Analysing the public right to protest and powers of the police under the Police and Criminal Evidence Act, 1984

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November 6, 2021

This article is written by Shohom Roy, pursuing B.B.A LLB from Symbiosis Law School, NOIDA. This article examines the balance between the rights of protestors and the powers vested in the police under the United Kingdom’s PACE Act,1984.

Table of Contents

Introduction

The United Kingdom has upheld its legacy of trying to achieve a balance between the interest of the citizens and the power of the authoritarian entities of the State, with the codification of human rights in the form of the Human Rights Act, 1998. As a signatory to the European Convention of Human Rights, the UK has modelled its domestic law on human rights after the provisions mentioned in the European Convention of Human Rights (ECHR). Since the passing of the Magna Carta in 1215 to the enforcement of the HRA, 1998 the complexity within society has called for additional and stringent safeguards to protect the rights of the police.

Protests are democratic tools wielded by the common people time and again in order to inspire positive social transformation and improve a specific facet of human life. Protests encourage people to participate in the active citizenry and help cure defects in representative democracy which is the most prevalent form of governance amongst the countries of the world. The interplay between the legislations of the United Kingdom protects the right to peacefully protest while also allowing the government to restrict protests under certain circumstances for the sake of public order.

The right to protest

The United Kingdom is a signatory of major international human rights instruments like the International Covenant on Civil and Political Rights (ICCPR), the Convention Against Torture (CAT) and the Convention on the Rights of Persons with Disabilities(CRPD). Therefore the government must be careful in fulfilling its international obligations while introducing any contravening legislation. The United Kingdom recognizes the right to freedom of peaceful assembly guaranteed under Article 21 of the ICCPR. The right to peaceful protest is a non-derogable right and has been granted to all individuals without any discrimination and covers all kinds of peaceful protests. The law mandates that the participants of an assembly showing non-violent conduct be granted protection under Article 21 of the ICCPR. However, violence by some members of a protest does not snatch away the right granted to the other participants. A peaceful protest can advocate controversial issues and cause disruptions but it is still covered under Article 21. The instigation of hostility and animosity from others holding different views does not provide a legitimate ground for restricting the right to protest under the garb of public order.

Under Article 11 of the Human Rights Act, 1998 which replicates the European Convention on Human Rights, the right to freedom of peaceful assembly has been granted to every individual. The right to protest is an extension of the right to peaceful assembly and the right to expression. Protests include peaceful marches, demonstrations, press conferences, public and private meetings, counter-demonstrations, sit-ins, motionless protests, flash mobs and candlelit vigils. The Courts have given significant importance to the location of a protest in the case of Hall vs Mayor of London (2010) to establish that protestors have the right to assemble for the purpose of expressing their dissent at the location where they wish to express and exchange their views. However, organizing an assembly at a private place without the owner’s consent can make the participants and the organizers liable for trespass. The law assumes that the government must show a reasonable degree of tolerance for the disruption caused by these protests.

As per the domestic and international legislation on human rights, the state has some obligations with respect to the protection of the people’s right to protest. The government should ensure that there should be interference with the peaceful assemblies including sanctions on organizers or participants only on the basis of legitimate and justifiable grounds. The jurisprudence regarding the restriction on the right to assembly revolves around the fact that such restrictions must be ‘narrowly construed’ and ‘convincingly established’. This actively demonstrates that the state can adopt legislative and institutional measures or undertake pragmatic measures for the purpose of facilitating the exercise of the right to protest. The state should also conduct an unbiased investigation into the functioning of the authoritarian entities and seek methods to alleviate the difficulties encountered by the people while exercising their right to protest.

The Police and Criminal Evidence Act,1984

The Police and Criminal Evidence Act, 1984 was passed in order to instil a sense of accountability among the police force, maintain safeguards while improving police efficiency and bring a system of transparency and accessibility. The Police and Criminal Evidence Act (PACE) has a number of operational codes which prescribe the procedure to be followed by the police while exercising their powers.

Code A of the Act deals with the powers of the strip and search.
Code B talks about the seizure of property and searching of premises.
Code C lays down the requirements for detention, treatment, and questioning of suspected individuals in police custody for offences other than terrorism.
Code D sets out the process to be followed for the identification of people during the investigation of an offence and the necessity for accurate and reliable criminal records.
Code E and Code F deal with the audio recording of interviews in police custody in a non-visual and visual manner respectively.
Code G talks about the power of arrest and
Code H is regarding the detention, treatment and questioning of suspected individuals associated with terrorist activities.

Striking a balance between rights and power

The police have the power to stop and search protestors under the Police and Criminal Evidence Act,1984 on reasonable grounds of carrying prohibited or stolen items. In the case of Howarth v. Commissioner of the Police of the Metropolis (2011), the Divisional Court dismissed the charge of unlawful stop and search during a protest against the oil industry. The Court held that according to past experiences participants of protests against oil industries have caused considerable damage and the carrying of molasses was adequate for raising suspicions about the small group of protestors. The prohibited items include offensive weapons like bladed or pointed items, articles used in theft, spray paint cans and tools as well as fireworks, drugs, firearms, etc. However, the law mandates that when a search is made a record must be kept as evidence.

The police officer must state his name along with the object of the search before conducting a stop and search. The suspect must be notified of the police station under which the police officer, conducting the search, is employed as well as the reasonable grounds for conducting the search. If the police officer is not in his official attire, he must show his warrant card before exercising his powers under the PACE Act. There are certain blanket search powers that allow the police to search large groups of people at public places with no reasonable protection. Section 60 of the Criminal Justice Act,1994 allows a police officer to search any person within a specific area for offensive weapons during a specified time period. Under Section 47A of the Terrorism Act 2000 (Remedial) Order 2011 the police have the power to search anyone without reasonable suspicion for terrorist activities.

Though Section 11 of the Public Order Act,1986 requires a notice to be sent to the police regarding the organization of a protest, compliance with the aforementioned law is not mandatory when organising a public assembly for a static demonstration. However, it is an offence to organise a protest march without notifying the police and the organizers may be held liable for acting in contravention to the details given in the notice. The police must cite a justifiable and reasonable ground for safeguarding public order while prohibiting a protest. Acts like obstruction of highways, aggravated trespass, and public order offences entail a range of sentences with the more serious offences punishable by length prison sentences.

Recent protests

The anti-capitalistic and climate change protests in April 2009 during the G20 summit highlighted the utter disregard for human rights and abuse of power by state authoritarian entities. The policing of the ‘Climate Camp’ near the offices of the European climate exchange led to violence between the police and the protestors and even the death of a newsagent who was trying to navigate his way home. The culmination of these events led to three parliamentary committee reviews into policing of protests as well as a review conducted by Her Majesty’s Inspectorate of Constabulary. It also led to the dismissal of the police officer from the Metropolitan Police Services responsible for the death of the innocent bystander on the grounds of ‘gross misconduct’.

Members of a global environmental movement named Extinction Rebellion initiated a number of nonviolent civil disobedience protests during the course of the year 2019 across multiple sites in London. The Metropolitan Police Service was criticized for its inability to issue orders and arrest individuals who were in contravention of the law. The protestors had organised ‘sit-ins’ and used tactics like ‘lock-on’ by affixing themselves to a stationary object thereby making it harder for the police to move them. However, the Metropolitan Police Service issued a directive under Section 14 of the Public Order Act,1986 declaring the ban on the movement and regrouping of the protestors at different locations in London. However, the High Court declared that the ban imposed under Section 14 was illegal since the assembly of people in separate groups under the umbrella of a single cause cannot be interpreted as a public assembly. Moreover, the MPS had bypassed the requirement of obtaining the consent of the Home Secretary and created a dangerous precedent of banning future assemblies according to the whims of the officials at the MPS. The judgment of the High Court defends the right to peaceful assembly and ensures that the policing of demonstrations must take place within the existing legal framework.

