishment of a democratic set-up and representative form of government wherein the majority has a right to incorporate their opinions about laws and policies concerning to the NCT of Delhi conditional to the limitations imposed by the Constitution.

In March 2021, the Act got altered by giving priority to the Lieutenant Governor (L-G) over the elected government in the city. This alteration came into force as the Government of National Capital Territory of Delhi (Amendment) Act, 2021.

Key Provisions of the Act

It amended Sections 21, 24, 33, and 44 of the 1991 Act, stating that the “government” in the National Capital Territory of Delhi meant the Lieutenant-Governor of Delhi.
It gives discretionary powers to the Lieutenant-Governor including the matters where the Legislative Assembly of Delhi is authorized to make laws.
It forbids the Assembly or its committees to conduct inquiries about administrative decisions and from making rules to taking up matters concerning routine management.
It looks forward to ensuring that the Lieutenant-Governor is “certainly granted an opportunity” to give her/his opinion before any decision taken by the Delhi Cabinet gets implemented.

Delhi Electric Vehicle Policy, 2020

In its 2018-19 budget, the Government of NCT of Delhi had introduced the “Green Budget” to reduce vehicular emissions to tackle air pollution in the region. Among all the mobility policies present in the Green Budget, one of the key initiatives was Delhi Electric Vehicle Policy, 2020.

On August 7, 2020, Delhi Government took the initiative to tackle growing air pollution in the territory by introducing the Delhi Electric Vehicle Policy 2020 to promote the adoption of electric vehicles, making the city of Delhi, the EV capital of India. The policy has an intention to deploy 25% of all new vehicles to be battery-operated, by 2024. Along with this, it has the ultimate goal of putting 5 lakh electric vehicles on the roads of Delhi. The current percentage of moving electric vehicles in Delhi is 0.2 percent.

Motives of the policy

The motives of this policy were constructive in addition to the central government’s FAME II scheme, resulting in the establishment of an EV cell to ensure the ground-level implementation of this scheme. Delhi EV policy had motivated electric buyers by providing premiums up to Rs. 30,000 on electric scooters, e-rickshaws, and e-good carriers. Moreover, it provides interest-free loans on commercial EVs along with free registration to all-electric vehicles. The funding for these motives would be supported using the ‘State EV Fund’ with contributions from various sources such as pollution cess, road tax, congestion fee, and from the Environment Compensation Charge (ECC).

EV based Infrastructure

The Delhi Government has also been concerned about the development of EV-based infrastructure and awareness, thus it made plans on setting up 200 EV-charging stations in the city over the coming years. Adding to the positives of this scheme, a 100 percent subsidy was offered by the government on using charging apparatus, which was restricted to Rs.6000 for 30,000 units. New infra was thrust towards the new employment. Being mindful of this, the Delhi government carried out training courses especially for youths, impacting skills and generating new jobs in the sector of electric vehicles. This policy is coincidentally India’s first announced scrappage policy.

Automotive Research Association of India (ARAI)

The Automotive Research Association of India was established in 1966 as a leading automotive Research and Development organization initiated by the Automotive Industry along with the Government of India. It is one of the prominent Testing and Certification agencies reported under Rule 126 of Central Motor Vehicle Rules, 1989, by the Government of India. It is recognized as a Scientific and Industrial Research Organization (SIRO) by the Department of Scientific and Industrial Research as well as by the Ministry of Science and Technology.

The ARAI is an independent body affiliated with the Ministry of Heavy Industries and Public Enterprises. It has its registered office at Kothrud, Pune. It has two divisions namely, Homologation and Technology Centre (ARAI-HTC) and Forging Industry Division (ARAI-FID), both situated in the industrial hub of Chakan, Pune. ARAI plays a major role in assuring less polluting, safe, and more efficient reliability of vehicles.

FAME II Scheme

Faster Adoption and Manufacturing of (Strong) Hybrid and Electric Vehicles (FAME) in India Scheme 2021 was launched out of the concern of increasing pollution, occurring due to diesel and petrol operated vehicles. The second phase of this scheme was inaugurated providing 670 electric buses to the states of Maharashtra Goa Gujarat, and Chandigarh. Additionally, 241 charging stations were planned to be made on the streets of Madhya Pradesh, Tamil Nadu, Kerala, Gujarat, and Port Blair. The goal of the second phase of the Fame India Scheme 2021 is to support approximately 7000 e-Buses, 5 lakh E-3 Wheelers, 55000 E-4 Wheeler Passenger Cars, and 10 lakh E-2 Wheelers by providing subsidies on such vehicles.

