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Admissibility of pre-contractual negotiations under the laws of India

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This article is written by Madhurita Tiwari, 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).

Introduction

When entering into a contract, many preliminary communications transpire between the parties before a definite offer is made. One party may simply ask, or respond to the request of information, or he may invite the other to make an offer. These communications can be in the form of e-mails, letters, or even in-person negotiations. All such communications are termed as extrinsic evidence to a contract, and there are rules for their admissibility in the court of law. 

The terms of a contract have to fulfil the precondition of being ambiguous for any extrinsic evidence to be admissible with respect to those terms.

Latent ambiguity

Caveat emptor is a fundamental principle in commerce and contractual relationships between a buyer and a seller. In simple terms, it means when a person is buying goods, he should examine them thoroughly as the seller is under no obligation to disclose the whole truth about the goods. Hence, contracts with patent ambiguity are mostly void ab initio, and courts do not allow evidence with respect to the same.

Again, when the language used in the contract is plain and applies accurately to the existing facts, one shouldn’t produce evidence to show that it was not meant to apply to such facts. {Section 94 of Indian Evidence Act (hereinafter referred to as “IEA”)}.

Lord Atkin observed in Pakala Narayana Swami vs. Emperor, “when the meaning of words is plain, it is not the duty of the courts to busy themselves with supposed intention”.

Thus, it is necessary that there is some kind of latent ambiguity in the contract, i.e. when the contract is plain on the face but doesn’t apply accurately or produces absurdity when applied to facts (Section 95 of the IEA), in order for the courts to allow extrinsic evidence. However, such evidence should not contradict, vary, add to, or subtract from the terms of a written contract. (Section 92 IEA).

For example, where the language used might have meant to apply to only one of many things that are each prone to the same description used (Section 96 IEA), or where the language could apply partially to two sets of existing facts but does not apply correctly to either (Section 97 IEA).

In Anglo American Metallurgical Coal Pty Ltd. vs. MMTC Ltd., Hon’ble Supreme Court observed that the IEA is not applicable to proceedings before an arbitrator. The application of Section 94 of the IEA as to extrinsic evidence being inadmissible in cases of “patent ambiguity”, is fundamental to Indian jurisprudence. 

The Court held that all the documents exchanged between the parties in the performance of a contract must be read as a whole, connecting each particular document to the existing facts, including how particular words are used in a particular sense.

While applying the proviso (6) to Section 92 of the IEA, the adjudicating authority must first ascertain whether the plain language of a particular document applies accurately to existing facts. If, however, it is ambiguous or unmeaning in reference to existing facts, evidence may then be provided to show that the words were used in a sense that would make them meaningful in the context of the entirety of the correspondence between the parties.

Rule of best evidence

The parol evidence rule is a common-law rule that governs what kinds of evidence parties to a contract dispute can introduce when trying to determine the specific terms of a contract. It prevents a party to a written contract from presenting extrinsic evidence (usually oral) since parties who have reduced a contract to writing should be bound by it alone.

Over time, this aspect of the parol evidence rule has become more confined and only extrinsic evidence that will  ‘add to, subtract from, vary or contradict’ the written contract is excluded and all other evidence can be adduced to prove the terms of the contract.

One of the cardinal principles in the IEA is the rule of best evidence. Under this rule, courts prefer primary evidence over secondary and documentary evidence over oral, wherever possible. 

When a particular matter is required to be documented by law, oral evidence cannot be given in its place at all. In such cases, documentary evidence excludes oral evidence. 

In the case of Roop Kumar v. Mohan Thedani, the Hon’ble Supreme Court said that when the parties have deliberately put their agreement into writing, it is conclusively presumed that they intended the writing to form the final statement of their intentions so as to avoid any future controversy and keep it beyond the reach of treacherous memory.

In Taburi Sahai v. Jhunjhunwala, the court held that a deed of adoption of a child is not a contract, therefore the fact of adoption can be proved by any evidence apart from the deed. The rule of exclusion of oral evidence applies only to the terms of contract, grant or disposition of property. If any other fact, apart from its terms, happens to be mentioned in the contract, the same can be proved by any other evidence, besides producing the document.

What is oral evidence?

The proviso to Section 92 of the IEA, especially, permits oral evidence where there is:

  1. Any vitiating factor such as fraud or illegality; 
  2. A separate oral agreement that is not inconsistent with the terms of the written contract; 
  3. A separate oral agreement creating a condition precedent to the contract; 
  4. A distinct subsequent oral agreement to rescind or modify the written contract;
  5. Any usage or custom not expressly mentioned in the contract (not being inconsistent with its terms), which is  usually annexed to such contracts; and 
  6. Any fact which shows the manner in which the language used is connected to the existing facts. 

Section 92 of the IEA bars to give oral evidence of communications between parties to the contract with respect to the contents of a written document. However, when the contract is silent with respect to some relevant terms, the parties may provide oral evidence of their negotiations to help interpret or supplement the contract which would show how the language of the document is related to the existing facts. However, the oral evidence must not be inconsistent with the written contract.

As was held in the case of Bal Ram v. Ramesh Chandra, the prerequisites of the proviso to Section 92 IEA are that the document must be silent on a matter related to which a separate oral agreement already exists. Such oral agreement must not be inconsistent with the terms of the document.

The main Section of Section 92 uses the phrase “as between the parties”, hence, the Section doesn’t bar oral evidence related to communications between a  third party and a party to the contract. Again, Section 99 allows oral evidence by a third party, whose interests are affected by a subsequent oral agreement between the parties, to vary the terms of the contract.

In Bai Hira Devi v. Official Assignee of Bombay, it was observed that this Section lays down that a person who is not a party to a document nor a representative-in-interest of a party to a document may give evidence of any facts tending to show contemporaneous agreement varying the terms of the document. Under Section 92 only a party to a contract is excluded from producing evidence subtracting from or adding to the terms of a contract, implying that a person who is not a party to a contract could lead to oral evidence varying the terms of a contract. This Section, therefore, only emphasises this aspect of Section 92. Section 92 speaks of only contracts, grants or other disposition of property whereas this Section deals with all documents, contracts or not. However, this Section speaks only of varying the terms of a document.

In Placido Francisco Pinto (D) by LRs & Anr vs Jose Francisco Pinto & Anr. the Court observed that oral evidence is admissible under Section 92 of the IEA to show that the document is a sham deed. The Supreme Court, however, held that the proviso 6 to Section 92 of the IEA will not apply if a document is straightforward, without any ambiguity in meaning.

In Mangala Waman Karandikar (D) TR. LRS vs. Prakash Damodar Ranad it was observed by the Apex Court that where the terms of the document are ambiguous, the proviso to Section 92 may be resorted to. However, when the document is straightforward and presents no such difficulty, the proviso doesn’t apply. If oral evidence is allowed to show that the terms of the document are different from what is expressed, it would amount to contradicting or varying those terms which Section 92 specifically prohibits. It would enlarge the ambit of proviso beyond the main Section. The legislature wouldn’t have intended to nullify the object of Section 92 by enacting exceptions to that Section.

Recently, in the case of Bangalore Electricity Supply Company Limited (BESCOM) vs. E.S. Solar Power Pvt. Ltd. [CA 9273 of 2019], Supreme Court reproduced the observations made by Lord Hoffmann in Investors Compensation Scheme Limited vs. West Bromwich Building Society on the broad principles of interpretation of a contract. It was observed that since legal interpretation differs from the interpretation of the way we interpret the words used in daily life, prior negotiations of the parties and declarations of their subjective intent are admissible only for rectification for reasons of practical policy. 

The Court also relied on Smt. Kamala Devi vs. Seth Takhatmal & Anr, to observe that the duty of the Court is not to delve deep into the intricacies of the human mind to explore the undisclosed intention, but only to take the meaning of words used i.e. to say expressed intentions.

Conclusion

Pre-contractual negotiations or prior negotiations between the parties while entering into an agreement are  not admissible, generally, unless the terms of the contract are later found to be ambiguous or absurd when applied to facts. It is important that the ambiguity should not be so obvious and on its face so as to bring the intention of the party into question. 

Again, when the terms of the contract are plain and straightforward, producing evidence to show that they mean something different than what is expressed therein is prohibited. Hence, Courts admit evidence only when there is latent ambiguity found in a contract. 

The rule of best evidence guides admissibility of evidence, hence, where negotiations have been documented, the courts would prefer such documentary evidence over oral evidence. However, when it is required by the law to mandatorily have something in a documentary form, producing oral evidence is strictly prohibited in such circumstances.

However, where the negotiations are in the form of oral statements only, they shall comply with Section 92 IEA before the court can allow their admission. It is important that they are not varying the written contract unless the oral evidence is being produced by a third party to the contract.

References

  1. D’Costa, Venancio, Goel, Gauri and Ojha, Astha , “India: Best Evidence Rule: Cardinal Principle Of Indian Evidence Act”, Mondaq, 27 April 2020, https://www.mondaq.com/india/court-procedure/924124/best-evidence-rule-cardinal-principle-of-indian-evidence-act
  2. GOH, Yihan. Contractual Interpretation in Indian Evidence Act Jurisdictions: Compatibility with Modern Contextual Approach. (2013). Oxford University Commonwealth Law Journal. 13, (1), 17-48. Research Collection School Of Law. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=3338&context=sol_research
  3. Lal Batuk, The Law of Evidence, 22nd Edition (2018), Central Law Agency.
  4. Obhan, Ashima and Bhutani, Seerat, “The Supreme Court on Rules of Contract Interpretation: Parol Evidence Rule, Obhan & Associates, Accessed: 27 October 2021 https://www.obhanandassociates.com/blog/the-supreme-court-on-rules-of-contract-interpretation-parol-evidence-rule/
  5. Singhania, Krrishan and Singhania, Srishti, “India: Entire Agreement Clause: Founders Be Aware!”, Mondaq, 23 May 2019 https://www.mondaq.com/india/contracts-and-commercial-law/808320/entire-agreement-clause-founders-be-aware
  6. Singh, Kanika, “Arbitration Court Reckoner: November & December 2020”, LiveLaw, 24 Jan 2021  https://www.livelaw.in/know-the-law/arbitration-court-reckoner-november-december-2020-168837#_ftnref27
  7. The Indian Evidence Act, 1872. 
  8. Veerabathran, Ramyaa, “‘Without Prejudice After Oceanbulk Shipping: A Comparison Between The English And Indian Positions Of Law”, NLIU Law Review, 225-239, National Law Institute University, Bhopal https://nliulawreview.nliu.ac.in/wp-content/uploads/2021/02/Vol-III-Issue-I-225-239.pdf

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Is there a limitation period for usufructuary mortgages

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Image Source: https://bit.ly/2IOJpwS

This article is written by Sai Manoj Reddy, pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from Lawsikho.com. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Introduction

In general, Mortgage refers to giving an immovable property as security for a loan or money borrowed from someone where the lender can sell the immovable property or get it transferred to himself in the event of default of the borrower. There are many types of mortgages that are recognized in India under The Transfer of Property Act, 1882 (from here on referred to as “TPA”).

Section 58 of The Transfer of Property Act, 1882 defines mortgage as:

“the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being arc called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.”

There are other types of mortgages like Mortgage by conditional sale, English mortgage, Mortgage by deposit of sale deed, Usufructuary mortgage and Anomalous mortgage that are recognised and defined further under Section 58 of the TPA.

It is settled law that there is no limitation period for redemption under the Usufructuary Mortgage and the Courts have time and again held that ‘once a mortgage, always a mortgage and stated that the mortgagee cannot claim the ownership of the mortgaged property just because a long period of time has been elapsed. The Courts have also observed that if the ownership is given to the mortgagee in such cases, then the whole purpose of the usufructuary mortgage will be defeated. We will further understand the reasoning given by the Courts in detail and also understand what is a usufructuary mortgage and how it works.

What are the Different Types of Mortgages in India?

What is a usufructuary mortgage?

The term ‘Usufruct’ means a legal right that is temporary in nature that is conferred to a party that allows him to use and derive income like rent, profits etc. from the property of another party. A usufruct is a person holding the property by usufruct.

Now coming to the Usufructuary Mortgage, it is a type of mortgage where the mortgagor delivers the possession of a property to the mortgagee to use the property and obtain rent, profits etc. from such property for repayment of the mortgage money. The mortgagee holds possession of the property and enjoys the benefits from such property till the payment of the mortgage money is complete.

How does a usufructuary mortgage work?

