Critical analysis of South African Constitutional Court’s judgement holding its surveillance law unconstitutional

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November 26, 2021

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This article is authored by Akash Krishnan, a student from ICFAI Law School, Hyderabad. It discusses in detail the judgement of the South African Supreme Court wherein a surveillance regime managed by the State was declared unconstitutional.

Table of Contents

Introduction

Imagine having a conversation with your friend wherein you speak freely about your emotions. Imagine the level of trust and comfort you have with that person while sharing your emotions. Now imagine a world wherein every word you speak could be heard and recorded by a third party. Imagine a regime where people are constantly under surveillance and they have no notice regarding the same. This imaginary scenario had become a reality in South Africa.

The Regulation of Interception of Communications and Provision of Communication-Related Information Act, 2002 (RICA) allowed the State to intercept and record the communications of any citizen after obtaining permission from a State-appointed judge. A clear-cut case of bias can be seen at the very inception of these surveillance orders wherein the concept of separation of powers is being completely ignored. Under this Act, the Government of South Africa was running a surveillance regime where data privacy was nothing but a myth. In this article, we will discuss the case where these actions of the State were criticised and RICA was held to be unconstitutional on the ground of breach of privacy. Let us now discuss the case in detail.

Amabhungane Centre for Investigative Journalism NPC v. Minister of Justice and Correctional Services & Ors (2021)

Provisions involved

Constitution of South Africa

Right to Privacy

Section 14 of the Constitution states that every citizen of South Africa has the Right to Privacy. This Right includes the following:

Right against the unlawful search of their person, house or property being searched.
Right against seizure of their belongings or property.
Right against infringement of the privacy of their communications.

Freedom of Expression

Section 16 of the Constitution states that every citizen of South Africa has the Right to Freedom of Expression and this Right includes the Freedom of the Press and Other Media.

Regulation of Interception of Communications and Provision of Communication-Related Information Act, 2002 (RICA)

Designated judge

Under Section 1 of RICA, a ‘designated judge’ is defined as a judge of the High Court who has been discharged from active service or a retired judge who is appointed by the Minister of Justice to perform the functions under RICA.

Direction for surveillance

Under Section 16 of RICA, a direction for surveillance can be issued by the designated judge on the following grounds:

A serious offence has been or is being or will probably be committed.
The information is necessary to protect public health, safety, national security and national economic interests.
The information is necessary to combat any actual or potential threat.
The information is necessary to comply with an international mutual assistance agreement.

Combined order for interception

Under Section 18 of RICA, the designated judge is empowered to issue a combined order for the interception of real-time communications, archived communications by the communication service providers or both.

Decryption direction

Under Section 21 of RICA, the designated judge is empowered to issue directions for decrypting any encrypted data that has been acquired through surveillance. Before issuing such a direction, the designated judge has to consider the extent and nature of the encrypted information, the reason for decryption and if there are any adverse effects to the decryption.

Brief facts

In the Hon’ble High Court, the Managing Partner of the Amabhungane Centre For Investigative Journalism, Mr. Sole, contented that he suspected that his communications were being monitored and intercepted in the year 2008 and that in the furtherance of the same, he had approached the Inspector General of Intelligence to confirm these activities and to seek his acknowledgement in this regard.
However, the Inspector General of Intelligence did not provide him with any disclosures and he rather Stated that the National Intelligence Agency (NIA) and the criminal intelligence division of the police did not commit any such activities and therefore were not guilty of the allegations levelled against them by Mr. Sole. In a letter issued by the Inspector General of Intelligence in this regard, he stated that even if any surveillance activities were carried out, due to the provisions under the RICA, no disclosures could be made regarding the same. To conclude, Mr. Sole did not receive any information about the alleged surveillance of his communications in the year 2008.
In a court proceeding in 2015, Mr. Sole’s conversations with Mr. Downer were produced as evidence. However, Mr. Sole was not a party to the suit and neither had consented to the recording of the conversation. In light of the same, he contended that he was indeed under surveillance in the year 2008 and in furtherance of the same he had reached out to the State Security Agency to obtain the relevant disclosures.
The State Security Agency provided him with the details of the directions issued on the basis of which he was subjected to surveillance and also provided him with his conversations with Mr. Downer that were used in the Court as evidence. However, the State Security Agency failed to provide him with any appropriate details as to the reason for which he was subject to surveillance.
In light of these facts, Mr. Sole had knocked the doors of the High Court to challenge the unconstitutionality of RICA on the ground that it is in contravention to the Right to Privacy of the individuals and that the provisions of State surveillance under RICA had indeed limited the Right to Privacy guaranteed by the Constitution.

Grounds on which the unconstitutionality of RICA was challenged

Notification issue

The Applicants challenged that when the State undertakes surveillance of any person under the provisions of RICA, there is no duty imposed on the State to notify the person under surveillance. Even after the surveillance was completed, the State did not notify the individual. Therefore, the individuals were always kept in the dark about any kind of surveillance activities that they were subject to.

Independence and ex parte issue

The Applicants argued that for commending surveillance activities, the State did not have to seek permission from an independent judge or magistrate because the Magistrate from whom such permission was sought was appointed under RICA arbitrarily without any proper procedure. There was a complete lack of adversarial process and the State could act of its own volition and therefore abuse the powers under RICA. Further, individuals were not protected in any proceedings or order that would be initiated/passed against them ex parte based on the surveillance recordings. Also, if an individual’s conversations were being made part of a suit or proceeding to which the individual was not a party, the prior consent of the individual was not being obtained for the same.

Safeguards issue

The Applicants contended that the provisions under RICA fail to provide adequate safeguards regarding data archiving and accessibility of communications. This contention was based on two specific grounds:

The communication service providers were directed to mandatorily store all communications that were made using their services for a period of 5 years from the date of communication and store these communications in a dedicated data archive.
There was no clarity as to how the State has access to this data archive and what is the procedure to be followed by the State for the examination, copying, sharing and storing of this information in the government archives.

Surveillance issue

The Applicants argued that the communications between lawyers and their clients, journalists and their sources contain crucial information and are covered under the ambit of non-disclosure. There could be several consequences if the data regarding ongoing legal proceedings or names of whistleblowers and other sources of the journalists is leaked or misused. It was further contended that the National Communication Centre (NCC) was conducting extensive surveillance activities. However, no power was vested in the NCC under any of the provisions of RICA to conduct such surveillance activities.

Order of the High Court of South Africa, Gauteng Division, Pretoria

Regarding the notification issue, the High Court observed that not notifying the individuals as to them being subject to surveillance is a breach of their Right to Privacy. In light of the same, the Court directed the State to create a post-surveillance notification regime wherein the individuals will be informed of the surveillance activities including the duration and reason for which the surveillance was undertaken after it had concluded.
Regarding the independence and ex parte issue, the High Court noted that the process for the appointment of judges under RICA was not clear. Arbitrary power was given to the Minister of Justice for the selection of the judge for an indefinite term and thus, the independence of the appointed judge could not be ascertained as there was a probability of bias on his part towards the State. In light of the same, it declared these provisions unconstitutional. The Court took a similar stance w.r.t the ex parte issue and observed that individuals under surveillance were not protected against ex parte orders and on the ground that every person should have a reasonable opportunity to defend themselves, the Court declared the provision regarding ex parte orders unconstitutional.
Regarding the safeguards issue, the High Court noted that the provision regarding retention of communications by the communication service providers are constitutional and the Court shall not interfere with the intent of the legislature behind enacting the provision. However, the provisions regarding the State accessing the information were held unconstitutional because there was no proper procedure established for the transfer and storing of the information by the State.
Regarding the surveillance issue, the High Court acknowledged the importance of attorney-client privilege. In light of the same, the Court held that even though the communications of the attorneys are not protected, these communications could involve matters regarding the clients and the information of the client should not be disclosed at any cost. Coming to journalists, the Court noted that it is imperative that the Freedom of Speech and Expression should be protected. Thus, it is important that the identity of the secret informers of journalists is not revealed. Section 16 of the Constitution allowed the Courts to expand the scope of the rights guaranteed under the Constitution and in furtherance of the same, the Court held that protecting the secret informers of the journalists is part of the journalists Right to Freely express their Opinion. Thus, in both instances, i.e., for lawyers and journalists, the High Court held that the provisions of RICA to this extent are unconstitutional. However, the Court noted that in extreme circumstances, journalists could be subject to surveillance.
Regarding the surveillance activities being undertaken by the National Communication Centre, the High Court held that these activities were not warranted by RICA and therefore are unconstitutional in nature.
In light of all the aforesaid observations, the High Court held RICA unconstitutional to the extent of the inconsistencies mentioned above.

Appeal/application before the Supreme Court

The Applicant, i.e., Mr. Sole had approached the Supreme Court to seek confirmations of the order passed by the High Court.
The First Appellant, i.e., the Minister of Police had filed a partial appeal regarding the order of the High Court pertaining to the surveillance issue. The Minister prayed before the Supreme Court that the direction regarding the post-surveillance notification should be set-aside.
The Second Appellant, i.e., the Minister of State Security had filed an appeal seeking invalidation of the entire order passed by the High Court.

Issues before the Supreme Court

Whether RICA fails to protect the Right to Privacy of the citizens of South Africa and therefore is unconstitutional?
Whether the Constitution empowers the State to conduct bulk surveillance?

Observations of the Supreme Court

The Right to Privacy is one of the most intricate parts of human life. Every person has the Right to Privacy. RICA allows interception of all forms of communications, i.e., it does not draw a line of difference between the personal conservations of the individual and the communications that may or may not be a threat to the country.
The intimate conversations of a private human being are of no threat to the country and therefore intercepting and recording the same is completely invalid. Also, the individuals who confide in the individuals who are being subject to surveillance, their conversations are also exposed even though they are not under surveillance.
The communication devices being intercepted might be used by other individuals of the household as well. Thus, the family of the person under surveillance is also being subject to surveillance. The Right to Privacy of the entire household cannot be breached just because of one individual.
In light of the same, RICA is held to be unconstitutional because it breaches the Right to Privacy enshrined under Section 14 of the Constitution.
Coming to the second issue, the Supreme Court held that the provisions of the Constitution do not allow the bulk surveillance of individuals.
Regarding the notification issue, the Supreme Court upheld the observations of the High Court and held that post-surveillance notifications should be mandatorily issued.
Regarding the independence issue, the Supreme Court held that the Minister of Justice has the power to appoint the designated judges and there was no transparency in the process of appointment. Also, the term of the designated judge was to be decided on the basis of the arbitrary opinion of the Minister. Thus, this provision was declared unconstitutional. Regarding the independence issue, the Supreme Court upheld the views of the High Court.
Regarding the safeguards and surveillance issues, the Supreme Court yet again upheld the order of the High Court and declared the provisions to be unconstitutional.
Having declared RICA unconstitutional, the Supreme Court directed the Minister of Justice to develop remedial legislation in this regard.

Conclusion

The Right to Privacy has been recognised by the Constitution of South Africa. Both the Supreme Court and the High Court have upheld this Right and have declared RICA unconstitutional. It is pertinent to note herein that the personal rights of an individual were given priority. This was because the privacy of several individuals who were associated with the person under surveillance was also breached. Therefore, the Court found it fit to protect the Right of Privacy and limit the abuse of power on part of the State.

References

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An analysis of Micro, Small and Medium Enterprises Development Act, 2006

By

Rachit Garg

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November 26, 2021

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This article is written by Aastha Verma, from Kalinga University, Raipur, Chhattisgarh. This article deeply analyses the Micro, Small and Medium Enterprises Development Act, 2006 and how Covid -19 has affected these enterprises.

Table of Contents

Introduction

The Micro, Small and Medium Enterprises Development Act, 2006 came into force on 16 June, 2006. It consists of six chapters which are further divided into 32 sections. This Act also provides for the formation of the National Board of Micro, Small and Medium Enterprises. The head office of the Board is in Delhi. Section 3 of the Act defines the members of the board. The Central Government, by notification, can constitute an advisory committee. Registration of micro, small and medium enterprises is replaced with the filling of the memorandum. To avail the benefit of the Act, it is always recommended to register the enterprises as a micro, small or medium enterprise. The concept is important for the promotion of industrial development in rural areas, use of traditional or inherited skills, use of local resources and mobilization of resources and exportability of products. It provides maximum opportunities for employment outside the agriculture sector as well.

Micro, Small and Medium Enterprises Development Act, 2006

Micro, Small and Medium Enterprises Development Act, 2006 provides the first-ever legal framework for recognition of the concept of enterprises. The Act provides a statutory consultative mechanism at the national level with the representation of stakeholders and a wide range of advisory functions. In accordance with the Section 7 of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, it is classified into two categories –

Manufacturing Enterprises – They are defined in terms of investment in plants and machinery and engaged in the manufacture or the production of goods pertaining to any industry. In micro enterprises, the investment shall not exceed 25 lakhs rupees, in small enterprises it should be more than 25 lakhs and upto 5 crore rupees, in medium enterprises it should be more than 5 crore and upto 10 crore rupees.
Service Enterprises – They are defined in terms of investments and engage in providing services. In micro enterprises, the investment shall not exceed 10 lakhs rupees, in small enterprises, it shall be more than 10 lakhs rupees and upto 2 crore rupees, in medium enterprises it should be more than 2 crore but upto the 5 crore rupees.

The government introduced the proposal in February 2018 for the classification of the enterprise according to the annual turnover which was more in line with the imposition of Goods and Services Tax (GST) but failed to implement it and now the MSMEs are classified according to the composite criteria of investment and annual turnover. As per Section 7, in micro enterprises the investment should be less than 1 crore and annual turnover should be less than should be less than 5 crore. In small enterprises the investment should be less than 10 crore and annual turnover should be less than 50 crore. In medium enterprises the investment should be less than 20 crore and annual turnover should be less than 100 crore.

