Investigation under Prevention of Corruption Act, 1988

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November 19, 2021

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This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It discusses in detail the offences under the Prevention of Corruption Act 1988, the process of investigation under the Act and the Central and State level bodies that deal with the investigation of offences related to corruption, bribery etc.

Table of Contents

Introduction

The Prevention of Corruption Act, 1988 was enacted with the objective of consolidating all the existing anti-corruption laws. One of the first legislation to govern the area of corruption was the Criminal Law (Amendment) Ordinance, 1944. It was enacted with the objective to prevent the disposal or concealment of property that was acquired through corruption, bribery and other allied offences. This ordinance was incorporated into the Prevention of Corruption Act.

A Central Vigilance Commission was set up in 1964 to exclusively deal with cases of corruption and several State-specific vigilance commissions were also set up with time to resolve the issue of corruption.

Before delving into the process of investigation provided under the Act and followed by these bodies, let us first try and understand the kinds of offences that are included under the Act.

Offences under the Prevention of Corruption Act

Bribing of a public servant by an individual

Section 7 of the Act deals with offences relating to bribery of public servants. The following acts when committed by a public servant amounts to bribery:

If the public servant obtains, accepts or attempts to obtain undue advantage from any person with the intention of performing his public duty improperly or dishonestly.
If the public servant obtains, accepts or attempts to obtain undue advantage from any person as a reward for performing his public duty improperly or dishonestly.
If the public servant obtains, accepts or attempts to obtain undue advantage from any person in exchange for inducing another public servant for performing his public duty improperly or dishonestly.

Any action under this provision is punishable with an imprisonment of three years that may extend to seven years and a fine.

Section 7A of the Act states that if a public servant obtains, accepts or attempts to obtain an undue advantage as a motive or reward from any person in exchange for using his personal influence on another public servant to induce him to perform his public duty improperly or dishonestly. This is punishable with an imprisonment of three years that may extend to seven years and a fine.

Bribing of a public servant by a commercial organisation

Section 9 of the Act states that if a commercial organisation gives or promises to give a public servant an undue advantage in exchange for obtaining/retaining a business or a business advantage, the person in charge of the organisation under whose authorisation the undue advantage is being given shall be punishable with an imprisonment of three years that may extend to seven years and fine.

Investigation

Persons authorised to investigate

Section 17 of the Act deals with persons authorised to investigate offences under the Act. The persons so authorised have been enumerated below:

An investigation by Delhi Special Police Establishment: An officer not below the rank of Inspector of Police
In metropolitan areas like Bombay, Madras, Calcutta: An officer not below the rank of Assistant Commissioner of Police
Any other place: An officer not below the rank of Deputy Superintendent of Police
No authorised officer can conduct investigations or cause arrest without obtaining an order from the Metropolitan Magistrate or Magistrate of First Class.

Restriction on the investigation in certain cases

Section 17A of the Act states that no person can investigate an alleged offence when such offence deals with the recommendation/decision taken by the public servant in discharge of his official duties. In case such an investigation is to be conducted, the approval of the following is required:

For offences in connection with the affairs of the Union: Approval of the Central Government
For offences in connection with the affairs of the State: Approval of the relevant State Government

However, no such approval is required if an arrest is made on the spot and the offender admits to the commission of an offence.

Power to inspect Bankers’ Books

Section 18 of the Act states that if the investigation officer is of the opinion that the bankers’ books, i.e., the bank statements of the offender need to be looked into for the purpose of investigation, the officer is allowed to inspect the same. This power of inspection is not limited to the bank accounts of the offender but also includes the power to look into the bank accounts of any person whom the officer suspects to be holding the money on behalf of the offender.

Specific amendments to the Act for the UT of Jammu and Kashmir

Establishment of an Anti-Corruption Bureau

Section 17 B of the J & K Prevention of Corruption Act, 2006 states that the Government of the UT of Jammu and Kashmir should set up an Anti-Corruption Bureau for investigating offences under this Act.

Power of attachment of property

Section 17 C of the Act states that if during the investigation of an offence under this Act, the Anti-Corruption Bureau is of the opinion that a certain property has been acquired by means of corrupt practices or criminal misconduct, then the officer investigating the case can seize the property with the written approval of the Director of the Anti-Corruption Bureau. If the seizure of the property is not possible, an order restricting the offender from dealing with property can be made by the investigating officer with the written approval of the Director of the Anti-Corruption Bureau.

Once the property has been seized or an order restricting the offender from dealing in the property has been made, the same has to be placed before the Designated Authority for approval. The Designated Authority may approve or revoke the order within 30 days.

The decision of the Designated Authority can be appealed against within one month of the decision to the Special Court. The Special Court may approve or revoke the order within 60 days of the filing of the appeal.

Central Vigilance Commission

Santhanam Committee Report

The Santhanam Committee was set up to review the problem of corruption in India and make suggestions to resolve the problem. In furtherance of the same, the Committee gave its report and the Central Vigilance Commission was set up based on the recommendations of the Committee report.

Responsibilities of the Committee

Examine the different vigilance units that are set up and look into the work efficiency of these units.
To examine the duties, responsibilities and functioning of the Special Police Establishment.
Make recommendations to increase the efficiency of these organisations in fighting corruption.
Make recommendations regarding appropriate changes in the law that would make anti-corruption laws more effective and ensure speedy trials in these cases.
Make recommendations regarding steps that could be taken to create awareness and avoid cases of bribery and corruption.

Recommendations

Central Vigilance Commission

The existing vigilance units are having less success when it comes to dealing with cases of corruption or bribery.
There was a need for the establishment of independent vigilance units that would function with assistance from the Anti-Corruption Unit of the Central Bureau of Investigation.
The newly formed Central Vigilance Commission should have two units. One unit should deal with cases of vigilance, abuse of power etc and the second unit should exclusively deal with cases of corruption/bribery. Also, there should be a Chief Vigilance Officer in each Ministry, Department and Central corporate undertaking.

Special Police Establishment (SPE)

A Special Police Establishment should be set up and it should be given powers to investigate offences of corruption and bribery by public servants and other officers of the Government.
The SPE should only look into and investigate specific offences of corruption and it would act as a supplementary body to the State police forces.

Establishment of the Central Vigilance Commission

In furtherance of the recommendations made by the Santhanam Committee, the Central Vigilance Commission (CVC) was established in 1964. However, it was not given the status of a statutory body at that time. It initially received statutory status in 1988 when an ordinance was promulgated by the President in this regard. Later, the Central Vigilance Commission Act, 2003 was enacted and a permanent statutory status was given to the Central Vigilance Commission.

Functions and Powers of the Central Vigilance Commission

Under Section 8(1)(a) of the CVC Act, the CVC exercises superintendence over the investigation of offences under the Prevention of Corruption Act when such investigations are carried out by the Delhi Special Police Establishment, i.e., the special unit of the Central Bureau of Investigation (CBI).
Under Section 8(1)(b) of the CVC Act, the CVC is empowered to direct the Delhi Special Police Establishment in matters relating to the investigation of offences under the Prevention of Corruption Act.
Under Section 8(1)(c) of the CVC Act, the CVC can inquire and investigate into matters that are referred to it by the Central Government.
Under Section 8(1)(e) of the CVC Act, the CVC is empowered to review the progress of the Delhi Special Police Establishment in matters relating to the investigation of offences under the Prevention of Corruption Act.
Under Section 8(1)(f) of the CVC Act, the CVC is empowered to review applications regarding sanction of prosecution for offences under the Prevention of Corruption Act.

Preliminary inquiry

Section 8A of the CVC Act states that after receiving a complaint of corruption or on the recommendation of the Central Government, the CVC shall conduct a preliminary inquiry into the matter. The offender should be given an opportunity of being heard during the preliminary inquiry. If after the inquiry, the CVC is of the opinion that the provisions of the Prevention of Corruption Act have been violated, then the CVC shall take any of the following actions:

Direct the Delhi Special Police Establishment or any other authorised body to initiate an investigation into the matter
Initiate disciplinary proceedings or any other appropriate action against the offender through a competent authority
Initiate proceedings under the Lokpal and Lokayuktas Act, 2013.

The preliminary enquiry should be completed in 90 days but it can be extended further for a period of 90 days for reasons recorded in writing.

Investigation

The power to initiate actions after an inquiry has been provided under Section 8B of the CVC Act. If the CVC after the preliminary inquiry deems that the case should be investigated by the Delhi Special Police Establishment or any other authorised body, then such investigation should be completed within a period of six months from the date of order of investigation. This tenure can be extended further for a period of six months for reasons recorded in writing.

Once the investigation is completed, the investigation report should be submitted to the CVC. The CVC after going through the report may take the following actions:

File a charge sheet before the Special Court against the offender.
File a closure report before the Special Court against the offender.
Initiate departmental proceedings against the offender.

Power relating to an inquiry

Section 11 of the CVC Act states that the CVC is vested with the powers of a civil court while conducting inquiries under Section 8A of the CVC Act. The powers have been enumerated below:

Summoning and examining a person on oath.
Ordering for the production of any document.
Receive evidence through affidavits.
Examination of witnesses and other documents.
Any other power as may be prescribed.

Directorate of vigilance and anti-corruption

After the constitution of the CVC in 1964, similar vigilance commissions were set up by different states to deal with matters relating to corruption and bribery in the state. The features of these state commissions have been discussed below.

Functions

To inquire into incidents of corruption, bribery and other allied misconducts on reference by the State Vigilance Commission or the State Government.
To furnish information about the alleged cases of corruption and other misconduct to the Government.
To inquire into allegations of corruption levelled against public servants.
To investigate offences coming under the ambit of the Prevention of Corruption Act.
In some cases, set up traps in order to catch public servants red-handed in an act of corruption or bribery.

Conclusion

Even after such an intricate mechanism has been set up under the Prevention of Corruption Act to investigate and punish the offences of corruption, the corruption rates in India are still high. In 2020, India recorded the highest rate of bribery in Asia with an overall bribery rate of 39%. It was noted that in 50% of the bribery cases, individuals were asked to bribe. The highest number of corruption cases were recorded in Maharashtra (664) followed by Rajasthan (363) and Tamil Nadu (304). The total number of reported cases were 2,978. One can only imagine the number of cases that go unreported.

These statistics show that even though we have a strong mechanism in place, the mechanism lacks efficiency and attempts should be made to increase the efficiency of the concerned bodies in the long run so as to avoid an increase in corrupt practices in the country.

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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Fiverr hiring a freelance motion graphics designer : draft the terms and conditions

By

Abanti Bose

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November 19, 2021

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This article is written by Vidhya Sumra, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

People are talking about freelancing more than ever before, thanks to the advent of the gig economy. This is because there are more freelancers today than there have ever been. Now, let us discuss what freelancing is.

Freelancing means working independently rather than being employed by any organisation. Freelancers are self-employed people who work for themselves. They are also known as independent contractors. Freelancers are engaged by different organisations on a part-time or short-term basis for a particular project or specific assignments. They do not receive the same benefits or salary as full-time employees, and neither do they have the same level of obligation to any organisation. A freelancer works on multiple projects for different clients at the same time. A freelancer must manage their priorities, time, and workload. That may seem like a lot to handle, but being your own boss can be very enjoyable. A freelancer can work from anywhere in the world, and most of the time, it means working from home.

What is a freelancer’s letter of agreement?

A freelancer and a company or business sign a letter of agreement, which is a contract between the two parties. The contract lays down all of the terms and conditions of the freelancer’s and company’s work, ensuring better understanding and involvement. There are many platforms on which freelancers can be part of the work. For example, Fiverr, Upwork, WorkNHire, etc.