Legislative reform

The joint committee on human rights investigated the legality of the stop and searches conducted by police officials during the policing of protests. The investigation revealed that police officers could search any individual whom they reasonably believed to be involved in terrorist activities. The European Court of Human Rights while listening to the case of two participants of a protest outside an arms fair who were subjected to arbitrary searches by the police, declared that there was a flagrant violation of the right to privacy and the right to peaceful assembly under Artic l e 8 and Article 11 of the European Convention of Human Rights. The Government accepted the judgment of the European Court of Human Rights and revised the powers of the police by introducing provisions in the Protections of Freedoms Act, 2012.

Conclusion

There has been constant pressure from various non-governmental and international human rights organizations to reform the current legal framework for policing protests. In light of these circumstances, the UK government has introduced the Police, Crime, Sentencing and Court Bill in the Parliament to bring about major changes in the manner protests are handled across the country. However, some critics have raised concerns over the new Bill. The implementation of vague laws that appear to strengthen the cause of human rights whereas in application create an environment where people are discouraged from pursuing their rights could be the motive behind the introduction of the Bill. This ‘chilling effect’ might cause the fear of prosecution coupled with criminal and civil punishments. It might also lead to constant surveillance creating a risk of loss of privacy. The government could track every individual and brand them as a criminal or deviants. The usage of police tactics like restricting participants of a protest within a specific area until they can be dispersed along with stop and search can have a ‘chilling effect’ on the people. Collection of information about participants with no criminal record in the National Domestic Extremism Database and the use of international mobile subscriber identity to gain information about the organizers and participants of a particular protest can have serious ramifications in the world of human rights. This abuse of power must be checked so as to ensure that the state does not criminalise dissent among the people.

References

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Reserve Bank of India v. Jayantilal N. Mistry (2021) : case analysis

By

Sneha Mahawar

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November 6, 2021

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RBI-1200 — Image source: https://bit.ly/3h1O4uF

This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It discusses in detail a litigation spread over six years on the disclosure of information by the RBI under the Right to Information Act, 2005.

Table of Contents

Introduction

There are multiple events that led up to the case of Reserve Bank of India vs Jayantilal N. Mistry (2021). Initially, in 2015, several writ petitions were filed for disclosure of the information relating to procedure and rules of inspections conducted by the RBI, inspection reports, records of actions taken against directors/managers for the recovery of public funds, etc. However, the disclosure was denied by the RBI on multiple grounds. In an order passed by the Supreme Court in the case of Reserve Bank Of India vs Jayantilal N. Mistry (2015), the RBI was ordered to disclose the information in the public interest but the RBI failed to comply with this direction.

In 2019, a contempt petition was filed against the RBI in the case of Girish Mittal vs. Parvati V. Sundaram (2019) wherein once again the Supreme Court ordered the RBI to make the disclosures but again no steps were taken by the RBI in this regard.

Finally in 2021, in the case of Reserve Bank of India vs Jayantilal N. Mistry (2021), the RBI filed a petition to recall the order passed by the Court in 2015. However, the Supreme Court observed that the RBI was trying to file a petition for review in the guise of an application for recall and held that the RBI should comply with the order passed in 2015.

Now that we have understood the circumstances leading to this case in brief, let us have an in-depth understanding of the same.

Reserve Bank of India v. Jayantilal N. Mistry (2015)

Brief facts

The Reserve Bank of India (RBI) conducts regular inspections of banks and financial institutions and prepares inspection reports for the same. These reports contain confidential information of the banks and financial institutions and RBI holds this information in a fiduciary capacity. Multiple writ petitions were filed seeking information regarding the procedure and rules of these inspections, inspection reports, records of actions taken against directors/managers for the recovery of public funds, etc.

The disclosure of this information was denied by the RBI on the ground that RBI had a fiduciary relationship with the banks and financial institutions. It was also contended that the disclosure of information was neither in the greater public interest nor in the economic interests of the country.

Held

RBI does not have a fiduciary relationship with banks and financial institutions. The inspection conducted by the RBI is in furtherance of its statutory duty and the inspection reports that are prepared by the RBI are also part of its statutory duty.
By providing the information for the purpose of inspection and by collecting this information, neither the RBI nor the banks and financial institutions are acting out of generosity or in the best interests of each other but are only performing the duties mandated by law.
Just because the label of collection and storing of information in a fiduciary capacity is being added does not mean that a fiduciary relationship actually exists. The existence of a fiduciary relationship depends on the existence of a relationship built on trust and confidence between two parties. However, the relationship between banks or financial institutions and the RBI is statutory and not based on trust or confidence.
RBI, being a statutory body, should act in the greater public interest and not in the interest of individual banks or financial institutions. It is under no legal obligation to increase the profits or protect the interests of public and private sector banks. Therefore, it should act with transparency and it is duty-bound to comply with the provisions of the Right to Information Act, 2005 (RTI Act).
Non-disclosure of the information sought by the Respondents will be detrimental to the public interests of the country and will also be against the economic interests of the nation. Only if the citizens of the country are aware of the economic stability of the banks and financial institutions of the country can the economy truly thrive. There is no threat to the economic security of the country if such documents are disclosed to the general public.
Section 8(1)(e) of the RTI Act states that disclosure of information should be avoided when such disclosure is unwarranted or undesirable. It also states that this provision should be relied upon only in exceptional cases. However, the RBI cannot rely on this provision to deny disclosure of information. This is because the role of the RBI as a regulatory authority is to make the banks and financial institutions accountable for their actions. The disclosure of the information would be in furtherance of this role of the RBI and thus the defence under Section 8(1)(e) of the RTI Act will not be available to the RBI in the present case.
Banks and Financial institutions should not be allowed to defraud the general public and the RBI should protect the interests of the general public by bringing the actions of the banks into the public domain.
The Government of India is based on the principle “of by the people, of the people and for the people.” Based on this principle, it is necessary that the Government discloses all the information regarding matters of public concern. This builds trust between the Government and the citizens of the country and ensures Government accountability at all stages.
The RBI is a statutory body and it has to abide by the fundamental principles of the Government of India. Any information that is not detrimental to the public or economic interest of the country should be disclosed by the RBI irrespective of the impact of such disclosures on private players.

Reserve Bank of India v. Jayantilal N. Mistry (2021)

Brief facts

The Supreme Court in Reserve Bank of India vs Jayantilal N. Mistry (2015) had held that RBI does not have a fiduciary relationship with banks and financial institutions. The existence of a fiduciary relationship depends on the existence of a relationship built on trust and confidence between two parties. However, the relationship between banks or financial institutions and the RBI is statutory and not based on trust or confidence. It further held that the RBI, being a statutory body, should act in the greater public interest therefore, it should act with transparency and it is duty-bound to comply with the provisions of the Right to Information Act, 2005.

However, the RBI failed to comply with the directions issued by the Court in the aforesaid case. The 2019 RBI Disclosure Policy that was directly in violation of the order passed by the court was withdrawn by the RBI after an order for the same was passed by the Supreme Court in the case of Girish Mittal v. Parvati V. Sundaram (2019).

The present petition was filed for the recall of the initial judgment of the court in Reserve Bank of India vs Jayantilal N. Mistry (2015).

Submissions of the parties

Submissions of the Applicants

In Indian Bank vs. Satyam Fibres India Pvt Ltd (1996), the Supreme Court has held that it is the inherent power of every court to recall or set aside an order if such order is affected by the following three conditions:

The order was obtained by fraud
One of the parties of the case misled the Court resulting in the passing of the order
The order suffers from a mistake committed by the Court.