Previous MSMEs Classification

Classification	Micro	Small	Medium
Manufacturing enterprises	Investment < Rs. 25 lakhs	Investment < Rs. 5 Crore	Investment < Rs. 10 Crore
Service Enterprises	Investment < Rs. 10 lakhs	Investment < Rs. 2 Crore	Investment < Rs. 5 Crore

Revised MSMEs Classification

Classification	Micro	Small	Medium
Manufacturing and services	Investment < Rs. 1 Crore &Turnover < Rs. 5 Crore	Investment < Rs. 10 Crore & Turnover < Rs. 50 Crore	Investment < Rs. 20 Crore &Turnover < Rs. 100 Crore

Objectives

Because of limited awareness and resources, a complete act for the formulation of rules and regulations for small businesses is in high demand in order to free it from other laws and regulations. The natural mobility of small enterprises to medium, has to be facilitated through various policy and legal frameworks.

The main objective is to facilitate the promotion and enhance the development of micro, small and medium enterprises and for the matters connected with them.
It seeks to provide for the establishment of a National Micro, Small, Medium Enterprises Board, a high level forum consisting of stakeholders for participative review for proposal and recommendation on the policies.
Examine the factors which are affecting the promotion and development of various enterprises and take initiatives to review the policies of the Central Government and enhance the competitiveness of each such enterprise.
Make the recommendation based on reviewing and advising the Central Government on the use of the funds.
To promote e-governance for empowering citizens, promoting sustainable growth and enhancing efficiency through digital services for more inclusive growth.
Establishment of specific funds for the promotion, development and enhancing the competitiveness of these enterprises and notification of scheme programs for the purpose.

Steps taken by the government

National Manufacturing Competitiveness Programme (NMCP) (2007-2008) – This programme was started with the aims of enhancing the competitiveness of the Indian manufacturing sector by reducing their manufacturing cost through better space utilization, scientific inventory management and reduced engineering time.
Public Procurement Policy 2012 in which each minister shall set an annual goal and procure a minimum of 20% of MSME within three years.
Credit Guarantee Scheme, 2000 which provides a guarantee to member lending institutions of loans sanctioned without collateral.
MSE cluster development program which includes infrastructure development, common facility centers etc.

Advantages of implementation

The Government of India wants entrepreneurs to normally register themselves to avail the benefits that are introduced by either the Central or the State Government under the Micro, Small, Medium Enterprises Development (MSMED) Act, 2006. It is a very powerful medium to enjoy the incentives offered by the Central Government. Some of the benefits are:

Under Section 15 and Section 16 of the Act, it is mentioned if the buyer fails to make payment of the amount to the MSME supplier within 45 days, then he shall be liable to pay compound interest with monthly rate of that amount which is three times of the bank rate notified by Reserve Bank of India.
Various tax rebates are offered to MSMEs.
The major advantage is that the labour intensity of MSMEs is much higher than that of large enterprises. It generates large employment at a low capital cost.
Registration with National Small Industries Corporation (NSIC), subsidy on NSIC performance and credit ranking, and financial assistance for setting up testing facilities.
Easy finance availability from banks without any collateral requirement (any property given as a security against a loan).
In the absence of collateral security, many business owners find it difficult to start their industry; however, if one is registered under MSMED Act, 2006 then it is specifically instructed to the bank to provide loans at lower interest rates than usual. Also, one can avail benefits from several banking institutions for their financial needs.
Reservation policies to manufacturing or production sector enterprises. They can also register for purchase by the government.
Higher preferences are given to the MSMEs for government license and certification.

Highlighting the loopholes

The MSMED Act, 2006 lays down various legal provisions for the welfare and the protection of the industries. There are a lot of good schemes which provide support in the competitive world. However, there are certain problems faced by MSMEs which are as follows –

Absence of adequate and timely banking finance.
Lack of market knowledge.
Non-availability of suitable technology and low production capacity.
Inefficient market strategy as no one is there to guide them
Non-availability of skilled labour at an affordable cost.

The provisions mentioned in the Act are perfect but the state governments delay in implementing certain provisions of the Act. Enterprises are engaged in providing services, whose equipment is not directly related to the service provided or as notified in MSMED Act, 2006. Even after the provision related to payment is mentioned in the Act, the MSME industry is facing the problem of delayed payment. To solve this problem, the Government of India has taken initiative to form the ‘facilitate council’. Section 18 of the Act lays down the setting up of the facilitation councils in cases when the dispute arises regarding the amount due for any goods supplied or services rendered. Also, suppliers come within the jurisdiction of the court and buyers can be from anywhere from India. The main aim of the facilitation council is to solve the dispute by the method of alternative dispute resolution. The court is not allowed to take the cases of appeal from the facilitation council unless the appellant has paid 75% of the amount ordered by the council.

According to data provided by MSMEs, there are not even ten states where the facilitated council is functioning properly and also there are some states where there is no such council. The reason behind this is just to prevent the industries from going through lengthy court proceedings which require a considerable amount of money and usually these enterprises cannot bear it. Also, there are a number of cases pending before the courts because of improper functioning of the council. The Central Government should take time and coordinate with the state governments and monitor the cases pending in the council. Many states have not taken initiative to implement the MSMED Act, 2006 so the Central Government should take appropriate steps to make it applicable to all the states.

Impact of COVID-19 pandemic on MSMEs

During the Covid -19 pandemic, everybody has faced challenges. Also, MSMEs have the worst casualty of Covid-19 induced lockdown. In the time of crises, it constrains the government’s ability to help them as most of them are not registered anywhere. Even GST has its threshold and most micro enterprises do not qualify and also they do not maintain accounts, pay taxes or adhere to regulatory norms because of which their cost reduces. According to a 2018 report by the Indian Finance Corporation, the formal banking system supplies less than one-third of the credit to MSMEs than its potential needs because of a lack of finance. That is why the efforts of the Reserve Bank of India to push more liquidity towards MSMEs have limited impact. Also, banks dither from extending loans to MSMEs because of the high ratio of bad loans. Delay in payment to MSMEs from their buyers (includes government as well) or things like GST refunds.

Conclusion

Micro, Small, and Medium Enterprises have been accepted as an engine of economic growth and play an important role in the development of the country as it generates more employment at low capital cost. It employs nearly 11 crore people through the operation of five crore enterprises producing a heterogenous basket of about 7000 different products. The MSMEs industry contributes 8% of India’s total Gross Domestic Product (GDP) but if there is a conflict between the buyer and seller and if it is not taken care of by the government then it will create chaos. Also, RBI is trying to pump money into MSMEs sector but it has had limited impact. So, the government should provide tax relief, give swifter refunds and provide liquidity to boost demand for the MSME sector.

References

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Horizontal and vertical reservations in light of recent developments in Bihar

By

Diva Rai

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November 26, 2021

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This article is written by Yash Kapadia. Through this article, we shall explain the topic of horizontal reservations in light of the recent developments implemented in Bihar and our point of view on the same.

Table of Contents

Introduction

Reservation favouring certain castes, communities and sects in India existed even before we attained independence from the British. It is instilled in our minds that reservation is an affirmative action wherein a certain set of individuals who are or have been backward and outcasted since several eras in terms of education, employment, social status, etc.

Reservation is mainly given to 3 sets of people, the Schedule Caste (SC), Schedule Tribe (ST) and Other Backward Classes (OBC). However, in 2019, the poor in the General category (EWC) were also given a certain amount of reservations.

Through this article, we shall discuss what exactly is reservation and the major laws governing them under the Constitution of India. Furthermore, we shall understand the concept of horizontal and vertical reservations in light of the recent developments that took place in Bihar in 2021 ending it with a personal point of view on these developments.

Disclaimer: This article is only for educational purposes and does not discourage or encourage reservation. If any statement may be interpreted so, it may be purely coincidental.

What is reservation as per the Constitution of India

In India, reservation is meant to be the act of reserving a fixed number of seats in government jobs, legislatures, and educational institutions for the weaker section of society who have been socially, educationally and in many other ways backward.

The following are some of the constitutional provisions governing reservation laws in India:

Part XVI of the Constitution lays down special provisions relating to various posts, services, education grants, etc to certain classes in the legislative assemblies of the Centre and states. Article 330 states that special seats shall be reserved for SC, ST and Anglo-Indian communities in the House of the People.
Article 15(4) of the Constitution states that nothing can prevent the State from making any special provisions for the betterment of educational and socially backward classes of people in India or SC, ST.

Article 16(4) similarly states that the State can make special reservations for certain appointments and posts in favour of any backward classes of people which in its opinion are inadequately represented in the services under the State.

The 77th Amendment of the Constitution in 1995 wherein Clause 4A was added to Article 16(4) wherein it provided for promotion of any class/classes of posts in services of the State for ST and SC who are not adequately represented.
The 81st Amendment inserted Article 16(4B) which gave power to the State to fill the vacancies of the year reserved for SC/ST in the following year thereby negating the 50% reservation on the total number of vacancies of that year.
Article 233T provides for a special reservation to SC and ST in every Municipality.
Article 243D provides for specially reserved seats to SC and ST in Panchayats.
Article 335 states that the claims of SC and ST shall be taken into consideration consistently by maintaining efficient administration in making their appointments for services and posts in the Union or State.

What is horizontal and vertical reservation

The reservation policy in India is divided into two parts:

Vertical reservation
Horizontal reservation

These criteria are put forth for reserving certain seats in government jobs, services, posts and competitive national level exams. We shall briefly explain both these concepts along with a landmark judgement passed by the Hon’ble Supreme Court of India in December 2020.

Vertical reservation

Vertical reservation means reservations that are meant for Scheduled Caste, Scheduled Tribes and Other Backward Classes. This type of reservation is applied separately for each of these groups specified under the law. For example, Article 16(4) is a type of vertical reservation.

Horizontal reservation

Horizontal Reservation refers to equal opportunities provided to different categories of beneficiaries such as women, veterans, transgender community and persons with some kind of disability, cutting through the vertical categories. For example, Article 15(3) is a type of horizontal reservation.

The horizontal reservation is to be applied separately across each vertical category. Let’s take an example, if women have 50% reservation in horizontal quota, then half of these selected candidates would have to be women in each vertical quota category which means that half of all selected SC/ST candidates will have to be women and half of the unreserved or general category will have to be women, and so on.

The Hon’ble Supreme Court of India, clarified the interplay of both these reservations in the case of Saurav Yadav and Ors. v. State of Uttar Pradesh and Ors, 2020.

Saurav Yadav case summary

Facts of the case

In the instant case, two candidates, Sonam Tomar (under OBC- Female category) and Rita Rani (under SC- Female category) participated in the selection process in 2013 for filling up posts of constables in Uttar Pradesh police. Both of them had secured 276.5949 and 233.1908 marks respectively. It is pertinent to note that the reservation categories of OBC and SC are vertical reservation categories, while female is a horizontal reservation category.

The two candidates failed to pass in their respective categories. However, it came to their knowledge that in the General-Female category, the last qualifying female had secured 274.8298 marks which was actually lower than Sonam’s score. Their grievance before the Court was that candidates with marks lower than what they secured had been selected in the General Female category disregarding their claim.

For the readers, it is pertinent to note that the State of Uttar Pradesh has horizontal reservations for women candidates, and the State, in its submissions before the Court stated that it would not able to carry forward the vacancies under horizontal reservation to the next selection, in a scenario wherein the right number of candidates for the horizontal reservation were not available. The cut-off mark for eligible females of General category was 274.8928. While all male candidates belonging to OBC, SC, ST category who successfully secured more than 313.616 i.e. the cut-off marks for male candidates in the general/open/unreserved category were selected. However, the same standard was not applied to the SC/ST/OBC women category candidates, although they had obtained more than the cut-off marks for the female candidates in the general or open or unreserved category.

Issue

The action on part of the Uttar Pradesh Government in refusing to consider the claim of ‘OBC Female Category’ candidates in respect of ‘General Female Category’ seats is correct or not.

Judgement

The Supreme Court Bench put forth direction to offer employment to all candidates belonging to the OBC female category who had secured more marks than the marks secured by the last candidate appointed in ‘General Category-Female’ for the posts of constables in Uttar Pradesh police. SC female category students’ claims were rejected as none of them secured the required marks.

Justice Bhat agreed with Justice Lalit’s main judgment which the latter authored on behalf of the bench, and added a few reasons to conclude it.

According to Justice Bhat, the silent features of vertical reservation are:

The open category or other categories cannot file it other than those by candidates of the concerned social category only i.e. SC/ST/OBCs.
Migrating from a reserved category to the open category is allowed based on merits.
In case of migration from reserved to open category, the vacancy in the reserved category should be filled by someone from the same category who is lower in rank.
If the vacancies are not filled by particular categories due to less candidates then the vacancies can be carried forward or dealt with appropriately by rules.

Justice Bhat stated “Horizontal reservations on the other hand, are not inviolate pools or carved in stone. They are premised on their overlaps and are ‘interlocking’ reservations. They cannot be carried forward.”

The Apex Court dismissed the submissions of the UP government and held that:

If both vertical and horizontal quotas were to be applied together then a high-scoring candidate actually qualifying without reservations would not be included in the list and would lead to selecting those candidates with lower scores.

On the other hand, if a high-scoring candidate is allowed to drop one category, the overall selection would include high scoring candidates. In other words, the meritorious candidates would be selected.

Recent developments in Bihar

Bihar’s Chief Minister, Nitish Kumar announced around June 2021 that there will be 33% horizontal reservation for women in the State’s engineering and medical colleges.¹ Bihar already has 60% reservation in the State’s higher educational institutions which has six vertical categories like SC, ST, OBC, EWS, EBC, etc. This newly announced reservation shall not be in addition to this 60% but it will be spread across all vertical categories which also include 40% unreserved seats for the open categories.² In simpler words, if an institution has 100 seats which are reserved for SCs then 33 of those must be filled by SC women as per the new reservation law which has been formulated in accordance with Article 15(3) of our Constitution.