Fiverr is equivalent to LinkedIn, however, it is more focused and geared towards freelancers. Fiverr is a platform that allows freelancers to market their skills to potential clients. This gives you a better chance to market your work to a worldwide audience. You must first build your profile by filling in basic information such as your name, profile picture, professional qualifications, and interests (which must be specified in order to attract potential clients), and then submit a request for clients. Fiverr is unlike any other platform because it offers freelancing in practically every field imaginable, including translation, graphic design, and astrology. Now, let’s discuss hiring a freelance motion graphics designer on Fiverr. Then, what all terms and conditions should be part of the agreement.

The following are the brief details about the agreement between the Fiverr and freelancer.

Compensation: The agreed-upon sum to be paid after the work is completed.
Timeline: A mutually agreed-upon deadline.
Scope of work: Defines the nature of the freelancer’s job for the term of the contract.
Additional services: The freelancer sets the payment terms for any extra work.
Late payment clause: A freelancer might charge interest or impose additional conditions if they are paid late.
Payment in advance: This clause enables freelancers to set a fixed fee in advance.
Termination: Situations in which the client has the option to end the contract.
Confidentiality: During the contract period, a freelancer should keep the job information confidential.
Privity: Highlights the freelancer’s relationship with the client.
Jurisdiction and Dispute Resolution: It is contingent on both parties’ nationalities.

Importance of drafting terms and conditions

Contracts are legal agreements that are intended to secure both the freelancer and the hiring company during and after the employment relationship. Establishing freelancing terms and conditions as a hiring manager ensures that the freelancer will complete the assignment according to the agreed-upon timetable and parameters. At the same time, the freelancer receives assurance that you will pay them according to the terms agreed upon, including the amount, payment method, currency, and timeframe.

There are a few more valid reasons to create and sign a contract with each freelancer you hire:

To avoid misunderstandings

Contracts help you avoid disputes over who is liable for particular tasks, such as covering business expenses, providing training, or issuing equipment, down the future. When establishing a contract, you may address all of these concerns right away, ensuring that there are no ambiguities or misinterpretations.

Court defence

Contracts are legal papers, which means they can be used in court if one party is violating the agreement. For example; if the freelancer is not completing the work, then the firm will have grounds to sue them, and they will be able to sue the firm if the firm is not paying them. We can also add jurisdiction and arbitration clauses in the agreement in case of any event of default by either party.

What should be included in a freelance contract?

All elements of the employment agreement should be covered by comprehensive freelance terms and conditions. This usually consists of the following items:

Contact information: Both parties’ full names, phone numbers, and email addresses are included. The freelancer’s identification number, as well as the company’s mailing address, are frequently supplied as well.
Scope of the project: Describe the task you are hiring the freelancer to accomplish, including the project’s goal, the projected duration, and the number of hours the freelancer will be working.
Deliverables: Make it clear what the freelancer is expected to do or deliver.
Rates and pricing: The amount you will pay the freelancer for their services is discussed in this section. How much does he or she charge? Do they work on an hourly basis or a flat pay per deliverable?
Payment options and terms: You will specify the freelancer’s payment method, schedule, and currency in this section.
Timelines and deadlines: While it is not always necessary to provide particular deadline dates in a contract, you should, at the very least, say when the working relationship begins and when you anticipate the task to be completed. It is also a good idea to state whether there will be consequences if the freelancer misses a deadline.
Ownership/copyright: This establishes who owns the work after it has been done. The freelancer usually has the rights to the work until you pay them. After receiving money, the freelancer is unable to use or resell the work to anybody else.
Legal term: To ensure that both the freelancer and the hiring manager are aware of their legal obligations, provide definitions of key legal terminology and concepts.
Fees and cancellation policies: Provide rules for compensating the freelancer if the project is cancelled before it is completed. For example, you may pay the freelancer a set rate based on the number of hours they have worked thus far.
Expenses and equipment: Certain sorts of work may necessitate the acquisition of specific tools, software, equipment, or training by freelancers. In this part, you should specify whether your firm or the freelancer is accountable for the expenditures.
Signatures: Finally, both parties’ signatures are required for freelance terms and agreements to be legally binding. To put it another way, the contract is only binding if both parties sign it.

Documents required for freelancing agreement

We will need the following documents for preparing the freelancing agreement.

Address proof of both the parties to the agreement.
Business proof of the company as well as of freelancer.
Documents that confirm the identities of the parties or organisations involved.

Additional legal documents for freelancing

You may require the freelancers you hire to sign additional legal documents in addition to the standard contract, such as:

Confidentiality Agreement: This legally enforceable contract, also known as a non-disclosure agreement, establishes a confidential relationship between your firm and the freelancer. It ensures that any sensitive information obtained by the freelancer will not be shared with others.
Intellectual Property Agreement: The transfer of intellectual property rights from one party to another is established by this agreement. When working with freelancers, this usually entails the freelancer handing over the intellectual property rights to their work to the company.
Non-compete Agreement: A non-compete agreement is a contract in which the person agrees not to work for other companies that are competitors of the employing company for a set period of time after the contractual relationship has ended. These agreements also restrict the person from disclosing confidential information or confidential info to anybody other than the hiring company.
Data Privacy Agreement: If a freelancer needs access to sensitive company data to do their task, you will want them to sign a contract obligating them to follow your firm’s data security and confidentiality standards.

Intellectual property for freelancers

For freelancers, intellectual property refers to the work they do while working for a company. An invention, design, brand, or any other production over which an individual or business has legal rights is referred to as intellectual property. One of the most prevalent freelancing jobs is content creation. However, there are legitimate concerns that arise from that line of work. The first difficulty is that ghostwriters may be hired by institutions and independent publishing houses/authors. Ghost-writers are someone who writes on behalf of an author but does not have their work published in their name.

This implies they won’t be recognised as the work’s original author, and they won’t be able to claim any intellectual property rights over it. There is another scenario to consider in this situation. In the majority of content writing situations, the copyright belongs solely to the client. There is, however, a distinction in both circumstances.

One example is when you are creating an entire book that will be published under the name of another author. Another scenario is when you are producing material for a client. From the standpoint of ethics and morality, the former scenario may be contradictory.

Below are a few examples of intellectual properties:

Trademarks: It protects trademarks, signs, vocabulary, and tone that set your products apart from the competition.
Copyright: This protects your original music, background scores, scripts, book, site material, or any other creative work you have created. According to Section 13 of the Copyright Act of 1957, copyright in literary works belongs to the original author who first published the work. This means that the original author has the right to reproduce the work, to make any cinematograph film or sound recording, to translate the work, and to do other things as set forth in Section 14.
Patent: Businesses frequently patent their inventions because they worry that someone else may do the same. This category includes any innovative solution, creation, process, software, or product design commercial product.

Conclusion

Traditional employer-employee relationships do not provide for the self-control, flexibility, or diversity that freelancing does. While it is advisable for individuals who wish to continue experimenting with their professional alternatives by branching out into new industries, it may not provide the long-term financial stability and security that one seeks in order to live a better life.

As the work-from-home culture grows in India, the freelancing business is undergoing significant changes. This not only permits the marketplace to welcome people from all over the world who may be great for the job, but it also signals that the degree of competition in these jobs has increased. While India is undoubtedly a promising market for freelancing, fundamental precautions should be taken in India, as described in the article above, because the activity is conducted online and there may be issues of accountability.

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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What are the chief principles or categories of misconduct to be prohibited while drafting a code of conduct for a new organization

By

Abanti Bose

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November 18, 2021

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This article is written by Rahul Sharma, pursuing Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

The success of any business relies on adding new customers and retaining old ones. Acquiring these customers is based on the competence and professionalism of the entire organization. It is the employees who take responsibility for their work commitments and build trusting relationships with customers and partners. Employees need to conduct themselves with the highest standards of integrity and respect for others. Depending on the nature of the business some companies are highly visible among the people and society in general and are held accountable for the actions and decisions of every employee. For this reason, the continued success is dependent on all employees following a strong code of ethical and professional conduct. This is the reason why companies put a great deal of emphasis on following a code of conduct that is agreed upon and accepted in the organization.

At a minimum, a code of conduct must describe the right and wrong behaviours in the following areas:

Personal conduct: The personal conduct of every employee shapes the work culture and defines our reputation as a company.
Anti-corruption: This category is about describing your company’s stand on fair competition, and its commitment to denounce all types of corruption.
Internal control: This category is about the governance and segregation of duties. Given the fast-paced VUCA(Volatility, uncertainty, complexity and ambiguity) world, companies must tread carefully when it comes to defining the decision-making process. To succeed in this dynamic environment, modern management believes in a decentralized approach to decision making, which makes the issue of internal control an important element in the code of conduct policy.

In the next section, we will go over the above categories in more detail.

Personal conduct

Integrity

Employees are expected to demonstrate the highest standards of integrity and professionalism when doing their job. Most companies stress on open and honest communication, and a promise from all team members to do the right thing. One important element here is upholding the trust placed in employees by others. The code must elaborate on the actions that would be taken against employees who are found to be indulging in unethical or illegal business practices. Violations of laws and regulations should not be tolerated.

Diversity

Here the company must include its commitment to equal opportunities for all employees. For this reason, the company must strive to attract a diverse workforce and to create an inclusive work environment that allows everyone to contribute. Any form of harassment, discrimination or other behaviour that may be perceived as threatening or degrading should not be tolerated.

Confidentiality

All employees have a responsibility to safeguard sensitive information relating to their company, as well as its customers, partners, and stakeholders. The duty of confidentiality is critical to building trust and strong relations with both parties that exist outside, and within, the organisation.

Privacy

All individuals have a right to privacy, and here the company must ensure its commitment to dealing with issues that are related to privacy and handling personal data with due care. Personal data is defined as any information which can be referenced to a specific and identifiable person. All employees must be aware of the company’s security policy and regulations such as GDPR.

Sustainability

Financial and sustainability goals are not at odds with each other in growing a successful company. They are complementary. Together, they allow us to run a profitable business while making a positive contribution to society. So right behaviours on environmental protection must be listed in the code of conduct.

Anti-corruption

Gifts and business courtesies

Employees must always exercise care when offering or accepting gifts and business courtesies, including invitations to meals or events.

Events and conferences

All events involving customers or business partners must have a clear business agenda. Business courtesies such as meals and entertainment provided during the conference must be limited, and not overshadow the business content. When organizing or participating in events and conferences, employees must evaluate the value of business courtesies that are offered during the event.

Conflicts of interest

Employees will not solicit any personal benefits for themselves (or their closely related people) that may be perceived as conflicting with the interests of the company.

Compliance with antitrust laws and regulation

Competition or antitrust laws are designed to protect free and effective market competition. Competition law prohibits companies from collaborating with competitors against the interest of potential customers. This includes a range of prohibited activities including price-fixing, sharing of price information with competitors, restricting the supply of goods or services, submitting false bids or tenders, and dividing markets or territories. All employees must comply with competition and antitrust laws. This means that employees are prohibited from:

being involved in any agreements, arrangements or practices that have as their object or effect to prevent, restrict, or distort competition.
discussing pricing or other competitive information with competitors, fixing prices with competitors or entering into any other arrangements with competitors that might restrict free competition. Employees involved in a private or public tender process must always comply with applicable tender regulations and provide correct, transparent, and non-discriminatory data.

Internal control

Authorization of transactions

Usually, companies have a written document that outlines which people or levels in the organization have the authority to approve various types of transactions relating to hirings, contracts, and cash disbursements. Transactions above a specific amount or limit must be approved by the Board of Directors. These maximum amounts allowed for approval at each level of the organization are stated in the ‘Authority Matrix’ for the company.