Let’s assume that Mr. Manoj is a businessman who sells ceramic tiles and also owns a lot of apartments in the city of Bangalore. In the course of his business, Manoj wanted to borrow 50 lakh rupees to buy some material for his business. Manoj approaches Mr. Alok Desai who is the lender and borrows 50 Lakh rupees and in return delivers the possession of 5 apartments to Mr. Alok Desai where he can obtain monthly rent as a form of repayment of the 50 Lakh rupees loan borrowed by Mr. Manoj. In this deal, Mr. Alok Desai gets temporary possession of the 5 apartments and the rent out of such apartments till the payment of the 50 Lakhs and interest is completed. Once the payment of borrowed money is completed, the possession ceases to be with Mr. Alok Desai. In this transaction, only the Usufructuary Right is given to Mr. Alok Desai whereas Mr. Manoj is still the owner of the property. Mr. Alok Desai can only use and obtain profits out of such property but he cannot change, modify, sell or do any such other activity which affects the ownership of Mr. Manoj. In simple terms rather than Mr. Manoj paying the borrowed money every month to Mr. Alok Desai, the rent from the apartments is used as a form of repayment of the borrowed money.

Legal provisions related to usufructuary mortgage

Usufructuary Mortgage is defined under Section 58(d) of the TPA.

The Usufructuary mortgage comes into force once the parties to the mortgage deed have signed the deed and the mortgagor has delivered the possession of the property to the mortgagee in return for the mortgage money borrowed from the mortgagee. 

Now the next step is to know what happens once the mortgagor has completed his payment of the mortgage money along with the interest. Section 62 of TPA deals with the right of the usufructuary mortgagor to recover the possession of the property from the mortgagee. According to this section, the mortgagor has the right to recover the possession of the property along with the mortgage deed and other documents once the entire mortgage money has been paid/recovered by/to the mortgagee. The mortgagee is duty-bound to return the possession of the property to the mortgagor along with the mortgage deed and all other documents which the mortgagor has submitted to the mortgagee once he has received all the mortgage money payable to him by the mortgagor.

Judgments

The landmark judgement on the concept of limitation on the usufructuary mortgage is delivered by the Punjab and Haryana High Court in the case of Ram Kishan & Ors. V. Sheo Ram & Ors. Where the court has held that there is no limitation for a usufructuary mortgage where there is no time fixed for repayment of the mortgage money. The court also relied on the concept of ‘Once a mortgage, always a mortgage and stated that if there is no time fixed in the mortgage deed for repayment then the mortgagor can redeem the property at any time he wants and the limitation period won’t apply to such mortgages. The court also held that the conception of mortgage involves three principles. Firstly, there is the maxim: ‘Once a mortgage, always a mortgage’, which means the mortgage is always redeemable by the mortgagor and any provision contrary to that is invalid. Secondly, the mortgagee cannot have any collateral advantage outside the mortgage agreement which is adversely affecting the ownership rights of the mortgagor over the mortgaged property. Thirdly, any stipulation that is preventing a mortgagor from getting back the property mortgaged will be null and void.

This judgement has been upheld by the Supreme Court in the case of Singh Ram (D) Tr.Lr vs Sheo Ram & Ors where the Supreme Court has reiterated that the special right of the usufructuary mortgagor under Section 62 of the TPA to recover the possession of the mortgaged property commences when the mortgage-money is completely paid out of the rents and profits or partly out of rents or profits and partly by payment or deposit by the mortgagor. The limitation period does not start until then for purposes of Article 61 of Schedule to the Limitation Act. A usufructuary mortgagee is not entitled to file a suit for declaration that he is the owner of the mortgaged property just because a long period of time has elapsed.

A similar question has been put before the supreme court in the case of Ram Dattan (Dead) by LRs vs Devi Ram and others where the appellants have approached the Supreme Court under a special leave appeal seeking the declaration of the ownership of the mortgagee over the mortgaged property as 45 years have been elapsed since the mortgage has been entered into between the parties. The Supreme Court has reiterated the law settled in the earlier judgements and dismissed the appeal before it stating that there is no limitation in the case of a usufructuary mortgage and the mortgagee is not entitled to any declaration just because a certain amount of time has elapsed from the date of the mortgage.  

Analysis and conclusion

The law is well settled when it comes to the limitation period for a usufructuary mortgage. The mortgagee cannot claim ownership of the property just because a long time period has elapsed. The courts have clearly made a distinction between the redemption rights under any other types of mortgages and usufructuary mortgages. Section 60 of the TPA applies to all the other types of mortgages where the mortgagee has the right to redeem the property by paying the mortgage money to the mortgagee and the limitation period starts from the day the mortgage money becomes due. But there is a clear distinction when it comes to usufructuary mortgage where the right to recover possession is dealt exclusively under Section 62 of the TPA and such right commences on payment of mortgage money out of the usufructs or partly out of the usufructs and partly on payment or deposit by the mortgagor. This distinction can be understood by reading Section 58, 60 and 62 of TPA along with Article 61 of the Limitation Act. A usufructuary mortgage is not like any other mortgage and cannot be treated on par with other types of mortgages because by doing so, Section 62 of TPA will be defeated. The right of the usufructuary mortgagor is not only an equitable right, it has statutory recognition under Section 62 of the TP Act. The Courts have time and again held that there is no principle of law on which this right can be defeated and any contrary view, which does not take into account the special right of the usufructuary mortgagor under Section 62 of the TP Act, has to be held to be erroneous on this ground or has to be limited to a mortgage other than a usufructuary mortgage.

References

  1. https://www.livelaw.in/top-stories/no-limitation-period-for-usufructuary-mortgage-supreme-court-183652 
  2. https://www.investopedia.com/terms/m/mortgage.asp 
  3. https://www.investopedia.com/terms/u/usufruct.asp 
  4. https://indiankanoon.org/doc/627172/ 
  5. https://indiankanoon.org/doc/116608229/ 
  6. https://www.livelaw.in/pdf_upload/usufructory-mortgage-no-limitation-sc-562-402336.pdf 
  7. https://upload.indiacode.nic.in/schedulefile?aid=AC_CEN_3_20_00005_196336_1517807319297&rid=33 
  8. https://www.indiacode.nic.in/bitstream/123456789/2338/1/A1882-04.pdf

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All you need to know about photo licensing agreement

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This article has been written by Pranjali Nanadikar, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. It has been edited by Zigishu Singh (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho). 

Introduction

The very first still photo was taken by a French soldier, professor and an amateur researcher Nicéphore Niépce. It took him over a decade to create his very first  picture taken by him from his balcony. It is amazing to see how the field of photography has come a long way and careers are now booming in the field. With the rapid increase in advertising, media and fashion industry photography has emerged as a lucrative and thrilling career option for many Indian youths.

In India, images are protected as artistic work under section 2(c) of the Copyright Act, 1957. No matter what kind of photography you do, learning how to license an image is an essential skill if you want to make a business out of your photography practice.

If you are not a copyright holder of a particular image and you want to use that image for your own purpose, then it is essential for you to gain licensed rights of that particular image or images. To gain Licensed rights of images, it is essential to enter into a written Photo Licensing Agreement. Photo licensing agreement has a minimum of two parties involved, that is a licensor who is owner of the copyrighted image and the licensee who wants to purchase the image or the rights of that image. 

When do you need a photo licensing agreement?

If a person needs a specific image for personal or commercial use, a photo licensing agreement is the right way to obtain photo usage rights from the photographer. This agreement is generally discussed prior to the sale of licensing rights. There are different terms and conditions which may be applicable. Both the licensor and licensee should have a common understanding  on the scope of agreement.

The disadvantages  of not having a photo licensing agreement

Photo license agreement protects both the copyright holder and the person licensing the work.

Here are on some of the consequences that can arise from the copyright holder without a photo licensing agreement:

  • Less revenue: Merely becoming a copyright owner of your work will not garner any income for you. The ability to sell licensing to commercial and private clients is also necessary to gain additional income for photographers. Without a photo licensing agreement a photographer cannot outline the terms of his licensing image. Photographers can offer the non-exclusive rights to several clients, increasing their revenue for a single piece because they can license it to more than one person. When offering exclusive rights, the photographer can charge a higher fee because that original work will not be available to be monetized in other ways.
  • Lack of control : The basic and most important use of a photo licensing agreement is that it allows you to agree on different ways an image can be used. So, it becomes easy to write down the photographer’s specific terms in an agreement and peacefully enjoy the advantages of licensing the image. In other ways, it becomes really easy for the licensee also to know the restrictions and scope of the usage of a photo. Also, it becomes easy for the photographer to mention what type of licenses he wants to give to licensees. For example you might offer only one type of licensure so that the client can only publish images through one venue. They would be able to use the image on the website and can’t print T-shirts with the same image. Using a licensing agreement means that you will be able to set terms and conditions to protect your interest in the work.

Following are some of the consequences for licensee

        Inability to use the image: If any company, individual or small entity wants to use a copyrighted image or images then  entering into a photo licensing agreement is the legal way to do it. If you want to use an image for marketing purposes, or even to publish on your personal blog, there needs to be a licensing agreement or purchase.

        Inability to keep others from using the image: If you don’t want to use a stock photo that’s being used by a million different people, you need to either hold the copyright or purchase licensing rights to an agreement that stipulates whether or not you hold exclusive rights to the image.

Common uses of a Photo Licensing Agreement

There are different types of licensing agreements. Here are a some common terms :

        Retail use:

If the client is using the image for his personal use directly or indirectly then a photographer should know that it’s a retail use.

For instance, if you are hired by a magazine to shoot photos for their own advertising campaign promoting their publication. 

        Commercial use:

When any client is using a photographer’s image for selling, promoting products, services, business websites, ideas then it will be called as commercial use of the image. It is a profitable use of an image. Professional photographers mostly tend to choose this type of use to maximize revenue. 

        Editorial use:

Editorial photography is used for editorial purposes, such as including images in a magazine or News but not for commercial purposes. Editorial rights are typically for images that are used for educational purposes. These rights can be used for blogs, newspapers, magazines, print publications and other educational resources. These all are strictly considered non-commercial uses. 

        Social rights:

Social rights means reposting an image on social media. It is a combination of commercial and digital  rights, but is specific to images on social media platforms. These rights are the rights given to brands or businesses to re-post or work on social media. 

Common things included in a Photo Licensing Agreement

According to various situations, a photo licensing agreement might be very simple or it can be more elaborate with its terms and restrictions. Following on some of the specific terms one should not miss while drafting a photo licensing agreements:  

        The Party : Definition of licensor ( the party who is selling the rights) and the licensee  (the party who is buying the rights) is mandatory. Also, legal names and legal names of the company should be included. Also, addresses of corporate offices of both the parties should be included and the businesses engaged by both the parties.

        Exclusive or Non- Exclusive: This is the most important clause after the name clause in the agreement. The photo licensing agreement should clearly state if the agreement is exclusive or not. Mostly, parties tend to have a clause of non-exclusivity as the buyer does not want his competitors to use the particular image and gain profit. It is also beneficial for the seller of the rights as he can raise his license fees and don’t need to worry about licensing the image for other parties.

        License fee: The amount of the licensing fee depends on various factors, but essentially on the scope of the license granted. It mainly depends upon factors such as how long and where the image license is valid, whether non-exclusive or exclusive rights of use and granted name is to be on the image or not. There are various tools also to determine the License fee.

        Scope: This clause defines the scope of the usage of the image, whether they can use this image on their web properties in print etc. licensor will mention the scope of the usage of licensing image.

        Time frame: This clause mentions the time period of the agreement so that it is clear for both parties that only the licensee has the rights to the image for a set length of time unless the license is renewed.

        Limitation: The photographer may restrict alteration of the images and sublicenses without prior written permission in this clause. This clause explains whether the licensee should  use a photo credit of the image or not.

Which type of image licensing is right for you? 

There is no specific answer for this. It totally depends upon what are your requirements and purpose of entering into a license agreement. Creative Commons (CC) licenses and stock licenses are more suitable for hobby photographers but they don’t produce any income. Professional photographers should not enter into CC or stock licenses as they have more potential to earn income. They should opt for agreements with clearly regulated terms of use instead. For reaching a much more targeted audience, a photographer should consider rights managed licensed images with image agencies. No matter which type of licensing agreement you choose to enter, it is very essential that the agreement provides both parties a clear legal framework. 

Conclusion

Mostly, photographers are unaware about their rights and their income sources. They should expect a payment for the photography. Entering into a photo licensing agreement, will help the photographers gain a new perspective and choice on a specific revenue. So, the bottom line is that the physical control of photographers has now been lost, but copyright laws remain the same. So, a photographer must keep control of how his images are used and how he can earn more profit from them. It is advisable for both the parties to draft a proper Photo Licensing Agreement from a lawyer especially who has a good knowledge of Copyright law and contract law.

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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All you need to know about international arbitration

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Arbitration and Conciliation
Image source - https://bit.ly/3iPMLP9

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

Introduction

Arbitration is one of the ADR processes that are particularly popular in both domestic and international economic disputes, as well as in resolving conflicts between nations. Arbitration is a process in which parties to a dispute opt out of the traditional litigation system to resolve the disputed subject matter, where the parties have the power to appoint a third party to act as an adjudicating authority known as an arbitrator, who, after hearing the parties’ submissions, announces a binding award known as an arbitral award.