Point of view

This development is a steady step towards giving special rights to women in India. Bihar has taken a lot of steps towards empowering women in the last three decades like in 1992, allowing two consecutive days of menstrual leave for women employed in government jobs. In 2006, 50% reservation was provided to women in Panchayati Raj institutions and Bihar was the first to do so. In 2006 again, the Mukhyamantri Balika Cycle Yojana was introduced for Class 9 and 10 girl students which provided for a conditional cash transfer programme for secondary education of girls which has helped to encourage girls to complete their education.

Providing horizontal reservation for women to a certain extent where it does not exploit the rights of meritorious candidates of open category is a good step for a brighter future.

Such reservations will improve the Female Labour Force Participation (FLFP) and female literacy rate which was 20.3% in 2019 before the pandemic.³Such reservation provides a gateway to women who have faced the atrocities of belonging to a backward class to achieve the level of education and go on to work at esteemed government jobs and posts thereby improving literacy rate as a whole.

Increasing the workforce of women has always helped boost the economy of any nation. Certain reservations must also be made towards women and transgenders in private institutions. Such reservations as employed by the Bihar government bring about revolutionary changes in a country and act as a firm example to other states in the country with a large population of working age women.

Conclusion

Today, the Right to Equality is a basic fundamental right which is recognised by everyone and the law prohibits any form of discrimination. However, in the deeper sections of our society, women and people belonging to the lower caste are yet discriminated against. These hardships are not brought to public knowledge but they exist. Over a period of 5 decades, laws and provisions have been made to give women, children and lower caste people the rights and opportunities they duly deserve.

These provisions have over a period of years only resulted in the betterment of our society as a whole by increasing the literacy rate, the diversity ratio at public and private forums and a lot more for India. A lot of development is yet to come and more and more women and children are inclined towards the field of education. Going a step further, women too have been interested and helpful in providing their aid to other weaker sections of our society which sets a strong example for the younger generation.

Through this article, we now understand the concept of horizontal and vertical reservation in light of the landmark case law of Saurav Yadav. We also understand the latest development enacted by the Bihar Government which shall go a long way in diminishing gender disparity in the years to come.

References

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The pre-trial stage under the Code of Criminal Procedure : step by step procedure

By

Shoronya Banerjee

-

November 26, 2021

0

This article is written by J Jerusha Melanie, pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Zigishu Singh (Associate, LawSikho).

Table of Contents

Introduction

The very purpose of a court is to render justice. In criminal cases, rendering justice comes down to finding the truth. And the truth is what is sought in every trial. Now, finding the truth is a mammoth task, and it is taken care of by the administrators of justice- the police, the court, investigative agencies, etc. But the road to finding the truth and rendering justice is long. So, the entire process is divided into three major stages- pre-trial, trial, and post-trial stage. This article exclusively deals with the pre-trial stage of any criminal case, as provided under the Code of Criminal Procedure (CrPC).

The birth of a criminal case

Every criminal case originates from the commission of an offence, and the legal proceedings against it are kick-started when it is informed to the police, generally, by way of an informant. The informant may be:

the victim,
someone on the victim’s behalf, or
anybody having information on the offense.

The offence may be either cognizable or non-cognizable.

Cognizable and non-cognizable offence

As defined under Section 2(c) CrPC, a cognizable offense is one in which a police officer may arrest without a warrant. Contrarily, as per Section 2(l), a non-cognizable offense is one in which a police officer has no authority to arrest without a warrant. If the information received by the police relates to more than one offense out of which even one is cognizable, the entire case is treated as a cognizable case.

The steps involved in the pre-trial stage

STEP 1- Information to the Police

Information on cognizable offence

If the information received by the police through the informant relates to any cognizable offense, the officer in charge of the police station records it under Section 154 CrPC. The informant can give the information in both oral and written form; if given orally, it should be reduced to writing and read over to the informant. The informant gets a copy of the recorded information free of cost.

This recorded piece of information received first-hand from the informant is called the First Information Report (FIR).

The FIR is the first version of the incident as received by the police. It is vital for both the investigation and corroboration of evidence, but it is not substantive evidence in itself. The criminal law sets its motion upon the lodging of FIR.

Information on non-cognizable offence

Upon receiving the information, the Magistrate may take cognizance of it under Section 190 CrPC. If he takes cognizance, he examines the informant upon oath. The examination’s substance is reduced to writing and signed by the informant and the Magistrate. After examining, if the Magistrate finds sufficient grounds to investigate the case, he orders the police to investigate under Section 156 and Section 202 CrPC; if not, he dismisses it. Once the police receive the Magistrate’s order to investigate, they carry on with the case as if it were a cognizable one, although they cannot arrest without a warrant.

What if the police refuse to record the information?

At times, the police may refuse to lodge an FIR. It may be either:

To avoid their workload, or
In the police officer’s opinion, no sufficient ground exists to enter into an investigation.

When the police refuse to enter into an investigation citing insufficient grounds, he gives a written report stating the reasons for his refusal; the informant gets a copy of the same.

On refusal to lodge FIR, the informant has two options to set the criminal law into motion:

Send written information to the concerned Superintendent of Police (SP) under Section 154(3). If the SP is satisfied that the information discloses the commission of any cognizable offense, he orders the police to investigate.
File a complaint directly to the Magistrate under Section 190 CrPC, which gets treated like any information received on an NC offense under Section 190.
File a ‘Zero FIR‘ in a police station other than the one which refused to file FIR (Kirti Vashisht vs State & Ors.). The station that files Zero FIR conducts any required medical examination and transfers it to the police station having proper jurisdiction.

STEP 2- Investigation

Upon filing an FIR (in case of a cognizable offence) or receiving the Magistrate’s order (in case of an NC offence), the officer in charge of the police station starts the investigation. Under Section 2(h) CrPC, the police (not the Magistrate!), conduct the investigation to collect evidence. The police have unhampered power to investigate under Section 157 CrPC, any cognizable case, irrespective of any court’s order (Emperor v Nazir Ahmed).

The police can commence investigating a cognizable case right after the filing of an FIR. However, for an NC case, the Magistrate’s order under Section 202 (read with Section 190 and 200) CrPC is required to commence the investigation.

Report to the Magistrate

Upon receiving information on a cognizable offense, the officer in charge of the police station sends a preliminary report to the empowered Magistrate through a superior officer appointed by the State Government.

Proceed to the spot

The officer in charge of the police station proceeds to the spot of the offense when:

He suspects the commission of a cognizable offense or
Receives the Magistrate’s order to investigate an NC case.

Proceeding to the spot is not mandatory if:

The case is not serious, and
The information is given against any person by name.

Attendance of witnesses

When the police officer suspects the acquaintance of any person (within certain limits) with the case at hand, he gives a written order under Section 160 CrPC for that person to appear before him; this is to facilitate the police to collect the required evidence. And the so-called witness is duty-bound to oblige the order.

The order is a part of the investigation and doesn’t amount to harassment of the witness or violation of Article 21 of the Constitution of India per se if reasonable grounds exist to believe that the witness knows something about the offense (Sube Singh v State of Haryana).

However, the following persons need not attend the police investigation at places other than their residence:

Males under fifteen or above sixty-five years of age,
Women, and
Mentally or physically disabled persons.

Examination of witnesses

Usually, the police examine the witness orally and reduce the statements into writing. Every witness’ statement is recorded individually in first-person form. It can be audio-video recorded too.

The witness is legally bound to truly answer all the questions put forth to him during the examination, except the ones that may expose him to any criminal consequence.

Prohibition on signing the recorded statements

No statement made by the witness to the police, recorded in writing while investigating, is signed by him. Under Section 162(1) CrPC, such statements can be used by the accused or the prosecution to contradict the witness under Section 145 of the Indian Evidence Act 1872 (Cross-examination as to previous statements in writing). Meaning, if the witness making such statements-

comes as a ‘prosecution witness’ in the trial, then the accused can contradict him using such statements;
comes as a ‘defense witness’ in the trial, then the prosecution can contradict him suing such statements.

But it cannot be used for corroborating the evidence of a witness in the court (Sat Paul v Delhi Administration). Also, no police officer should directly or indirectly induce, threaten, or promise while investigating.

Recording of confessions and statements

A confession made by the accused to the police is inadmissible in evidence under the Indian Evidence Act 1872. However, Section 164 CrPC provides the exception that such a recording must fulfil the following conditions to be admissible in evidence:

Only a Metropolitan Magistrate or Judicial Magistrate (with or without having jurisdiction in the case) must record the confession or statement during the investigation;
The recording Magistrate must be satisfied that the confession is voluntary;
The Magistrate must warn before recording the confession that the accused is not legally bound to confess.
If the confession is recorded by audio-video means also, then the presence of the accused’s advocate is required;
The recording must satisfy Section 281 CrPC.

Medical examination of rape victims

While investigating an alleged commission or attempt of rape, the victim (if consents) goes through a medical examination by a registered medical practitioner employed in a government hospital within 24 hours from the information’s reception. The medical examination enables the police to get crucial information on the offense, including the offender’s identity. The medical practitioner prepares a report of the examination and forwards it to the investigating officer.

Search by the police

The officer in charge of a police station can search any place within the limits of his station to find something necessary for investigating if:

Reasonable grounds exist that it may be found in that place; and
He opines that it is obtainable only without undue delay.

The officer records in writing such reasonable grounds before the search, a copy of which is sent to the nearest empowered Magistrate. The search must satisfy Section 100 CrPC, which mandates:

Presence of minimum two independent search witnesses and the occupant of the searched area, and
Making of a list of items seized during the search, signed by the search witnesses.

When the suspected place is outside the limits of the investigating officer’s police station, he asks the police officer of the station under whose limit the place falls to issue a search warrant.

Arrest of the accused

While investigating an NC case, if an arrest is felt necessary, the court issues an arrest warrant under Section 70 CrPC, directing any police officer to arrest the accused.

However, while investigating a cognizable case, the police officer arrests without an arrest warrant under Section 41 CrPC, any person against whom:

A reasonable complaint is filed,
Credible information is received, or
Reasonable suspicion rises that he committed a cognizable offense punishable with imprisonment up to seven years, fine, or both.

If an immediate arrest is not needed, the officer issues a notice to appear before him at a given time and place, to which the accused is legally bound to oblige. If he fails to oblige, then an arrest is expedient. Any accused arrested by the police with a warrant must be produced before the Magistrate within twenty-four hours of arrest.

Release of accused if evidence insufficient

Within the twenty-four hours of arrest, the accused is released on executing a bond with/without sureties under Section 169 CrPC that he will appear before the Magistrate whenever required, if:

the investigation is complete within 24 hours of arrest, and no firm evidence exists against the accused, and
The officer opines that no reasonable ground exists to produce the accused before the Magistrate or prolong the detention.

The police record the release in a ‘Closure Report’.

Forward of accused to Magistrate if evidence sufficient

If the investigation is complete within 24 hours of the arrest and sufficient evidence exists against the accused, under Section 170 CrPC the police will:

Forward him to the empowered Magistrate, or
If the offense is bailable, release him after taking security for his appearance before the Magistrate.

What if the investigation is not complete in twenty-four hours?

The police cannot detain anyone who is arrested without a warrant for more than 24 hours (Section 57 CrPC); such detention exceeding 24 hours amounts to illegal arrest and violation of Article 22(2) of the Indian Constitution. But no investigation can be practically completed within 24 hours. Section 167 CrPC provides the solution to the dilemma as to what to do with the detained accused.

Under the above circumstances, the police forward the accused to the nearest Judicial Magistrate, along with a copy of the investigation diary maintained under Section 172 CrPC.

Such a Magistrate can extend the police custody for 15 days. After that, the accused is forwarded to the Magistrate having jurisdiction over the case, who can order any further detention (except police custody!) for the following period:

Ninety days (for any alleged offense punishable with death, imprisonment for life or for a term not less than ten years);
Sixty days (for any other offense)

After the extended period, the accused is released on bail if he furnishes it.

STEP 3- Report of the investigation

After investigating, the subordinate officer involved in the investigation submits a report under Section 168 CrPC to the officer in charge of the police station, who further forwards a Completion Report to the Magistrate under Section 173 CrPC. The Completion Report is of two types- Closure Report and Charge sheet.

Closure Report

Closure Report is the Completion Report forwarded by the police to the Magistrate when the accused is found innocent due to lack of sufficient evidence and released on a bond under Section 169 CrPC. Upon its reception, the Magistrate either dismisses the case under Section 203 CrPC on the ground of insufficient evidence or takes its cognizance under Section 204 CrPC.

Chargesheet

Chargesheet is the Completion Report forwarded by the police to the Magistrate when sufficient evidence exists against the accused. This report is commonly called the ‘challan’.

Contents of the Completion Report

Parties’ names,
Nature of the information,
Witnesses’ names,
Possibility of the offense,
Accused’s name,
Whether the accused is arrested,
Whether he is released on his bond,
Whether he is forwarded in custody under Section 170,
Any records of statements and confessions, or relevant documents,
Medical examination of any victim woman under Section 164A, etc.

The informant is informed of the submission of the completion report to the Magistrate.

End of the Pre-Trial Stage

The Pre-Trial stage ends when the police submit the Completion Report to the Magistrate. Next, the Trial stage starts once the Magistrate takes cognizance of the case by issuing the process for proceedings under Section 204 CrPC.