Contract management

Any contract or agreement which an employee enters into on behalf of the company must be registered and stored in electronic format in the contract database of the applicable country or business unit. This includes all contracts with customers, suppliers, and business partners. It is the responsibility of the individual who signs or executes the agreement on behalf of the company to ensure that the contract is correctly registered and stored electronically in the contract database. Information regarding access to the contract database in each country can be found on the intranet sites of each country. Certain types of contracts will create additional compliance obligations.

Reporting and disclosure

Financial and legal reporting should always comply with all applicable laws and regulations and be full, fair, accurate, timely and understandable.

Price sensitive information and insider trading

This is particularly important for publicly traded companies as they must abide by strict laws concerning the handling of sensitive information which may have an impact on the share price. For example: Your company policy may outline that all new contracts with expected sales over 2% of Group revenue are automatically considered price-sensitive information if the outcome of the contract has not already been announced to the public.

Post defining the misconduct categories and their definitions for your organization, it is also important that you create mechanisms that provide for grievance handling and their redressal. The labour laws provide for mechanisms for terminating an employee when it is proved that the said misconduct had occurred. In case of crimes such as fraud, sexual harassment etc., depending on the severity of the cases, the same can be handled through the Indian Penal Code by registering an FIR against the person. or Internal Disciplinary Hearings mandated by the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. Moreover, it is recommended that the company makes it clear on how to report such cases and who to report and in what manner. In some companies, there are very strict provisions for making sure that such a forum is not misused for personal vendetta. There is a strong business case of creating a code of conduct policy and following through with it. In India, there are numerous examples when reputed and large organizations were marred by incidents of misconduct that were happening at the very top of the system.

The great Satyam scam is about corporate governance, greed, and fraudulent auditing practices that were allegedly done in support of auditors and chartered accountants. The company misrepresented its accounts both to its board, stock exchanges, regulators, investors and all other stakeholders. This means a large number of people were involved in the conspiracy of making some quick and easy money. This also shows that it was probably considered okay by the company executives to engage in such wrong behaviours if their ends were being met. Can you imagine what would happen if the top brass of a country was to engage in such behaviour without any working mechanism to uncover such misconduct? The people of the country would suffer, which is exactly what happened in the case of Satyam’s employees.

Some result-oriented professionals consider misconduct policies and governance as a time taking activity and more of an ‘obstruction’ to value creation. However, this belief does not hold true because behind a well-functioning organization comes the strong ethos of ethical behaviour and proper understanding of what is right and what is wrong even when there is a thin line differentiating them.

Conclusion

In conclusion, the above categories are important to include in your code of conduct policy to ensure that all stakeholders; employees, suppliers and customers understand the right behaviours when engaging in daily transactions. This will not only safeguard the company’s interests but will also create an environment of trust and mutual understanding.

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

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

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A comparative analysis of IP law in Sri Lanka and EU directives

By

Rachit Garg

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November 18, 2021

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This article has been written by Hinal Khon, pursuing a Diploma in National Company Law Tribunal Litigation from LawSikho. It has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Intellectual property law is the general area of law that encompasses copyrights, patents, designs, and trademarks. (Talagala, 2012). The concept of intellectual property law is recognized and accepted worldwide, and developed and developing countries are enacting laws to protect individual intellectual property rights. Intellectual property, with its international and complex nature, generally regulates the invention, use, and exploitation of mental or creative labor. (Talagala, 2012). A salient feature of intellectual property law is the continuous expansion of its subject matter. The primary goal of intellectual property law is to encourage human invention by safeguarding intellectual property rights. This article lays down a comparative analysis of IP Law in Sri Lanka and EU Directives.

Intellectual property law in Sri Lanka

Sri Lanka’s legal system has its roots in history. The main legal traditions that are applicable throughout the country are Roman-Dutch law and English law. While Roman-Dutch law arrived during the Dutch rule, the common law of the land was borrowed from the British government. (Talagala, 2012). The intellectual property law in Sri Lanka is of British origin. The British laws continued t even after independence; however, Sri Lanka was driven to develop a better framework for protecting intellectual property rights in the setting of an evolving commercialized society with the introduction of the open economy. Following this need, the Code of Intellectual Property Act No. 52 of 1979 was enacted as part of a program to update all business laws in the country, based on the World Intellectual Property Organization’s [WIPO] recommendations. As a party to the TRIPS Agreement, Sri Lanka was required to establish an intellectual property law regime based on the Agreement’s requirements. As a result, in 2003, the Intellectual Property Act No. 36 of 2003 was enacted in strict accordance with TRIPS rules. (Talagala, 2012)

Sri Lankan copyright law is based on the Intellectual Property Act No 36 of 2003, which Parliament adopted to protect and recognize the country’s intellectual property rights. (Philips, 2009). In Sri Lanka, intellectual property law confers ownership rights in copyright, patents, designs, trademarks, and trade names. The current direction of unfair competition is also governed by the Intellectual Property Act, which encompasses a range of elements. (Talagala, 2012).

Enforcement Mechanism of IP laws in Sri Lanka

There are four aspects to the enforcement mechanism of IP laws in Sri Lanka: civil judicial procedures, criminal procedures and penalties, customs control and dispute resolution through the Director-General of Intellectual Property. (Talagala, 2012). Under current law, the copyright term for works created by individuals in the author’s life plus 70 years. (Philips, 2009).

The intellectual property rights owner can file a civil suit in the court against people who infringe on their rights, threaten to infringe on their rights, or are likely to infringe on their rights under the Act. (Talagala, 2012). The owner has three remedies: injunction, damages, and other reliefs as the court may deem and equitable. In addition to this, the court has jurisdiction to issue orders dealing with enforcement of IP rights such as disposal of the infringing goods outside the commerce channel or distribution of goods with compensation. (Talagala, 2012)

The Intellectual Property Act has made willful infringement of intellectual property rights offenses punishable with fine, imprisonment or both where proceedings can be instituted by the owner of the IP right in concern or the police. (Talagala, 2012)

It has also developed an innovative mechanism of IP enforcement in which owners of copyright or related rights who have been aggrieved or affected by a violation of their rights can seek redress from the Director-General of Intellectual Property. It is a method of enforcement that takes the form of a dispute resolution system rather than a quasi-judicial inquiry. (Talagala, 2012).

IP law in EU

Intellectual property law has its origin in Europe. Intellectual property regulations in the EU are significantly . Many international conventions cover this, most of which are enforced by the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO). (Oxford LibGuides: Intellectual Property Law: European Union, 2021). The primary objective of Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 is to create a comprehensive and coherent legal framework to facilitate innovation, creativity, investment, and production of new content, including in the digital environment, to avoid fragmentation of the internal market. Along with it, the EU directives also facilitate the use of content in the public domain.

Difference between the laws in both countries

The IP law in both countries differs in many instances, even though the law in Sri Lanka law is inspired from the Europe. Some of the significant differences between the laws in both countries are stated below. (Bandara & Ariyadasa, 2019)

EU directives safeguard the rights arising from the internet, in addition to the distribution of out-of-commerce works and other subject matter and the online availability of audiovisual works on video-on-demand platforms to ensure complete access to the material. At the same time, the Sri Lankan legal system is entirely unaware of the internet’s advent.
The EU Directives ensure the promotion of academic research over the internet while protecting the author’s rights and ensuring cross-border participation. In comparison, the rights of Sri Lankan authors are confined to black letters, which were drafted in 2003 and provide enforcement of a territorial nature .
The Directives face text and data mining corporations, requiring them to get the authorization to preserve data. While EU Directives mainly clarify the fair use of copyrightable material by providing a loophole for data mining businesses, Sri Lankan law makes no mention of digitization or data mining. Although the IP Act elaborates on the fair use exception, it does not explicitly mention digital data or work.
Sri Lankan IP law does not address cross-border piracy of digital works. However, EU Directives ensure material licensing to unify new mandatory exceptions or limitations concerning digital uses and cross-border educational activities.
While the EU Directives require the Member States to provide an exception to allow cultural heritage institutions to permanently reproduce works and other subject-matters in their collections for preservation purposes, the Sri Lankan IP Act protects folklore under section 6, and no mechanisms to protect rights or licensing agencies to secure them have been posited.
According to EU directives, states should ensure that suitable safeguards are in place to protect the right holder’s legitimate interests. While sections 9 and 10 of the Sri Lankan Intellectual Property Act protect owners and authors, the Act lacks a sufficient framework.
For these directives, it is appropriate to offer a specific liability mechanism if no authorization is obtained. In contrast, the IP Act of Sri Lanka is silent on online content sharing, even though section 6 of the IP Act protects literary works.
EU Directives suggest essential assessment criteria for the owner of copyrights online-content-sharing service providers; they have to put up their best efforts according to industry-wide professional diligence norms. The law in Sri Lanka is silent on content providers and does not address intermediary liability.
Author and performer remuneration should be reasonable and proportionate to the actual or potential economic value of the licensed or transferred rights, taking into account the author’s or performer’s contribution to the overall work or other subject matter, as well as all other relevant circumstances. Although a lump sum payment can be considered appropriate remuneration, it should not be the rule. Member states should be able to establish certain situations in which lump sums should be applied. Moral rights are recognized under the IP Act, as well as the Authors’ recompense.

Conclusion

Intellectual property refers to the ownership of intangible assets such as ideas, information, and knowledge. In pre-colonial Sri Lanka, there is little indication that private intellectual rights in ideas, information, and knowledge existed within a legal framework , as they do today. (Talagala, 2012). Intellectual property rights is a western concept that emerged in Sri Lanka. Even though intellectual creations are common in every culture and society, how intellectual property rights are recognized, protected, and enforced varies significantly from one country to the next. The intellectual property concept has created many complexities and difficulties in understanding the principles and core principles by the public. For example, a person who buys a car can rent it out and make money, whereas a person who buys a CD or DVD cannot legally do so due to copyright requirements in the Intellectual Property Act. (Talagala, 2012). These problems have been made even more challenging by modern technological breakthroughs. The Intellectual Property Act was enacted in 2003, and it provides a comprehensive framework for protecting IP rights, but it’s practical nature in enforcement is somewhat weak. Sri Lanka’s current intellectual property framework is frequently viewed as a system imposed on the country as part of a trade deal. (Talagala, 2012).

References

Talagala, C. S. (2012). Enforcement of Intellectual Property Rights in Sri Lanka: Some Issues. SSRN Electronic Journal. Published. https://doi.org/10.2139/ssrn.2136251
Bandara, I., & Ariyadasa, A. A. (2019). PROTECTION OF COPYRIGHT OWNERS & AUTHORS RIGHTS IN THE INTERNET: A COMPARATIVE ANALYSIS OF IP LAW IN SRI LANKA AND EU DIRECTIVES. International Conference On Business Innovation (ICOBI), 159–163. https://www.nsbm.ac.lk/wp-content/uploads/2021/08/ICOBI_2019_Protection-of-Copyright-Owners-Authors-Rights-in-the-Internet-A-Comparative-Analysis-of-IP-Law-in-Sri-Lanka-and-European-Directives.pdf
Philips, D. (2009). An Introduction to the Law of Copyright. Journal of the University Librarians Association of Sri Lanka, 13(1), 71. https://doi.org/10.4038/jula.v13i1.1335
Libguides.bodleian.ox.ac.uk. 2021. Oxford LibGuides: Intellectual Property Law: European Union. [online] Available at: https://libguides.bodleian.ox.ac.uk/c.php?g=422962&p=2888482 [Accessed 10 November 2021].