Two additional grounds for recall or setting aside an order were provided in the case of A.R. Antulay vs. R.S. Nayak (1988). These grounds are firstly, non-addition of a necessary party in the case and secondly, the order was passed ex-parte and the party against whom the order was passed had received no notice regarding the hearing of the case.
In Budhia Swain vs. Gopinath Deb (1999), another ground was added to the list, i.e., if an order has been rendered in ignorance of facts then the same can be recalled by the Court.
In Asit Kumar Kar vs. State of West Bengal (2009), the Supreme Court held that the right to be heard is a fundamental principle of the principles of natural justice and if an order is passed without hearing a party, it should be recalled.
In light of the aforesaid precedents, it was contended that the Court had failed to consider several important questions of law and thus the impugned order was defective and therefore an application for recall was maintainable.
It was further contended that banks and financial institutions have the right to privacy that is provided under Article 21. Thus, the disclosure of the information would be an infringement of their fundamental rights.

Submissions of the Respondents

In Delhi Administration vs. Gurdip Singh Uban (2000), it was held that when applications are filed not because any clarification or modification or recall is necessary but because the applicant, in reality, wants a re-hearing, such applications in substance are review applications that deserve to be rejected. A party cannot be permitted to circumvent or by-pass circulation procedure and indirectly obtain re-hearing in open Court and the Court should not permit such application if it is in substance a review application.
In light of the aforesaid precedent, it was contended that the Applicant was attempting to guise a review petition in the form of an application of recall and the same should not be allowed.
In Asit Kumar Kar vs. State of West Bengal (2009), the Supreme Court held that the right to be heard is a fundamental principle of the principles of natural justice and if an order is passed without hearing a party, it should be recalled.
In light of the aforesaid precedent, it was contended that all the parties were given a chance of fair hearing in the initial case. Thus, there was no violation of the principles of natural justice and the order cannot be recalled on that ground.
It was also contended that any information that is not detrimental to the public or economic interest of the country should be disclosed by the RBI irrespective of the impact of such disclosures on the banks and financial institutions.

Held

The Supreme Court Rules, 2013 has no provision under which an application of recall can be filed by any party.
The Court upheld the ruling in the case of In Delhi Administration vs. Gurdip Singh Uban (2000) and observed that the present application for recall was a review petition in disguise.
In In Re: Vijay Kurle And Ors vs Unknown (2020), the Supreme Court had held that if a party files an application knowing that such application is not maintainable, it would amount to an abuse of process of the court.
In light of the aforesaid judgement, the Court observed that RBI cannot abuse the process of Court in an attempt to reopen concluded judgements of the Court.
In light of the aforesaid grounds, the application was held non-maintainable and a direction was issued to the RBI ordering it to comply with the directions issued by the Court in 2015.

Conclusion

The Right to Information Act 2005 was enacted to ensure that the citizens have access to essential information that is available under the control of the public authorities. It was rightly held in 2015 that the RBI is a statutory authority and is bound by the provisions of the RTI Act and should act in furtherance of the objectives set under the RTI Act.

The role of RBI is not limited to ensuring economic/financial stability in the country. It has the additional responsibility of protecting and promoting the interests of the public. However, the manner in which the RBI has acted since 2015 is a clear indication that the RBI is deviating from the duties and responsibilities entrusted to it. The citizens have a right to know about a bank or financial institution before entrusting their hard-earned money to these banks and financial institutions. Only time will tell whether or not the RBI complies with the direction issued by the Apex Court in the present case.

References

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Understanding offences affecting administration of justice through case laws

By

Sneha Mahawar

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November 6, 2021

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This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides an understanding of Sections 340 to 352 of the Code of Criminal Procedure, 1973 by means of case laws.

Table of Contents

Introduction

Chapter XXVI of the Code of Criminal Procedure, 1973 lays down provisions as to offences affecting the administration of justice spread over Sections 340 to 352. The major purpose behind the Code of Criminal Procedure, 1973 is to ensure effective administration of justice by means of the procedural code that needs to be adopted by both the executive and the judiciary in order to dispose of criminal cases. Sections 340 to 352 specifically deal with ensuring the fulfilment of the purpose of the Code by means of providing the procedure that needs to be abided by while dealing with a list of offences that are hindrances to appropriate administration of justice. This article helps the readers understand the provisions of Chapter XXVI of the Code by means of notable case laws.

Sections 340 to 352 of the Code of Criminal Procedure, 1973

Before delving into the provisions with the help of landmark decisions, it is necessary to know as to what the Sections deal with;

Section 340: Procedure in cases mentioned in Section 195;
Section 341: Appeal;
Section 342: Power to order costs;
Section 343: Procedure of magistrates taking cognizance;
Section 344: Summary procedure for trial for giving false evidence;
Section 345: Procedure in certain cases of contempt;
Section 346: Procedure when court considers that case should not be dealt with under Section 345;
Section 347: When Registrar or Sub-Registrar to be deemed a civil court;
Section 348: Discharge of offender on submission of apology;
Section 349: Imprisonment or committal of a person refusing to answer or produce the document;
Section 350: Summary procedure for punishment for non-attendance by a witness in obedience to summons;
Section 351: Appeal for convictions under Sections 344, 345, 349 and 350;
Section 352: Certain judges and magistrates not to try certain offences when committed before themselves.

Jadu Nandan Singh v. Emperor (1910)

The Calcutta High Court while deciding the pre-independence case of Jadunandan Singh v. Emperor (1910) highlighted the importance of a cautious approach that needs to be adopted while setting the criminal law in motion which accompanies a reasonable foundation of the charge in respect of which prosecution is to be directed. Section 340 of the Code of Criminal Procedure, 1973 has laid down the procedure for cases that are mentioned under Section 195 of the Code, and therefore Section 340 sets the criminal law in motion with respect to the offences that affect justice administration. The Hon’ble High Court’s decision, in this case, has been reiterated in the case of Ramautar Mistri v. Rajendra (1961) where the Patna High Court observed that no prosecution must be ordered on any ground if the reasonable probability of conviction was not found by the Court.

Chajoo Ram v. Radhey Shyam (1971)

It is to be noted that when an offence is in relation to a court as under Section 195 (1)(b) of the Code of 1973, the Court’s sanction is to be obtained first. In 1971 the Supreme Court of India upheld the decision made in the two previous cases in the well-known case of Chajoo Ram v. Radhey Shyam (1971). The Apex Court held that such a sanction must be granted in cases where the offence of perjury appears to be of a deliberate and conscious nature, and it must be accompanied by a conviction that is reasonable, and likely. By holding this, the top Court wanted to confer the information on other courts that starting a prosecution for perjury too frequently without due caution, and with reliance on doubtful materials would defeat the purpose of a careful prosecution, and cautious approach by the courts while setting the criminal law in motion thereby affecting proper administration of justice.

Pritish v. State of Maharashtra (2001)

A bench of Justices K.T. Thomas, S.N. Phukan, Y.K. Sabharwal of the Supreme Court of India upheld that the scheme of Sections 340 to 344 of the Code comprises an in-built safety for the individuals sought to be proceeded against, by obliging the court to afford an opportunity of being heard to them, in the case of Pritish v. State of Maharashtra (2001). The Apex Court observed that under Section 340 of the Code of Criminal Procedure,1973, the Court is not bound to conduct a preliminary inquiry. If the Court wishes to do so then, a finding should be made which would showcase that in the interest of justice, a preliminary inquiry is required in the case for the concerning offence. In the latter case, the purpose of such an inquiry is not to conclude whether the accused is guilty or innocent, instead, it is only to decide whether such inquiry is expedient in the interest of justice.