The first instance of arbitration can be traced back to 1794, when the United States of America and the United Kingdom engaged in a process similar to modern-day arbitration to settle a disagreement over Amity, Commerce, and Navigation, the result of which is known as Jay’s Treaty 1794. Arbitration has gained a strong foothold in economic conflicts, both domestic and international since it is more flexible than the traditional litigation system. To name a few, many international accords have come to reinforce the roots of arbitration and promote it globally over time:

  1. The Geneva Protocol on Arbitration Clause of 1923.
  2. The Geneva convention on the execution of foreign awards 1927.
  3. The New York Convention of 1958 on the recognition and enforcement of Foreign Arbitral Awards.

With time, Institutional Arbitration began to replace the ad hoc arbitration system. This article will go into the fundamentals of international arbitration and provide a thorough examination of The Hague’s Permanent Court of Arbitration.

What is international arbitration?

After World War II, there was a need for an arbitration mechanism that could function between corporations in different countries as trade and business became more worldwide. In 1959, a pact known as the New York Arbitration Convention was signed. More than 65 countries have participated in arbitration rulings since the New York Convention was accepted by 154 UN members.

Other conventions have been formed since then. The New York Convention is included in the Federal Arbitration Act of the United States, which states that it “must be implemented in United States courts.”

What is the mechanism of international arbitration?

Consider a dispute between two corporations that are located in different nations. Which court has jurisdiction in this case? Which country’s laws must be adhered to? Having a neutral mechanism that everyone acknowledges makes resolving these inter-country issues considerably easier in these circumstances.

There are a number of arbitration organisations that work under the New York Convention or other treaties. A request for arbitration must be made with one of these associations in order to launch an arbitration. The International Chamber of Commerce (ICC) is one of the largest of these organisations; here’s how their system works.

File a request for arbitration

Let’s imagine you wish to pursue arbitration over a dispute with a customer in another country. You would file a request with the ICC and pay $5,000 in administrative and filing fees. You must describe the nature of the disagreement and the grounds for the claim in the request. You must also specify the resolution you desire, as well as any monetary damages, if applicable. There must have been a formal arbitration agreement between the two parties. The ICC sends your request to the opposite party, who has 30 days to respond.

Before the tribunal

If the other party objects to the arbitration agreement or fails to react, the ICC will make a decision on these points. The ICC will also require a fee advance.

Tribunal

It begins its work once several other preliminary procedures have been completed and the tribunal (one or more arbitrators) has been established. The majority of these meetings are held via teleconference. The process itself is adaptable, with the parties and the tribunal agreeing on terms. Witnesses and experts, as well as the parties involved, may be heard.

Following the tribunal’s ruling

A timeline for the final award is established and filed to the ICC International Court of Arbitration.

Forming a global arbitration agreement

Consider drafting an international arbitration agreement or including an international arbitration clause in your contracts if you do business with clients, vendors, or workers from other countries. According to the International Chamber of Commerce, all contract disputes “shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules by one or more arbitrators appointed in accordance with the said Rules.

What are the benefits of the international arbitration agreement?

The main advantage of international arbitration is that it is enforceable, whereas litigation (court cases) between companies in different countries may not be. It is also set up with both partners’ cooperation, and the results are usually kept private. Other advantages are comparable to those of arbitration in the United States: it is a faster and less expensive alternative to litigation. ​The only way to bring someone to arbitration in another country without international arbitration would be to use that country’s laws. This isn’t always a viable choice. Assume you intended to use arbitration to resolve a dispute with a customer in Germany. That includes finding a German-speaking arbitrator who can work in Germany. Because German laws and arbitration procedures may favour the customer, you would be at a disadvantage.

Arbitration history

Jay treaty of 1794

The Jay Treaty, which created the first organised arbitral proceeding, is the foundation of modern-day arbitration. The Treaty of Versailles was signed by the United Kingdom and the United States of America. The pact is the result of disagreements over unresolved concerns following the American Revolutionary War. Three commissions were established as a result of this treaty:

1. The first commission was established to resolve boundary disputes.

2. The second commission was established for mixed issues including claims for compensation arising from debts owed by US officials to British national officials, which were to be compensated by the US officials.

3. The third commission also dealt with mixed issues, which involved claims by US officials against the United Kingdom for the treatment of their property after the US gained independence.

The treaty established modern-day arbitration between two governments, as well as for disputes between citizens of one state and citizens of another.

Alabama Claims Arbitration

In the sphere of international arbitration, this is also a significant development. Damages experienced by the US government as a result of Confederate navy ships attacking Union ships were the topic of the argument. Following this, the United Kingdom and the United States signed the Washington Treaty in 1871, deciding that this and other conflicts would be resolved through an international arbitration tribunal based in Geneva. The arbitral ruling favoured the United States. The significance of this arbitration is that it established a precedent for effectively resolving interstate issues through arbitration.

For the first time, the council of arbitrators was made up of individuals who were not national officials of the disputing parties. As a result, it established the idea of a third party with no stake in the dispute serving as an arbitrator in arbitration, resulting in the arbitral tribunal’s independence. It was the very first arbitration that resembled today’s arbitration process. Furthermore, it was noted for the first time that the parties within the nexus of the dispute were given the opportunity to choose the appropriate procedural law.

Arbitrational progress by the end of the nineteenth century and the beginning of the twentieth century, as well as the road to the twenty-first century

Individuals could not contact any arbitral tribunal for the purpose of alternative conflict resolution at the end of the nineteenth century; their cases of disagreement had to be presented before the commission or arbitral tribunal by the state of their nationality. This is in stark contrast to today’s arbitration process. As a result, arbitration for interstate conflicts fell out of favour in the early twentieth century. The Permanent Court of International Justice was created in 1921, and its successor, the International Court of Justice, was established in 1945, resulting in a sharp drop in arbitration cases.

Arbitration appears to have regained popularity following the end of the Cold War, as seen by the cases heard by the Permanent Court of Arbitration.

The International Centre for Settlement of Investment Disputes was established in the 1960s as a result of companies including arbitration clauses in their contracts in relation to manufacturing and production in different states, resulting in an increase in arbitration in matters of dispute between foreign investors and states at the turn of the twenty-first century. Another notable development in the field of arbitration is the mechanism of the Iran-United States Claims Tribunal, which was established in 1981 with the goal of resolving the dispute between Iran and the United States following the Iran Hostage Crisis through international arbitration.

International arbitration principles

Binding Arbitration Award

International issues resolved through arbitration have enforcement in their nature since they are binding on the parties that seek resolution through arbitration. Legal Dispute Settlement refers to agreements that are legally binding, whereas Diplomatic Dispute Settlement, which includes mediation, conciliation, and other methods, refers to agreements that are not legally binding. In other words, the arbitral award, which is the result of the arbitration, is binding on the parties.

The fact that the parties accept the stipulation that the outcome of arbitration would be binding on them when they enter into an arbitral procedure results in the binding character. In other words, parties that choose to resolve a dispute through arbitration agree to be bound by the arbitral ruling in advance. Furthermore, it is upheld by UNCITRAL arbitration rules Article 34 paragraph two.

Party Autonomy

One of the most important aspects of arbitration is that the party has the authority to create the arbitration procedure. This also means that the arbitrator is chosen by the party, as is the procedural law, which governs how the procedure is carried out, and the applicable law, which governs the resolution of the dispute. Furthermore, it permits the parties to designate the disputed subject matter over which the arbitral tribunal’s proceedings will begin, allowing the tribunal to preside over only the matters provided by the parties.

Institutional vs. Ad Hoc Arbitration

What’s the difference? In Institutional Arbitration, unlike ad hoc arbitration, the procedural rules that apply to the arbitration proceedings are specified by the institution that facilitates arbitration and are referred to as institutional norms. However, it is not always required because parties might pick which procedural law to follow. The Permanent Court of Arbitration, for example, allows the parties to utilise procedural rules other than the PCA’s. In the situation of ad hoc arbitration, as previously noted, the principle of party autonomy allows the party to choose which procedural rules will apply to the arbitration procedures.

Competence de la Competence 

Once a tribunal has been constituted and is enabled by an arbitral clause, the tribunal itself is the sole judge of the tribunal’s competence and limitations. It is up to the tribunal to determine whether it has jurisdiction over the disputed subject matter. Competence de la Competence is the name given to this principle. The Jay Treaty was the first time this principle was applied.

What is fast-track international arbitration?

Although it should in principle be swifter and less expensive than traditional court litigation, international arbitration has recently come under fire for its increasing cost and the increasing length of the proceedings, which has made it more similar to traditional court litigation. To reduce the cost of international arbitration, it is possible to use lawyers at international arbitration boutiques, who typically charge less than large international corporate firms. Third-party funding, where an investor agrees to pay the legal fees with respect to a case in return for a stake in the amount ultimately awarded, can also serve to reduce a victim’s out-of-pocket costs to pay for international arbitration.

To ensure speed in the resolution of disputes it is possible for the parties to agree to resolve arbitrations via what is known as “fast-track” or “expedited” arbitration, which is arbitration with procedural rules designed to ensure that disputes come to an end swiftly. It is also useful to choose a skilled arbitrator and appropriate legal counsel, with significant legal experience in international arbitration law and procedure.

Conclusion

When it comes to international commercial issues or conflicts between two governments, arbitration has shown to be one of the most effective dispute resolution procedures over time. It has evolved into a machine that secures the enforceability of foreign awards while still providing flexibility to maintain the party’s autonomy.

International arbitration is sometimes called a hybrid form of international dispute resolution, since it blends elements of civil law procedure and common law procedure, while allowing the parties a significant opportunity to design the arbitral procedure under which their dispute will be resolved. International arbitration can be used to resolve any dispute that is considered to be “arbitrable,” a term whose scope varies from State-to-State, but which includes the majority of commercial disputes.

References


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Winding up of banking companies under Banking Regulation Act, 1949

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This article is written by J Jerusha Melanie pursuing BA LL.B (Hons.) from SRM School of Law, Kattankulathur, Chengalpattu, Chennai and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Introduction

Every company has a separate legal personality of its own. It is born the day it is incorporated and dies the day it gets wound up. The same goes for any banking company since it is incorporated under the Companies Act, 2013. 

India has a vast population. All their financial needs are met by a lot of banking companies in India. Similarly, an enormous amount of money is deposited with the banking companies. So, to ensure that citizens’ hard-earned money is vested in the hands of reliable banking companies, the Reserve Bank of India (RBI) regulates their activities as per the Banking Regulation Act 1949. Along with regulating their general activities, the RBI also governs the banking companies’ winding-up process. Such processes are governed by the Banking Regulation Act 1949, not the Companies Act, 1956.

Let’s discuss the provisions of the winding-up of banking companies under the Banking Regulation Act 1949.

Ways to wind up a banking company 

Part III of the Banking Regulation Act 1949 (hereafter referred to as “the Act”) deals with the suspension of business and winding-up of banking companies. Section s 38 to 44 exclusively deal with the winding up of such companies. There are two ways by which the process to wind up any banking company can be initiated, which are:

1. Winding up by the High Court, and 

2. Voluntary winding up.

The general rule for liquidating any banking company’s assets was given in the landmark case Mann v. Goldstein [1968] 1 WLR 1091; in this case, it was held that whenever any banking company is unable to pay off its debts it should avail the aid of judicial proceedings. 

  1. Winding up by the high court: 

Part III Section 38 to 43 exclusively deal with the winding up of banking companies by the High Court (hereafter referred to as “The Court”). The High Court mentioned under these sections denote the High Court exercising jurisdiction in the place where the registered office of the banking company in concern is situated; if it is a banking company incorporated outside India, then the High Court exercising jurisdiction in the place where the principal office of such company is located would be the mentioned High Court. 

Section 38(1) of the Act provides the grounds based on which the Court shall order a banking company to wound up. The grounds are: 

  1. The banking company is unable to pay its debts, or

2. RBI applies for the winding up of such s company under s.37 of the Act. 

Section 37 of the Act

Section 37 of the Act deals with the suspension of the banking company if it is temporarily unable to meet its obligations. On the application submitted by such a company, the High Court can make an order to stay any actions or proceedings against the banking company for a fixed period, not exceeding six months. The Court must furnish a copy of the stay order to RBI.  

Section 37 of the Act also states that the said application must be filed along with the report of RBI stating that such a banking company would be able to pay off its debts if the application is granted. However, it is not needed if the High Court is convinced by sufficient reasons; under such a situation the stay order can be granted even without the RBI’s report. But the report should be submitted during the suspension period.

When the application is filed by the banking company to the Court under Section 37, the Court may appoint a special officer to take into his control all the assets, books, documents, etc. of the banking company.

During the suspension, if the RBI finds that the affairs of the company are detrimental to the depositors, it can make an application to the Court for it to be wound up as per section 38 of the Act. 