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Can trademark protection be extended to cryptocurrency

By

Abanti Bose

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November 18, 2021

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20191217200727-6Crypto — Image source: https://bit.ly/34x0XH1

This article is written by Akshay, pursuing Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Cryptocurrency has sparked worldwide interest, with some referring to it as “the future of money.” Despite the fact that cryptocurrencies cannot be used in the same way as conventional money at this time, it is retained as an investment in the hopes that its value will grow as it gets more widespread. As a result, it is frequently referred to as a “crypto-asset” by financial institutions. Cryptocurrency is distinguished by its own financial market, with corporations such as Facebook and Samsung declaring plans to launch their own versions of cryptocurrency to participate in this market.
Following the triumph of ‘BITCOIN,’ the world’s most popular cryptocurrency, many people have been interested in this ground-breaking technology. Nike has registered a trademark in the United States for their cryptocurrency, dubbed “crypto sneakers.”
Blockchain technology facilitates cryptocurrency trades by allowing transactions to be carried out in a secure, protected ledger using a networked database structure secured by hashing power. Such transactions are permanent, irreversible, and anonymous, avoiding the use of middlemen while being transparent and unaffected. Cryptocurrencies were created to replace some of the existing currencies and fulfil similar financial tasks without requiring government approval or recognition as legal currency. A virtual corporation or a capital raising entity typically issues them. A virtual organisation is one that is represented by computer code and may be run on a distributed ledger or blockchain.

What is cryptocurrency?

Cryptocurrency is a type of virtual money that uses cryptography for security and a decentralised ledger for transaction recording. It only exists in a digital format, unlike a real note or coin issued by the government. It is represented by a computer code that may be configured to encompass a wide range of rights and duties in order to accomplish activities beyond operating just as a means of payment or exchange. It can be used to enable digital access to a product, an application, or a service, as well as to reflect real-world asset interests.

In addition, unlike traditional currencies, Bitcoin is not generated and distributed centrally. Instead, it is a network of computers that does computational work while keeping a digital record of transactions. As a result, the newly minted coin gets rewarded.

The debut of Bitcoin, which was originally described in a white paper in 2008 and subsequently implemented in 2009, was the first step forward in the cryptocurrency era. There have been almost 2500 cryptocurrencies since then. Ethereum, Litecoin, Ripple, Zcash, Dash, and Monero are a few well-known cryptocurrencies with distinguishing trademarks.

Is it possible to protect cryptocurrencies under trademark law?

BitFlyer, Inc. had sought for a trademark to register the word “BITCOIN” for use as “computer programmes employed in the field of electronic commerce transactions; computer programmes; electronic machines and apparatus; telecommunication machines and apparatus” in 2016, but the USPTO had denied it. The word was only descriptive of the subject matter and characteristics of the products submitted by the applicant, according to the USPTO. The USPTO also denied an application for registration of the word BITCOIN in 2018, claiming that the mark was merely descriptive of the subject matter and a characteristic of the applicant’s services.

Furthermore, in the United States, the mark ‘OMNICOIN’ was registered in Class 36 for “cryptocurrency, namely, providing a virtual currency for use by members of an online community via a global computer network; cryptocurrency, namely, a peer-to-peer digital currency, incorporating cryptographic protocols, operating over the internet, and used as a method of payment for goods and services; cryptocurrency, namely, a peer-to-peer digital currency, incorporating cryptographic protocols “Cryptocurrency, essentially, a peer-to-peer digital currency, combining cryptographic protocols, running over the internet, and utilised as a form of payment for goods and services,” according to Class 36.

In June 2020, the Spanish Patents and Trademark Office, like the UK, awarded Trademark Protection to a Bitcoin salesperson engaged in buying and selling bitcoin, with registration number M4046141. Such a grant of Trademark Rights for the term “BITCOIN” has been criticised across the world because Bitcoin and Blockchain are based on open source technologies that anybody may use to deliver cryptocurrency services.

The United States is most likely the first country to experience an increase in case laws relating to trademark law and cryptocurrencies, especially since it began enabling the registration of bitcoin names.

The plaintiff in Alibaba Group Holding Ltd vs. Alibabacoin Foundation requested a preliminary injunction against the defendants for trademark infringement of its brand Alibaba as a new cryptocurrency, Alibabacoin. They asked for a ban on using the word Alibaba Coin to refer to their cryptocurrency until the lawsuit was resolved.

The preliminary injunction was granted by the US District Court for the Southern District of New York, and the defendants’ move to dismiss the lawsuit was refused. One of the defendants’ main claims was that Alibaba had clearly said that it would never engage in the cryptocurrency sector and, as a result, had relinquished its right to use its cryptocurrency trademark. The Court dismissed this argument, noting that “accepting this view of abandonment would render American trademark law largely ineffective,” and granted Alibaba a preliminary injunction after determining that Alibaba had established a likelihood of success on the merits of its trademark infringement claim. Furthermore, the Court determined that the defendants used the mark “in conjunction with their online business activities,” indicating that the mark was utilised in commerce as a good or service.

In Telegram Messenger Inc. vs. Lantah LLC, the US District Court for the Northern District of California granted a preliminary injunction prohibiting the defendant from using the term ‘Gram’ for its cryptocurrency brand because it was confusingly similar to the plaintiff’s trademark of ‘Gram,’ which was a pending registration at the USPTO for “financial services, namely, providing a virtual currency for use by members of an online co-op.”

The Southern District Court of New York issued a default judgement in favour of Kanye West in the matter of West vs. McEnery, ordering the defendants to stop using the name ‘Coinye West’ as a trademark for their cryptocurrency firm.
Due to its drive to change, cryptocurrency has assumed many different forms. Since the introduction of bitcoins, other variations have appeared in the form of ‘alt-coins,’ which are alternatives of differing degrees and can take on a variety of other forms. With next-generation blockchains like Neo and Ethereum, the world of cryptocurrencies becomes significantly more difficult. Because bitcoin is so varied and difficult to regulate, no single person or institution can claim ownership or responsibility for it; as a result, there appears to be little chance of protecting any Intellectual Property Rights (IPRs) in community-based blockchains.

The drawback of not giving cryptocurrency trademark protection

The consequences of failing to attribute trademark ownership might result in a slew of problems stemming from the erroneous application of such technology. Consider the case of a typical internet user who is interested in cryptocurrencies and intends to purchase it. After reviewing his options for purchasing bitcoins, he decides to get them from a person who is actively pushing the sale of the currency while also operating as a fraudulent investor. Because the aforementioned cryptocurrency is not held and protected under trademark law, the proprietor cannot prevent anybody acting in such a fraudulent capacity from causing harm to the cryptocurrency brand’s image.
If the customer fails to avoid the aforementioned activity, he or she may incur unwarranted difficulties as a result of a lack of available remedies. Furthermore, phrases like ‘Bitcoin’ and ‘Blockchain’ have grown in popularity, and it is simple to use similar terms for other goods or services without violating the law. As a result, it’s critical to figure out how to preserve cryptocurrencies so that customers aren’t duped by different cryptocurrency providers and approved providers’ reputations aren’t tarnished.

As a result, attribution of collaborative authorship to owners in the form of ‘collective marks’ is another option to sole proprietorship over such technologies. The same would serve as a safeguard against consumer deception while simultaneously resolving the decentralised control dilemma. However, this is not a problem-free path because verifying genuine ownership of trademarks can be challenging.

Conclusion

Cryptocurrency has grown in popularity in recent years, allowing people to receive and send payments that are not confined to a single currency. Such technology has the ability to completely transform and revolutionise our economic operations. However, the globe as a whole is still grappling with a slew of regulatory and legal issues surrounding bitcoin.
Many titans, including Facebook, Samsung, and Nike, are eager to enter the cryptocurrency race to provide for its cryptocurrency outlets. As a result, as previously stated, technological advancements in the realm of cryptocurrencies have introduced new obstacles and issues that must be handled through regulatory and legislative adjustments.
First and foremost, cryptocurrencies and the many types of cryptocurrencies that might arise must be given a position in the Nice Classification. As a result, recognition must take the shape of law in order to generate new jurisprudence. Furthermore, while a formal framework in the intended member state is formed, cryptocurrency should seek Trademark Protection in countries that allow such protection to reinforce their claim over the use of a certain mark, work, or logo.
Finally, reforming trademark laws may appear ambitious in countries where bitcoin has been outright prohibited (for example, India) because of its negative impacts on morals and public policy. Such nations will not provide protection against misrepresentation and deceit by third parties. As a result, any technology would have to withstand the test of time in order for us to determine the best course of action for dealing with the threats that arise from the use of bitcoin.

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Tracing the distinction between tax and fee

By

Rachit Garg

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November 18, 2021

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This article is written by Mounica Kasturi and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Introduction

The legislative competence of the Centre and States in India is demarcated in the Constitution of India through the three lists under Schedule VII. The power to levy tax or fee is not coextensive with each other and different meanings have been ascribed to the term ‘fee’ and ‘tax’. Initial judgments of the Hon’ble Supreme Court have carved ‘quid pro quo test’ between the fees collected and the services rendered to identify fees from tax. Tax was considered to be a general burden for public welfare whereas levy of fee corelates to expenses incurred by the government in rendering a service. The fees collected were to be kept in a separate funds and not to be added to the Consolidated Fund.

Case laws

The first major case to discuss the difference between a tax and a fee was Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1963 SC 966. In this case, the Supreme Court held that a levy is a fee when, firstly, the amount raised through the levy correlates to expenses incurred by the government in rendering a service. Hence, there must be an element of quid pro quo. Secondly, the funds collected must not be merged with the Consolidated Fund and must be earmarked specifically for the expenditure incurred by the government in rendering the services.

These two elements were further solidified by the Supreme Court in the case of Mahant Sri Jagannath Ramanuj Das v. State of Orissa, AIR 1954 SC 400 where it was held that the fee must be the consideration for certain services which the individuals received, and it must not be merged in the general revenue of the State to be spent for general public purposes. The two above mentioned principles of a fee have undergone a substantial change through later judicial pronouncements, and the strict necessity of both has been diluted.

In the case of Sreenivasa General Traders v. State of A.P., 1983 4 SCC 353, it was held that Co Relationship between the levy and the services rendered/expected is one of general character and not of mathematical exactitude. It is only necessary that a ‘reasonable relationship’ exists between the levy of the fee and the services rendered.

In the case of Krishi Upaj Mandi Samiti & Ors. v. Orient Paper & Industries Ltd., (1995) 1 SCC 655, the validity of market fees levied by market committees on the sale and purchase of bamboos was in question. The Court in para 21 of this judgment summarised the jurisprudence on the distinction between tax and fee, inter alia, on the following counts:

The subjects on which fees can be imposed has been separately covered under Schedule VII of the Constitution,
Public interest seems to be at the basis of all imposition but in a fee, the reason for the imposition of the levy is some special benefit that is conferred and accruing to the person on whom the fee is levied.
In determining whether the levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specific area or classes.
It is not a postulate of a fee that it must have relation to the actual service rendered. However, the rendering of service has to be established and the service so rendered cannot be remote.
To satisfy the test of quid pro quo, a good and substantial portion of the fee must be shown to be expended for the purpose for which the fee is levied.
Further, while it is not necessary to confer the whole of the benefit on the payers of the fee but some special benefit must be conferred on them which has a direct and reasonable correlation to the fee.