Special protection to women victims

Throughout the Pre-Trial stage, the victims of offenses under Sections 354, 354A, 354B, 354C, 354D, 376, 376A, 376AB, 376B, 376C, 376D, 376DA, 376 DB, 376E, or 509 CrPC are specially protected in the following way:

If the woman victim is the informant, the information is recorded by a woman police officer;
If such victim is physically or mentally disabled, the information is recorded by the police at a place of the informant’s convenience;
Woman victims’ statements are recorded by a woman police officer, by audio-video means as well.
The time limit for investigating such offenses- 2 months.

Conclusion

The pre-trial stage of any criminal case primarily revolves around the police. The police investigation forms the basis of every criminal case; it establishes the initial direction of the case. The lives of the accused and victim lie essentially upon how the investigation drives the trial. Considering the weight of its consequence, it is imperative to conduct it with the utmost diligence and care. At the end of 2020, a whopping number of 2134975 cognizable cases were pending investigation, out of which 87599 were pending for more than three years! Time decreases the possibility of finding the truth, and so does ignorance. Wipe out ignorance; let justice prevail!

References

Indian Kanoon – Search engine for Indian Law
Crime in India 2020, National Crime Records Bureau
THE CODE OF CRIMINAL PROCEDURE, 1973
THE INDIAN EVIDENCE ACT, 1872
THE INDIAN PENAL CODE, 1860
Ratanlal and Dhirajlal’s The Code of Criminal Procedure 23^rd Edition
https://www.humanrightsinitiative.org/publications/police/fir.pdf
https://www.legalserviceindia.com/legal/article-4370-zero-fir.html
https://bvpnlcpune.org/Article/Police%20Investigation%20and%20Closure%20Reports-Prof%20_Dr_%20Mukund%20Sarda.pdf
https://www.law.cornell.edu/wex/corroborating_evidence#:~:text=Corroborating%20evidence%20is%20evidence%20that,the%20context%20of%20a%20 conviction.
https://lexlife.in/2020/06/28/explained-what-is-a-charge-sheet/
TABLE 17A.5.xlsx (ncrb.gov.in)

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Analyzing 15th Finance Commission report

By

Sneha Mahawar

-

November 26, 2021

0

This article is written by Saurav Kataria, of H.P. National Law University, Shimla. In this article, the author has discussed the 15th Finance Commission and briefly analyzed its report.

About the Finance Commission

The President under Article 280 of the Constitution constitutes the Finance Commission. The Finance Commission gives recommendations through which the states and the Union distribute tax revenue among themselves. The main features of the commission are that it addresses the vertical imbalances between the taxation power and expenditure responsibilities among the Center and states and also equalizes all public services across the state. It is the function of the Finance Commission to make recommendations to the President relating to the below-mentioned matters. It is pertinent to note that these have been different from recommendations of the previous commissions.

The terms of reference that are to be taken under consideration are –

The allocation between the states of the respective shares of the net proceeds of taxes that are to be divided among them under Chapter I, Part XII of the Constitution and the distribution between the Union and the States of the net proceeds of taxes that are to be divided between them.
The principles which should govern the grants-in-aid of the revenues of the states out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under Article 275 of the Constitution for purposes other than those specified in the provisos to clause (1) of that Article.
Based on the Finance Commission’s recommendations, the steps required to supplement the Consolidated Fund of a State to supplement the resources of the State’s Panchayats and Municipalities.

The Commission will examine the Union’s and States’ current financial situation, including deficits, debt levels, cash balances, and efforts to maintain fiscal discipline, and will recommend a fiscal consolidation roadmap for sound fiscal management, taking into account the responsibility of the Central Government and State Governments to maintain appropriate levels of general and consolidated government debt and the Commission may also look at whether the revenue deficit grants should be granted.

The Commission has used the population data of the 2011 census which is different from other commissions in which the 1971 population census was also included.

The 15th Finance Commission

The 15th Finance Commission is chaired by Mr. N.K. Singh was constituted by the President in November 2017. The Commission has a very wide range of recommendations for states in various sectors like power and waste management etc. The 15th Finance Commission was required to submit two reports – this first report consisting of recommendations for the financial year 2020-21 and the second report with recommendations for the 2021-26 period.

The report of the 15th Finance Commission is divided into four volumes –

Volume 1 and 2 contain annexes and the main report.
Volume 3 deals with the Union Government and its departments and also deals with challenges between the period and the roadmap ahead.
Volume 4 deals with states and in that analysis of the states, it addresses all the key challenges which are faced by the states.

Vertical and horizontal devolution

Vertical devolution

It is also known as the devolution of the taxes of the Union to States. For the period of 2021-26, the share of states is recommended to be 41% in the central taxes which is the same as that of 2020-2021. However, this is less than the 14th Finance Commission share which was 42%. The Commission has said that the grants from Central resources to the states were reduced because they have to adjust that 1% for the newly formed union territories of Jammu Kashmir and Ladakh. It was done to maintain stability among the resources during this pandemic.

Horizontal devolution

It is also termed as allocation between the states. The horizontal devolution is categorized into various heads for different areas and the weightage is given accordingly.

The criteria are given as follows maximum weightage is given to the income factor which is 45% of the share, next is given to population and area which is 15% for each, next head is of demographic performance which is given a share of 12.5%, next 10% share is given to forest and ecology and at last 2.5% to tax and fiscal affairs and this all heads combine of 100%. This is how the share is allotted between the states. This is the same as of the year 2020-21 we can see this in the table mentioned below also it covers the difference from 14th Finance Commission.

Criteria	14th FC (2015-20)	The year 2020-21	15th FC (2021-26)
Income	50	45	45
Area	15	15	15
Population (2011)	10	15	15
Population(1971)	17.5	–	–
Demographic Performance	–	12.5	12.5
Forest and Ecology	–	10	10
Forest Cover	7.5	–	–
Tax and Fiscal	–	2.5	2.5
Total	100	100	100

All the above-mentioned numbers are in percentage.

Grants to be provided from centre’s resources

Following are the grants mentioned which will be provided from centre’s resources:

Revenue deficit grants

The 15th Finance Commission will provide an amount of Rs 2.9 lakh crore to 17 states to eliminate the revenue deficit.

State-specific grants

States will get a grant of Rs 1.3 lakh crore for 8 sectors which are health, school education, higher education, implementation of agricultural reforms, maintenance of PMGSY roads, judiciary, statics, and aspirational districts and blocks. Also, the commission has kept a portion for the performance-linked incentives in the grant.

A state-specific grant of Rs 49,599 crore is recommended by the commission and it should be given in the areas of social need, administrative governments, infrastructure, water, and sanitation, preservation of cultural-historical monuments, high-cost physical instruction structure, and tourism. A high-level committee should be established to review and monitor how the state-specific grounds are utilized as recommended by the Commission.

Grants to local bodies

The total grant provided for local bodies is Rs 4.36 lakh crore which is divided into various categories of the local bodies like 2.4 lakh crore for rural local bodies, 1.2 lakh crore to urban local bodies, and 70 thousand crores for health grants from local governments. The health grants will also be provided to convert rural centres and primary health care centres to health and wellness centres which will also support diagnostic infrastructure.

The grants to local bodies will be distributed based on the population and area of the states with a 9:1 ratio respectively; these grants are other than the health grants. The commission has fixed some conditions for availing these grants. The entry-level criteria include (i) the publication of preliminary and audited accounts in the public domain, and (ii) the establishment of minimum property tax floor rates by states, as well as improvements in property tax collection. If the state on the recommendation does not constitute a State Finance Commission then no grants will be given to local bodies after March 2024.

Disaster risk management

Disaster management will have a total of Rs 1.6 lakh crores of funds in which the Centre’s share will be Rs 1.2 lakh crore. The Commission also recommended that the fund should be divided in the existing pattern, that is the Centre to state ratio for the northeastern and Himalayan states will be 90:10 and for the other states, it will be 75:25.

Defence and internal security

The Modernisation Fund for Defence and Internal Security (MFDIS) would be established as a special non-lapsable fund to fill the gap between budgetary requirements and capital spending in defence and internal security. Over the next five years, the fund is expected to have a corpus of Rs 2.4 lakh crore (2021-26). From the Consolidated Fund of India, Rs 1.5 lakh crore would be transferred. The remaining funds will come from actions like disinvestment in defence public sector businesses and the monetisation of defence lands.

Performance initiatives and grants

The 15th Finance Commission has recommended a grant of Rs 4,800 crores for the states to enhance educational outcomes, Rs 6,143 crores for online learning and development of professional courses, and Rs 45,000 crores to get at performance-based initiative for all the carrying out agriculture.

Recommendations for the health sector

The 15th Finance Commission has recommended states increase their spending on health and make it more than 8% of their whole budget by the year 2022. The primary healthcare expenditure should be two-third of the total health expenditure by 2022, making it easy for the states to adapt and innovate the centrally-sponsored schemes. All Indian Medical and Health Services should be established. A total grant of Rs 1,06,606 crore which is 10.3% of the total grant will support the health sector.

Fiscal roadmap

Fiscal deficit and debt levels

The Commission recommended that the fiscal deficit should be brought down to 4% GDP by the Centre. It recommends the fiscal deficits for every year like 4% in 2021-22, 3.5% in 2022-23, 3% in 2023-24. If the state is unable to utilise the amount in 2021-25 then it can utilise that amount by 2026. During the first four years (2021-2025), states will be allowed to borrow an additional 0.5 per cent of GSDP if they implement power sector reforms that include (i) reducing operational losses, (ii) reducing revenue gaps, (iii) reducing cash subsidy payments by adopting direct benefit transfer, and (iv) reducing tariff subsidy as a percentage of revenue.

Revenue mobilisation

Taxation based on income and assets should be tightened. The coverage of measures relating to tax deduction and collection at source (TDS/TCS) should be increased to avoid excessive reliance on income tax on salaried incomes. State-level stamp duty and registration fees have a lot of untapped potentials. Property records should be computerised and connected with transaction registration, as well as the market value of properties. The property valuation process should be streamlined by state governments.

GST

The inputs and outputs intermediating with the inverted duty structure should be resolved. Revenue neutrality which is compromised by the multiple rate structure and several towns and adjustment on the GST rate should be restored. Also, it should be rationalized by merging the rates of 12% and 18%. For expanding the GST scope, the states need to step up and look into it.

Criticism

It absolves the Union administration of responsibility for its budgetary restraint and dilutes the Union’s and States’ shared accountability. The commission should have provided performance-based initiatives to the states to perform better in the population control reform. It should have also included the population census of 1971. Fiscal federalism will be affected and weakened if there are any restrictions imposed on states’ capacity to borrow and it will have a negative impact on state spending, particularly on development investment.

Conclusion

When we see any of the Financial Commission reports, there are some drawbacks in it. There are certain crucial points which we always have to see how it affects the country. There were many challenges faced in the recommendations made by the commission like global economic slowdown, lower tax revenues etc. The disturbance in the economy was created by the coronavirus pandemic due to which many new reforms were made by the Finance Commission in concern to the health sector. Many policies like GST, direct tax code, and improving expenditure outcomes will need to have a special focus from the government in the future from the Finance Commission. From the report, we can easily see that the health sector has to improve and this is why the commission has higher grants for it.

References

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What you need to know about inter-state arrest

By

Sneha Mahawar

-

November 26, 2021

0

This article is written by Shashwat Kaushik, a student of CCS University. This article gives an insight into the legality of inter-state arrest and the guidelines that police ought to follow before making an arrest and the landmark cases regarding inter-state arrest.

Table of Contents

Introduction

Interstate police arrest means when the police of one state arrest the accused or culprit in some other state, though this type of investigation or arrest is constitutionally invalid. The police force can only arrest or investigate an accused who lies within the boundaries of their state. For eg- If someone commits a crime in Delhi and is vested in Delhi then only Delhi police have the authority to arrest that criminal and not the police of some other state. In order to arrest an accused of some other state, the police force of a state must communicate with the police force of that particular state where the accused is and that has the authority to take immediate actions.

Guidelines for inter-state police arrest

Guidelines for inter-state police arrest:

The police should look for earlier authorization/approval of the greater/unrivaled officials recorded in a hard copy or on telephone (in the event of criticalness) to leave state/UT to do the examination.
In order to make an arrest, the cop should adhere to the facts and record reasons in a hard copy revealing that the arrest is vital with the goal of investigation.
The policeman should move the jurisdictional Magistrate to look for arrest/court orders besides in situations when there is a peril that the accused may escape or disappearance of implicating proof.
The cop should record reasons clarifying why it is important to visit another state without getting arrest/court orders.
On the off chance that the conceivable arrestee is a female, a lady cop has to be a part of the group.
All cops in the group ought to be in uniform, and bear precise, noticeable, and clearly visible IDs with their designations.
Police should make all endeavours to have autonomous witnesses from the area.
The captured individual should be offered a chance to be counselled by his lawyer before being taken from the state.
While returning, the cop should visit the nearby police headquarters to make a journal entry indicating subtleties of the captured people/persons and things seized during the police investigation. The same ought to be recorded by the police group on getting back to the home state. Police groups putting forth capture should attempt to acquire travel remand in the wake of producing the arrestee before the judge within 24 hours except if exigencies of the circumstance warrant in any case.

Case laws

The Patiala House Court, a lower court in India’s capital, New Delhi, in an interval choice, allowed bail to the accused in the case of Disha A. Ravi vs State (Nct Of Delhi) & Ors (2021), who had been engaged in the creation and sharing of ‘Toolkit’ records via online media. The computerized Toolkit contained records with relation to the recently presented Farmers Bills and the candidate was captured for the offences of rebellion and criminal trick as far as it matters for spreading of the Toolkit. While permitting the candidate’s bail application in the absence of any solid explanation or proof that would bring about the opposite, the Court mentioned relevant observable facts on the pertinence of the law of subversion. The Court likewise held that the option to look for a worldwide crowd with no topographical obstructions on correspondence was a piece of the right to speak freely.