Grounds on which the RBI can apply to the Court for a banking company’s wind up

The grounds on which the RBI can file an application to the Court for any banking company’s wind up are provided under section 38(3) as:

1. The banking company-

a. Has failed to comply with the requirements as in Section 11; or

b. Has become disentitled to carry on banking business in India under Section 22; or

c. Has been prohibited from receiving fresh deposits by an order under Section 35(4)(a) or Section 42(3A)(b) of the Reserve Bank of India Act, 1934 (2 of 1934); or

d. Has failed to comply with any other requirement of the Act and has continued such failure; or

2. As per the opinion of RBI, –

a. A compromise or arrangement sanctioned by a court concerning the banking company cannot be satisfied with or without modifications; or

b. The returns, statements, or information furnished by the banking company to RBI disclose that it is unable to pay its debts; or

c. The continuance of the banking company is prejudicial to the interests of its depositor. 

Court Liquidator/ Official Liquidator

 A Court Liquidator is appointed by the Central Government and attached to every High Court under Section 38A of the Act. 

However, under Section 39, if the RBI applies to the Court, the RBI, the State Bank of India, or any other bank as notified by the Central Government shall be appointed as the Official Liquidator. If such a Liquidator is appointed, then the Court Liquidator must vacate the office. 

The main functions of the Official Liquidator are to:

  1. Collect and take into his custody the assets of the banking company, 
  2. Submit a preliminary report to the Court, and 
  3. Conduct the winding-up proceedings.

Notice to preferential claimants

As per Section 41A, the Official Liquidator is must serve a notice to the following persons within 15 days from the date on which the winding-up order is made: 

  1. Preferential claimants under Section 530 of the Companies Act, 1956 (1 of 1956), including the Central Government, any State Government, employees of the banking company, etc., and 
  2. Secured and unsecured creditors. 

Under Section 41A(2), the preferential claimants to whom the notice is served are mandated to send the liquidator the statement concerning the amount claimed by them, within one month from the date of the service to be eligible for claiming preferential payment. 

Also, under Section 41A(3), the secured creditors to whom the notice is served are mandated to send the liquidator within one month of the service the amount of their claim along with the value of the security. If they fail to send it, the valuation made by the liquidator is final. 

Preliminary report by the Official Liquidator

Section 41 of the Act provides that the Official Liquidator must submit a preliminary report to the Court within two months from the date on which the winding-up order was made. The report must contain the information available to him regarding the following: 

  1. The number of assets of the concerned banking company (in cash) which are under the custody of the liquidator on the date of the report submission, and 
  2. The number of assets of the concerned banking company that is likely to be collected (in cash) before the expiry of the said two months.

This report is needed to estimate the assets that can be used to make speedy payments, and discharge the banking company’s liabilities to their depositors and creditors. 

Preferential payment to depositors

Section 43A of the Act deals with preferential payment. It states that the preferential claimants to whom Notice was served under Section 41A and had responded within one month from its service will get priority for preferential payment. Such payment will be made or initiated by the liquidator within three months from the date on which the winding-up order is issued by the Court.

After the preferential claimants, within the same three months, the depositors in every savings bank account will be paid INR 250/- or the balance at their credit, whichever is less.

After them, all the other depositors will be paid INR 250/- or the balance at their credit, whichever is less.

The remaining assets of the banking company available for payment to general creditors shall be utilized for payment on a pro-rata basis of the debts of the general creditors; the remaining shall be given to the due depositors.

The banking company will finally wind up after settling all the payments required to be made under the Act. 

The other mode of winding up a banking company is by way of voluntary winding up, which is discussed below.  

insolvency

2. Voluntary winding up:

Section 44 of the Act deals with the voluntary winding up of banking companies. It states that a banking company can voluntarily wind up only if RBI furnishes a written certification stating the company can pay off all its debts. Meaning, a written certificate by RBI must accompany any application filed by a banking company to the Court for its voluntary winding up. Further, Court has the power to order the voluntary wind up to continue on its supervision.

While the voluntary winding up is in process, the Court, on its own motion or the application of RBI, can order winding up by the Court itself (that is, as under Section 38 of the Act) on the following grounds:

  1. The banking company is unable to pay off its debts during the voluntary winding-up process; or
  2. When the banking company is undergoing the voluntary winding up under the supervision of the Court, the Court finds that the winding-up cannot take place without having any detrimental effect on the depositors.  

Conclusion

The winding-up of banking companies refers to the end of the business of any banking company. The procedure to wind up any banking company is provided under Section 38- 44 of the Banking Regulation Act, 1949. The process can be initiated by both the banking company itself or the High Court. Either way, the main reason why such winding up is regulated by the Govt. and RBI is because a vast number of citizens keep their hard-earned money there and that the Government must ensure people get their rightful money. 

References

  1. The Banking Regulation Act, 1949 [Act No. 10 of 1949] [As amended by The Banking Regulation (Amendment) Act, 2017] (30 of 2017)
  2. The Companies Act, 1956 [Act No. 1 Of 1956] [ 18th January, 1956]
  3. The Companies Act, 2013 [Act No. 18 Of 2013]
  4. Reserve Bank of India Act, 19341 [Act No. 2 Of 1934]
  5. Reserve Bank of India (rbi.org.in) 
  6.  Goldstein v. State :: 2006 :: Court of Appeals of Georgia Decisions :: Georgia Case Law :: Georgia Law :: US Law :: Justia 
  7.  Dictionary by Merriam-Webster: America’s most-trusted online dictionary 

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Common agreements that corporate lawyers work on

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This article has been written by Shubham Singh, pursuing the Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho). 

Introduction

Corporate law’s main goal is to handle all legal and external affairs including litigation, investigations, compliance, mergers and acquisitions, contract disputes, and international trade difficulties. Corporate attorneys are responsible for ensuring the legality of business transactions, representing firms, and providing legal advice to corporate workers. It primarily focuses on how corporations and firms engage with one another both outside and internally through economic transactions and corporate governance.

Corporate attorneys are typically corporate generalists who advise firms on their legal requirements, rights, and responsibilities, as well as provide guidance on company structures and appraise enterprises. To meet their clients’ complex demands, corporate attorneys also collaborate with other transactional lawyers in fields like tax, and real estate.

Corporate lawyers plan transactions, draft contracts, negotiate agreements and attend meetings. A corporate lawyer’s job is to make sure that an agreement’s terms are clear, unambiguous, and would not cause future difficulties for their client in future. They also provide guidance on the roles and duties of corporate executives, directors, and insiders.

Seven agreements every corporate lawyers should know

Every business, from a local trading company to a multinational corporation, needs a contract. The online world has made the process of getting legal documents easier than it has ever been before. Contracts are vital for businesses of all sizes, so it is important to know one’s legal rights. This article includes some examples of contracts that are essential for corporate lawyers to know, as well as some tips on how to go about drafting agreements.

Following are the common agreements corporate lawyers work on:

·        Joint venture agreement,

·        Non-disclosure agreement,

·        Employee agreement,

·        Shareholders’ agreement,

·        Sale and purchase agreement,

·        Franchise agreement,

·        Partnership agreement.

1.    Joint venture agreement

A joint venture is a financial and technical partnership that takes the shape of projects, acquisitions, or alliances with existing businesses. Indian joint ventures typically include two or more individuals/companies, one of which may be a non-resident, forming an Indian private/public limited company and owning agreed-upon shares of its capital. A joint venture agreement largely governs the method in which the joint venture company’s owners can transfer or sell their shares. Companies, partnerships, and joint working agreements are all examples of joint ventures.

A joint venture agreement is a legal instrument that allows two or more companies to work together to do business or engage in economic activity. The partners agree to form a new business by investing equity and sharing the enterprise’s income, expenditures, and control in proportion to their capital contributions. The partnership might be for a single project or a long-term commercial relationship.

A notable example of a joint venture is Mahindra-Renault, which was created in 2007 and brings together India’s largest car company Mahindra & Mahindra with France’s world-renowned vehicle manufacturer, Renault SA. The contract should express the terms and conditions of the agreement as precisely as possible, and it should be controlled by the laws of the state. Each contract is as distinct as the project and the individuals involved. As a general rule, one should include some of the clauses listed below in their agreement.

  • Definitions,
  • Details of the parties,
  • Object and purpose of the joint-venture,
  • Contribution and distribution of the parties,
  • Distribution of shares,
  • Termination and consequences of termination,
  • Financial arrangements,
  • Rights and obligations of the parties,
  • Representation and warranties,
  • Indemnities,
  • Confidentiality,
  • Dispute resolution,
  • Governing law,
  • Jurisdiction,
  • Force majeure,
  • Signatures.

2.    Non-disclosure agreement

Businesses must keep initiatives, creative ideas, and intriguing new products under wraps to maintain a competitive edge, lest they get into the hands of a competitor. Similarly, new businesses with a fresh and profitable idea can only flourish if they keep their plans secret. A non-disclosure agreement, commonly known as an NDA, is a legal contract that keeps such sensitive material under wraps. Within a broader legal document, these agreements may be referred to as confidentiality agreements (CA), confidentiality declarations, or confidentiality clauses.

An NDA is frequently used when sensitive information must be released to potential investors, creditors, workers, consultants, clients, or suppliers—or any other stakeholders who require access to the company’s sensitive information that cannot be disclosed to anyone else.

Confidentiality in writing, signed by all parties, can help to build confidence in these types of discussions and prevent intellectual property theft. The non-disclosure agreement will specify the nature of the secret information in depth. Some NDAs bind a person to confidentiality for an indefinite period, preventing the signer from disclosing the agreement’s sensitive material at any time. Without such a formal agreement, any information given in confidence could be misused or mistakenly made public. The consequences of breaching an NDA are spelled out in the contract and may include monetary damages, lost commercial opportunities, and even criminal prosecution.

Business owners frequently need to share confidential or sensitive information with outside parties. Sharing information is vital whether seeking funding, potential business partners, new clients, or key staff. Non-disclosure agreements have long been a legal framework to retain confidence and prevent essential information from leaking out where it could jeopardise the content’s profitability. Secret recipes, proprietary formulas, and manufacturing procedures are all examples of information that may require NDAs before sharing. Client or sales contact lists, non-public accounting numbers, or any distinctive item that distinguishes one organisation from another are also some examples of protected information.

For example, a corporation may sign into a business cooperation agreement with another company in order to develop a shared product by combining both organisations’ resources and skills. For this collaboration both the companies may need to share their sensitive and important information and if this information gets leaked it may result in major financial loss and lost business opportunities. In this case, a non-disclosure agreement can play a big role in ensuring confidence in both parties to share confidential information.

The information one will need to complete a non-disclosure agreement includes:

·        Details of the parties,

·        Terms and termination,

·        Purpose and objective of the agreement,

·        Definition of confidential information,

·        Agreed on use of confidential information,

·        Exceptions for disclosing the information,

·        Remedies,

·        Jurisdiction.

3.    Employee agreement

Employee agreements are the typical contracts used in relationships between employees and employers to layout both parties’ rights, responsibilities, and obligations during employment time. An employee agreement, given its function, might be one of the most important documents used by an employer. By ensuring that both parties understand the main elements of the contractual connection, the employee agreement will aid a firm in deepening its relationship with its employees. Typically, an employee agreement is simplified to a regular written agreement that both the employer and the employee must accept and sign. Employers, on the other hand, are not required to transform every employee agreement into a written agreement. Employee agreements are frequently stated verbally or via other activities performed by either the employer or the employee, rather than being restricted to paper. Corporate sanctioned memorandum, company policy, and practice, or employee handbook content can all be used to create implicit agreements.

Employers may use employment contracts to ensure that their most qualified employees are bound by contract terms, which will serve as a disincentive to employees leaving the company and a benefit to the contract.

High-skilled employees can be enticed to join your organisation through employment contracts. For highly skilled employees, the idea of having a contract can provide greater stability. These individuals may have other job offers, so a contract with enticing incentives could entice them to join the organisation. Finally, having an employment agreement offers the employer more control over the job done by the employee who is obligated by the provisions of the contract. The following shall be the essential content of the Employee Agreement-

  • Details of both the parties,
  • Definitions,
  • Term and termination,
  • Compensation and benefits,
  • Terms and conditions governing employee agreement,
  • Confidentiality clause,
  • Non-compete clause,
  • Dispute resolution,
  • Jurisdiction,
  • Governing law,
  • Signature of both parties.

4.    Shareholders’ agreement

A shareholder is a person who makes a financial investment in the company. He is given a fixed number of shares in the company in exchange for his investment. These shares permit him to become one of the firm’s owners and grant him the opportunity to vote on certain matters concerning the company.

A shareholder agreement is a legal agreement between a company and its investors. It lays forth the rights and responsibilities of shareholders, as well as provisions governing the company’s management and authority. The agreement’s goal is to protect the interests of shareholders, particularly minority shareholders (those who own less than 50% of the company’s stock).