The requirement of a ‘reasonable relationship’ between the levy of fee and services rendered was also observed in State of Gujarat v. Akhil Gujarat Pravasi V.S. Mahamandal, (2004) 5 SCC 155. Further, in the case of Jindal Stainless v. Haryana, (2006) 7 SCC 241 as well as the Jindal Stainless Ltd. v. State of Haryana, (2017) 12 SCC 1 cursory observations noted that while a tax has no element of quid pro quo, a fee cannot be validly levied without a quid pro quo.

There has undoubtedly been a dilution of this distinction over the years as evidenced through multiple pronouncements by the Apex Court on this issue. However, a recent judgment by the Hon’ble Supreme Court further waters down this distinction.

A recent judgment of the Hon’ble Supreme Court in the case of Jalkal Vibhag Nagar Nigam & Ors v. Pradeshiya Industrial and Investment Corporation & Anr., Civil Appeal No. 6107 of 2021 further waters down this distinction. In the said case, the court upheld the validity of water tax under the Uttar Pradesh Water Supply and Sewerage Act. 1975. Under the said Act, the tax was levied on the area covered by the water supply services of UP Jal Sansthan. It was argued that such tax was actually in the nature of fees and therefore, cannot be levied by the state government under Entry 49, List II. The Hon’ble Supreme clarified that quid pro quo criteria lack any practical or constitutional significance. Taxes and fees could both carry elements of compulsory extraction. It is also emphasised that the exact correlation between the expenditure incurred and the service provided is no longer to be demanded.

The Bench comprising of Justice D.Y. Chandrachud, Justice Vikram Nath and Justice BV Nagarathna, further observed that the element of quid pro quo might not be necessarily absent in the case of every tax. Therefore, the present judgment renders the quid protest obsolete. Rather, the court considered the nature of the levy and held that since water tax in the present case is levied on the premises through which water is made available, and not on the actual consumption of water by the owner of the occupier, it is a valid taxon land and buildings.

Analysis

While it is true that an element of service might not be totally absent in the case of a provision imposing the tax, the present judgment fails to consider the decisions of the Apex Court which have clarified that a broad co-relationship between expenses and service is necessary. The present judgment does away with the quid protest but does not provide light as to which other criteria are to be used in its absence. Further, the judgment of the Hon’ble Supreme Court is also confusing as they observe that compulsory exaction can be present in both tax as well as fee and also simultaneously hold that levy under Section 52 of the UP Act is a compulsory exaction and therefore, in the nature of the tax.

This debate has wide spread ramifications even today. The validity of many levies is dependent on their classification as a tax or a fee. We are to see which shape the present debate takes in future.

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Digging deeper into immigration and its roots : how cultural diversity responds to identity crisis

By

Rachit Garg

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November 18, 2021

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This article is written by Vatsal Bhargava from the Institute Of Law, Nirma University, Ahmedabad and the article is edited by Khushi Sharma (Trainee Associate, Blog iPleaders)

Table of Contents

Introduction

The term immigration dates back to the 17^th century. Immigration is the means by which individuals become permanent residents or citizens of a different country. Immigration has historically benefited states in terms of social, economic, and cultural values. Many contemporary states are defined by a vast diversity of cultures and ethnicities that have developed from previous periods of immigration. Immigration in the post-World War II era was largely a result of the refugee movement that followed the war, as well as the end of colonialism in Asia and Africa in the 1960s. The number of people migrating from these places to historic colonial capitals like the United Kingdom and France had also increased. Working in the industry, health care, and transportation, the immigrants played a critical part in reconstructing the infrastructure of Europe following WWII. They did, however, face prejudice, which led to the marginalization of ethnic groups and minority communities in some countries.

Some states attempted to address immigrant’s socio-economic alienation by limiting future immigration, while others adopted an approach that encouraged the fusion of multiple cultures into a single cohesive notion of citizenship.

Immigration in India and the laws

Historically, India has been a land of wealth. Several invaders have stayed in India as immigrants over the years. Scholars from distant lands visited renowned centres of learning in their search for knowledge throughout India’s history. Many of these immigrants chose to reside near commercial and agricultural hubs, resulting in vast urbanised areas. Some foreigners made India their new home after the British left in 1947.

According to the Census of 2011, India is home to a population of 5 million immigrants. According to data from the United Nation’s Department of Economic and Social Affairs Population Division, India’s immigrant population fell from 7.6 million in 1990 to 5.1 million in 2019. Although the number of refugees and asylum seekers decreased between 1990 and 2019, they now account for a growing share of India’s total immigrant population.

Immigration from India has also been significant. Several Indians moved to the West Indies, Mauritius, and African countries as contract labourers and commercial entrepreneurs during British rule. These immigrants stayed to build prosperous lives in the nations to which they had emigrated. As a result of this phenomenon, an increasing number of Indians have willingly departed the nation in quest of better possibilities abroad. In recent years, migration has generally taken three forms: family unification, professional immigration for job or business possibilities.

Immigration laws vary from country to country and from time to time, depending on the political situation. International law governs a country’s immigration policy for its citizens. Immigration Law affecting a country’s citizens is regulated by international law. Obtaining citizenship or nationality in a different country is the prime objective of immigration.

The author will slightly touch upon the purpose and primary focus of these laws. We will not be discussing the entire legislation. Citizenship and nationality law in India is primarily governed by the provisions of the Constitution. The Indian Constitution establishes a single citizenship system for the entire country. Articles 5 to 11 of Part II of the Indian Constitution deal with citizenship issues. Articles 5 to 9 of the Constitution define a person’s status as an Indian citizen at the time of inception of the Constitution.

The Immigrants (Expulsion from Assam) Act, 1950, was enacted to enable certain immigrants to be expelled from Assam. The Immigration (Carriers’ Liability) Act of 2000 was passed to address the problem of carriers bringing in large numbers of passengers without proper travel documents in violation of the Passport Act of 1920. The Bureau of Immigration is in charge of immigration in India.

The Bureau of Immigration is in charge of immigration services at India’s major international airports as well as foreigner registration in five major cities. Foreigners Regional Registration Officers are field officers in charge of immigration and registration activities in Delhi, Mumbai, Kolkata, Chennai, and Amritsar (FRROs). Apart from the FRROs in charge of immigration and registration in the five cities stated above, the concerned District Superintendents of Police serve as Foreigners Registration Officers (FROs) in all of the country’s states.

Foreigners entering India are required to obtain visas under the Passport (Entry in India) Act, 1920. The act also specifies which documents must be submitted during their legal travel in order to gain entry to the country.

The Foreigners Statute 1946 governs foreigners’ admission and stay within Indian boundaries until they leave.

The Registration of Foreigners Act 1939 and the Registration of Foreigners Rules 1992, requires some foreigners to register with the Registration Officer if they stay longer than their visa period permits.

Hardships, identity crisis and socio-economic mobility

Settling in another country brings a number of difficulties irrespective of your background. All immigrants around the world experience it in one way or the other. The main challenge is the language barrier, which impacts one’s capacity to communicate with others. Every aspect of life in which we connect with people is influenced by our ability to communicate. Learning a native language is vital for everything from education to jobs. Immigrants are among the persons most likely to encounter workplace discrimination. Furthermore, many immigrant workers are not entitled to the same labour and safety safeguards as native-born workers enjoy. Health treatment, legal representation, and access to mental health and social services are among the most difficult services to obtain. Once again, language might be an underlying aspect of the problem. Immigrants’ access to insurance and health care has been hampered by policy changes implemented by states. Financial constraints, discrimination, and the threat of deportation are some of the major challenges. This has sparked concerns about immigrants’ ability to take advantage of several basic services.

Numerous immigrants claim that the cultural differences are the first thing they notice when they arrive. This might include everything from social customs to more significant matters like gender roles, religious diversity, and heritage, all of which can be substantially different in a new country. Even the well settled immigrants experience significant cultural and communication problems. In many cultures, fear and suspicion of immigration have fostered the creation and spread of cultural myths.

Identity crisis has a huge impact on mental health. Immigrants face a variety of challenges that can adversely impact their mental health, including the loss of cultural norms, ritual practices, and support networks. Cultural adjustment and changes in identity makes them continue to live in their past. Bereavement can be triggered by the loss of one’s social structure and culture. The loss of basic sociocultural characteristics such as language, attitudes, values, social structures, and support networks occurs as a result of immigration.

Identity crisis vs cultural diversity

The existence of various cultural groups within a society is referred to as cultural diversity. It includes enhancing the knowledge, skills, and behaviours required to fully recognize and support cultural differences. Everyone is included and it is ensured that everyone can participate on their own. The similarity or dissimilarity between the culture of origin and the culture of settlement, linguistic and social support networks, and acceptability by the majority culture all influence identity crisis in immigrants. If a person feels alienated from his or her culture and unrepresented by the majority culture, he or she develops feelings of rejection, detachment, and low self-esteem.

Immigrants struggle to get recognition of the proper expertise or skill that is required from them by the employers. Many immigrants don’t have basic market knowledge or access to social networks that can help them find a job. Discrimination towards people of immigrant background can play a part. The barriers of origin and skill diversity to immigrant socioeconomic opportunity reveal that access is restricted. The linguistic, educational, and cultural assimilation play a vital role in participation and economic success.

Plight of immigrants in india and government’s response

According to Migrant Integration Policy Index, India was ranked the lowest out of the total 52 countries for migrant inclusivity for 2020. There are no policies in the country that take into account the special needs of immigrant children. The states require immigrants to provide proof of residence that mostly is, in the form of a domicile certificate and school transfer certificate of the destination country, which they find difficult to obtain because they are no longer domiciles of state of origin and received their education there itself. Voting rights and right to form political parties is restricted to Indian citizens.

Although immigrant families have been able to take advantage of RTE policies, their children frequently suffer discrimination and cultural challenges in Indian schools. To cover these critical policy gaps, refugee communities such as the Rohingya rely on charitable efforts and the work of non-governmental organisations (NGOs).

Ayushman Bharat, is only available to families in lower-income groups, as outlined by the 2011 socioeconomic and caste census, and thus excludes immigrants. However, Integrated Child Development Services (ICDS) schemes provide additional nutrition, pre-school education, vaccinations, and health check-ups to children aged 0-6, can normally be obtained without documentation of identity.

Immigrants continue to experience challenges of inclusion in different aspects of daily life, affecting their employment opportunities, access to justice, and educational opportunities. Nearly 300,000 refugees live in India. However, India is neither a signatory to 1951 United Nations Convention nor the 1967 Protocol. India also lacks a national refugee policy and law.

Any number of refugees can be declared illegal immigrants by the government, and they can be penalized as trespassers under the Foreigners Act and the Passport Act. The Citizenship Amendment Act of 2019 discriminates refugees on the basis of religion when it comes to granting them citizenship in India.

In the example of Sri Lankan Tamil refugees, India’s treatment of the refugees is very clear. Plenty of them are in camps in Tamil Nadu. The government allows their children to attend school and enables them to pursue jobs. Following the end of the civil war in Sri Lanka in 2009, India encouraged people to return by using voluntary repatriation approach, in which people decide for themselves in cooperation with UNHCR. UNHCR has issued guidelines emphasizing the importance of fostering an enabling environment for voluntary repatriation and mobilizing support for returnees.

The UNHCR: rules and directives

The Office of the High Commissioner for Human Rights aims to promote, safeguard, and secure the human rights of all immigrants, regardless of their status, with a special emphasis on those who are most vulnerable to human rights violations. OHCHR advocates for a human rights-based strategy to immigration that prioritizes the immigrant in immigration policies and governance, and attempts to ensure that migrants are included in all national action plans and policies. UNHCR works to address migration challenges that affect refugees and other people who fall under asylum seekers, refugees, and stateless people. It focuses on promoting stronger governance and greater compliance of the universal nature of human rights, including the rights of all people regardless of their legal status, in ways that strengthen international refugee protection policies and rules. Their goal is to ensure that migration-management strategies take into account immigrant’s protection.