In permitting the bail application, the Court held that there was nothing to recommend that the candidate bought into any secessionist thought. The State even neglected to demonstrate how the candidate carried a worldwide crowd to the “secessionist components” by sending the Toolkit to Greta Thunberg. No proof was brought on record to show that any violence occurred at Indian Embassies compliant with the demonstrations of the candidate and any of the co-schemers. Further, neither law and order nor judiciousness requires an individual to be obligatorily confined in care to be gone up against other co-charged people, as presented by the State. The State couldn’t recover anything from the candidate even after questioning her for five days. While the examination is at an early stage and the examination office is currently gathering more proof and capturing the respondent based on the material accessible, the personal freedom of the respondent couldn’t be confined only based on future expectations. Therefore, the State’s issue with the bail application was more elaborate.

The Court maintained the overall principle of “bail, not jail” as there was no obvious motivation to limit the candidate who had a flaw-free criminal predecessor. The bail application was permitted dependent upon the person and was levied with an individual guarantee of Indian Rupees 100,000 [approx. USD 1,334] with two guarantees each in a similar sum. During the bail, the candidate was requested to cooperate with the concerned investigation, not to leave the country without authorization of the Court and to show up at each proceeding under the steady gaze of the Court without deterring the advancement of the case.

Sandeep Kumar v. The State (Govt. of NCT of Delhi)

This case lays a reasonable foundation on which a police department of one state can arrest an accused in some other union territory.

Authentic foundation

The Delhi High Court was managing a Habeas Corpus case recorded by a man for the arrival of his wife after she was persuasively removed by the Uttar Pradesh police from their JNU home.

The lady had changed her religion from Islam to Hinduism before her marriage to a Hindu. Her family had protested the marriage and later her sibling recorded a grievance with the Ghaziabad police claiming that his sister had disappeared.

A group led by SI Sharma, from the Loni Police Station, later entered the JNU grounds with the help of Delhi Police authorities and removed the lady from the JNU home. The lady in the end was taken to her family in Uttar Pradesh. The candidate told the Court that he was confined in the Loni police headquarters for three days and two evenings without presentation before the Magistrate.

The High Court questions why a lady was “just handed over” to her family. At the time of hearings, the Court noticed that the lady was an adult and capable of taking care of herself. In this situation, the Court questioned how she was “handed over to her family by the concerned police official, knowing well that she had married willingly.”

In this scenery, the Court likewise took basic note of the accommodation by the Delhi police that they had no insinuation of the visit by the Uttar Pradesh police. The High Court noticed, in a request passed in 2018, If that is the situation, it makes one wonder with regards as to why they didn’t demand keeping the stated purpose of the law and rather basically permitted the police authorities from PS Loni to remove two grown-ups from the JNU campus.

Advisory group’s discoveries

The Committee tracked down that the marriage between the candidate and his wife was led by common assent following Hindu rituals and customs.

However, it came to the conclusion of the Committee that the ability to capture had been terribly abused by SI Sharma of the Loni police station. Certain regulations were additionally found concerning some different authorities of the Vasant Kunj (North) and Loni police. The Court has ordered that disciplinary activity be started against the named cops. Further, the Court additionally ordered that Rs 50,000 each be granted as remuneration to the applicant and his better half for the experience they were put to. The DGP of the Uttar Pradesh police was additionally ordered to keep in touch with the couple, apologising for the activities of the police.

Obligations upon magistrates

The officer before whom the arrestee is delivered should apply his mind to the current realities of the case and ought not to concede travel remand precisely. He should fulfil himself that there exists material in the form of entries in the case diary that justifies the prayer for transit remand. The demonstration of coordinating remand of a charge is generally a legal choice. The judge doesn’t act in executive responsibility while requesting confinement of the charge. He should guarantee that the necessities of Section 41 (l)(b) of the Criminal Procedure Code (CrPC) are fulfilled.
The cop should send the case journal alongside the remand report so the judge can see the value in the authentic situation and apply his psyche whether there is a warrant for police remand or legitimization for legal remand or there is no requirement for any remand whatsoever. The justice should momentarily set out the purposes behind his choice.
Another compulsory procedural necessity for the Magistrate considering a travel remand application is spelt out in Article 22 (1) of the Constitution of India. This entitles the person arrested to be informed as soon as possible about the grounds of such arrest.
The Magistrate needs to guarantee that the captured individual isn’t denied the option to counsel and to be guarded by a legitimate expert of his decision. The Magistrate ought to ask the individual captured brought before him whether he has knowledge regarding the grounds of his capture and whether he needs counsel and be defended by a legal practitioner.

Other bearings

As far as Section 41(1)(c), Criminal Procedure Code (CrPC), control rooms are set up in each region. Names and addresses of the people captured and assignment of the Police officers who caused the capture to be shown. The control room at the state level should gather subtleties of the people so captured.
The cop should record every procedure directed by him at the spot and set up a ‘capture notice’ showing time, date of capture, and name of the connection/companion to whom suggestion of capture has been given. It should uncover the explanations behind the arrest.
Since the arrestee is to be removed from his state to a spot away from where he might not have any association, he might be allowed to bring with him (if potential), his relative/colleague to stay with him till he is delivered before the jurisdictional Magistrate. Such a relative would have the option to arrange legitimate help for him.
The captured individual should be delivered before the jurisdictional Magistrate at the earliest, regardless, not past 24 hours from the date of capture barring the excursion time so that capture of such individual and his confinement, if important, might be defended on a legal request.

The 24 hours time span recommended under Section 57 CrPC is to be practised as far as possible. It does not empower a police officer to keep a person in a police station a minute longer than is necessary for the purpose of investigation and it does not give him an absolute right to keep a person till 24 hours.
The cop should affect capture under Section 41(l)(b) CrPC just when he has sensible doubt and believable data. He should fulfil himself about the presence of the material to impact capture. He must satisfy himself about the existence of the material to effect the arrest. There must be definite facts or averments as distinguished from vague surmises or personal feelings. The materials before him should be adequate to cause a genuine conviction.
To make the capture, the police officer can’t take cover under someone else’s conviction or judgment. He should influence capture at his own danger and duty as the impact of unlawful capture could be the commission of the offence of unfair constraint culpable under Section 342 of The Indian Penal Code. No capture can be made because it is legitimate for the cop to do as such. Denying an individual of his freedom is a big deal
The IO should keep a total and thorough case journal showing the examination completed by him.
The logbook of the vehicle utilized for transportation should be kept up and marked. The IO should show whether the vehicle was government or a private one. Name of its driver and how and by whom it was orchestrated. Only authorised vehicles ought to be utilized for transportation to the degree conceivable.
MHA/Central Govt/Commissioner of police should outline appropriate rules for cops to deliver all reasonable help. The inability to cling to the principles/rules should deliver the cop responsible for departmental activity just as the scorn of the court.
The public examiner ought to give expected help to the cop visiting his State at the hour of looking for travel remand.

Conclusion

Inter-state arrests are legal as far as it is in the notice of the other state police, or you are cooperating with them. The inter-state arrest comes with a set of rules which must be obligated before pursuing the same.

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.

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Traditional knowledge digital library in India : impact on patent examination

By

Abanti Bose

-

November 26, 2021

0

1537528814digital-library — Image Source: https://rb.gy/b31xxh

This article is written by Akshatha Shetty, pursuing Certificate Course in Intellectual Property Law and Prosecution from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

An attempt was made by the University of Mississippi Medical Centre to patent turmeric powder. Though the University was granted a patent overusing turmeric powder for curing wounds, the Council of Scientific and Industrial Research (CSIR), India, challenged the same by claiming that the use of turmeric powder was not a new invention and that its medicinal use existed since ages. Later, the United States Patent and Trademark Office (“USPTO”) revoked this patent agreeing to the obvious fact.

However, the revocation of the turmeric patent at USPTO incurred a lot of time, effort, and money. It also highlighted that there exists a need to remove language barriers, as India’s traditional knowledge (hereinafter referred to as “TK”) was mostly recorded in Sanskrit and other regional languages. All this pushed to create a proactive mechanism for the protection of TK.

Thus, to prevent exploitation and to provide worldwide protection to Indian traditional knowledge, in 2001, a project named The Traditional Knowledge Digital Library (“TKDL”) was initiated in India. This article’s focus lies on the Traditional Digital Knowledge Library and its impact on patent examination.

Traditional knowledge digital library

TKDL was formed in collaboration with:

CSIR,
Ministry of Health,
Ministry of Science and Technology and the Department of Ayurveda, Yoga, and Naturopathy, Unani, Siddha and Homeopathy (AYUSH), and
Ministry of Health and Family Welfare of India.

TKDL is being implemented at the CSIR. The interdisciplinary team which worked in the formation of the TKDL for Indian Systems of Medicine included traditional medicine experts (Ayurveda, Unani, Siddha and Yoga), scientists, patent examiners, IT experts and technical officers.

The TKDL contains digital documentation, in millions of pages, of publicly available traditional knowledge (TK) that relates to Ayurveda, Unani, Siddha, Sowa Rigpa and Yoga.

Once the traditional knowledge is recorded in TKDL, legally, it turns into public domain knowledge. Under the patent law, this means that it is considered to be prior art. This criterion removes its ability from being patentable. Patent examiners can easily check this database and reject any patent application that probably is a mere copy of the traditional knowledge. Thus, TKDL enables in preventing instances of bio-piracy.

Impact on patent examination

To overcome the language and format barrier, TKDL provides information in five international languages: English, French, Japanese, German and Spanish, on TK existing in India. This helps the patent examiners at international patent offices to understand better.

Information on Indian TK has been structured and classified under an innovative classification system called the Traditional Knowledge Resource Classification (TKRC). TKRC is modelled on WIPO’s International Patent Classification (IPC). Furthermore, it has also inspired revisions of the IPC system, which makes it better adapted to incorporate traditional medical knowledge. Thus, the TKRC is not unilaterally shaped by the IPC; the IPC has also been updated and adapted to the TKRC.

More than 22 lakh medicinal formulations/ practices have been recorded into the TKDL database, along with several thousand sub-groups. This has improved the standard of search and scrutiny of the prior art concerning patent applications filed in the area of traditional knowledge.

By facilitating access to information, which otherwise would not be easily available to patent examiners, TKDL seeks to prevent the granting of patents for products developed utilizing TK where there has been little if any, inventive step. This, in turn, prevents the granting of erroneous patents.

The TKDL enables prompt and almost cost-free cancellation or withdrawal of patent applications relating to India’s traditional knowledge.

At present, access to TKDL is available to 13 patent offices:

United States Patent & Trademark Office,
European Patent Office,
Indian Patent Office,
Japan Patent Office,
Canadian Intellectual Property Office,
United Kingdom Patent Office,
Intellectual Property Australia,
German Patent Office,
Intellectual Property Corporation of Malaysia,
Chile Patent Office,
Rospatent- Intellectual Property Office of Russia,
Spanish Patent and Trademark Office and,
Peru Patent Office under the TKDL Access (Non-disclosure) Agreement.

As per the preconditions of the Access Agreement, examiners of the patent office can make use of TKDL for research and examination purposes only and cannot disclose the subject matters of TKDL to any third party unless it is required for citation. TKDL Access Agreement is unique and has in-built protection on non-disclosure to safeguard India’s interest against any possible abuse. However, it has attracted some criticism because of its high level of confidentiality.

Did you know that at the time when TKDL was being formed, i.e., in 2001, it was estimated that, every year, around 2,000 patents relating to Indian medicinal systems were being fallaciously granted by patent offices around the world?

More interestingly, even copyright over yoga postures and trademarks on yoga tools were increasing unchecked in the West. The US alone has granted more than 100 yoga-related patents!

Since gaining access to TKDL in February 2009, the European Patent Office has identified around 215 patents that make use of Indian TK. In some cases, the EPO has set aside its intention to grant the patent, while in others, applicants have either modified or withdrawn their applications.

For example:

(i) On 19.2.2009, the EPO decided to grant a patent to Italy’s M/s. Data Medica, Padova SPA, for the usage of Pista as an anti-cancer drug. The TKDL Department of CSIR of India produced evidence on 09.07.2009. Based upon this evidence, the EPO set aside its prior intent to grant the patent on 14.07.2009.

(ii) On 25.02.2010, the EPO decided to grant a patent to M/s. Livzon Pharmaceutical Group Inc., China, to use Kalamegha and Mint to treat avian influenza. India, through its TKDL Department of CSIR, produced evidence on 20.05.2010, based upon which the EPO set aside its prior intention to grant a patent on 10.6.2010. Due to this, M/s. Livzon Pharmaceutical Group Inc. altered its claims on 05.07.2010 in the independent usage of Kalamegha and Mint to treat avian influenza.

(iii) On 09-06-2005 M/s Purimed Co. LTD., Korea filed a patent application to treat heart diseases using Indian lotus. The TKDL Department of CSIR, India, produced the evidence. The applicant decided to withdraw its claims/patent application on 04-08-2009.

According to WIPO, in just under two years, in Europe alone, India has succeeded in bringing about the cancellation or withdrawal of 36 applications to patent traditionally known medicinal formulations. Not to forget, TKDL has played a crucial role in this success. Similar results are expected from other patent offices too. According to the CSIR, this could help prevent legally complex and expensive opposition processes.

A study by a TKDL expert team at the EPO shows a sharp decline (44 per cent) in the number of patent applications filed concerning Indian medicinal systems, particularly concerning medicinal plants. The TKDL is proving to be an effective deterrent against bio-piracy.

According to a report of WIPO, with the help of TKDL, India has successfully managed to protect around 0.226 million medicinal formulations, that too at zero direct cost!

It is also a worthy point to note that, while the post-grant opposition is highly expensive and requires legal assistance, the pre-grant objection, which is supported by the TKDL database, is economical and does not require legal support because the prior art evidence is available from the KTDL.