A shareholder agreement’s objective is to settle any conflicts between shareholders and the corporation. One cannot promise that nothing will ever go wrong, but if it does, such agreements can help one resolve issues and preserve a healthy relationship between shareholders and the firm. It also serves to protect a shareholder’s investment and establishes rules and regulations for shareholders and other parties associated with the firm. Since no two shareholders are alike, it is necessary to have  a shareholder’s agreement. An agreement must be reached with the awareness that everyone is unique and has diverse perspectives on the themes or problems under consideration, and they may or may not agree with each other. The most important parameters a shareholders’ agreement must include are-

  • Name of the initial shareholders
  • Responsibility of the shareholders
  • Voting rights of the shareholders
  • Terms of changing the original shareholders’ agreement
  • Determination of how stock can be sold or transferred
  • Obligations of parties in the agreement
  • Outlining financial responsibilities by the shareholders
  • Distribution of dividends
  • Developing an exit strategy.

5.    Sales and purchase agreement

A seller and a buyer enter into a sale and purchase agreement (SPA) to make the transaction smooth and to legally bind both of them to execute the transaction. Sale and purchase agreements are most commonly used in real estate deals; however, they can be found in any field of business. The agreement is the result of negotiations between the buyer and the seller, and it finalises the sale’s terms and conditions.

Before a transaction can take place, the buyer and seller must agree on the price of the item to be sold as well as the transaction’s terms. The sale and purchase agreement serves as a framework for negotiations. The SPA is frequently utilised when making a significant purchase, such as real estate, or making multiple purchases over time.

It also provides extensive information about the buyer and seller. As discussions progress, the agreement records any deposits made and marks elements of the agreement that have already been met. The agreement also stipulates when the final transaction will take place.

In a nutshell, the common features and provisions of a sale and purchase agreement (SPA) are as follows-

  • Details of both parties,
  • Agreement to sell and purchase,
  • Terms of the agreement,
  • Purchase price,
  • Delivery,
  • Risk of loss,
  • Acceptance,
  • Warranties and indemnities,
  • Warranty of title,
  • Governing law and jurisdiction,
  • Force majeure.

6.    Franchise agreement

A franchisor and a franchisee to establish a legal franchise relationship between them and to ensure that this relationship works out smoothly without any problems or difficulties entering into a franchise agreement. The franchisee is granted the legal right to open a franchised outlet and operation under the terms of a franchise agreement, which includes the licence and right to use the franchisor’s trademarks, goodwill, logo, trade dress, business protocols, procedure guide, and selling the franchisor’s products and/or services. A franchisor’s franchise disclosure document, which must be provided to prospective franchisees prior to offering or selling any franchises, must include the franchise agreement as an exhibit.

The franchise agreement allows the franchisee to specify how the business and branding will be adopted by the franchisee. The consequences for mismanagement or violations of business branding are set in place to ensure that the brand’s image and reputation are always safeguarded. The following aspects must be well-drafted and understood by both the franchisor and the franchisee in a franchise agreement: –

  • Details of the franchisor and franchisee,
  • Subject matter and purpose,
  • Territorial scope,
  • Intellectual property rights,
  • Terms of use,
  • Post termination use,
  • Obligations of franchisee,
  • Obligations of franchisor,
  • Consideration,
  • Termination of the agreement,
  • Indemnification,
  • Dispute resolution,
  • Governing law and jurisdiction clauses.

7.    Partnership agreement

A partnership agreement is a legally binding agreement between two or more persons to manage and operate a business and share profits. Partnerships come in several different forms. For example in some partnership businesses, all partners share equal liability and earnings, although, in other partnerships, partners may have restricted liability. In a broader sense, a partnership can be any cooperative venture between two or more parties. Governments, non-profit organisations, businesses, and private individuals may be involved.

In the sense of a for-profit operation performed by two or more individuals, there are three types of partnerships: general partnership, limited partnership, and limited liability partnership. In a general partnership, all participants share equal legal and economic responsibilities. Each of them is directly responsible for the debts incurred due to the partnership. Profits are distributed equitably as well.

Limited partnerships are a cross between general and limited liability companies. A general partner is a partner who has complete personal liability for the partnership’s debts. Another person is a silent partner, whose liability is restricted to the amount invested. The silent partner is usually not involved in the partnership’s management or day-to-day operations.

Limited Liability Partnerships (LLPs) are a popular business form for accountants, lawyers, and architects. This kind of Partnership reduces the personal liability of partners in such a way that, for example, if one partner is sued for malpractice, the assets of the other partners are not put into jeopardy.

Equity partners and salaried partners are two types of partners in some legal and accountancy partnerships. The latter is more senior than associates, yet he or she does not own anything. They are usually compensated with bonuses based on the company’s profits.

The necessary elements of a partnership agreement are as follows-

  • Details of parties,
  • Definitions,
  • Purpose and objective of partnership,
  • Term and termination,
  • Responsibilities of parties,
  • Representations and warranties,
  • Financial distribution,
  • Management, decision-making and binding the partnership,
  • Dissolution,
  • Dispute resolution,
  • Death and disability,
  • Transfer of partnership interests,
  • Dispute resolution mechanism.

Conclusion

Legal agreements are a lawyer’s bread and butter. From the moment a person decides to create a company or buy a new house, lawyers are on hand to make decisions, negotiate contracts, and advise them on what terms they should agree to. The legal world is a busy place, and new agreements are being created all the time. As a result, it is critical to understand the most crucial agreements that must be dealt with in the changing time.

References


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All you need to know about equal remuneration enforcement

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This Article is written by Dhruv Kumar & Amish Gupta from the University of Petroleum and Energy Studies and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Introduction

The constitution of India was framed in the year 1946 by the constituent assembly. Cabinet mission plan (1946) lay down the foundation of the Lengthiest, rigid simultaneously flexible constitution which was a huge achievement for the framers of the constitution.

The major policy objectives and priorities painted in the constitution are well stated in the preamble of the constitution briefly found at the beginning of the constitution of the Union of India. The preamble has prime significance as it lays down the ends and aims which are to be achieved in the social-economic subject without any hindrance or delay in achieving the same. Rights, liberties, duties, responsibilities concerning a citizen of India are well mentioned in the constitution of India. Ways of justice have been elaborated which ensures equality amongst all without any kind of discrimination. In fact, the rights and the remedies are not only available to the citizen of India but also to the foreigners who claim to be doing a job, business or tourist and are within the territory of India. 

The governance structure and principles to be followed and respected with respect to India are briefly elaborated in the Directive Principles of State Policy which are enshrined in Part IV of the Indian constitution. It aims at achieving the set objectives in a civil and idealistic manner. At the time of framing the policies and laws, there are more or less explained guidelines that needed to be levied and adhered to. Merely forming up policies isn’t enough as the extent of its enforcement also matters. All the aspects covered under the DPSP are relevant to the Indian context. The objective stated in the concept of equal pay for equal work holds the same fate as the other mentioned DPSPs. 

Significance of the concept of equal remuneration is never hidden and has always been a major point of discussion which requires amendments as per the changing working conditions and the uncertainty while determining the capacity of an individual to work in the prescribed period of time simultaneously applying fair mind while determining the wages to be given to each as the work nature might differ but efforts can and has to be same for becoming entitled to the equal pay if the work allotted is of similar nature.

Equivalent Pay for Equal Work is a global development at a huge level with the 1951 UN Convention concerning Equal Remuneration expressing that the guideline of equal remuneration is to be applied to people for work of equivalent esteem and can likewise be found in the International Covenant on the social, economic and the cultural rights.

Remuneration

Remuneration is defined under section 2(g) of the Equal Remuneration Act 1976 which defined it as any kind of pay or salary which can be cash or any other form, paid to a worker or employee who is employed for work in any factory or establishment under the contract. 

Equal Remuneration Act, 1976

From ancient times we have observed that women have very low status in society and men also rule over women. Even the working area is not prevented by this oppression where even the woman works equally to the man but still end up getting paid less than man. By the growing contribution of women in the industries, it was realized that there should be a law that should prevent a woman from such discrimination at their working place. It came to the notice of legislature and hence they enacted the law of equal remuneration which was passed by parliament in 1976 which was enacted to pay equally for the equal amount of work irrespective of their gender. This act intends to bring equality in pay and prevent discrimination in a matter like transfer, promotion, and training of female workers. 

The major objective of the act is to prevent discrimination against females in the matter of pay or incidental thereto and that is the reason for enforcing this law as the central act which has applicability all over India. All matters related to this act will be taken up to the appropriate authority who is the Central government that is entrusted with the protection of discrimination. Chief Labor Commissioner (Central) heads the Central Industrial Relations Machinery (CIRM) who further appoints the Labor Enforcement Officers. These appointed officers work as inspectors who inspect the production and remuneration registers of the industries on the direction of the appropriate government.  For ensuring that the policy of ‘equal pay’ has been followed by factories, it is mandatory on the part of the employer to maintain the register where the pay/ salary of every worker with the amount of work which can be in a number of hours, will be clearly mentioned which should be in prescribed form D

Inspectors shall also have the power to enter into any premises for the purpose of inspection and to inspect any book of accounts that has the remuneration details. He can seek evidence from any person from whom he believes to be acquainted with evidence. apart from this, the central government will also appoint officers above the rank of labour officer who will entertain the claim of the parties ad settle the dispute between employer and employee if arises 

It is mandatory for every worker to follow the rule of ‘equal pay and whoever violates it, will be punishable under Section 10 of the Equal Remuneration Act 1976 which states the punishment for one month or fine up to Rs. 10,000 or both for the employer who discriminated against the worker on the ground of sex. 

It is inferred from circumstances that this act has no absolute applicability and thus constitutes the exceptional situation where there can be discrimination on the pay of the workers. The difference can be because of the seniority factor, productivity system or, any other merit factor which should not be linked to the gender of the worker. If an employer is accused in the matter of discrimination in the pay of workers then he can defend himself by stating the evidence and reason for the discrimination in his way and to satisfy the jury that the discrimination is not merely based on gender. The disparities between the remuneration of the worker may be related to the job like if the employee has additional education or training, has more experience in the field, extra work done by him including nights or any other excellent skills which make him an extraordinary employee and the discrimination on these factors will not be covered under the respective act as there is sufficient reason and the discrimination is just and fair. 

Constitutionality of the right

 Equal pay for equal work is not a fundamental right neither it is a constitutional right but by many judgments, the court established that by interpretation of Articles 14, 15, and 16 of the Constitution of India 1950 which are fundamental rights, it can be inferred that equal pay for equal work is also constitutional right for every person as no one can be discriminated on the ground of gender and for this protection, parliament enacted the equal remuneration act 1976. This policy is based on Article 39 of the Indian constitution which mentioned that states are duty-bound to enact policy for ensuring equal pay for equal work.  

It was the first time when court constituted that there will be a policy on article 39(d) of the Indian constitution which is a DPSP which is generally not enforceable by law but still executive played a role under article 39 and enacted a policy for equal pay, under the case of Kishori Mohanlal Bakshi vs. Union of India in 1962 . This was not enough as the court doesn’t enforce the rule of ‘equal pay for equal work’ and hence in 1982 in the case of Randhir Singh v. Union of India, the Apex court held that the court can enforce this policy as it is based on Article 14 and 16 of the Indian constitution which states that equality is a fundamental right and remedy can be sought under Article 32 of Indian constitution. Moreover, in the case of State Of Punjab And Ors v Jagjit Singh and Ors, Justice J S Khehar and SA Bobde extended the applicability of the policy to the casual workers and daily wagers who mostly face discrimination in the pay even if they work equal to the permanent workers. 

Code Of Wages Act, 2019

Code of Wages Acts 2019 repealed the Equal Remuneration Act and rather than describing the rights and duties of women separately, this code has applicability on both men and women equally.

Code of wages 2019 has wider coverage than the equal remuneration act as it not only covers the aspect of gender discrimination but also prevents discrimination based on caste. It extends its arm to provide the benefit of equal pay to transgender who is exploited more than a woman in society. Today, the law is doing a lot to help grow the of transgender. 

Earlier in the old act, the government was authorized to declare the unequal as equals and for that declaration, they were not bound to give any reason or support their decision with an explanation. This was the presumptive proof that was not serving good results. Hence section 16 of the equal remuneration act was done away with the code of wages act 2019 as per the case of Air India Etc. Etc vs Nergesh Meerza & Ors

Challenge for constitution and test for judiciary

The constitution of India always had a challenge in formulating the laws and policies as India is a huge country with a vast number of diversities existing with different mindsets and believes. However, the existence of political, social and economic and gender gaps makes the situation even worse for the framers of the constitution and the judiciary as they have the responsibility to respect the rights and sentiments of every individual who represents a certain religion, caste, and gender. With regards to the profound influence this topic has in the minds of policymakers and the citizens, therefore, lawmakers and the courts have time and again interpreted the meaning of the term ” equal remuneration” from a different angle as it can be well envisaged that payment made for equal work cannot be different.  