In terms of a number of rights, the 1954 Convention specifies minimum standards of treatment for stateless people. The right to education, employment, and shelter are a few among them. The Convention also ensures that stateless people have access to identification, travel papers, and administrative support. The 1961 Convention works to reduce statelessness. It creates an international framework to ensure that everyone has the right to live in freedom. It calls for states to include safeguards in their nationality rules to prevent people from becoming stateless.

The United Nations Convention on the Rights of Immigrant workers 1990 is a comprehensive international treaty that protects the rights of migrant workers. It underlines the link between human rights and immigration. The Convention strives to protect migrant workers and their families; its presence establishes a moral standard and serves as a guide and encouragement for each country’s support for migrant rights. The Convention attempts to ensure that migrants and nationals are treated equally and have the same work environments. The convention is based on the principle that all migrants should have access to a basic level of protection.

The International Covenant on Civil and Political Rights (ICCPR) aims to safeguard the civil and political rights. On December 19, 1966, the United Nations General Assembly adopted it. It is also called the international bill of Rights. The ICCPR Rules urge countries which have ratified the Convention to protect and safeguard basic human rights like the right to life and human dignity, equality before law, freedom of expression, assembly, freedom of association, freedom of religion, freedom of privacy, freedom from torture, ill-treatment and arbitrary detention. The Covenant has a total of 173 parties as of September 2019.

Immigrant rights and state sovereignty

There is one concern that preserving human rights and putting the individual at the core of migration issues might jeopardise state sovereignty, or that firmly enacting migration governance may be damaging to state sovereignty in some way. Existing international law sets no obligations on governments regarding how to manage their immigration flows or how to create migration policies. It only provides a foundation for long-term migration regulation that respects individuals while also acknowledging government’s authority over non-nationals.

Migration governance mechanisms that protect immigrant’s human rights can help states strengthen their sovereignty by safeguarding safety and public order. Regulating worker migration is critical for the state’s stability and prosperity, particularly in a globalised society where labour mobility, or the movement of individuals across state borders for work, is a crucial aspect. This is due to the fact that migrant workers make a significant contribution to human development of the regions in which they work by filling providing necessary skills.

States should provide healthcare facilities to migrants as well as their own citizens to comply with international human rights law. The World Health Organization (WHO) has identified that adopting an inclusive approach to migrant’s right to health care enhance their health, reduce disparities, facilitate integration, and contribute to social and economic growth. Poverty, prejudice, language, cultural differences, administrative barriers, and legal status are all risk variables that impact the health of immigrants, as per WHO.

Conclusion

Immigration has a profound impact on who we are as a society. It affects legislations, regulations and cultures. It determines cultural identity. Who we shall become as humans is determined by how we treat the persons who wish to be a part of our communities in the future. Contemplating the future of migration is essential, particularly at present, when we are witnessing the largest migration of people occurring. There are as well growing inequalities within countries, environmental crisis and a growing connectivity of knowledge that is invariably controlled by the government. Human adaptability to sociological, economic, and political obstacles, has relied heavily upon immigration. Immigration will continue to be a global issue in the future. Both people and the regions affected by immigration suffer significant impacts. Migration can lead to inclusive and sustainable development in both origin and destination nations while also benefiting immigrants and their families provided that it is supported by suitable policies.

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Equity carve-out v. spin-off- finding the best

By

Shoronya Banerjee

-

November 18, 2021

0

Mergers-and-Acquisitions-Article-202104051633 (1) — Image Source: https://rb.gy/mz5gjn

This article has been written by Esha Barua Chowdhury, pursuing the Diploma in M&A, Institutional Finance, and Investment Laws (PE and VC transactions) from LawSikho. This article has been edited by Tanmaya Sharma (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Introduction

Corporate entities go through various phases of restructuring which requires separating the additional business units. It is essential that such restructuring happens for a definitive goal and is for the benefit of the entity. Corporate actions also tend to affect the operations of the market therefore, market participants and investors need to make sure of the effects of such corporate restructuring and divestitures. As a matter of fact, both equities carve out and the spin-off is divestitures, meaning, by such action, the parent company tends to dispose of the subsidiary business unit through sale, exchange, or closure. A company restructures, either to strategically gain more than what it was already making or, to hive off a subsidiary that might have become a liability, more than an asset.

Reasons for divestitures

Divestitures happen by way of partial or full disposal of a subsidiary, the reasons being the need to focus on the main business or to strategically earn profits by way of separating two competent businesses. Attachment with the subsidiary might at times undermine the value of the parent company and therefore separation becomes imperative. Divestiture might be essential to achieve the full potential of each business as opposed to a consolidated entity. The reasons for divestiture can be as under:

To address financial or liquidity issues,
To separate operations for better management,
To scale up profits,
To focus on core operations,
To gain tax advantages,
To emerge out of a faulty acquisition.

Removal of subsidiary or disinvestment is required when it is:

a) Not contributing,

b) Destroying value,

c) Loss-making,

d) Expensive, or

e) is more profitable individually.

At times, the reasons can be any number of combinations of the mentioned points. Divestitures can take the form of a spin-off, split-off, or equity carve-out. This article is concerned with analysing and discussing the difference between a spin-off and an equity carve-out to find out which is the better.

What is a spin-off?

A spin-off refers to the process in which a parent company sells/ distributes all of its existing shares within a subsidiary company to its existing shareholders as a result of which a completely new and independent company is formed out of it. This distribution of shares is done on a pro-rata basis, i.e., the shareholders would get an equivalent ratio of shares that they already own within the parent company. The spun-off company will have a new management structure with a new name and would be an entirely new entity altogether. It would, however, have the same or similar assets, same human resources, and intellectual property that it used to have earlier, before the spinoff. In most cases, the parent company still continues to provide financial and advisory support to the spun-off entity.

Besides the distribution of shares, the parent company can also offer the shareholders the shares of the subsidiary company at a discount price. This is done through the process of exchange where the shareholders purchase a higher amount of stock in the subsidiary company while exchanging it with a lower value of stock in the parent company.

Example: – An investor can exchange Rs 100 of stock in the parent company for Rs. 110 worth of stock in the subsidiary company. When a division is converted into a separate entity, the existing shareholders of the parent company get all the benefits of owning the shares of the subsidiary company. The parent company, at times, does something similar to buyback of its shares from the shareholders by offering them shares of the new company in exchange.

Features of spin-off

The parent company does not receive cash considerations for undertaking the spin-off.
The shareholders enjoy the dual holding.
The Spun-off company has a distinct and independent identity altogether.
A parent company can spin off 100% or less of the interest up to 80% of voting and non-voting shares. Minority interest of the holding is kept back at times.

What is the purpose of corporate spin-off?

During the process of a spin-off, a completely new independent company is formed which retains its identity as being different from that of the parent company as a result of which, the work, management, and assets of such get differentiated from that of the parent body. The main reason for a spin-off by the parent company is because it thinks that the divestiture would be lucrative. The work of the parent company gets limited to financing and providing advice to the company. As the company becomes independent, spin-off tends to increase the returns for the shareholders as the subsidiary as well as the parent company both focus on their own products/services.

The parent company spins off due to 2 main reasons:-

a) To improve the performance of the parent company.

b) To improve the performance of the subsidiary company.

1) Improved performance of the parent company

A parent company may conduct a spin-off so that it can focus better on the complete utilization of its resources. As a result, when the subsidiary becomes a new independent entity, the resources that are present with the parent company are better utilised by it resulting in growth and improved performance of the parent company. Additionally, companies that aim at streamlining their businesses or wish to venture into new areas, often separate their existence from the less performing or low productive or subsidiaries that have reached their complete potential by the mode of spinoff where the subsidiary becomes a completely different entity from that of the parent company.

2) Improved performance of the subsidiary company

A spin-off creates a company with a new name though with the same human resources and the same intellectual properties as that of the parent company. Establishing the subsidiary as a completely new company requires the parent company to take a reduced role in providing finance and advice on how to run the subsidiary. This in turn increases the returns of the subsidiary company and provides for its growth as the subsidiary can now focus on their individual products and items independent from that of the parent company.

Types of spin-off

There are 2 types of spin-off which are as follows:-

No ownership retained (pure spin-off)

A pure spin-off refers to a process of corporate restructuring in which a parent company distributes 100% of its owned shares in the subsidiary among its shareholders. The spun-off company gets more autonomy as the parent company no longer holds any form of shares in the subsidiary.

Minority ownership retained

In this type of spin-off, the parent company only retains 20% of its owned shareholdings in the subsidiary company and the remaining 80% of the shares held are distributed among the parent company’s shareholders at a pro-rata basis. By using such a form of spin-off the parent company still retains some shareholdings and some form of decision making power in the subsidiary company. Sometimes the parent company can also act as an advisor to the subsidiary company.

Impact of spin-off on a company

Immediately after a spinoff, share prices of the parent company go down as it involves the transfer of assets from the parent company. It reduces the book value of the parent company, thus resulting in a fall in share price.

Pros and cons of spin-off

Pros

Certain subsidiaries of the parent company might have promising business goals and strategic priorities. To understand their true potential and streamline their business, companies choose a spin-off.
It helps the parent companies in cutting off/ removing underperforming, non-promising subsidiaries.
A company may go for a spin-off when it fears that any of its subsidiaries are underperforming and has a chance of going into debt. In such cases, to prevent the parent company from bearing the burden of their debt, spins off are opted.

Cons

Share prices of spin-offs tend to be highly volatile and chances exist that they may suddenly drop even though the company may be promising.
A spin-off is usually very costly as there are many legal and institutional matters involved.
The shareholders may be dissatisfied as they might not want the shares of the spun-off company as they may not match their investment standards.
There are a lot of uncertainties of employment associated with employees in case there is a spin-off.

Examples of spin-off:

A lot of well-known companies have spun off which led to the growth of the subsidiary. Some examples are:

Hewlett-Packard Co spun-off Agilent technologies Inc (1999)
Viacom created spinoff company Viacom Inc (2006)
Expedia created spinoff company TripAdvisor (2011)
Kraft Foods Inc created spinoff company Kraft Foods Group Inc (2012)
eBay created spinoff company PayPal (2017)
Alcon, an eye care business was created and spun off by Novartis

Spinoff can be beneficial to the company if it is planned minutely. In 1991 HCL enterprise had spun off HCL Technologies and made it into an IT services firm, which has shown greater growth in later years. Aditya Birla Group spun off its financial services to Aditya Birla financial service services. There is no transfer of cash.

Another term that is similar to spin-off is split off. Shareholders in the parent company are offered the shares of the subsidiary company and can hold shares of either company. The distribution of subsidiary shares is not on a pro-rata basis. Subsidiaries should go for IPO and based on the market price the shares can be exchanged. The main difference between a spin-off and a split-off is that in a split-off, shareholders must exchange their existing shares for the new company whereas, in a spin-off, the existing shareholders are given shares in the new company. Now that we have understood spin-offs, let us know what an equity carve-out is.

What is carved out?

A carve-out also called equity carve out refers to the divestiture of a business unit in which a parent company sells a minority interest of its share in the subsidiary company to investors outside of the company. Such sale of shares is done by way of an Initial Public Offering (IPO) where the shares of the divested unit are sold to the public. As a result, the subsidiary company becomes a standalone company with a new set of investors and a completely new financial statement. However, since only a minority share of the subsidiary is offered via IPO, the control still remains within the hand of the parent company. The parent company, subsequent to carve out, takes the stand of an advisory body and advises the standalone company upon its further dealings.