Another major point is that it takes around four to thirteen years for the matter to be concluded under the post-grant opposition, whereas, it roughly takes around three to twenty weeks in the case of the pre-grant objection with the aid of the TKDL database.

The TKDL has an integrated global biopiracy watch system that allows the monitoring of patent applications related to Indian medicinal systems. It enables effective detection of attempts to misappropriate this knowledge by third parties filing applications with patent offices around the world. It means that immediate corrective action can be taken, and at zero direct cost, to prevent bio-piracy. Till date, India is the only country to have put such a system in place.

Also, the willingness to adapt the IPC to the TKRC standards, with the common conception of international intellectual property rights regulations, acts as a tool against the neocolonial ‘information feudalism’ or a ‘Western knowledge dominance’, where intellectual property regimes are unilaterally imposed on the developing world by developed countries and multinational corporations. Seen in the context of global information feudalism, it seems remarkable that India’s TKRC has had a direct influence on the standards of patent classification globally.

Conclusion

The awareness and interest in the utilization of traditional medicine have been steadily renewed worldwide. This has also resulted in enlarging its vulnerability to exploitation. This poses a threat to indigenous and local communities of India, to whom the TK is an asset and on which their livelihood depends. This also curbs the freedom of Indian producers to operate in foreign markets. All these lead to facing the risk of an economic crisis.

These ‘wrongful patents’ not just affect our community and economy, but also questions our identity. Through traditional knowledge, we conserve and protect the biodiversity and the secrets passed down to us by our ancestors.

The documentation of traditional knowledge prevents the chances of bio-piracy thereby protecting it from misuse and misappropriation by third parties. TKDL is the first of its kind prior-art database of traditional knowledge globally and has proven to be a powerful restraint against bio-piracy. While being recognized internationally as a unique effort, TKDL has set a benchmark in TK protection around the world.

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

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EIA Draft Notification, 2020 : diluting the environmental regulatory regime

By

Sneha Mahawar

-

November 26, 2021

0

Environmental Impact Assessment — Image Source: https://rb.gy/wc4z1d

This article is written by Nidhi Bajaj, a student of Guru Nanak Dev University, Punjab. This article seeks to analyse the EIA (Environmental Impact Assessment) Draft Notification, 2020 through highlighting its salient features and identifying its various loopholes.

Table of Contents

Introduction

In March 2020, the Ministry of Environment, Forest and Climate Change (MoEFCC) proposed a Draft EIA Notification to replace the existing notification of 2006. The Draft was widely criticized by environmentalists and activists for making huge dilutions in environmental safeguards by allowing several categories of projects to bypass public consultation, introducing ex-post facto environmental clearance, and basically undercutting the climate goals. In this article, the author will be discussing the salient features of the EIA Draft Notification, 2020 and its pitfalls in light of various judicial pronouncements.

EIA : meaning and significance

In simple terms, EIA i.e. Environmental Impact Assessment is the systematic process of identifying the likely environmental impacts of a current or proposed action or project.

The UN Environment Programme (UNEP) defines an EIA as “an examination, analysis, and assessment of planned activities with a view to ensuring environmentally sound and sustainable development.”

EIA is a tool to identify and evaluate the environmental, social, economic, and health-related impacts of a project prior to decision making.

Significance of EIA is as follows:

By identifying, predicting, and evaluating the environmental impact of the development projects, EIA promotes environmentally conscious decision-making by suggesting mitigation measures conducive to the goal of sustainable development.
EIA ensures that the project details are disclosed to the public and that everything happens in accordance with the legal safeguards.
EIA upholds the effective application of the precautionary principle.
Environmental Clearance (EC) is one of the most important features of an EIA framework.

EIA in India

When EIA was first introduced in India in 1978, it only dealt with the river valley projects but later on, its scope was expanded to include various other developmental projects. The first EIA Notification, namely the EIA Notification 1994 was issued on 27 January 1994 and subsequently, the EIA Notification 2006 was passed to overcome the shortcomings in the previous notification.

The EIA Notification 2006 determines the current environmental regulatory framework in India. It provides for mandatory environmental clearance for a variety of projects including mining, river valley projects, thermal power plants, infrastructure such as road, highway, ports, harbours, and airports, and industries, etc. In this process, an Expert Appraisal Committee (EAC) conducts an assessment for clearance and prepares a preliminary report. Such a report is published followed by a public consultation where the issues and concerns related to the project are raised by the affected parties. After considering all matters, EAC makes a formal recommendation to the regulatory authority, which then takes the final decision as to whether the project can be executed in the proposed form or needs to be modified or given up on. It is noteworthy that the 2006 notification has been amended more than 50 times.

In March 2020, the Central Government in the exercise of the power conferred upon it by the Environment (Protection) Act 1986, issued an EIA Draft Notification 2020 to replace the 2006 notification and to bring about transparency and expediency in the EIA process through the implementation of the online system, further delegations, rationalization, standardization of the process, etc.

EIA Draft Notification, 2020 : salient features

Comprehensive definition clause

The EIA Draft notification 2020 has introduced a comprehensive list of definitions, defining the major terms of the process, an aspect that was missing in the earlier notifications. Some of the important terms that have been defined include –

Accredited Environmental Impact Assessment Consultant Organisation;
Appraisal;
Capital Dredging;
Certificate of Green Building;
Corporate Environment Responsibility;
Eco-sensitive areas;
Eco-sensitive zones;
Environmental Impact Assessment Report;
Environment Management Plan;
Public consultation.

Technical Expert Committee

Rule 9 of the EIA Draft notification 2020 provides for the constitution of a technical expert committee under Section 3(3) of the Environment (Protection) Act, 1986 by the central government for categorization or re-categorization of projects on scientific principles including streamlining of procedures, etc. The Committee can have a maximum of 10 members and shall have a tenure of 5 years.

6 Stage prior environmental clearance process

The 2006 notification provided for a four-stage Environment Clearance(EC) process for new projects-

Screening;
Scoping;
Public Consultation;
Appraisal.

Whereas Rule 10 of the 2020 draft provides for a 6 stage Prior EC Process or Prior Environment Permission (EP) process for category A or category B1 projects–

Scoping;
Preparation of Draft EIA Report;
Public Consultation;
Preparation of Final EIA;
Appraisal;
Grant or Rejection of Prior Environment Clearance.

The change, however, is limited to the nomenclature as these steps do exist in the current framework without their explicit mention thereof as a separate stage. But, one thing worth observing is that in the new draft the stage of screening has been deleted.

Amendment in prior-EC or prior-EP

Rule 18 of the EIA Draft Notification, 2020 contains a provision for amendment in prior EC or prior EP through the filing of an online application to the concerned regulatory authority. However, this shall not apply to cases where there is a shift in the project site location after the conduct of public consultation or grant of prior-EC. Such a shift will be deemed to be a new proposal and will be appraised de-novo in accordance with the prescribed procedure unless the Appraisal Committee is satisfied that the shift is so minor as to have no change in the EIA Report.

Due recognition to online mode

The EIA Draft Notification 2020 has rightfully embraced the shift to an online mechanism as it provides for online filing of applications at various stages and for issuance of prior-EP through an online system. For instance, Rule 12(3) of the draft provides for the issuance of standard terms of reference (ToR) to certain projects through online mode.

Grant or rejection of prior environment clearance

Rule 17 of the Notification provides that the regulatory authority has to convey its final decision to the project proponent with respect to grant or rejection of environmental clearance or environmental permission, as the case may be, within ninety days of the submission of the final application and supporting documents. The 2006 notification provided for a time period of 105 days from the receipt of the final EIA Report for grant or rejection of prior EC. This is indeed a praiseworthy effort that will expedite the EC or EP grant or rejection procedure.

Appeal against the prior EC or Prior EP to National Green Tribunal

The EIA Draft Notification, in its Rule 25 provides for an appeal against the prior-EC or prior-EP granted by the Regulatory Authority to the National Green Tribunal. Such appeal has to be preferred within thirty days of the decision of the regulatory authority.

What went wrong

The Draft EIA Notification 2020 faced countrywide opposition due to the following reasons:

Limiting public consultation

Principle 10 of the Rio Declaration on Environment and Development states, “Environmental issues are best handled with the participation of all concerned citizens, at the relevant level”. Public consultation is a very crucial stage in environmental impact assessment. The EIA Draft Notification 2020 provides for a notice period of 20 days to the public for furnishing their responses and comments regarding the proposed project as opposed to the current time period of 30 days provided under the 2006 notification. The government has attributed this shortening of the period to the growth of the internet and mobile telephony. It has been argued by various environmental organisations and activists that even the 30-day period was inadequate due to inaccessibility of information and further delay in its transmission to stakeholders residing in remote areas. Neither people nor the environment can be expected to bear the cost of expediting industrialization and development. Hence, adequate time should be provided to the public for making a rational choice as they are the ones who will be most affected by the concerned project. If reducing time is a major concern, the government should deliberate on reducing the time taken in issuing of approvals, advertisements, etc.

Another problematic provision of the draft is the blanket exemption from public consultation provided to certain categories of projects including:

Modernization of irrigation projects;
All linear projects under item 31 and 38, in Border Areas;
All the off-shore projects located beyond the 12 Nautical Miles;
All Category ‘B2’ projects and activities;
All projects concerning National defence and security or involving other strategic considerations which are to be determined by the central government. Also, according to Rule 5(7), no information regarding such projects shall be placed in the public domain.

The notification provides no criteria for designating a project as strategic. Hence, what is strategic is left to the sole discretion of the central government. Such discretionary power given to the government is arbitrary and wholly misplaced as the very moment a project is designated as ‘strategic’, no information regarding it shall reach the major stakeholder i.e. public and that is a direct violation of the concept of environmental democracy.

The shift from half yearly mandatory compliance report to yearly compliance report

After a project gets approved, the project proponents are required to submit compliance reports for ascertaining whether they are complying with the conditions of prior-EC or prior EP and to ensure that no environmental damage is caused by such projects in violation of the terms of the EC.

Rule 20 (4) of the draft EIA Notification, 2020 states that “The yearly compliance report shall be submitted, each year, from the date of grant of prior-EC, till the project life, to the Regulatory Authority concerned.”

It is pertinent to mention that the 2006 notification provided for submission of bi-annual compliance reports. Allowing longer periods for filing compliance reports virtually amounts to providing a safety net to the defaulting proponents who will get sufficient time to cover up the damage caused by them.

Ex-post facto EC

EIA is a mechanism to evaluate a project for its environmental consequences prior to its beginning. But the 2020 Draft Notification provides for ex-post-facto environment clearance for those projects which have already begun working, and no environment clearances were given or sought for the same. Such a proposal is a gross violation of the polluters pay principle and turns it into the ‘Pay and Pollute’ principle. Environmental lawyers are of the view that this will “encourage industries to commence operations without bothering clearance and eventually get regularized by paying the penalty amount” and likely “open a floodgate of violations…”.

The Hon’ble Supreme Court of India has also held that environmental law cannot countenance the notion of an ex post facto clearance and that such a measure would be contrary to both the precautionary principle as well as the need for sustainable development. Hence, such ex-post-facto clearance is an arbitrary measure that has the potential to weaken the whole EIA regime to a substantial extent.

Relevant case laws

Alembic Pharmaceuticals Ltd v. Rohit Prajapati (2020)

In this case, the Hon’ble Supreme Court of India struck down the concept of retrospective EC or ex-post-facto environment clearance as being in derogation of the fundamental principles of environmental jurisprudence. The Court relied on the case of Common Cause v. Union of India (2017), wherein it was held that the concept of retrospective EC is alien to environmental jurisprudence including EIA 1994 and EIA 2006 and that grant of an ex post facto environmental clearance would be detrimental to the environment and could lead to irreparable degradation of the environment.

Association for Environmental Protection v. State of Kerala (2013)

In this case, the Supreme Court has held that commencement of projects without obtaining prior EC is violative of the fundamental Right to Life of the people of the concerned area as guaranteed under Article 21 of the Constitution of India.

Lafarge Umiam Mining Private Limited v. Union of India (2011)

The Supreme Court has highlighted the importance of public consultation in the EIA process in this case. It was held that the public consultation or public hearing is a mandatory requirement of the EC and provides an effective forum to the persons aggrieved by any aspect of any project to register to seek redressal of their grievances.

Samarth Trust And Another v. Union Of India And Others (2010)

In this c a se, the Delhi High Court has comprehensively dealt with the nature, scope, and methodology of a public hearing. The Court observed that “A public hearing is a form of participatory justice giving a voice to the voiceless and a place and occasion to them to express their views with regard to a project.” Highlighting the importance of public hearing, the Court also observed that:

A public hearing gives an opportunity to the people to raise issues regarding the social and health impact of a proposed project.
A public hearing brings transparency to a proposed project. It gives information to the community about the project who are given an opportunity to express their views on the same.
A public hearing is a form of social audit that provides social acceptability to a project, wherever necessary.

The Court held that a public hearing must be conducted in a formal or a semi-formal manner also gave the following guidelines:

Adequate notice must be given to all the concerned parties which includes fulfilling three basic components: adequate time for preparation, adequate publicity for the benefit of all concerned, and availability of all relevant information.
A panel must be available to conduct the public hearing in a disciplined manner.
A faithful record of the views expressed must be maintained including video conferencing and recording of minutes.
The public hearing must be fair to all participants.
The public hearing has to be structured.

Sandeep Mittal v. Ministry of Environment, Forests & Climate Change & Ors. (2020)

In this case, the National Green Tribunal, while recognising the need for an effective monitoring mechanism, observed that compliance of conditions of Environmental Clearance has to be monitored on a quarterly basis, as far as possible and in no case less than twice a year. The Tribunal stressed on speedy monitoring and speedy action, wherever necessary in light of the principle of Sustainable Development and the Precautionary principle, which have been held to be a part of the Right to Life.