Article 39(d) of the Indian constitution states the principle i.e. Equal Pay for Equal Work. This principle is not merely enshrined in the constitution rather strictly adhered to in the day-to-day governance of the country. Indian courts and political leaders have ensured effective implementation of the policies and the principles of national importance. With time, the right to get equal wages for equal work has proved not only the constitutional right but has a higher value and is said to be a constitutional ultimate goal that has a significant role to attain a democratic approach and practising equal treatment In its true and practical sense. Enforcement of articles 14 to 18 in the Indian constitution is the evidence stating the importance of equal treatment that has only become possible with the consistent and constant efforts of the government in ensuring no one violates the law and disrespects its principles. 

In India, to date equal and open pay policy is struggling to get recognition in becoming more active in the economic sectors of the country. The issue in recent times is directly related to the future of India which might lead to uncertainty and disturbance where people would be revolting for the equal payment of salaries for equal work done. Even after the existence of concrete laws and principles been engraved in the constitution the call for ending this discrimination is suffering to achieve success at the pace desired as gender and pay inequality is persisting across wide regions of nation causing a threat to the violation of the article 39(d) of the Indian constitution.

Drawbacks in the current law and governance system

The goal of the lawmaking body while making laws to convey forward the tenet of ‘equivalent wage for equivalent work’ was respectable without a doubt however current insights have demonstrated that the gender orientation pay drawback is lessening yet not up to the norms of the rest of the world. Even though the Code on Wages was made to achieve more tough measures to overcome this issue, the actual law isn’t satisfactory and has specific defects and botched freedoms also. Although this Code has discarded the parallel arrangement of sex to incorporate individuals of each sex, it hasn’t resolved an issue that India was looking for seemingly forever. Sex-based prejudice, notwithstanding being a critical component of this Code, breaks down to address another social class while attempting to resolve the issue of equal pay linking to the lower communities or castes. Generally, in free working environments all over India, the work done by individuals of specific ranks considered generally low has been underestimated. I accept that it is a botched chance of sorts where the law could be better used to dispose of more up-to-date types of caste and gender discrimination, particularly in the working environment alongside achieving the balance of payment of wages between all the genders.

Interpretation of law by the courts is criticized on numerous occasions and the power of the court to decide the matter without anybody questioning is challenged many times in the form of appeal and petitions which end up piling up because the court procedure is time taking. The code on wages states, employers pay an equal amount of wages to the employees who have the same job and similar work nature to do within a similar time duration. The aforementioned explanation has been interpreted in a cramped manner by the courts as a consequence of which the broad aspects of the definition are missed several times leading to an existing lacuna stuck in the judiciary system of the country. The idealistic and imaginative approach must be replaced with a realistic approach in the current scenario where it is often seen that the work assigned requires an equal and same degree of skills and experiences however the nature of the work and duties allotted might differ no matter which gender is playing which role. For instance, a man working outside the house in a factory putting his physical strength in his job simultaneously women working in the daycare centre involved in the care and protection of children, here both the gender are performing equal work requiring equal hard work and degree of excellence in their respective fields while at the same time skills they use for doing their work are altogether different. So the degree and work experience have to be considered while determining the wages rather than focussing on the place and the kind of work performed. Traditional devaluation must be eliminated from society and wider interpretation will help in the determination of wages in different sectors and establishments. 

Indian scenario

The lacuna of unequal pay between male and female e in India is very inauspicious with ladies who are working and earning, with an average of 19% not as much as men, who are acquiring 46.19 rupees more than ladies, considering each hour wages. India positions 112th in the Global Gender Gap Ranking starting in the year 2019 with a descending pattern after slipping 4 places when contrasted with the past year. Notwithstanding the sex wage disparity, India is additionally confronting a gigantic pay gap among coordinated and unorganized sectors, country and metropolitan regions, constant and daily wage workers. Even though the per capita pay in India has improved impressively, it has appeared to have an insignificant impact on the sexual orientation pay gap.

The rise of unfair rates in the present scenario has resulted in boosting the pay gap in the economy. This has become a major matter of concern as instances can be seen where the disparity occurs between employees and workers in the same workplace doing the same job in the same position.

Exceptions to the principle of – “equal pay for equal work”

Nothing in this world is as flawless and accurate as every law. Provision, principle, belief have some of the other exceptions present deep inside which can never be denied or neglected. Absolute right is a myth as every right has limitations up to certain boundaries which have to be abided by the common person. As time passed, these exceptions changed and evolved differently with every case law as it has to be interpreted distinctly by applying the judicial mind with an ultimate objective to administer justice. The alterations and amendments are the results of a sequence of advancements as the exceptions develop with time and are not expressly embedded anywhere in the constitutional texts. As per believes of people, such instances where the law is altered or denied is considered as a law having distinct properties which may not be called exceptions in its actual symbolization.

In the landmark case of F.A.I.C and C.E.S. v. Association of India, the Supreme Court of India held that distinctive pay scales can be made stable for government workers holding the same post and performing indistinguishable work based on the contrast in the level of liability, dependability, secrecy. Later on, the court additionally said that equivalent payment relies upon the idea of work done and not the trivial amount of work. There might be subjective contrasts as respects unwavering quality and obligation. 

In the case of Mewa Ram v. A.I.I.M.S, Supreme Court held that if the obligations and capacities are alike however if academic qualification recommended for the two posts are dissimilar and there is a distinction in a proportion of liabilities, the guideline of equivalent pay for equivalent work would not make a difference. In this manner, disparate payments can be given to Hearing Therapists and Audiologists in A.I.I.M.S because of distinction in instructive qualifications.

Conclusion

India is a country that has experienced colossal separation beginning of the time from Britishers, then, at that point, the male during the period of pre-independence that practiced bigotry against the opposite sex based on their birth and gender which depressingly expanded post-independence period cornering the women resulted in an escalation in bigotry. it can be well noticed that the condition of different sexes of LGBT community population is agonizing even after the courts had declared them to be one of the respected gender and community who should not suffer in any field and is held to be equal to the other two genders as they are still considered a sin to the human survival and termed as taboo for various reasons. This discrimination enlarges the gap between different genders leading to an unjust society to live in.

In any case thereof, we are secured in light of the designers of our Indian Constitution who outlined it in a manner so that the inherent rights can be well safeguarded and ensured and each individual no matter male or female who is working with same characteristics, skills, qualities, effectiveness would be paid similarly regardless of their sex, race, sex, religion, caste and appearance. 

It is additionally significant on the part of the law and governance of the country producing effective and timely amendments when required that are presently not in standard with the current situation and sanctions increasingly more just and fair laws to forestall sexism and discrimination. 

What’s more, appropriate cures ought to be given to individuals who are influenced by this sex hole infection so that individuals would trust our administration system, legitimate redressal framework should be there or they would feel vulnerable because destitute individuals as of now have very little cash and bonafide authority with them. 

Likewise these days, there are reports and signs are depicting that sexual discrimination crack is presently diminishing and that the social evil is eliminated at an impressing and desirable rate, therefore, setting one’s heart on and one ought to be glad for it.


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The Jury System in India and its decline

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

History of the Jury System in India 

The jury system during trials is not a new thing in India as it was once conducted here until 1973 while the British were still in power. The establishment of such jury system was more of a western innovation which replaced the traditional Panchayati Raj system before the British came in power. Juries were basically a group of people mostly 12 in number and they had the duty to give verdicts based on the evidences and witnesses submitted to them. However, such a system was subject to various controversies which eventually led to the decline of the jury system not only in India, but also worldwide which is discussed later in the article. The very first case heard by a jury was in 1665 where one Ms Ascentia Dawes was charged with the killing of an Indian slave girl. The jury consisted of six Englishmen and six Portuguese people and she was found guilty of the crime, however she was acquitted because of the mentality of the crime. Gradually, the jury system became biased and favourable towards the British thereby ignoring the ruthless oppression done towards the Indians.

Basic concept of the Jury System 

The Jury System as discussed earlier consists of a group of people specialised in the field of law and who are entrusted with the task to produce a decision on the submission of relevant facts and evidences in a case trial. In this system, it is the Judge who explains to the jury about the applicable laws in a particular case and with that the jury has to apply them in the evidences and determine a verdict. A criminal trial always included 12 jurors while the law allowed up to two jurors to be excused as the trial proceeded.

However, a Judge and a Jury cannot be held as similar. A Judge is an individual who is tasked with presiding over a case proceeding while a jury is a group of people who have sworn in to give a verdict to a case as is given to them by the court. A trial by jury is preferred, mostly in the US, as the attorneys can use emotional arguments which may turn the case in their favour. Ironically, this is also a reason behind the decline of jury trials worldwide, including the US as the juries are often subject to biasness and partiality.

The Nanavati Case 

The Nanavati Case, also known as KM Nanavati vs State of Maharashtra (AIR 1962 SC 605), is considered as one of the most important cases in the whole Indian legal history. This case also officially marks the end of jury trials in India. However, the Nanavati case is not the last case which was heard by a jury. The last case to be heard by a jury in India is discussed below in the Article. Returning to this case, Kawas Manekshaw Nanavati ( also known as Rustom Pavri), a senior commanding naval officer, was charged with the murder of Prem Ahuja, his wife’s lover. The detailed facts of the case is discussed below: 

  • The case of KM Nanavati vs State of Maharashtra was a 1959 Indian court case, where the accused was charged with the murder of his wife’s lover, Prem Ahuja. This incident attracted a lot of media coverage and many books were written based on this incident. Initially Nanavati was declared not guilty by a jury, but the verdict was dismissed by the Bombay High Court and the matter was retried as a bench trial.
  • The accused, Nanavati was second in command of the Indian Naval Ship ‘Mysore’. He was married to Sylvia and had three children.
  • Prem Ahuja was an automobile businessman and was also the Agnik who in turn was the friend of Nanavati. There he introduced Ahuja to the Nanavati’s and a friendship between them was formed.
  • The accused, being in naval services had to leave Bombay frequently for work, thus leaving behind his family. For this reason, Sylvia Nanavati felt lonely and started to talk with Prem Ahuja which slowly turned into a good friendship.
  • However, this friendship led to an illicit relationship between the two and for this Sylvia Nanavati felt extremely guilty.
  • As a result, she admitted about her illicit relationship to her husband, which got him enraged leading to the murder of Ahuja.
  • For this Nanavati went to his ship and took a semi-automatic revolver along with six cartridges from the ship’s store on a false pretext.
  • Later he went to Ahuja’s house and entered his bedroom to shoot him dead.
  • After conducting such act, he later turned himself to the police and was arrested under the section 302 of Indian Penal Code. This case was primarily to be heard at the Sessions Court.

This is the facts about this famous case.

Judgement 

The Court in this case held that the murder was a well-processed and thoughtful one, which certainly did not attract Exception 1 of Section 300 of the Indian Penal Code as the accused also failed to bring the case under General exceptions by adducing evidence. For this, the Court found the accused guilty under Section 302 of the Indian Penal Code and sentenced him to imprisonment for life.

 The majority of the people know that the Nanavati case is the last case that was conducted by a jury only because of the media attention it got. But the real last trial to be conducted by a jury was held at the Calcutta High Court in the year 1973. This case has been discussed in detail below.

The ‘Real’ Last Jury Trial in India 

This case about the last jury trial in India is not so talked about and for which very few people know about this case. This incident took place in Kolkata, West Bengal during the election periods where two communist activists namely ‘Prakhar Chandra De’ and ‘Rabindranath Chandra De’ were charged with the murder of Dipak Sarkar in 1967. The year of 1967 was a very dangerous year as people were very aggrieved due to the rising prices and food shortages. Bandhs, Hartals, etc, became a common phenomenon.

The General Elections of 1967 marked the fourth election after independence and in the State of West Bengal, there was huge competition and violence between two major parties, the Congress and the Communist Party of India (Marxist). As the election results were announced, it was seen that the CPI(M) had won the elections thereby ending the long rule of the Indian National Congress Party.

There were huge celebrations across the streets and suddenly a few celebrants attacked a Congress club named ‘Taruner Ahoban’ which caused a little damage. Three days later, the victim Dipak Sarkar, was attacked by five people including the two accused. He was stabbed several times when he was coming out of a salon. He later died in the hospital.

Prakash and Rabindranath went into hiding and were not caught until October. A trial by jury was held sometime after where all the five people were charged with common intent to murder under Sections 302 and 304 of the Indian Penal Code.

Thus, the real last jury trial was conducted in the year 1973 where Prakash and Rabindranath were retried at the Calcutta High Court Sessions. A special jury was formed comprising of only ‘highly qualified persons’. Both the defendants were charged with murder, acid attacks, agitating riots and many more. A record of forty-four witnesses was heard including five eyewitnesses. However, the jury was of the opinion that the defendants were not guilty by reaching a unanimous verdict. Respecting the jury, the judge complied with the decision of the jury and freed them.