In general parlance, a Carve-Out usually precedes a complete spin-off, however, to satisfy the conditions of the 80% divestiture of shares to the shareholders no more than 20% of the shares held in the subsidiary company by the parent company can be offered through IPO.

Features of carve-out

The parent company does not sell all of its shares in the subsidiary company.
The subsidiary company so carved out becomes a public company with its own set of teams, management, human resources etc.
A completely new set of shareholders (public) are introduced within the company.
The parent company retains its controlling interest.

What is the purpose of equity carve-out?

Either purpose of the process of equity carve-out or spin-off or any other divestiture strategy is to completely divest the shares of a particular company and become independent however, it is not often possible to find a single buyer who would follow up with the entire transaction and to find and do so might often take years. Sometimes companies want to commission certain shares in their subsidiaries while retaining control, in such cases, companies often revert to the strategy of equity carve-out. Through such a process the parent company could easily get the money in return for the already released shares in the market while retaining their control.

Deloitte Corporate Finance finds 64% of companies engage in carve-outs for cash or capital requirement and such carve-outs can be done because the entity is “not considered core to the [parent] company’s business strategy.”

Impact of equity carve-out

Equity carve-out amounts to the establishment of the Subsidiary as an independent public entity as a result of which the shares of the company become listed in the stock exchange and they can now be publicly traded. Carveout might precede spin-off. But such future spin-offs need to have 80% control, meaning, no more than 20% of the subsidiary’s stock can be offered in an IPO.

Pros and cons of equity carve-out

Pros

The control of the subsidiary company still lies with the parent company as only a part of the shares are divested to the public through IPO.
Carve-outs help the existing companies in focusing on their own activities and simultaneously help the subsidiaries to stabilize themselves.
It improves the overall capital strength of the parent company.

Cons

Divestiture or dilution of ownership of the parent company in the subsidiary company does not change the controlling power even though the subsidiary becomes independent. Since only a minority share held by the parent company is offered during the IPO, the controlling power still remains in the hand of the parent company and the subsidiary cannot function in a completely independent manner.
A conflict of interest could arise between the two management teams of both companies due to differences in their management style, goals and operations.
It involves some restructuring costs which sometimes makes its implementation a costly affair.

Examples

Las Vegas Sands carved out its Sands China subsidiary to raise capital over $3 billion.
GlaxoSmithKline sold its consumer healthcare business, including its health food drinks portfolio, to Hindustan Unilever.
L&T’s has hived off its electrical and automation business by selling it to Schneider Electric. Kalpataru’s power transmission assets were sold to CLP for debt reduction and to focus on strategic diversification
Indiabulls carved out commercial office business into a separate firm under the name of Indiabulls commercial assets limited.

Difference tabulated

Sl.No	Spin-Off	Carve Out
	The parent company dispenses 100% of its interest in the holding.	Parent Company dispenses only 20% of its interest in the holding.
	Shares of the subsidiary business unit are provided to the existing shareholders on a pro-rata basis (proportionate to their shareholding in the parent company).	Shares of the subsidiary are given to the public by way of an Initial Public Offering (IPO).
	Shares are enjoyed by the shareholders in the parent as well as in the subsidiary company. No exchange of shares.	Shares of the subsidiary are publicly traded and no obligation of holding such shares is created within the parent company.
	A spin-off is aimed at establishing the subsidiary’s identity independent of the parent company.	A carve-out does not aim at accomplishing the parent company’s main objective but aims at achieving its organizational and capital objectives.
	Spin-off aims to provide the benefit of progress to shareholders in both the parent and the subsidiary company.	Carve out aims to provide the benefit of enjoyment of increasing the value of the shareholders.

Equity carve-out v. spin-off : which to choose?

The better mode of divestiture or the mode of right corporate restructuring depends upon the goals a promoter wishes to achieve. Equity Carve-out is opted for when the parent company is searching for an opportunity to “sell” the subsidiary company through total divesture or by selling shares within the subsidiary without giving up complete control.

As mentioned above, fulfilling the first mentioned condition, which is to find a single buyer who will make a purchase in its entirety at one go, is fairly impossible. The parent company, therefore, goes for a Carve-Out by offering partial shares through IPO. If any promoter has such goals, then, carve out is the suitable option to choose.

On the other hand, promoters who choose to go for Spin-off, look at creating a separate existence of the parent from the subsidiary company as doing so would be lucrative for them both. It is done when the parent company realizes that the subsidiary company has no further scope of growth being associated with the parent or it has reached its complete potential and both the companies can now only grow further if they are separated.

The goal of the spin-off, initially, is not to make money but to sell or buy equity creating a distinct independent identity of the entities. This is done by offering shares of the subsidiaries by the parent company to its shareholders on a pro-rata basis. Pro-rata allocation also allows for a non-taxable event. If any promoters’ goals are aligned to such a cause, then spin-off is the most suitable option for them to choose.

Conclusion

In such kinds of divestitures, non-core businesses are hived off/sold from the parent resulting in more and more merger & acquisition activity. Generally, a holding company holds shares of a subsidiary company from 50 to 100 percent. The holding company sells the shares of the subsidiary to the public or to its existing shareholders to restructure. Therefore, the question, whether to spin off or carve out can only be answered depending on the progress of the company and the condition of its core business. Primarily, the focus should be on the core business. If a business unit or asset is not performing, it can cause a hindrance to the growth of the core business. Hence, companies find it imperative to sell off non-synergistic businesses. It might also be the case that the subsidiary is performing better than the main business. In such a scenario it is prudent to separate it from the parent in order to focus on both the businesses strategically. When management becomes difficult and the holding company is not economically doing well, they are given to the public to raise capital. In the end, it’s the ultimate call of the promoters to decide whether to spin off or to carve it out.

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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Role of poverty law in India

By

Diva Rai

-

November 18, 2021

0

thequint_2016-08_6fc09dc0-a890-48bf-9357-3211b13f2eae_HERO — Image source - https://bit.ly/3HAYVsn

This article is written by Aryaa Singh, pursuing BBA LLB (Hons) from NMIMS school of Bangalore. This is an insightful article on the role of poverty law in India.

Table of Contents

Introduction

Poverty is described as a lack of material items or money sufficient to meet a person’s basic needs. Absolute poverty is described as a total lack of resources to meet fundamental human needs such as food, clothing, and shelter.

The inability to meet basic needs such as food, clothing, or shelter is referred to as poverty.Being poor in Canada is not the same as being poor in Russia or Zimbabwe. Poverty varies widely based on one’s situation, and there is no single cause for it. Disparities between rich and poor within a country may be a warning indicator of a worsening situation.

Whatever classifications are used, one thing is certain: poverty is a complex socioeconomic issue. Despite how poverty is described, it is universally recognised as a problem that requires everyone’s attention. It is vital that all members of our society work together to create chances for everyone to reach their greatest potential.

What is law of poverty

The Universal Proclamation of Human Rights emphasises a broad spectrum of human rights, including, among other things, a declaration that no one shall be subjected to torture or cruel and inhuman treatment or punishment. However, near the end of the Declaration, there is Article 25, which states the following: “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”

Poverty law is defined as “the legal statutes, policies, and cases that apply specifically to the financially destitute in his or her day-to-day living.” The purpose of poverty legislation, in a common sense perspective and in practise, is to protect the poor from injustice by the law.

A similar commitment is made in Article 21 of the Indian Constitution. However, based on a casual reading of Article 21, it simply states that “No person shall be deprived of his life or personal liberty except in accordance with the procedure prescribed by law,” this would never be assumed.

In Francis Coralie Mullin v. Administrator, Union Territory of Delhi and Others(1981) the Supreme Court declared that: “…the right to life includes the right to live with human dignity and all that goes along with it, namely, the bare necessities of life such as adequate nutrition, clothing and shelter and facilities for reading, writing and expressing oneself in diverse forms, freely moving about and mixing and commingling with fellow human beings. … it must, in any view of the matter, include the right to the basic necessities of life and also the right to carry on such functions and activities as constitute the bare minimum expression of the human-self.”

Need of poverty law in India

Before delving into this subject, we must first understand the connection between poverty and education. Poor children are rarely given a solid education, and as a result, adults from the same socioeconomic level are denied steady and appropriate jobs. Even if children start school at an early age, circumstances force them to drop out and work for their family’s survival, causing them to remain in the same social stratum as their parents.

Poverty robs people of many necessities that others take for granted. This is one of the causes why the poor engage in such illegal activities: they want to have access to opportunities and materials that they have been denied for a long time. As a result, people resort to illicit means to meet their demands, which contributes to crimes such as burglary, theft, robbery, assault, rape, & attempted rape, among others.

The justice system regards them as criminals rather than poor people because they committed the crime and met all of the conditions for being a criminal. Poverty has little impact on crime, yet crime can keep people poor owing to factors such as a criminal record and education. We cannot erase crime unless we develop a social and political system in which everyone has a good existence, which includes proper employment, proper income, healthcare, education, and nutritional food for children.

Why do the poor become victims of crimes

The poor are more prone than other economically secure persons to be victims of crime. They become crime victims as a result of the greed of others; they are used as a means. For example, when a drug peddler wants to provide the substance, he or she may need someone who is willing to face legal consequences if caught, therefore he may offer a specific amount of money to an unfortunate person, and the poor will agree to commit the crime.

It is most unfortunate that even today, a significant part of the population is living in extreme poverty. The Committee on Economic, Social and Cultural Rights stated in 2001 that poverty was “a human condition characterized by the sustained or chronic deprivation of the resources, capabilities, choices, security and power necessary for the enjoyment of an adequate standard of living and other civil, cultural, economic, political and social rights.”

Implementation of existing law and scope for recommendations

What is Poverty Alleviation?

Poverty alleviation refers to the economic and humanitarian actions taken to eradicate poverty from a country. According to the World Bank, if a person’s daily income is $1.90 or less, he or she is living in extreme poverty, which currently affects 767 million people worldwide. According to the most recent government figures, 268 million individuals in India were living on less than $1.90 per day in 2011. To alleviate poverty and provide basic facilities to poor households, the Government of India developed a number of programmes and schemes.

The Agenda for Alleviation

India, as a welfare state, is committed to its people’s development. Legislation and development policies reflect the constitutional responsibilities. It is currently recognised that a joint measure focusing on faster growth and direct interventionist-safety net procedures is the best way to maximise control techniques. Furthermore, the institutions implementing these measures must guarantee that they complement the policy approach.

The judiciary has kept a close eye on this constitutional obligation, ensuring that any conflict between the legislature and the government is minimised. Building on Article 21, the judiciary has adopted a broad view that encompasses practically all aspects of poverty, whether direct or indirect.

Constitutional Espousal

The National Commission to Review the Working of the Constitution proposed a constitutional obligation on the State to provide to the citizens ‘Rural Wage Labour’ as a Fundamental Right and proposed the introduction of a new Art. 21B for this purpose. The judiciary has stated in Basheshar Nath v. Commissioner of Income Tax Delhi that “the easiest way of depriving a person of his right to life would be to deprive him of his means of livelihood to the point of abrogation”.

Constitution of India for the poor

The function of the law in poverty alleviation is a key topic. The Indian Constitution is the highest commander of law in India, and the writers of the Constitution were anxious that each and every citizen has the opportunity to be developed and uplifted, thus provisions for this were incorporated. Despite the fact that the term “poor” is not included in the Indian Constitution, the Preamble, Fundamental Rights, and Directive Principles of State Policy all support the welfare state model.