The ultimate motive of this scheme is to encourage Indians to buy electric vehicles. Through this scheme, the government is going to provide subsidies on the purchase of new electric vehicles which will promote electric mobility. Previously this scheme was launched from 2019 to 31st March 2022, but the government extended it for 2 years, making it applicable till 31st March 2024. Under this scheme, necessary charging infrastructure will also be set up for electric vehicles. The government has also increased the subsidy incentives from Rs 10000 per kWh to Rs 15000 per kWh. Thus, the scheme will be helped in the encouragement of the interlinking of renewable sources of energy which will be empowered through charging systems.

Issues involved

Considering the chaos regarding Tata Nexon EV, the Deputy Commissioner of GNCTD ordered the removal of the said vehicle from the list of eligible vehicles for subsidy. Subsequently, Tata Motors filed a writ petition under Delhi High Court.

Arguments by Tata Motors

Tata Motors submitted its reply on the matter, stating that the said mileage of 312 km is based on the Automotive Research Association of India (ARAI) testing, the nodal agency that is responsible for vehicle testing ahead of launches.
The mileage figure for Nexon EV, given by ARAI, is a verified figure achieved under the standards established by law.
The said the vehicle meets the eligibility criteria for the central’s government FAME II scheme as it touches the minimum range of 140 km.
As far as the complaint regarding certified mileage of 312 km is concerned, Tata claimed that like any other vehicle, Nexon EV will also deliver mileage less than, or occasionally, more than the claimed number because the mileage is affected by driving style, roads, etc.
The Nexon EV has become one of the renowned cars and India’s first eco-friendly car. Thus, if the order not gets stayed, it would hamper the sales of the said car

Responses by GNCTD

The single test result by ARAI cannot overturn the claim by the complainant who has witnessed a consistent 200 km range in real-life conditions on the roads.
Tata Motors never made efforts, neither voluntarily nor dutifully, to verify the complaint despite knowing the fact that there were more of such complaints.
The government cannot subsidize untrue products and if such products came into the market, it will be contemptuous of the subsidy policy.
If the government will not entertain such complaints, the public will lose trust in Original Equipment Manufacturer stated range figures that act as an important factor in car-buying decisions.

Concurrent with the events, the Government of Delhi constituted a 5-member committee panel to verify the claims of complainants and thrust out the final decision on the matter while suspending the perks on Nexon EV with instant effects.

Court’s observation

The Delhi High Court observed that the disputed order, passed by Delhi Government, lacks the process of verification. The order that came before constituting a committee highlights the fact that there was no concrete material with the officer prior to the order. Moreover, the Court stated that an inspection committee cannot take the place of the statutory testing agency specified under the Central Motor Vehicle Rules, 1998. The inspection committee can submit a report to a statutory agency for consideration but cannot create a foundation for discarding the certification.

Judgment

By considering the issues involved, the court observed that case and came up with the judgment. The Honourable Court of Delhi issued a notice on the company’s writ petition and granted interim relief by grading a stay order against the delisting of Tata Nexon EV from the Delhi government’s subsidy-qualified list of vehicles under EV policy, 2020. As per Court orders, the interim stay was concrete otherwise irrevocable loss or damages will be incurred towards both the government and their policy. Furthermore, the Court granted time to the Delhi government to file the counter-affidavit.

Conclusion

For a few years, the Capital of India has been counted as the most polluted state in the country. Air pollution has become such a big issue in the city that many times the government had to shut down schools and colleges due to fear of certain respiratory diseases. The government of Delhi has taken many initiatives to cope up with the emerging pollution by its innovative schemes like odd-even, Red light on Gaadi off campaign, banning of disposable generators, etc. Continuing this custom, the government of Delhi introduced the Delhi Electric Vehicle policy 2020, which promoted the usage of electric vehicles. Tata Motors, known for its strongest and efficient cars, introduced its Tata Nexon EV.

The major benefit of electric cars is the contribution that they can make towards improving air quality in towns and cities. In over one year, just a single electric car on the roads can save an average of 1.5 million grams reduction in CO2. These cars do not have tailpipes, thus pure electric cars produce no carbon dioxide emissions when driving. This reduces air pollution considerably. But, a customer is a god and if we fail to satisfy the god, we should be ready to face the consequences. Thus, it is the responsibility of all the citizens to move towards electric vehicles, and the government of India, with the help of automobile companies, must provide us with efficient and reliable EVs. This process should go simultaneously.

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.