This is the reason why this case is not known vastly and very few sources still have some amount of information in this case. The Nanavati case which was held thirteen years earlier grabbed all the media attention thereby making the people know that the case was the last case to be heard by a jury ever. But after such a decision of the jury in Prakash and Rabindranath’s case, marked the official end of the jury system in India.

The Gradual Decline of the Jury System 

The main reasons which led to the decline of the jury system in India and in the world is Biasness and partiality. In such cases, the jury tends to make a verdict in favour of a certain party irrespective of the relevancy of facts and evidence provided to them. These things may happen due to the biases of the majority of the jury, the emotional correlation between the jury and the facts of a case, threat or bribe by either of the parties forcing the members to give the decision in their favour or due to media and political pressure. These factors have been explained as follows :

  • Biasness of the Jury 

This has been a common phenomenon during the jury trials where the majority of the jury members were found to be biased towards one party. In India, during the British Raj, such an incident was evident enough. The members of the jury, being British Nationals, tended to be in favour of the British Parties which led to partial decisions being made. As a result of which, proper justice was ignored and the party with enough source and favourability was found to be in an advantageous position than the other.

  • Emotional Attachment 

This was also a common case in jury trials where some of the members would correlate their incidents in life with the facts of a case and for which the decisions were not accurate, which in turn hindered the smooth performance of the justice system.

  • Threat or Bribe by Parties 

Threatening the jury members or bribing them was often seen especially in criminal cases, where the party having better power, either monetary or political, would often threaten the jury to give decisions in their favour. The juries are just a group of people called upon by the Courts to give a verdict based on the law provided to them. Not having the equivalent protection by the government as was in the case of Judges, the juries were an easier target to exert undue influence upon. This also became an obstacle in the performance of the Justice System.

  • External Pressures 

Pressures like media or political often influence the jury to give a partial decision. This can be best explained with the help of the Nanavati case. In that case, as we have read, the media and the general public all were in support of the accused, as according to them, the action which he committed was justified. The jury also found no breach of law in the actions of the accused only because of the peer external pressure and that is the reason why the matter was retried in the Bombay High Court by a division bench. Such also marked the ‘official end of the Jury system in India.

Apart from India, jury trials are on a consistent dip in the United States, where almost every criminal and civil matter is heard by a jury. Unlike India, the jury is an important part of the US legal system. However, as per recent statistics, only around two percent of civil and criminal cases that are not dismissed are decided by a jury. This implies that the jury, in the present day, does not get included in the major affairs as once it did. This is also due to another factor which included the longevity and costliness of the jury trials. Cases heard by judge or division benches are tend to be faster and more cost-effective as compared to jury trials. Also modern concepts like Arbitration, Mediation, Conciliation have also contributed to the decline of jury system not only in India but around the world.

Conclusion 

Before the Jury trial system came into existence, all the legal disputes were resolved through the Panchayati Raj system in India. In such a system, there were elected people named as ‘Panchayats’ and were vested with the executive and judicial powers. However, when the British came to India, the highly looked down upon the Panchayati Raj system and imposed their own English Law System. In those days, Jury was a major part of the English legal system and for which, India also had such a system but not until 1973.

The jury system was often biased, favoured towards the British, thereby depriving the Indians of their right to get justice. The Nanavati case marked the official last jury trial in India, which was of course, after the British left India. In modern times, Jury trials across the world have declined considerably because of the more disadvantages that it got than the advantages. The modern legal remedies that have been established also significantly contribute to such decline of the jury system. Hence, after around 30 years of post-independence, India was able to successfully replace the jury system with the new Criminal Procedure Code of 1973.

References


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Copyright vs. traditional knowledge in music : a comparative case study

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Music

This article has been written by Anuja Saraswat, pursuing the Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Introduction

Since time immemorial, music has been viewed as a unique piece of personal property, played to entertain and elicit emotional responses from the listener. It’s reasonable that westerners don’t understand, or even openly mock, the regulation of music’s “power” when they have this view of music. Traditional societies, on the other hand, frequently attribute tremendous abilities to their music, such as the ability to cure illness, create an abundant game, summon lightning, murder, etc. With such vast powers, it only makes sense to rigorously restrict and regulate music’s use, rather than its financial rewards. Western law, on the other hand, has evolved in sync with western music, emphasizing the preservation of individual property rights and commercial rewards. As a result, traditional music and western law clash on a fundamental basis. This collision between indigenous/traditional knowledge and intellectual property law is a complex legal issue in today’s world. This article is going to delve into the intricacies involved in protecting the right holders of traditional music. Subsequently, it would deal with the governing national as well as international laws involved to protect the right holders of the traditional music. It is further going to compare the copyright law regime of various non-western and western countries with the help of varied case studies and provide suggestions and recommendations as to how the rights of the indigenous community are recognised and given importance in the current legal framework.

Traditional knowledge in music : a race between western and non-western cultures

Traditional knowledge is known to be a distinct body of knowledge and practices acquired through centuries by people concerning the natural environment of a given geographic area. It encapsulates a lifetime of learning, careful observation, and exploration. It is expressed through stories, songs, music, proverbs, customary rules, and language and is rooted in culture, spirituality, and worldviews. It is passed down orally and through cultural activities and rituals from generation to generation. It’s worth noting that music was not recognized as a distinct art form until 1882. After gaining independence, the United States embraced the core laws of the Statute of Anne, but it wasn’t until 1831 that music was given legal protection. As a result, literature, weaving patterns, and sculpture dominated the early years of copyrights. In the 18th and early 19th centuries, the main creation of contemporary copyright law happened while Western culture was either largely isolated or the “colonial power,” and it was not considered essential to cater to the needs of other cultures. As a result, the rules became more specifically fitted to the role of artistic works in western civilization. As a result, when non-western music is propelled into the commercial music industry, present copyright law stands ill-equipped to give cross-cultural protection.

To protect musicians’ rights, the World Trade Organization and U.S. courts have devised a complex copyright system. However, because the dominant copyright system presupposes a distinctively western perspective to the creative process and intellectual property rights, similar rights are not granted to indigenous tribes’ traditional knowledge. As a result, there is a growing problem with traditional culture governance, which has become particularly serious in the field of music sales revenues. Traditional music is considered a part of the public domain by US courts, who are preoccupied with the assumption that creativity is solely dependent on the assignment and exploitation of property rights over cultural works. As a result, songwriters have complete freedom to combine traditional melodies into new songs.

Not all cultures share the ideas of the U.S. and the World Trade Organization (WTO) on the creative process, as well as the idea of controlling traditional culture as a result. Traditional groups argue that they have legitimate assertions regarding how their culture is increasingly exploited. This approach is opposed to the status quo in the United States and the parallel legal system of the World Trade Organization (WTO). These cultures contend that present copyright legislation should be used for more than only the sole purpose of collecting royalties.

Copyright regime in protecting the rights of the music owners

The ‘right to restrict or permit, the reproduction, adaptation, disclosure to the public and others, and the moral rights of attribution and integrity are the main protection afforded by copyright. This appears to be a good fit for many of the requirements and goals of indigenous peoples and traditional communities. The Indian Copyright Act is an excellent example of copyright legislation that provides specific protection to traditional cultural expressions. As per Section 38 of the said Act, any performer who engages in any performance has a particular right known as the “performer’s right” in connection to such performance. This privilege is given to indigenous artists. This right will last for another twenty-five years. Any individual who, without the performer’s consent, produces a sound or visual recording of the performance; or communicates the performance to the public in any way during the duration of the performer’s right is judged to have infringed the performer’s right (an exception is made concerning usage for educational or reporting purposes). However, while granting such a right to performers of indigenous arts is a step in the right direction, it only gives minimal protection. For example, this right is granted to an individual or a group of performers, whereas, on the other hand, traditional cultural expression belongs to the entire community; second, the right is granted for only twenty-five years, after which the cultural expression will become public domain, free for anyone to distort and deface it in any way they see fit. As a result, there is a pressing need to resolve several key concerns attached to the concept of copyright before copyright legislation can be enacted to provide adequate protection for folklore. 

African countries

A brief inspection of the copyright protection laws of specific African countries demonstrates an effort by African states to reconcile both indigenous notions of music property and Western intellectual property protection. The Bill of Rights in South Africa, for example, “recognizes that members of a cultural community may not be denied the right to enjoy their culture.” The South African Bill of Rights aspires to “create a common value system for a national consensus,” implying that the distinction between customary and statute law will be blurred. The South African Constitution, on the other hand, acknowledges the “status and role of traditional leadership” and specifies that courts must apply customary law when appropriate. This results in a pluralist legal system, in which the law that applies in any given situation can be either customary or statutory.

American countries

The United States copyright legislation, as well as the copyright framework included in the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), disregard traditional norms and take a mercantilist approach towards the creative process. Because a copyrightable work can only be generated by an author’s brilliance, this legal system assumes that a single author deserves exclusive rights over a copyrighted work. The assumption behind this legal framework is that by providing an economic incentive to authors, the creative process will flourish. Furthermore, it is assumed that the lack of any form of compensation for creative endeavors will stifle the creative process. By regulating the definition of work, ownership of that work, and allowed uses of that work, copyright law formalizes the mercantilist approach. Copyright is only applicable to original works that have been fixed in a physical medium. The author of a work has the right to reproduce, distribute, perform, display, or create derivative works from the copyrighted work under copyright law. Infringement actions emerge when other parties use the work or copy a significant portion of it without the author’s authorization. Although observers consider the copyright system as an unbiased adjudicator of an individual’s property rights and freedom of expression, the prevailing or dominating majority groups have profited from ethnic minorities’ contributions.

TRIPS framework 

The TRIPS framework is a pro-business regulatory framework intended at protecting copyright and other intellectual property rights. Even though TRIPS’ declared purpose is to regulate only intellectual property trade, the agreement encourages domestic legislators to change national legislation and increase intellectual property author and owner protection. The 2001 revisions to China’s 1990 copyright legislation, implemented to bring the country into compliance with TRIPS, for example, increase the scope of protection for copyright owners to encompass performance, broadcasting, exhibition, leasing, distribution, and information communication via the internet. The principal beneficiary of this new copyright law is a multinational corporation doing business in a developing country. TRIPS fundamentally extends on the Berne Convention’s economic rights and strengthens author/owner control by forcing countries to implement automatic copyright awards, include software in copyright protection, and tighten enforcement methods. Similarly, by formulating the boundaries of fair use exclusions and explicitly eliminating protection for moral rights, TRIPS dilutes the public interest part of copyright. The understanding that any non-compliance can be judged through the WTO’s dispute settlement procedures ensures TRIPS monitoring.

Exclusive rights assigned to the copyright owners vs. claims of traditional knowledge right holders

There have been several controversies that have emerged while deciding who should be the rightful owner of the traditional folk music and to whom the protection should be provided in case of a conflict. The case study based on this is discussed below:

The case study of “The Lion Sleeps Tonight”

One of the instances in South Africa is the modernization of traditional music, which highlights how current copyright laws may diminish the value of traditional culture. This lawsuit is a dispute between the estate of Solomon Linda, a Zulu songwriter, and Disney Enterprises, Inc. over the usage of a song (Disney). Linda died a well-known but underprivileged Zulu singer/songwriter and his family is still poor today. Linda’s estate claims copyright to the song “The Lion Sleeps Tonight,” which was featured in Disney’s 1994 film “The Lion King.” The allegation stems from Disney’s failure to recognize the purported copyright derived from Solomon Linda and his band, The Evening Birds’ 1939 recording of “Mbube.” The 1911 British Imperial Copyright Act was in effect in South Africa at the time of the song’s production.

In the 1950s, Linda sold the song’s rights to Gallo (Africa) Limited for ten shillings, and the firm attempted to commercialize it in the United States. One of the folk singers, Peter Seeger, from the United States, heard “Mbube” and adapted “Wimoweh” from it. Soon after, George Weiss, Luigi Creatore, and Hugo Peretti rearranged “Wimoweh” to create a new song, “The Lion Sleeps Tonight.” If the work’s creator was the first owner and an assignment was made while the Act was still in place, the assignment would only endure for 25 years after the author’s death, according to the British Imperial Copyright Act. All assignments would revert to the original author’s legal representative or estate after 25 years. Linda and his estate were unaware of the song’s reversionary interest. When the estate’s representatives discovered that the reversionary interest could exist, they selected a new executor in 2003.

Based on the disputed assumption that “The Lion Sleeps Tonight” is a substantial replica of “Mbube,” the executor asserts that all uses of the song since 1997 have required the estate’s specific agreement. In the absence of it, the executor claims that all uses of the song, including those by Disney in all Commonwealth jurisdictions, are infringements of the “Mbube” copyright. Although the Zulu community’s collective right to the song will not be considered at the hearing, it should be highlighted that Linda had the good fortune of having a strong individual copyright claim as a result of the recording. This example, however, is the exception rather than the rule, because indigenous communities are frequently unaware of copyright law, do not assign individual responsibility for innovation, and do not document their works.