Article 21: Protection of life and personal liberty:

The right to life is a human right, and no state can deprive its inhabitants of this right unless a legal procedure is followed. This does not merely suggest that life cannot be destroyed or taken away, as in the imposition and execution of a death sentence. Since no one can exist without a means of subsistence, the right to work is equally important.

Article 39A – Equal justice and free legal aid

Every party to litigation has legal access to the court to present their cases, but the proceedings need the payment of court fees as well as the assistance of an experienced lawyer. Article 39 of the Convention on the Rights of the Child states that the legal system should provide free legal aid to those in need.

Article 15 and 16

Authority of Insurance articles (COI) grant the state the authority to create special arrangements for backward castes and social groupings. They include steps to offer preference to socially, educationally and economically disadvantaged elements of society in state-owned enterprises and government jobs.

Present Scenario

People living in extreme poverty are disproportionately affected by the epidemic, which exacerbates their already restricted access to food, clean water, consistent income, and public services, while also limiting their ability to adopt social distance. Prior to COVID-19, the poor faced a number of challenges to their economic growth.

According to recent World Bank projections, the pandemic is generating a severe economic shock that could undo decades of poverty alleviation gains and throw more than 80 million people into extreme poverty.

Conclusion

The main goal is poverty abolition. India has vowed to ‘Leave No One Behind,’ promising to prioritise progress for those who are the most disadvantaged. Regrettably, current statistics are gloomy. More Indians have fallen into poverty, hunger, and economic inequality in the previous two years, according to the NITI Aayog’s 2019 Sustainable Development Goals Index.

Furthermore, the COVID-19 pandemic and the ensuing lockdown measures, intended to prevent the virus’s spread, have driven millions of people into poverty around the world. While data is still being gathered, the pandemic has the potential to undo any gains made thus far. As a result, proactive efforts by governments, large corporations, and all major players to implement policies that assist the poorest are even more important.

Since poverty, like a pandemic, has no borders and is a worldwide issue, international organisations are also working to help the poor and implement protections such as human rights for the entire world. Similarly, the Indian government should make particular arrangements to help better the lives of the underprivileged.

References

Peter Cuthbertson, Poverty and Crime: Why a new war on criminals would help the poor most, CIVITAS, 1, July 2018
https://www.civitas.org.uk/content/files/povertyandcrime.pdf

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Copyright ownership and infringement issue with Polycom and Xiaoyu company

By

Shoronya Banerjee

-

November 18, 2021

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Copyright — Image Source: https://rb.gy/gmuonf

This article is written by Praveer Shukla, pursuing a Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

What is copyright?

Copyright is a kind of intellectual property right protection. The protection of copyright is available for original work. Copyright is also known as the author’s right. It is a right that is given to a creator for their literary and artistic works. Its work covers a wide range from books, music, paintings, computer programs, databases, advertisements, maps, sculptures, films, and technical drawings. Copyright can be obtained for either published or unpublished works.

What can be protected using copyright?

Under the Copyright Act, 1957 various works are eligible for copyright protection, such as:-

Sound recordings,
Musical compositions,
Audio-visual works like TV shows, movies, online videos, etc.,
Written works like books, articles, etc.,
Visual works like paintings, posters, etc.,
Computer software and video games,
Dramatic works.

Rights granted by copyright

The main aim of the Copyright Act, 1957 is to protect the time, effort, and creativity of the creator’s work. The Act grants certain rights to the copyright owner. Some of the rights are as follows:-

The right to reproduce work. The copyright owner gets exclusive rights to reproduce their works.
The copyright owner gets the right to prepare the derivative works. Derivative works are works that are based on the original work.
The copyright owner has the right to distribute the copies of work by sale, lease, or any other mode of transfer of ownership.
The owner of the copyright has the right to perform the work publicly and also the right to display the work publicly.
The owner has the right and option to transfer the exclusive rights to any other person.

Limitations and exceptions

Copyright ownership is very effective for the creators. However, copyright has its limitations. The copyright law does not cover the actual concepts, facts, ideas, or techniques contained in the copyrighted work. However, some things which are not covered by copyright law are covered under other forms of intellectual property. In many jurisdictions, copyright law gives an exception to the copying of works for commentary or other related uses. There are several exceptions to copyright ownership, of which the most significant one is the fair use exception. Other exceptions to copyright ownership are:-

The copyright laws allow archives and libraries to make copies for preservation purposes.
Under copyright laws, protection is granted to the original expression of ideas. It does not grant protection to the ideas themselves. (Baker v. Selden case)
Copyright law allows the owner of a computer program to make a backup copy of their works. Such a copy of a copyrighted work is not considered an infringement.
Performance and displays for religious services, transmissions to the handicapped and blind, and content related to classroom education are allowed under copyright law.
Certain authorised entities are allowed to reproduce and distribute the copies of certain works in specialised formats especially for the use of the blind or others with disabilities.
The purchasers of legal copies are allowed to re-distribute or dispose of those copies.

Transfer, licensing, and assignment

Copyright transfer means the transfer of property rights by the right-holder to another person. Such transfer occurs as a part of a huge asset purchase or sale or may occur on their own. Copyright transfer is similar to assignment agreement as both provide ownership records and transfer the rights of all parties. In simple terms, copyright transfer means the transfer of copyright by the copyright owner to some other individual or a third party.

With the transfer of copyright ownership, the assignee becomes eligible for all the rights that are related to the copyright of the transferred work. The assignee becomes eligible for all the rights concerning the copyright of the transferred work. The assignee shall be treated as the copyright owner concerning such rights. The assignor will be treated as the owner of the copyright concerning the unassigned rights.

A copyright assignment is valid only if it is written and duly signed by the assignor or their authorised agent or representatives. When the time of transfer is not mentioned in the assignment contract, it is to be considered as 5 years from the date of transfer. If the regional extent is not stipulated, it will be applicable across India. Transfer of copyright is mentioned in Section 19 of the Copyright Act, 1957.

In Saregama India Ltd. v. Suresh Jindal and Ors, it was held by the Court that the owner of the copyright may assign the copyright to any person either wholly or partially. This case is a leading case on whether the assignment of copyright for an unlimited period or a limited period and the breach of any conditions mentioned in the agreement will lead to the termination of the agreement or not.

In the present case, the Petitioners reached the Court to obtain a restraining order against the Respondents for restraining them from selling any records, discs, cassettes, or any other sound recordings concerning the films produced by the Respondent during the period of the agreement.

After carefully analysing the facts presented by both the parties to the Court, the Court held that the agreements entered into by the Petitioner and the Respondent mentioned the assignment of copyright concerning the soundtrack recording and the works related to the film. The concerned film was not produced when the agreement was made. Clause 6 and 14 of the agreement mentioned the intention to limit the agreements and also stated that the agreements are not entered for an unlimited period. The violation of necessary clauses mentioned in the agreement would lead to the termination of the agreement.

Copyright infringement

When a copyrighted work or material is produced or used without the permission of the copyright holder, it is known as copyright infringement. It can also be understood as a breach of rights that are granted to the holder, by any third party. Copyright infringement occurs mostly in the case of music and movies. Copyright is infringed when any of the following things are done to a copyrighted material:-

Copying of a copyrighted material,
Issuing copies in the public,
Performing or showing the copyrighted work to the public by any third party without the permission of the copyright holder,
Renting or lending a copyrighted work to the public,
Communicating the work to the public.

Copyright may also be infringed when someone imports an infringing copy or deals with it or possesses it without the due permission of the copyright holder. Both civil remedies and criminal remedies are available for the copyright holder in case of infringement. Civil remedies available are-

An injunction to prohibit further infringement.
Delivery of all the infringing articles to the owner.
Right to seize copies (if any) of the infringing articles.
Recovery of damages or loss incurred due to the infringement. This recovery is to be made from the accounts of the infringer’s profits.

These civil remedies are available under Section 55 of the Copyright Act, 1957.

Case law of Polycom and Xiaoyu company

The Beijing Intellectual Property Office released copyright ownership and infringement dispute case between Polycom and Xiaoyu Company on November 2, 2020. On April 26, 2021, this case was listed among the “Top 10 Technology Innovation Cases” of the Beijing Intellectual Property Court.

The case was related to the issue involved in copyright ownership and infringement. The Plaintiff, Polycom, discovered that Defendant, Xiaoyu Company had made three software models named, Xiaoyi Easylink Windows Client, Xiaoyi Easylink ME80 Machine Terminal, and Xiaoyi Easylink Android Client. These software models were copied from Plaintiff’s RPD3.3 software and RPM3.3 software.

The defendant copied the software architecture, programming interface, network transmission protocol, call session module, software code, and software function name. Polycom filed a lawsuit before the Beijing Intellectual Property Court against Xiaoyu Company for copyright infringement, distribution, modification, and information network dissemination rights.

It was held by the Beijing Intellectual Property Court, in the first instance, that Xiaoyu Yilian Company and Xiaoyu Home Company jointly developed and produced the Xiaoyi Easylink Android Client. On hearing both Plaintiff and Defendant, the court believed that a part of the software was the same or similar to that of Polycom’s RPM3.3 software. Defendant copied RPM3.3 software and the modifications of RDM3.3 software, thereby infringing Polycom’s rights to copy and modify the software.

Xiaoyu Company offered Xiaoyi Easylink Android Client to the public via its official website www.xylink.com. This act by Defendant was a violation of Plaintiff’s information network dissemination rights for the software. On its final hearing, the Court ordered Xiaoyu Company to compensate Polycom for the loss of RMB 500,000 and reasonable expenses of RMB 450,000. Xiaoyu Company and Xiaoyu Home Company were ordered to jointly and severally compensate for reasonable expenses of RMB 300,000 and Xiaoyu Home Company to compensate for the loss of RMB 350,000.

Conclusion

The infringement of copyright is a serious violation and many provisions can be implemented to protect the copyright from being violated by any third party. The case of Polycom and Xiaoyu Company is one such example of a copyright infringement case, which made it more specific that the rights of the copyright owner are protected and there will be no negligence in providing the copyright owner his or her rights.

References

Case Briefs. casebriefs.org. 15 November 2021 <https://www.casebriefs.com/blog/law/intellectual-property-law/intellectual-property-keyed-to-merges/copyright-law/baker-v-selden/>.
FindLaw’s Team. findlaw. 23 December 2016. 15 November 2021 <https://www.findlaw.com/smallbusiness/intellectual-property/transfer-of-copyright.html>.
Indiankanoon. indiankanoon.org. 15 November 2021 <https://indiankanoon.org/doc/1136195/>.
indiankanoon.org. 15 November 2021 <https://indiankanoon.org/doc/627673/>.
indiankanoon.org. 16 November 2021 <https://indiankanoon.org/doc/1520267/>.
IPC Court. IPC Court. 16 November 2021 <http://ipc.court.gov.cn/en-us/index.html>.
Kenton, Will. Investopedia. 11 June 2020. 16 November 2021 <https://www.investopedia.com/terms/c/copyright-infringement.asp>.
Investopedia. 13 September 2020. 16 November 2021 <https://www.investopedia.com/terms/c/copyright.asp>.
Rouse. Lexology. 15 July 2021. 16 November 2021 <https://www.lexology.com/library/detail.aspx?g=574fbba8-bb62-4b07-9f90-64789aa45296>.
WIPO Office in China. 16 November 2021 <https://www.wipo.int/about-wipo/en/offices/china/#>.

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