Conclusion

The EIA Draft Notification 2020 in its bid to improve the ease of doing business proposes to neglect the important environmental goals. It is lamentable that the government chose to incorporate concepts such as ex post facto clearance and limited public consultation in the draft EIA notification which are clearly against the Supreme Court guidelines. However, the good thing is that people are conscious of their rights and duties towards the environment and are coming together against the arbitrary aspects of notification. Lastly, it is worth mentioning that departure from the fundamental principles of environmental jurisprudence including the polluter pays principle, the principle of sustainable development, the precautionary principle cannot be permitted in any circumstance and the same time, while balancing economic growth with environmental protection, the importance of Article 48 (Duty of state to protect and improve the environment) and Article 21 (Right to the Environment) of the Constitution of India cannot be ignored.

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.

Compare and contrast German contract law and Australian contract law

By

Oishika Banerji

-

November 26, 2021

0

This article is written by Sarthak Kulshrestha, a student of Jagran Lakecity University, Bhopal. This article presents a comparative study between the concepts and performance of contracts in Germany and Australia considering the law of contract and obligations in both the countries.

Table of Contents

Introduction

Though the contract law is almost similar worldwide, the scope of comparison between German contract law and Australian contract law exists considering several points of differences between the two.

Every day, parties enter into numerous transactions globally, representing the share of global Gross Domestic Product (GDP). These transactions are possible because parties share common knowledge of how to enter into a contract, and what to expect as a result of the same. This common knowledge is based on commercial practices shaped and restricted by regulations from different jurisdictions. The contract laws from different jurisdictions all over the world are written in different languages and are operated according to their own legal requirements and tradition. Currently, Germany is one of Australia’s most significant trade, investment, tourism markets, and also one of the top 10 sources of Foreign Direct Investment (FDI). This is evident of the commonalities between them as legal requirements of entering into the contract with Germany make the cross-border trade practices possible to be carried out considering similarities, consistencies, and contrasting features between the countries’ contract law. This article deals with the concepts of German and Australian contract law considering some commonalities between them.

German contract law : an insight

In the year 2002, the German Civil Code was adequately amended when the Act on the Modernisation of the law of obligations came into force. This Act came as a reform in the law relating to the contract and obligations as Germany, in the past, suffered severe losses of taxpayers’ money caused by the state liability. The original German Civil Code to regulate civil matters was meant to contribute to the needs of the society concerning such issues and the general clauses demonstrated adaptability to new economic, cultural, and sociopolitical norms.

Under the category of contract and obligations, the parties are free to establish relations within statutory limits and good faith. For example, unless the promisor can prove that a breach of contract has been caused in a way entirely outside his sphere of risk, he is liable for damages. But if the promisee chooses to do so, he may ask the promisor to complete the contract till the time its impossibility does not show up. The principle that “anyone who through an act performed by another or in any other way acquires something at the expense of that other without legal justification is bound to return it to him” is stated in broad terms, but it is cautiously applied by the courts.

Fundamental concepts

The fundamental concepts of German contract law include the significant aspects of the contract law of the land.

Freedom of contract

Freedom of contract also implies the autonomy of the parties and entails that the contracts do not require consideration and can contain the elements which are agreed between the parties unless specifically required by law.

Violation of statutory prohibition

The contracts which violate a statutory prohibition are void. However, many a time it becomes a matter of interpretation whether or not its prohibitory provisions were intended to nullify contravening contracts. Thus at such times, the contract becomes a valid one.

Contracts are void if contrary to good morals

The immoral contracts are void. The German Courts interpret “immoral” as anything which lies in contrast with the sense of the decorum and ethics of every person who possesses an understanding of differentiating between right and wrong.

Form of the contracts

The contracts, unless the law provides otherwise, may be either oral or written. But, there are a few types of contracts which are ought to be in writing, and they are as follows:

Assuming or assigning a mortgage;
A lease for more than a year;
A promise of an annuity;
Guaranty and surety contracts (not in commercial transactions);
Acknowledgement of debt.

Formation of contract

It is not expressly mentioned that a contract comes out as a valid one after proper conduct of offer and acceptance. However, it is a well-established fact that an offer and acceptance are required to form a contract.

Mere dispatch of the offer is not sufficient and the offeree doesn’t have to become aware of the offer. For example, if the offer has been put into the mailbox of the offeree, then the offer is said to have reached the offeree even if he does not check the mailbox the other day. Offers and acceptances can be revoked until they have become effective.

A contract can only come into existence when both the parties have agreed upon the same thing in the same sense. The notion that a contract can legally come into existence only by an offer and acceptance which reflects the complete agreement of the parties is not necessarily consistent with modern realities. When a person uses public transportation or public utilities or even when he uses a parking space for his car, there is no offer and acceptance in the traditional sense because the rates are fixed.

Performance of contract

Regarding the performance of the contract, there have been several provisions stipulated in the contract law concerning the place and manner of performance of the same.

Place of performance: In the absence of the provision of place at which the promise of the contract is to be performed, the debtor’s place of business would be the place of performance. Generally, in German law, the debtor’s obligation is referred to as Bringschulden. In any event, all standard form contracts include a provision that specifies the place of performance.
Conforming performance: A contract in which the parties have fully performed the obligations following the terms or the creditor accepts something else than what was originally agreed, is said to be conforming performance.
Delayed performance: When the debtor does not perform the agreed promise on time, he constitutes the delayed performance of the same.
Impossibility to perform: Under German law, impossibility exists where performance is rendered impossible for both parties. Where performance is still possible but has become so burdensome that it would be a breach of good faith for the creditor to insist on.

Classification of contracts

The contracts have been classified into various types based on the functioning of the parties in each one of them. They are as follows:

Reciprocal contracts: Reciprocal contracts are the contracts in which the parties intend that the performance of each party is equivalent and dependent upon the performance of the other parties.
Third-party contracts: The contracts which are made for the benefit of the third party are called third-party contracts. It expressly provides the performance in the favour of the third party and the party has the right to demand the performance of such a contract.
Sales contracts: In German law, the sales contract is called “Kaufvertrag” which means a purchase contract. It is a reciprocal contract that puts an obligation on the seller to transfer the ownership of the subject matter in exchange for the price, and which obligates the buyer in return, to pay that price and accept the transfer of ownership title of the subject matter. It requires a separate transaction, namely delivery of possession of the object.

Necessary provisions

To carry out the formation of the contracts according to the prescribed legal rules, there are various necessary provisions in the German contract law to make the contracts possible to perform as these provisions help to resolve the problems in the making and performance of the contract. Some of the provisions are listed below:

Contractual penalties

A penalty clause in a contract provides that in case the debtor does not perform his promise or does not perform it properly, then he must pay a monetary penalty or do something else that is legally valid. A creditor may claim a penalty, even though the creditor suffered no injury provided, of course, that the debtor’s fault is responsible for the non-performance, delayed performance, or improper performance.

Provision of recission

According to this provision, a contracting party can include in the contract a clause that provides that he reserves the right to rescind the contract. The exercise of this right terminates the contract and substitutes an obligation to make restitution. The right to rescind can arise by operation of law as one of the remedies that the innocent party can use when the other party is in default of his contractual obligations.

Gift deed : In German law, a gift (inter vivos donation) occurs when one person (the donor) transfers something of value from his assets to enrich another (the donee), in which both agree that the donee need not compensate the donor for that subject matter. It has to be in writing if it has to be enforced in the Court.
Gratuitous loans : A gratuitous loan is a contract that obligates the lender to permit the borrower gratuitously to use an object owned by the lender. If the duration of a gratuitous loan is not provided for in the contract nor can be implied from its purpose, then the lender at any time can demand the return of the object.

Australian contract law : an insight

Contract law in Australia is classified as civil law. In Australia, the law of contract is based on the English common law system rather than on a particular codified statute. The principle on which the Australian contract law underlies is, the freedom of contract in which the parties which have entered into a contract, have the liberty to choose the bargain as they find suitable.

General aspects of Australian contract law

A society needs a civil law system for the contracts to get legally enforceable and it allows for legal mechanisms to ensure the parties involved in a contract, to be treated equally before the law. The general aspects for the justified functioning of the same are as follows:

Form of the contract

The Australian contract law provides for the freedom of the parties to enter into a contract in any form, either written or oral. However, the Australian courts give significant weight to the expression of the parties’ intentions stipulated in writing.

Parties to the contract

Under Australian contract law, the privity rule holds significance as, those who are not parties to a contract cannot be bound by it, notwithstanding with certain exceptions. A contract is generally enforced only between the parties who entered into the contract.

Security or title over the assets

When over any “personal property” asset, a security asset is created, then the Personal Property Securities Act 2009 (PPSA) will apply. To preserve the security holder’s interest, the interest has to be registered on the personal property securities register within the applicable time. Personal property includes all property that is not land or certain rights granted by Commonwealth or State Governments.

Fundamental concepts

Australian contract law which is a civil law deals with the enforceability of the contracts in the Court of law, functioning on a simple line of concepts as explained below:

Formation of contract

Here, a contract is defined as a set of promises. A promise is an undertaking by one person to do something or abstain from doing something if another person does something or abstains from doing something or makes a promise in return. It is legally binding and in Australia, this requires to have an agreement, lawful consideration, intention of the parties to create a legal relationship, compliance to the legal formalities, and competency of the parties to such a contract.

Scope and content

Once the contract is formed, it can be legally enforced by or against one of the parties. For example, a contract entered between X & Y for the benefit of Z will create contractual obligations only on X and Y, the parties to the contract and the same cannot be imposed on Z. Also, it cannot be enforced by Z since the obligations are only upon original parties.

The doctrine of privity of contract was formally recognized in Tweddle v. Atkinson (1861). In this case, the father of a bride promised the father of the groom to pay the groom (plaintiff) a sum of money upon the marriage. But, before making this payment, the bride’s father died and his estate didn’t honour his promise. The plaintiff sued for the money but failed on the ground that, though the contract had been made for his benefit, he was not one of the parties to the contract.

Terms of contract

In every contract, certain rights and obligations of the parties are contained which are determined by the terms specified under such a contract. These terms may be expressed (explicitly agreed between the parties in oral or written form) or implied (not articulated by the parties but based on implied presumption). To constitute a term of the contract the parties must have intended it to be promissory. As is the case with determining intention to create legal relations, intention in this context is determined objectively as to what a reasonable person would have thought to intend in such circumstances.

Remedies

As the remedies against a breach of contract, the Australian contract law provides for damages as a matter of right. Damages for breach of contract are viewed as a ‘substitute’ for performance and they are available to put the plaintiff in the position in which they would have been having the contract been performed properly. Punitive damages are not available. However, damages are available for the mental stress that the aggrieved party must have borne as a result of the breach of contract. Also, the loss must not be remote from the breach.

Other remedies are also available such as liquidated damages and debt. Liquidated damages will be available where a clause in the contract between the parties provides that a fixed sum of money will be payable upon breach. However, debt is quite different from the damages discussed, in that it involves a claim for a sum of money due under the contract. It is, therefore, a liquidated sum, but is not in the form of a substitution remedy but is a claim for a monetary amount owed under the contract.

Necessary provisions

To carry out the formation of the contracts according to the prescribed legal rules, there are various necessary provisions in the Australian contract law to make the contracts possible to perform as these provisions help to resolve the problems in the making and performance of the contract. Some necessary provisions are as follows:

Restriction on penalties

Under the usual law of contract, the parties are permitted to agree upon a sum of liquidated damages, or the method of calculation of such a sum, payable by one party to the other in the situations of a breach of contract. Such an agreement on liquidated damages must represent a genuine attempt to estimate the likely damages which may be suffered. If it is imposed by one party merely as a threat to enforce compliance or is specified to arise in circumstances that may be triggered arbitrarily, then the provision may be regarded as a mere penalty and not enforced by the Court.

Restriction on restraint of trade

Any restriction upon the dealing by a party to a contract with third parties, directly or indirectly, whether during or after the term of a contract may constitute exclusive dealing, conduct regulated by the anti-trust provisions of the Competition and Consumer Act 2010 (Cth); or maybe a restraint of trade at common law, which if unnecessarily broad in the conduct restrained, the time of the restraint or the area over which the restraint exists, will be void, and not enforceable by the Court.

Limitations and exclusions of liability

The parties to a contract are free to limit or exclude liability for breaches of contract, or in any other circumstance. The party which seeks the limitation or exclusion clause is supposed to convince the Court that the clause is properly interpreted and analysed as the party contends.

Key learning from both the laws

The common learning which both the laws entail is the “concept of good faith” followed in the law of contract.

The principle of good faith serves to prevent injustice that can arise through the mere application of a provision and constitutes a necessary correction for the weaknesses of statutory law. The common law system, in Germany, acknowledges this principle and it is specified to every contractual obligation. The parties which enter into a contract are supposed to consider the interests of the other party under the same contract in which they expect the other to do the same as a matter of faith. Therefore, parties are obliged to duly consider the protection-worthy interests of the other party and to conduct themselves loyally. As an example of good faith, if a party forfeits its right and does not rely on it for a long time, the other party may rightfully expect this one to refrain from exercising this right completely. On exercising the right, the principle of good faith would be breached in case of disloyal exercising of that right.

Discussing the principle of good faith in light of Australian contract law, it is right to say that the principle of utmost good faith is upheld in Australia. Australian contract law is rapidly moving towards three propositions. First, in most contracts, a requirement of good faith must be implied. Second, the source of the implied requirement of good faith is an implied term of the contract. Third, the requirement of good faith is satisfied by a party who has acted honestly and reasonably. Good faith is considered as the essence of the contract, thus every aspect of the law of obligations should be consistent with its principle.