Somabhai Vallavbhai v. Aditibhai Parshottam (1924)

A bench of Justices N Macleod, and Kt. Shah of the Bombay High Court decided on the question as to whether a second appeal will lie before the High Court against an order passed on appeal under Section 341 of the Code of Criminal Procedure, 1973 or not in the case of Somabhai Vallavbhai v. Aditibhai Parshottam (1924). The Hon’ble High Court reasoned that where the first court makes a complaint or refuses to do so, then in such cases the appellate court may withdraw the complaint, or make one by itself. Therefore, no second appeal will lie to the High Court against an order that has been passed on appeal under Section 341 of the Code of 1973.

Amarsang Nathaji v. Hardik Harshadbhai Patel (2016)

The Supreme Court of India in the 2016 case of Amarsang Nathaji v. Hardik Harshadbhai Patel, observed two necessary prerequisites for initiating proceedings under Section 340 of the Code of Criminal Procedure, 1973 which are:

Materials that have been presented before the court of law must be sufficient enough to make out a prima facie case for a complaint about inquiry purposes referred in clause (b)(i) of sub-section (1) of Section 195 of the Code of Criminal Procedure, 1973.
Inquiry in the alleged offence in a particular case is necessary for the interest of justice.

The Apex Court went further to state that it has been provided under Section 343 that the magistrate has to deal with the complaint that has been filed under Section 340 of the Code, in the same way as a police report is concerned. The list of offences provided under Section 195 (1)(b)(i) all fall within the ambit of warrant cases, which ipso facto leads the magistrate to follow the procedure provided under Sections 238 to 243 of the Code. The procedure that has been provided under Section 340 needs to be resorted to only when the matter in concern is of a serious nature with caution.

Dwarka Prasad v. State of Madhya Pradesh (2016)

A single bench of the Madhya Pradesh High Court consisting of Justice P S Chouhan while delivering the judgment in the case of Dwarka Prasad v. State of Madhya Pradesh (2016) took into account Section 344 of the Code which provides a summary procedure for trial for giving false evidence. The Hon’ble High Court observed that under Section 344 of the Code, the Court of Session or the first-class magistrate has been empowered to try perjury cases that have been committed before them, and therefore punish the accused in such cases summarily. The two essential conditions that need to be taken care of before this power is exercised are:

The witness appearing before the court before the latter has delivered the judgment have wilfully provided false evidence with the intention of getting such evidence used in the proceedings.
The court trying the case must be convinced with the fact that trying the person accused of perjury is necessary for the interest of justice.

Surendra Nath Banerjee v. The Chief Justice and Judges of the High Court (1883)

The scope of Section 345 of the Code of Criminal Procedure, 1973 that deals with the procedure in certain cases of contempt was discussed in the pre-independence case of Surendra Nath Banerjee v. The Chief Justice and Judges of the High Court (1883). It was observed that the contempt cases that are committed in the Court’s presence will be covered within the purview of Section 345. It is necessary to note that prior to the passing of the Contempt of Courts Act, 1971, the High Courts of India possessed similar powers like the English Superior Courts under the common law system which empowered the former to punish all contempt committed in reference to it summarily, just like the latter.

Kuber Nayak v. State (1962)

Section 349 of the Code of Criminal Procedure, 1973 which concerns imprisonment or committal of a person refusing to answer or produce a document, was provided with an interpretation in the case of Kuber Nayak v. State (1962). The Court of law observed that Section 349 of the Code is a special provision in connection with the witness who refuses to answer questions that are required under Section 179 of the Indian Penal Code, 1860. It has always been advised to resort to Section 349 of the Code of Criminal Procedure, 1973 before applying Section 345. But prior to applying Section 349, the three grounds which should satisfy the Court to apply the said provisions are:

The witness must have been asked to produce a thing before a criminal court.
The witness has refused to produce the asked thing or document which is in his or her possession.
The witness has been provided with a reasonable opportunity to produce the asked thing but despite the same, the witness has refused to.

Satchidanand Jena v. State of Orissa (1996)

The Orissa High Court while deciding in the case of Satchidanand Jena v. State of Orissa (1996) took into account Section 350 of the Code which deals with the summary procedure for punishment for non-attendance by a witness in obedience to the summons. The Hon’ble High Court observed that whenever a witness is summoned and he or she fails to appear without a justified reason, the Court may try the witness summarily after giving him or her an opportunity to present his or her defence, followed by which the witness will be sentenced to fine which must not exceed Rs. 100. In this case, the Orissa High Court had quashed proceedings under Section 350 that was taking place against a witness who could not appear on the date that was fixed and provided with a reason for his absence thereby expressing his regret.

Conclusion

The provisions under Chapter XXVI of the Code of Criminal Procedure, 1973 are necessary to be well acknowledged because they take the responsibility of erasing any kind of hindrances that can encroach upon the administration of justice. The case laws that have been discussed in this article provide an explanation of the provisions under this chapter so that the reader can relate to the procedural aspect of the idea underlying beneath this chapter of the Code.

References

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Importance and benefits of contract negotiation

By

Oishika Banerji

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November 6, 2021

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

Table of Contents

Introduction

Contracts are very common in everyday business transactions between different businesses, businesses and consumers and between consumers as well. Contract negotiation is a process where two or more parties describe the terms of contract before signing the agreement and making it an official contract.

The main purpose of contract negotiation is for all parties to be aware of the rights and duties and feel comfortable with the details of the contract and to obtain the assent of all the parties before proceeding with the contract. Contract negotiation is the final and most important stage of a contract, of the contract as this is where the parties discuss achieving a uniform goal. It is vital for a business to “partner “with a vendor who would help the business to achieve its goal and objectives along with fulfilling its obligations.

Contract negotiation should be positively beneficial to both parties in every area to achieve an equitable and fair deal. A well negotiated contract lays down a solid foundation for a long term relationship between both the parties .

Problems faced because of improper contract negotiation

1. Developing countries face a lot of intricacies and challenges when it comes to large-scale projects , government transactions. A well negotiated contract is very important not only for the parties to fulfil the current obligations fully, it should be foreseen for a long duration .The contract should be well defined and regulated by establishing the essential parameters. This is the most important reason why the emerging markets in developing countries need fine-tuned negotiation.

2. Many developing and underdeveloped countries are exploited only because they lack the financial resources and expertise while negotiating with a developed country. Especially when it comes to transactions between the government of two or more countries is imperative for a well-negotiated contract, in most case the governments of developing countries fail to negotiate the proper terms of the contracts, which most of the time leads the developed countries to be dissatisfied as they did not receive the desired benefit from the project. Such services which involve the relationship between two or more countries not only affect the parties of the contract and the profits derived from such contract but also the stakes and the credibility of an entire nation on a global level .

3. Conflicts that arise out of contract leads to expensive arbitration or lawsuits, the costs involved in arbitration and litigation are huge. The arbitral awards could amount to crores of rupees which could totally disrupt the project and the business‘s financial stability and reputation. This is the main reason for failure of many start-ups in India.

4. It is very important for the attorneys to take the long term victory of a business into consideration and not focus on short-term goals. The attorneys who focus on immediate returns put the business at a huge risk.

5. In most of cases one of the parties has more bargaining power than the other. The weaker party struggles to reach on equal footing during negotiation. Which ultimately creates friction in the weaker party’s mind even before the start of the contract.

6. While negotiating the parties should take into account the rapid changes occurring in the outside world , which are also vital factors and these crucial details should not be missed.