International framework for the protection of traditional music

Despite the TRIPS Agreement’s approval and implementation by all 148 WTO member nations, developing countries and growing customary international law are pushing back against this imposition of sovereignty. According to multilateral treaties and emerging case law, the current copyright regime’s exclusive absorption of individuality is incompatible with the process of cultural production accepted in developing countries. As opposed to the TRIPS model, the international community has acknowledged indigenous communities’ ability to preserve their heritage under copyright law. The Universal Declaration of Human Rights, the Berne Convention, and the General Agreement on Tariffs and Trade (GATT) are the three primary international agreements that currently govern the protection of non-western music. Among the three potential sources of protection, only the Berne Convention and the GATT are currently considered binding international law. Furthermore, neither of these approaches is proven to help safeguard non-western music. Finally, exploitation of non-western music will need to be handled specifically in a new international agreement.

  1. Universal Declaration of Human Rights 1948

Article 27(2) of the Declaration directly addresses the protection of artistic works, stating that “everyone has the right to the protection of oral and material interests arising from any scientific, literary, or artistic output of which he is the creator.” However, it is just intended to serve as a guideline for treatment. If a government or company, for example, violates Article 27 by appropriating a community’s music, the Universal Declaration simply serves as fuel for political pressure. It may or may not allow access to legal forums. As a result, the Universal Declaration’s practical application is severely constrained.

  1. The Berne Convention

The challenges of preserving non-Western music were first addressed at the 1967 Stockholm Conference on the Berne Convention, which resulted in the creation of Article 15(4) (a), the only provision addressing traditional music. Unfortunately, the provision states that “for unpublished works where the author’s identity is unknown but there is every reason to believe he is a national of a country of the Union, it shall be a matter for legislation in that country to designate the competent authority who shall be entitled to protect and enforce his rights in the countries of the Union.” As a result, traditional groups and musicians are not granted directly recognized ownership rights over their music unless their national government designates them as the “responsible authority.” The Berne regulations, on the other hand, are nearly equivalent to the United States copyright system. The same difficulties of involuntary transmission and de facto control that beset the US scheme would resurface if the major Berne clauses were applied to traditional music. As a result, in the case of non-Western music, the Berne Convention is mostly ineffective.

  1. The General Agreement on Tariffs and Trade (GATT)

When a country suffers harm as a result of a GATT violation, the most common response is to halt trade or apply sanctions on the offending party until it complies. Smaller countries in Africa, South and Central America, and Oceania are currently producing the most marketable indigenous music. If, for example, Senegalese music becomes the next big thing in world music, the US music business might start recording it in contravention of Senegal’s intellectual property laws.

Aside from these protections, Article 15 of the International Covenant on Economic, Social, and Cultural Rights declares that everyone has the right to freely engage in community cultural life, enjoy the arts, and have moral and material interests protected as a result of artistic work. Furthermore, nation-states must preserve, respect, and maintain traditional knowledge for the conservation and sustainable use of biological diversity, as well as promote their wider application with the approval and participation of traditional knowledge holders, according to Article 8(j) of the Convention on Biological Diversity, 1992.

Traditional contributors to modern work should have continuous access to their resources, and any advantages obtained from their contribution should be shared equally; and traditional custodians should be acknowledged as the contribution’s creators, at the very least. Although intellectual property owners may argue that overprotection will deter them from investing in research and development, under protection may lead traditional right holders to construct regulatory fortresses to keep intellectual property innovators out or just hide their assets. One sensible approach to the ownership conundrum is to raise the originality standards for copyright to avoid authors/owners from dominating works they did not create. To prevent conventional right holders from exerting too much control, they may be allowed to claim just the works that they continue to use.

Conclusion 

Although the current copyright regime comprises Western conceptions of ownership, originality, and integrity in creative work, issues will surely arise when these normative standards are applied to topics that are part of a separate cultural milieu. In the United States, the TRIPS Agreement and Copyright’s unique jurisprudence foster an individualistic vision of authorship that discriminates against and marginalizes substantial musical contributors to the current cultural scene. By confusing multi-cultural conceptions of authorship and creativity, copyright law mandates the misappropriation of indigenous cultures, restricts an important source of invention, and slows the growth of the global marketplace. The law in the United States, as well as the TRIPS Agreement, should be updated to reflect this. Copyright legislation should take into account cultural and economic reality. It must recognize that different cultures have different views on how to assert proprietary control over music and thus provide some form of ownership rights that recognize not only private property claims but also the collaborative nature of the creative musical process to achieve its goal of promoting creativity. Some of the particular recommendations include strengthening originality standards, clarifying the term of ownership overworks, and boosting moral rights. Furthermore, there must be norms for customary law, just as there are for statutory and common law i.e. customary law that would be applied in a given setting must have the same force as a statute that would be applied in a similar, non-traditional circumstance. Because the South African Constitution includes provisions for customary law and its enforcement, it sets a strong precedent for the recognition of customary law’s legitimacy alongside that of statute law. Only in this way would traditional law and statutory law be on an equal footing in terms of protecting traditional people. If these intercultural safeguards had been in place during Solomon Linda’s climb to fame, he would not have perished in abject poverty, without the respect or money he deserved. Recognising the differences between customary and statutory law can help to build respect for both systems. Only if these two systems are treated with respect and mutual enforcement can they coexist harmoniously. As a first step toward equal empowerment of traditional music custodians, true protection of their economic and cultural rights, and overall human rights advancement, such structural adjustments are critical.

References

  1. https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1322&context=hrbrief 
  2. https://www.education.gov.in/hi/sites/upload_files/mhrd/files/upload_document/CprAct.pdf 
  3. https://www.gov.za/documents/constitution/constitution-republic-south-africa-1996-1 
  4. https://www.copyright.gov/title17/title17.pdf 
  5. https://www.wipo.int/treaties/en/ip/berne/ 
  6. https://www.wipo.int/wipo_magazine/en/2006/02/article_0006.html 
  7. https://www.wipo.int/pressroom/en/briefs/tk_ip.html 

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Key issues faced by SSOs in SEP licensing

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This article has been written by Ben Saju Zacaria pursuing the Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho. This article has been edited by  Aatima Bhatia (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho).

Introduction

The legal rights or the protection available for the works, invention, literal or artistic creations of an individual are  collectively known as Intellectual Property Rights. They can be divided into two categories.

              (i)  Copyright and related rights

              (ii) Industrial Property

(i) Copyright and related rights: These are the legal rights and protection available for creators of artistic and literary works. These rights may  include musical works or and even computer codes. These rights help in monetization and preventing unauthorized use. .

(ii) Industrial Property: These rights can be classified into two categories:

  • Trademarks and Geographical Indications: These are the items that are attributed either to their origin or quality.
  • Patents, Industrial and Trade Secrets: These are legal rights and protection given to innovations, design and creation of technologies. These rights prevent unauthorized usages 

Except for  trade secrets, all other rights are given for a finite period. Standards are technical requirements or specifications that seek to provide a common design for a product or process. Patents which are essential to a standard and have been adopted by a Standard Setting Organization (SSO) are known as SEPs. This article deals with issues faced by SSOs in licensing SEPs. 

Standard Setting Organisations

Standard-Setting Organizations are also called Standard-development organizations (SDOs). Standard-Setting Organizations can either be private, quasi-governmental or government bodies that are primarily engaged in works such as coordinating, developing, revising, reissuing, promulgating, amending and maintaining the industry standards that are widely adopted by a group for the products and services. The main function of the Standard-setting Organizations is that they set up technical and performance standards in the respective industry thus promoting the widespread industrial use, lowering the development cost of the products and consequently  increasing competition. However, it can also  result in fostering Anti-competitive agreements and patent holdup. Standard-Setting organizations can be divided based on their role, extent of applicability ( national and international ) and position.

The most important and well established Standard-setting organizations are the International Organization for Standardization,  the International Electrotechnical Commission, and the International Telecommunication Union (ITU). The Bureau of Indian Standards is India’s National Standard-Setting Organization. Standards can be divided into two categories:

(i) De-Facto: These refer to the standards formed as a result of the use of certain technology widely by the market players and which are accepted by the market thus securing the dominant market share without being recognized by any Standard-Setting Organizations. For Example, the QWERTY  layout in the keyboards.

(ii)De-jure: These are the standards approved and adopted by the Standard-Setting Organizations. It is  the duty of the SSOs to implement the standards in the mark. For example; Internet Engineering Task Force has adopted the Transmission Control Protocol/Internet Protocol (TCP/IP) as a Standard for communications on the Internet.

Standard-Essential Patents ( SEP )

Standard-essential Patents are the patents that are compulsory requirements for setting the standardized technology adopted by the respective Standard-Setting Organizations. Therefore Standard-Essential Patents are the standard to be followed by the technologies in their field which are protected under the Patent Regime. In Microsoft Corp. v. Motorola Mobility, Inc. The US court defined SEP as “A given patent is ‘essential’ to a standard if the use of the standard requires infringement of the patent, even if acceptable alternatives of that patent could have been written into the standard“.

This patented technology can be a small portion of a product, thus it would be impossible to manufacture standard followed products without the SEPs. Standard Organizations require its members to disclose their patents and pending applications which could be part of the standard adopted and grant licenses for the Standard-Essential Patents.

Frand

FRAND is the short form of fair, reasonable and non-discriminatory. The SEP owners are obliged to license the rights to others based on the FRAND terms in return for the royalty. FRAND agreements are implemented with an aim to prevent license abusing and monopolistic attitudes. Once an Organization is providing FRAND license they shall provide it even to the non-members.FRAND is a  policy added into the bylaws of the Standard-Setting Organization Agreement. It is widely accepted that there are no globally accepted tests for determining whether a license agreement is following FRAND or not.

Major issues with standard-essential patents

(i) Patent Holdup:

Once a patent is accepted by Standard-Setting Organizations, it becomes unavoidable. In order to meet the standards other manufacturers are forced to use that technology. Otherwise, their product would not be marketable under the label following specific standards. This unavoidable situation strengthens the bargaining power because there is no alternative for the technology. Patent holdup happens when the holders of SEP are trying to impose heavily unreasonable and unacceptable royalty rates. Therefore to prevent a monopolistic market the SSOs constrain patent holders with FRAND licenses. However, the vague nature of the agreements continues to affect licenses. 

The Competition Commission of India in the case of Micromax v Ericsson noted that “hold-up can subvert the competitive process of choosing among technologies and undermine the integrity of standard-setting activities. Ultimately, the high costs of such patents get transferred to the final consumers.”

(ii) Royalty base:

The reasonableness of the royalty amount can be assessed only on the basis of the correct selection of perfect principles for calculating royalty. Normally, SEP holders prefer calculating royalty based on the net sale price of the final product rather than the value of the patented Part. Thus the licenses are forced to pay a royalty for the components that are not within the scope of royalty. This formula for calculating royalty is causing adverse effects on licensees

In Virnetx Inc v Cisco  The US court of Appeals for the Federal Circuit held that it is  better to calculate royalty based on the value of the Patent rather than the whole value of the product.

(iii) Royalty Stacking

Royalty Stacking is a kind of situation in which more than one royalty is added together leading  to a high aggregate amount of royalty. This kind of situation arises when more than one SEP patented product is used in the same multi-component product, where the aggregate royalty may exceed the total sale price.

(iv) Availability of injunctive relief

To enforce the royalty rates, the SEP owners use the threat of injunction as a powerful weapon. Due to this threat, the licensees, in order to prevent heavy loss from infringement, are forced to accept these unreasonable royalties. But sometimes injunctive reliefs are used against the willing licensees for unreasonable royalty, which is against the FRAND commitment as the FRAND agreement provides sufficient royalty. Such an action will cause a monopolistic power holder and an abusive dominant position,  thus violating competition laws. Therefore it is fair to claim injunctive relief only when the licensees are not ready to pay the royalty accepted through the FRAND agreement.

The basic principle for granting an injunction is that the applicant must suffer irreparable loss in the absence of an injunction. In India, injunction is based on principles of equity. The consideration for the SEP holder is royalty, and the only thing which is to be checked is whether the royalty adopted is adequate or not. So even if the accepted royalty is low, an injunction should be granted only if an irreparable injury affected the SEP holder.

Conclusion

The laws regarding SEP are still emerging and  are not well established and therefore, judgments vary from place to place. One important thing to remember is that SEPs are used not because of other options, instead, they are used to follow a common standard and ensure uniformity.  So, as a developing nation, India possesses a huge IPR Economic Market and we can’t hang behind due to a lack of jurisprudence. For better development, companies must pass their technology based on the reasonable terms and conditions executed through the FRAND agreement. That doesn’t mean the SEP patent holders have to be prejudiced; the Rights of the SEP patent holders are also to be safeguarded. Therefore, an effective mechanism for settling the disputes regarding the Standard-Essential Patents has to be established by hearing both the parties thereby fixing the rate and settling the dispute, where the decision has to be taken within an intention to protect the end customers too.


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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