Conclusion

The study of the fundamentals of the contract law of Germany and Australia shows us that how the contracts are formed and enforced in the Court of law. The differences regarding the judicial system of both the countries and the functioning of the provisions regarding the law of obligations provide the gap between the law of the contract of Germany and Australia. The trade practices are carried out between both the countries following the rules and regulations of their commercial laws. The Australian contract law is said to be a bit complex regarding the enforceability of the contracts in general and may move to the implementation of more of a set of International rules for the contract.

In Germany, the contract laws are comparatively less complex, and simple aspects of the law of obligation are followed such as the freedom of every private person above 18 years of age to enter into a contract followed by the rights and obligations of the parties arising by the contract. It is also observed that the German contracts avoid the excessive use of legalese, making the terms less complex.

Hence, the Civil law concerning the law of contract in Germany and the Australian contract law, which is also classified as civil law, make the parties enter the contracts in daily life on national and international levels considering the commonalities such as following the common law system, principle of good faith and fundamentals of contract formation & performance in both the countries.

References

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https://www.acc.com/resource-library/australian-contract-law

Case analysis : Sesh Nath Singh and another v. Baidyabati Sheoraphuli Cooperative Bank and another

By

Abanti Bose

-

November 26, 2021

0

This article is written by Naresh Kumar Nagar, pursuing Certificate Course in National Company Law Tribunal Litigation from LawSikho.

Table of Contents

Introduction

The Hon’ble Supreme Court while exercising appellate jurisdiction recently dealt with the issues related to condonation of delay under the Limitation Act 1963, in context of its applicability to the Insolvency Proceedings envisaged under Section 7 of the Insolvency and Bankruptcy Code 2016 (hereinafter referred to as the Code in this article) in the case “Sesh Nath Singh and another v. Baidyabati Sheoraphuli Cooperative Bank and another” (hereinafter referred as ‘Sesh Nath case’) ( LL 2021 SC 177). This article studies and analyses this case in the context of the aforesaid condonation of delay related issues as applicable to insolvency proceedings under the Code while exploring the underlying jurisprudence.

Brief facts of the case

The parties to the ‘Sesh Nath case’ got into a legal tussle as the Appellant (the Corporate Debtor) defaulted in repayment of the loan granted by the Respondent (the Financial Creditor). The loan as a cash credit facility was sanctioned on 15.02.2012 by the Financial Creditor. The account of the Appellant was accordingly declared as a Non-Performing Asset (NPA) on 31.03.2012 for default in repayment. Subsequently, a notice u/s 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (i.e. SARFAESI Act ) was issued on 18.01.2014 advising the Corporate Debtor to repay the amount of loan in full within sixty days else further action under the Act could be taken up. Thereafter another notice was issued by the Respondent on 13.12.2014 seeking the peaceful possession of the secured assets from the Corporate Debtor under Section 13(4)(a) of the SARFAESI Act as the Corporate Debtor failed to comply with the Notice under an earlier notice under Section 13 (2).

The Corporate Debtor, however, approached the Hon’ble Calcutta High Court on 19.12.2014 against the said notices. The High Court on 24.07. 2017 issued an interim order forbidding the Financial Creditor from proceeding against the Corporate Debtor under SARFAESI Act till further orders.

Meanwhile, on 10.07.2018, the Financial Creditor moved an application for starting of insolvency resolution proceeding u/s 7 of the Code before the Calcutta Bench of the National Company Law Tribunal (hereinafter referred to as “the Tribunal”). The Corporate Debtor resisted the filing of the said application on the pretexts other than that of limitation. The Tribunal, nevertheless, permitted the admission of the application u/s 7 of the Code on 25.04.2019. The Tribunal also appointed an Insolvency Resolution Professional while declaring a moratorium prohibiting all actions or activities as mentioned u/s 14 of the Code in wake of the admission of application u/s 7 of the Code.

The Corporate Debtor, thereafter, moved an appeal against the order of the Tribunal before the National Company Law Appellate Tribunal (hereinafter referred as Appellate Tribunal) u/s 61 of the Code inter alia raising the contention that application was hit by limitation in light of the fact that even though the account of the corporate debtor was declared NPA as early as 31.03.2013, the application u/s 7 of had been filed as late as on 27.08. 2018 after the expiry of more than five years; and as such the limitation period of three years envisaged under Article 137 of the Limitation Act, had lapsed already. The Appellate Tribunal dismissed the appeal making the remark that the ground of limitation was preferred only for the first time in appeal and that there had been no observation recorded thereon of the Tribunal under the Code. Weighing the merits, the application u/s 7 of the Code was considered to be within the Limitation period by the Appellate Tribunal and the decision of the Tribunal was upheld.

Finally, an appeal was filed before the Hon’ble Supreme Court against the order of the Appellate Tribunal by the Corporate Debtor.

The issues of law raised in appeal before the Hon’ble Supreme Court

The issues of law involved in the appeal vide para 57 of the judgment, dated 22^nd March 2021, have been as under:

Could the delay of more than three years in filing an application under Section 7 of the Insolvency and Bankruptcy Code 2016 be forgivable, in absence of a formal application for the same being made by the applicant under Section 5 of the Limitation Act, 1963?
Could Section 14 of the Limitation Act, 1963 be made applicable to the applications under Section 7 of the Code? If so, could the exclusion of period of time under Section 14 be conceded, only after the termination of the proceedings before the wrong forum?

The grounds raised by the parties to the case

(A). The grounds relied on by the Financial Creditor (the Respondent):

The Financial Creditor relied on the following legal provisions in support of maintainability of the Application:

That Section 7 of the Code allows the filing of an application for initiation of insolvency resolution proceedings as soon as there occurs a default in payment of the debt which has become due;
That the proceedings for the realization of the debt had been initiated well within the limitation period insofar as the requisite proceedings were set into motion on 03.03.2013, when the notice u/s 13 (2) of SARFAESI Act was issued to the Financial Debtor, almost within a year of the debt being declared as NPA as against the prescribed limitation period of three years vide Art 137 of the Limitation Act 1963 as applicable in this case.

(B). The grounds adhered to by the Corporate Debtor (the Appellant):

The main contentions raised by the Corporate Debtor ( the Appellant) have been:

That delay of more than three years could not be waived in filing application u/s 7 of the Code without moving a formal application by u/s 5 of the Limitation Act, 1963 by the Financial Creditor.
That an application under Section 7 of the Code cannot be allowed the benefit of Section 14 of the Limitation Act,1963 vis a vis the ‘explanation’ to the Section 14 of the Limitation Act 1963, insofar as:
1. The proceedings started by the Financial Creditor, under SARFAESI Act, had not yet ended on the date of filing the Application under Section 7 of the Code;
2. The action undertaken by the Financial Creditor under SARFAESI Act does not fall under the category of civil proceedings.

Analysis of the disposal of the Issues of law by the Hon’ble Supreme Court

Regarding contention raised by the Corporate Debtor ( the Appellant) at point B(1) above, the Hon’ble Supreme Court held that Section 5 nowhere talks about any application and it enables the Court to admit an application or appeal if the applicant could convince the court that he had a just and adequate cause for not making the application/preferring the appeal, within the limitation period. Despite it being a common practice to obtain a formal application under Section 5 of the Limitation Act 1963, in order to gauge the adequateness of the cause preferred in support of the inability to approach the Court or Tribunal within the allowed limitation period; nothing bars the Court or Tribunal in exercising its discretion to condone delay without insisting a formal application if there has been enough material on records disclosing an adequate cause for delay. The Hon’ble court has thus sagaciously precluded the necessity of insisting on a formal application u/s 5 of the Limitation Act 1963 if there happens to be enough matter on records as to justify the adequateness or otherwise of the cause to allow condonation of delay. This really would result in avoidance of superfluous paperwork and thereby help in saving valuable time of the court.

The contention at point B(2) above, has been addressed by stating that Section 14 has to be read in totality; and that the substantive provisions of Section 14 nowhere enjoin that Section 14 is to be invoked only after the conclusion of the former proceeding. The implication has been that the recourse to the explanation to Section 14 of the Limitation Act 1963 is to be had for dispelling any confusion or doubts in the main section and not to expand it. Hence, Section 14 allows the time exhausted in proceedings before a wrong forum to be excluded, in case the said forum could not entertain the proceedings due to some technical defect. Where such former proceedings already stand concluded, the closing limit to claim exclusion would be the date on which the proceedings came to be terminated. Since, in this case, proceedings under SARFAESI Act had still been continuing in the High Court as on the date of filing of the application under Section 7 of the Code in the Tribunal, the full period after initiation of proceedings under SARFAESI Act had to be amenable to exclusion. The Hon’ble Court has laid down the correct interpretation insofar as the pendency of the proceeding before the wrong forum or otherwise tends to keep the outer limit of the prescribed limitation period as open-ended. Plausibly, therefore, the entire period till the date of the filing of the application u/s 7 of the code, in this case, would qualify to be excluded for the purpose of reckoning the limitation period.

The Court held that the “Court”, in Sub Section 2 of Section 14 of the Limitation Act, would imply any forum for a civil proceeding including any Tribunal or any forum under the SARFAESI Act in view of the whole range and gamut of proceedings under the Code before the National Company Law Tribunal or National Company Law Appellate Tribunal. Since a subsequent civil proceeding whether pursued in due course in a Court in the first instance or appeal or in revision, vis a vis any party, for the same relief, is liable to be considered as a civil proceeding in a forum, be it in the first instance or Appellate or in revision, against the very same party for the very identical relief. That is to say, if proceedings before Debt Recovery Tribunal (DRT) or National Company Law Tribunal (NCLT) amount to be civil proceedings then the earlier proceedings undertaken before any forum against the very same party for the very similar relief would mean to be the civil proceedings. Accordingly, as the Chief Metropolitan Magistrate or the Judicial Magistrate exercising powers under Section 14 of the SARFAESI Act, acts as the civil court/ executing court, proceedings under SARFAESI Act would have to be counted as civil proceedings before a court. Here also, the Hon’ble Supreme Court correctly and logically have held in plain words that if the later proceedings in any matter for any relief before any forum happen to be civil proceedings then the earlier proceedings pursued in the same matter for the similar relief before any forum earlier would naturally have to be deemed as civil proceedings. This indeed has been a fine piece of jurisprudence.

Moreover, it has also been correctly held that the final objective, of moving an application under Section 7 of the Code, is the realization of debt by invocation of Insolvency Resolution Process; and it is the default on the part of the Corporate Debtor which prompts the cause of action for initiating an application under Section 7 of the Code. Realization of debt as such being the object of application u/s 7 of the Code, the benefit u/s 14 of the Limitation Act is plausibly amenable to be invoked while reckoning of the period of Limitation with effect from the date on which default occurred.

The crux of the Hon’ble Supreme Court’s decision

The judgment, in the nutshell, can be depicted in simple words as under:

That a condonation of the delay could be conceded by the Court in under Section 5 of the Limitation Act 1963 even without filing a formal application, if there be enough materials on record in the case disclosing adequacy of the cause for delay;
That the Section 14 of the Limitation Act can be attracted or resorted to for the purpose of reckoning of a period of limitation in filing an application under Section 7 of the Code;
That proceedings undertaken in pursuance of the SARFAESI Act are to be taken as civil proceedings in a court;
That even in circumstances where Section 14 does not exactly apply, the grounds enunciated in Section 14 can, nevertheless, be called into service to allow relief to an applicant under the provisions of Section 5 of the Limitation Act.

Conclusion

This judgment may be seen to be founded on the principle of purposive interpretation of statutes whereby the Court could fill in the apparent gaps in the legislation for the sake of clarity or dispel ambiguities by taking into consideration the context in which the legislation was enacted. Since words do not always carry plain meanings, recourse is to be had to a purposive or contextual approach, in place of simple literalism, which requires that any statute should be read as a whole in order to ascertain the context of the words in question. The purposive interpretation as such lays emphasis on the context to grasp the purpose of the statute. Where the meaning of the statute is literally ambiguous, either Legislature has to correct the defect or the courts will have to do their utmost with the imperfect text if it occurs before them.

The insolvency resolution process envisaged under the Code is an attempt to bring the corporate person, partnership firms and individuals back from the brink of insolvency by timely exploring ways to make the businesses viable enough to pay back its debts in default failing which to take steps for liquidation in a time-bound order to prevent the erosion of the worth of assets of such persons to facilitate the cause of entrepreneurship, avoiding risk to credit facilities and to safeguard the equitable interests of all stakeholders. Such being the stated objects and reasons for the enactment of the Code, the Hon’ble Supreme Court taking an overall contextual view sought to clarify that the ultimate objective, of the Code or for that matter Insolvency Resolution Process, is to realize the debt in default due to the creditors. This clarification implies that the insolvency resolution process under the Code is not merely for rehabilitation or revival but is ultimately a means to salvage the debts due to the creditors. This as a logical sequel leads to an extension of the benefit under Section 14 of the Limitation Act to the proceedings undertaken under the SARFAESI Act and thereby to the application for initiation of insolvency resolution process under the Code.

Thus, the context succinctly laid clarification about the applicability of the provisions of the Limitations Act 1963 under Section 5 and Section 14 in respect of an application filed under Section 7 of Code goes a long way to mark the underpinnings of purposive interpretation in the judgment of the Hon’ble Supreme Court in the Sesh Nath Case. The Hon’ble Supreme Court has finally dispelled all the doubts and ambiguities that have been there or have been raised about the applicability of Section 5 and Section 14 of the Limitation Act 1963 generally and with respect to Section 7 of the Code as well; and as such the decision may rightly be deemed as a definitive word on the aforesaid specific provisions of the Limitation Act as they now stand correctly and explicitly expounded by the Hon’ble Supreme Court.

References

Sesh Nath Singh and another v. Baidyabati Sheoraphuli Cooperative Bank and another

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