Importance and benefits of negotiation of contracts

1. Structure and Planning – As planning is the most important stage of any project, the best way to discuss planning and mapping out the structure is through negotiation. A clear plan lays down a proper foundation for a successful project, avoids impromptu confusions and saves money. Therefore everything, from starting the project to receiving the outcome of the project needs to be clearly chalked out to obtain the best possible outcome.

2. Certainty –The chief intention of contract negotiation is to achieve certainty on quality, quantity, and the repercussions of unfulfilled objectives by either of the parties .

3. Clarity – Negotiation helps the parties to have a transparent view of each other’s mind and expectations.

4. Ambiguity- Goods and services which need to be provided should be clearly defined without any ambiguity.

5. Best deal- It is very important to see clarity and not conflict within the negotiation. It should achieve the best deal for both parties. It is very important for both the parties to negotiate and have an understanding which they both have agreed upon.

6. Achievement of an organisation’s objectives- the goal of every negotiation should be to achieve the desired result, even if it falls short of the original objective and it cannot be achieved a satisfactory advancement should be worth creating the contract.

7. Long-term relationship- Most of the cultures such as the Japanese place emphasis on the aspect of negotiation which creates long term relationships and it’s very important for the business to build allied partners and business relationship networks.

8. Avoiding Conflict – As the consequences of the conflict are time-consuming and expensive, it is vital to spend time and money during the negotiation stage to avoid further possible contracts.

9. It helps to avoid intercultural barriers – Every country has a different culture and style of working, through negotiation we can effectively meet the requirements of both the parties .

10. Finance – The root of most of the conflict is financed therefore it is important for the parties to mention all the finance in detail (e.g.: total cost, payment schedule, mode of payment).

11. Date and time– Both the parties should negotiate on the event of the fulfillment of transaction clearly. Proper estimation of dates is very important as date and time directly impacts the monetary aspect of both the business. Therefore, a clear definition of important dates like the date of commencement, date of termination or renewal of the contract is important .

12. Risks and Liabilities– It is at the stage of negotiation that both the parties can foresee and prepare themselves for future risks and liabilities .

13. Definition of goals –

The parties need to jointly define goals for their business and effective ways to achieve the set goals.
The goals are
further divided into short term goals and long term goals both of which have to be clearly defined, the liability lies on the attorney to give preference to both the goals depending on the requirement of the type of goal.
Profit- By effective negotiation the business will be able to sell at a larger price which will yield more profits which is the most important objective of the business therefore the negotiator and the business both can make good profit . A good negotiator is an invaluable asset to the organization and good negotiation directly impacts the growth of the business .

Steps for contract negotiation

As we have vividly looked into the problems and importance of negotiation of contract we shall discuss good negotiation steps and strategies to achieve a good negotiation outcome and to overcome the challenges of negotiation .

1. Goal of the contract – The ultimate motive behind the construction of the contract shall be to identify the goal of the contract negotiation (Eg : merger contract , real estate contract ).

2. Questions – negotiation is the best stage for the parties to address each other’s concerns and questions.

3. Geographical laws – It is very important to abide and comply with the regulations of the local laws for the success of a project.

4. Contract laws – As contract laws from one place to another absolute knowledge of contract laws is essential.

5. Research about the other party – A thorough research about the other party is very important to anticipate what they might bring up on the table while negotiating. A thorough research helps in anticipation and aligning of goals.

6. Assess risks – unexpected turns like change in government regulation, or change in either of the business can harm the project therefore immunities like insurance, additional costs during contingency should be anticipated and reserved.

7. Negotiation Strategies

1. Negotiate the contract into parts – The whole contract is very lengthy which leads to the possibility of missing out on a few parts therefore, every clause needs to be negotiated in small parts.

2. Separate personal emotions and business negotiations – often when people like the other party they tend to agree to all the terms of the party which in turn might result in a loss in the longer run. Therefore keeping emotional feelings and business discussions distinct, is vital.

3. List out priorities – when priorities are clearly listed out the negotiation discussion becomes a very easy and smooth process. Sometimes everything seems important but to reach a fair deal both the business needs to compromise hence listing out the most important priority is very important.

4. Good cop bad cop method – While negotiating it is great if one person shoots hard questions and other poses submissive questions. This gives a comfortable and strong approach to the other party .

Conclusion

Contraction negotiation being the last phase of the contract life cycle is one of the most expensive stages of the contract life cycle. Now – a – days contract negotiation starts in the drafting stage itself while the parties exchange their drafts to add essential clauses .

There are various mediums of contract negotiation unlike the traditional conversation like negotiation on video conference, normal call, emails etc. The parties proceed with the assumption that all these negotiations will be reflected in the final agreement. Drafting a final agreement with equitable benefit and full consent of both parties is easier said than done .

References

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Period poverty : need to reform laws to achieve menstrual equality

By

Diganth Raj Sehgal

-

November 6, 2021

0

160202185152-china-women-period-leave-illustration-2-super-tease-696x392 — Image source: https://bit.ly/3mxCPfN

This article is written by Vandita Bansal, a student of Symbiosis Law School, Noida. The article discusses various menstruation-related taboos prevalent in India and period poverty faced by women.

Introduction

“I am not free while any woman is unfree, even when her shackles are very different from my own” ~Audre Lorde

Menstruation is a natural process, and basically, all women of reproductive age in the workplace go through this cycle every month. It is a natural process that begins in females between the ages of 11 and 14 years old and is one of the signs of the start of puberty among them. In fact, at any one moment, almost one-quarter of the female population would be experiencing this cycle. Menstruation has long been associated with taboos and beliefs that restrict women from many parts of social and cultural life. In India, over 365 million women and girls menstruate, with just 18% of women using menstrual hygiene products. This is due to poverty, a lack of understanding, social taboo, and a variety of other factors. It is not just an economic and social issue, but it is also a fundamental one that must be addressed. If menstruation is natural, why is it viewed as taboo?

What is period poverty

Period poverty is a worldwide problem, with millions of women and girls suffering and even threatened because they cannot afford basic period care. Period poverty is defined as a woman’s difficulty to buy menstrual hygiene products in total. Products include more than just sanitary pads, tampons, and menstrual cups. It includes a variety of other problems like the cost of medication facilities and many more. It results in the change from sanitary to unsanitary items such as clothing, toilet paper, rags, and so on. The inadequate access to menstruation products and hygiene education has been a serious obstacle in achieving menstrual equity. Cases like shortage of sanitary napkins, washing facilities, and waste management make this a costly issue for every woman. Inadequate access to menstruation products and hygiene education has been a major impediment to achieving menstrual equity. The cases of not only a shortage of sanitary napkins but also of washing facilities and waste management make this a costly issue. The discussion on period poverty attempts to open a dialogue in order to reduce stigma and promote basic knowledge on menstruation.

It is also important to remember that ‘not all menstruators are women, and not all women menstruate’ while considering period poverty. There are women all over the world who do not have menstruation because of a variety of medical problems. It is important that we have a discussion regarding menstruation that goes beyond the gender binary. Menstruation is also strongly affected in most third-world nations as a result of malnutrition, and India is no exception.

Menstrual products and affordability

Though some people have the option to choose and buy between menstruation cups, tampons, and pads on a daily basis, there are still the majority of people in India who do not have the money or resources to do so. Pads, the most easily available sanitary item, are not economically affordable for the majority of menstruators. Also, not to forget tampons and menstruation cups, which are easily available in cities.

Luckily, the situation is getting better. According to findings from the National Family Health Survey (NFHS-5), the majority of women who use sanitary products and follow hygiene throughout their menstrual cycle have grown across states and union territories. As of 2019-2020, Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Goa, and Telangana were among the states and UTs with the highest percentage of women using menstrual hygiene products. However, Bihar had the lowest proportion of women using safe menstrual items, at 58.8 %.

Root causes of period poverty

Period poverty in India has been increased by a variety of factors, including expensive sanitary product pricing, a lack of information about their use, and the normalization of silence surrounding menstruation and related cultural ignorance as a “women’s problem.” Period poverty has three aspects: a lack of knowledge, acceptability, and access. The taboos, stigmas, and misconceptions regarding menstruation are some of the primary and most major causes of period poverty. Every discussion regarding menstruation is muted, and the silence around the topic has become so common that people are embarrassed if they break it. This, in turn, worsens the already-existing problems.

Period poverty around the world

Lack of access to menstruation products has become a worldwide issue. However, in this aspect, discussions on menstruation sometimes ignore the intertwining of class, caste, and gender. The taboos and lack of information further normalize embarrassment regarding menstruation and promote stigma all over the world.

In 2020, Scotland became the first country in the world to provide its menstruators free access to sanitary products by unanimously passing the Period Products Free Provision Scotland Bill in Parliament. The Bill was introduced by Monica Lennon, a Scottish Parliamentarian. She has been fighting for the elimination of period poverty since 2016. According to the Bill, authorities were given legal responsibility to make sure that products such as tampons and sanitary pads be provided free of charge to anybody who needs them. From 2018, these items were provided in schools, but the government has now taken a step further, making tampons and pads free in all public areas. “Menstruation is normal. Free universal access to tampons, pads and reusable options should be normal too. Period dignity for all isn’t radical or extreme. It’s simply the right thing to do.“, said Monica Lennon. Since then, the example was set for the rest of the world to follow.

On February 18, 2021, to eliminate period poverty, the Prime Minister of New Zealand Jacinda Ardern declared that all schools will have free access to sanitary items starting from June 2021. According to research, one in every twelve teenage girls misses school because of this issue, and Ardern’s government wants to eliminate period poverty in the country with this campaign. In a declaration, she stated, “We want to see improved engagement, learning and behavior, fewer young people missing school because of their period, and reduced financial hardship amongst families of participating students. Providing free period products at school is one way the government can directly address poverty, help increase school attendance, and make a positive impact on children’s well-being,”.

Several other nations are also trying to eliminate period inequity in their own ways. In an effort to eliminate period poverty, Britain announced in January that it will repeal the 5% VAT on female sanitary items. As per the BBC, the European Union (EU) is in the process of abolishing the period product tax. In the Republic of Ireland, however, such items are exempted from VAT.

Periods are not a luxury, therefore items should not be charged at a higher rate. Even Germany reduced the tax on tampons and sanitary pads from 19% to 7% starting in 2020. France, Spain, Poland, and Austria have also reduced sales taxes on sanitary products. Kenya, a lower-middle-income African country with 36.1 percent of its population living below the poverty line (2015/2016), reduced the VAT on sanitary pads and tampons in 2004 to make them more affordable. Also, the Kenyan government has planned for a program to provide free sanitary pads at schools in low-income communities.

Poor menstrual hygiene is not limited to developing nations, even people living in developed countries cannot afford sanitary items and end up using rags, newspapers and toilet rolls, etc.

Right to bleed with dignity

In the United States, a new way of campaigning known as the menstruation movement or period movement has grown since the 1970s. The movement began in the 1970s in response to toxic shock syndrome, a rare and deadly illness caused by bacteria growing in tampons used to collect menstrual blood. The movement is focused on a woman’s personal comfort.

The effort has also brought in free hygiene products in school washrooms. As part of “menstrual equality,” efforts have now been made to expand this campaign to trans men who also menstruate. In the United States, several colleges are providing free menstrual products in men’s washrooms, claiming unheard menstrual rights.

Menstrual Hygiene Management

Empowering women and girls to handle their periods with dignity is not a problem that should be given to women and girls to solve on their own. Instead, all societies, governments, and non-governmental organizations (NGOs) should work together to find multiple solutions to existing challenges. MHM (Menstrual Hygiene Management) involves three main steps:

Menstruation education and awareness, as well as ways of dealing with it in a dignified manner.
Adequate water and safe places for women and girls to keep clean during their menstrual cycles.
The facility of providing safe and easy disposal of sanitary items.

MHM is important because the difficulties these women and girls suffer during menstruation restrict them from exercising their human rights, changing a natural fact that nearly all women suffer a barrier to gender equality. Menstrual hygiene rights are human rights, as the concept of human rights says in the Preamble of the Universal Declaration of Human Rights that all human beings should be identified for their basic dignity. This is challenging for women to do without proper menstrual hygiene management practices. Menstrual hygiene rights are also related to the rights to non-discrimination, to health and a healthy environment, to education, and to work.

Effective menstrual hygiene management is also required to fulfill a number of the Sustainable Development Goals, such as ensuring healthy lifestyles, equal and fair education, gender equality, clean water and sanitation, and economic growth. Menstrual Hygiene Management also helps to keep the environment clean by reducing waste and conserving water.

Menstrual Hygiene Day

Menstrual Hygiene Day was formed in 2014 by the German-based NGO WASH United to publicly honor women’s right to manage their menstruation in a clean environment wherever they are. Menstrual Hygiene Day (28 May) addresses the stigmas associated with menstruation via social awareness, education, and action by recognizing that menstruation is a natural human activity and a sign of good health. The taboo related to discussing menstruation must be eliminated. The campaign for respect for menstruating women goes beyond their right to visit places of worship. It involves giving them suitable sanitary napkins as well as a healthy diet.

Menstruation and human rights

Human rights are those rights that almost every individual enjoys as a result of his or her human dignity. We can say menstruation is inextricably linked to human dignity. If women do not have efficient bathing facilities and effective and safe ways of managing their menstrual hygiene, then it is difficult for them to manage their menstruation with dignity. Taunting, isolation, and humiliation due to menstruation also violate the concept of human dignity. Dignity and health fall within the ambit of life and liberty under Article 21 of the Indian Constitution. Since the Right to Health is a part of the fundamental right to life, it is a basic right guaranteed to every Indian citizen under Article 21.

Even gender inequality, extreme poverty, humanitarian crises, and bad practices transform menstruation into a period of deprivation and humiliation, affecting women’s enjoyment of basic human rights. This is also applicable for women and girls, as well as transgender males and nonbinary people who menstruate. Every person at some point in their life faces menstruation-related exclusion, neglection or discrimination.

Some of the rights which get affected by how women and girls are treated during menstruation:

The right to health – Whenever women and girls lack the resources and facilities required to maintain their menstrual health, they also suffer health problems. Menstruation taboo can also discourage women and girls from seeking medical help for menstruation-related illnesses or pain, restricting their right to enjoy the best of health and well-being. The global community has decided to address this and provide safe Water, Sanitation, and Good Hygiene (WASH) for all people by 2030 under the Sustainable Development Goals (SDGs), adopted in September 2015.
The right to non-discrimination and gender equality – Taboos and beliefs regarding menstruation often promote unfair practices. Menstruation-related restrictions to school, job, health care, and public activities further promote gender disparities.
The right to water and sanitation – Water and sanitation facilities, like bathing facilities, which are personal, healthy, and culturally acceptable, as well as an adequate, safe, and cheap water supply, are essential requirements for maintaining menstrual health management.
The right to education – A lack of a safe place or the skill to manage menstrual hygiene, as well as a lack of treatment to reduce menstruation-related pain, can all lead to increased rates of school absence and poor educational results. Some studies have found that when girls are unable to manage menstruation well at school, their attendance and performance drop. This creates a great impact on their dignity and well-being, as well as their right to an education and to work.
The right to work – Poor access to adequate ways of managing menstrual hygiene, as well as a lack of medication to treat menstruation-related problems or discomfort, limit women’s and girls’ employment opportunities. They may refuse to take certain professions, or they may be forced to reduce working hours and salaries.

What is being done

Regardless of the challenges raised, it is important to recognize that much is being done across the world to eliminate period poverty. UNFPA (United Nations Population Fund), for example, offers a number of strategies to promote and enhance menstruation health across the world. Among these are:

Menstrual supplies and clean sanitation facilities are provided directly to women and girls by UNFPA. In times of humanitarian crisis, UNFPA provides dignity kits, which include disposable and reusable menstruation pads, underwear, soap, and other essentials (In 2017, 484,000 dignity kits were provided in 18 countries).
Menstrual health education and skill development are also promoted by the UN organization. Some UNFPA initiatives educate girls on how to make their own reusable sanitary napkins. Others provide information on menstruation cups.
Furthermore, as a human rights problem, the organization seeks to promote menstruation education and awareness. This is provided through youth programs and comprehensive sexuality education initiatives such as the Y-Peer program.
Similarly, UNFPA is contributing to the collection of data and evidence related to menstruation health and its relation to global development. Surveys funded by UNFPA, for example, give important information into girls’ and women’s understanding of their menstrual cycles, health, and access to sanitary products and facilities.

The Sanitation and Hygiene Fund

The Water Supply and Sanitation Collaborative Council has been replaced by the Sanitation and Hygiene Fund (SHF). A new global financial institution that functions continuously to ensure that no one is left behind. The SHF, in collaboration with donors and other partners, seeks to fill a gap in the worldwide response to the sanitation, hygiene, and menstrual health crises by providing nations with the resources they need to achieve sanitation and hygiene for everyone.

Despite the efforts of appropriate authorities within the United Nations human rights system, especially the treaty-monitoring bodies and the Human Rights Council’s specific guidelines, neither of the core international human rights treaties deal freely and directly with the problem of menstrual hygiene. Hence, the issue continues to receive less attention in the area of policy, research, and resource allocation.

It is the responsibility of the State to ensure fulfillment of all human rights, including those relating to menstrual hygiene, and also take steps, both nationally and through international help and cooperation, especially economic and technical guidance, to respond fully to menstrual hygiene needs through all means available, such as the adoption of applicable legal frameworks.

Period poverty in India

Due to the lack of resources available, India’s policy of exempting sanitary napkins from service tax didn’t create enough impact on both people and the economy. As per, the study of the Indian Ministry of Health, only 12% of menstruating women in India have access to hygienic sanitary products. The remaining 88%, on the other hand, are dependent on unhygienic products like rags, cloth, sand, leaves, etc as their only options. This puts them at risk of infectious urogenital diseases like Urinary tract infection (UTI), vaginal itching, bacterial discharge, etc.

As a result of this social shame, isolation, humiliation, and lack of access to products, more than 40% of students in India miss their school when they are menstruating. Avoidance of education because of menstruation shows the country’s lack of adequate sanitary facilities. It is believed that one out of every five girl children drops out of school soon after they begin menstruating. As a result of such inefficient and unhealthy measures, young girls are exposed to various physical health problems at a very young age. It also impacts their sexual, reproductive, and mental health. The increasing privatization of India’s health system has eventually ignored the demands of a large section of the country, especially the menstruating women.

Though the sex education curriculum addresses the difficulties of menstruation, it always reaches the people after they start experiencing the menstrual cycle. As a result of the lack of information on this, around 71% of India is clueless about ‘what a period is’ before they go through it. Even the exclusion of boys from menstrual education creates a sense of confusion among them, which leads to incidents of discrimination based on ‘period shame.’

Another issue for girls is that 40% of government schools in India do not have well-functioning common toilets and others don’t have separate toilets for girls and female teachers. Among the incidents of poor sanitation, access to sufficient sanitary products remains to be a question. The main issue is the lack of menstrual-friendly culture in schools. First of all, the non-availability of female teachers throughout the country, especially in rural areas seems to be unaddressed, and second is the cultural taboo attached to menstruation restricts the involvement of male teachers in such conversation. In India, menstrual products are not considered as necessary as other products. Thus, it doesn’t come in essentials because of people’s conservative thinking and beliefs.

Interventions and period poverty

After a voice raised by many people and activists on social platforms, various non-profit organizations are working in developing menstrual equality policies throughout the country to solve the challenges faced by women due to the unavailability of sanitary products. Even the government is trying to create an impact for the same among people. In 2014, the “Swachh Bharat: Swachh Vidyalaya” initiative was launched with the motive of providing functioning and well-maintained ‘WASH’ facilities in schools throughout the country. The facilities provided under ‘WASH’ are soap, a private area for changing pads, enough water for washing, and a place to dispose of old and used sanitary napkins.

Also, Menstrual Hygiene Management (MHM) suggests that both teachers and school administrations should participate in spreading awareness about menstrual health and its consequences.

Time by time, efforts have been made by the government to uplift the menstruation taboo like the introduction of napkin vending machines and eco-friendly disposal techniques. On Women’s Day in 2018, the government introduced 100% oxy biodegradable sanitary napkins, named ‘Suvidha’ in packs of four for the price of ten rupees. Though the government tried to incorporate the use of sanitary napkins through this campaign, it failed to create a nationwide awareness.

Organizations tackling period poverty in India

Here are some of the organizations which try to tackle period poverty in the best way they can.

Project Stree

The founder of this organization, Juhi Patel while growing up in India, witnessed menstrual health stigmas and period poverty from the very core. In an interview with The Borgen Project, she said, “I simply felt so incomplete not having done anything about it”.

She co-founded Project Stree a non-profit organization in 2019 with Ria Soni. The project aims to eliminate period stigma and address period poverty in India. The organization organizes various seminars in communities to raise menstrual education and awareness along with distributing eco-friendly pads. Fighting period poverty in India, according to Patel, is about more than merely giving free sanitary products. “It is also for those women who don’t have a voice and don’t feel secure in their body to be able to stand out for themselves,” she explained.

The limited access to sanitary facilities can also be linked to taboo. Many Indian women are embarrassed to buy sanitary pads even when they can afford them. In rural areas, when menstruating women and girls are not permitted in religious institutions, they are then forced to spend nights in menstrual huts to avoid contact with any person as the impure blood makes them untouchable. To address this concern, Project Stree began physically delivering pads to communities and homes. Since its start in 2019, Project Stree has helped over 2020 people and provided 6,965 pads, assisting in the reduction of period poverty in India.

Sanitation First

Breaking the taboo of menstruation is simply one part of addressing period poverty in India. Many girls living in poverty do not have access to safe and cheap sanitary products. Because of poverty, their families are forced to choose between food and these items. The COVID-19 pandemic has worsened the situation for them when even food items are not available to them. Thirukurungudi Santhanam Padmapriya, the chief executive of Sanitation Primary, told The Borgen Project that for many Indian households, “the first concern is to secure food with whatever money is available for the family.” Then, and only then, we can consider buying sanitary products.”

Sanitation First is a non-profit organization committed to reducing period poverty in India via the distribution of sanitary napkins, teacher training, and student education. Sanitation First offers anti-microbial napkins known as Safepads, which prevent infectious microorganisms. Additionally, the organization created areas and facilities throughout schools for the proper disposal of sanitary napkins. Padmapriya, also, stated that this was not the “end-all solution.” “We need to start focusing on hygiene education.” The hygiene education is not limited to girls as “we thought that girls are only a small portion of the population, so we target everyone,” she explained. Education campaigns have been started by them to remove the stigma regarding menstruation. Due to the implementation of the teaching programs in their schools, about 92 percent of boys and 91 percent of girls thought that periods should not be kept hidden.

The Humanify Foundation

Humanify Foundation founder Niraj Gera also organizes seminars and workshops where he interacts with both boys and girls. The Humanify Foundation is a non-profit organization started in India. In 2019, it started a major campaign in rural India to educate and raise awareness about menstruation. The organization holds seminars in communities and schools and distributes sanitary napkins to low-income women. Gera is a motivational speaker who promotes a variety of causes. As a man, discussing these problems motivated young girls to feel secure and to discuss their periods with their families more freely. The Humanify Foundation also issued a photography series portraying menstruation taboos and difficulties that women experience.

What can the government do

If we want to change the way menstruation is seen today, the education, health, and municipal sectors should collaborate on this initiative. Here are some pointers which can be used to address the issue and ensure growth in terms of menstrual hygiene management (MHM).

Providing sanitary goods for free/reduced rates

Making sanitary products more available to women is one of the most important ways to prevent period poverty. Moreover, the figures show the lack of access to sanitary items is severely disappointing in rural parts of the country, even metropolitan cities are the same in this situation. Moreover, while the figures that show the lack of access to sanitary goods are severely disappointing in rural parts of the country, metropolitan cities are not performing much better in these areas. As a result, rather than just reducing taxes, governments should ensure that high-quality sanitary items are given free of charge, mainly people belonging to the lower strata of society.

Bettering other facilities

Whenever the government plans to construct more toilets, they should consider that public toilets are places where gender issues arise. They must prioritize menstrual health management in their development plans, which usually focus on infrastructure growth (in quantity) above improving the already awful public toilets.

As already said, the areas of health, education, and infrastructure must work together to create a more gender-equitable society. Therefore, various amenities such as water supply, waste management systems, public safety, well-maintained public toilets, and gender-sensitive infrastructures should be put in place in order to establish a functioning and successful MHM system.

Conclusion

Menstrual health is still considered taboo in many countries. The shame of menstruation and menstrual sanitation is a clear violation of various human rights, especially the right to human dignity. Therefore, resolving these challenges requires a thoughtful approach. One solution can be to start a movement that does not exclude any vulnerable menstruators (girls with physical and mental disorders, trans-men, teenage girls living on the streets, child workers, and persons in imprisoned juvenile centers). It is high time that period poverty should be identified as a part of the country’s public health crisis.

Government can reduce stigma by enlightening themselves, normalizing conversations about periods, imposing gender-sensitive policies (mandatory menstrual hygiene sensitization programs, menstrual leaves), providing sanitary items and services in schools and workplaces, prioritizing menstrual health and well-being as much as food, water, or medicines, and revising health curriculum in schools and universities.

Menstruation is a natural biological process, and young girls and women should realize that they can reproduce only because of this virtue. ‘Menstrual Hygiene,’ as one of the most basic fundamental human rights, needs immediate attention and action across the country, and this cannot wait.

References

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Changing dimensions of economic crime

By

Abanti Bose

-

November 6, 2021

0

piracy — Image source - http://bit.ly/31ft5er

This article has been written by Akhoury Anusheel pursuing the Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

An economic crime, as the name indicates, is a crime that has an adverse impact on the economic standing of an individual or group of persons, a company or many such institutions, or the government (State or Central), thus affecting the economic condition of a certain nation.

These crimes differ from crimes against persons because they do not directly affect the physical state of the person aggrieved. In simpler words, an economic offence, say fraud, is different from assault because the former implies the illegal extraction of money from a person’s bank account, whereas the latter implies creating actual fear of imminent physical injury in a person’s mind and/or causing actual physical injury to said person.

Such crimes are also called white-collar crimes or blue-collar crimes. They are different from crimes against persons as they lack the element of violence, happen after careful deliberation, and are oftentimes committed by groups of individuals, especially those who have a say over others, i. e., those with influence, such as directors of a company, general managers, politicians, bureaucrats etc.

Economic offences are symbolic of an ailing government and give evidence of a corrupt bureaucracy and executive, the market and institutions. The following definition may be handy here:

“Corruption… has a wide range of corrosive effects on societies. It undermines democracy and the rule of law… distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.”

Another definition of economic crime is as follows:

“Economic crimes are a manifestation of criminal acts done either solely or in an organised manner with or without associates or groups with the intent to earn wealth through illegal means, and carry out illicit activities violating the laws of the land, other regulatory statutory provisions governing the economic activities of the Government and its administration.”

There are certain characteristics of economic crimes that make it different from other crimes, or crimes against the individual. These are:

The intention behind an economic crime is to gain some material profit or escape material loss, or to cause the aggrieved person some material loss. Here, material profit and loss also includes pecuniary (monetary) profit or loss.
Such offences contain elements of criminal breach of trust, deception, fraud or cheating.
Economic offences do not cause physical/bodily harm to a person, but adversely impact his/her financial health; companies or other financial institutions too can be targeted.
Such crimes have a negative effect on a country’s financial standing.
These offences are committed by privileged or well-off sections of the population – people with influence in the economic or political spheres of society, who have access to secure, sensitive information as well as the reach to commit said offences.

Kinds of economic crimes

Economic offences can be broadly classified into three types, which are as follows (However, this categorization is not exhaustive):

Traditional economic offences like corruption, smuggling, false imports, etc.
Emerging or modern economic offences such as credit card theft/fraud, counterfeiting of currency, UPI fraud, cyber crimes, etc.
Cross-border economic offences which consist of offences such as money laundering.
Now, we shall look at some of the aforesaid economic offences in brief.

Blackmail – not entirely an economic offence, but has an economic aspect to it. It is a threat to do bodily harm to a person, in order to coerce another person to give something valuable – money, a precious object, sensitive information, property, etc.
Bribery – a very common kind of economic offence – this is an act in which money, or any other valuable object is given or accepted, in expectation of or in return for favours related to say, employment opportunities, promotions, bureaucratic circumvention, etc. Government officials, politicians, members of the executive body of the states and nation oftentimes give or accept bribes. It is a crime to both give and accept a bribe.
Credit card fraud – unauthorized access and use of a person’s credit card to purchase something of value, or siphon money.
Forgery – Passing off a fake negotiable instrument as genuine, so as to defraud or cheat the recipient.
Insider trading – When a person/employee, working at a company or institution has sensitive, confidential information related to the business, and uses it to trade in shares of publicly held corporations.
Insurance fraud – across kinds of insurance, when the insurer defrauds the insured of his or her funds.
Money laundering – the investment or transfer of money from racketeering, drug transactions or other embezzlement schemes so that it appears that its original source either cannot be traced or is legitimate.
Embezzlement – a person entrusted with the safekeeping of money or property, seizing it for his or her own benefit.
Racketeering – a broad term which covers any illegal business transaction done for personal gain.
Tax evasion – different from tax avoidance, which is legal (tax avoidance is finding nitpicks in the law to legally “escape” from payment of avoidable taxes). Tax evasion is the illegal hiding of income, which in turn allows persons to file lower tax returns, therefore enabling them to save money.

Aside from these general terms, there are many economic offences mentioned in the Indian Penal Code, 1860, but they are too many to mention here.

Computer-aided/cyber economic offences

[Note: It should be kept in mind that economic crime and financial crime are synonymous with each other and so are cyber economic crime and cyber financial crime. This is to avoid confusion.]

All cyber economic offences are not new offences unheard of entirely in as much as they are the same offences already known committed through new means – technological aids which have been the result of time and are misused for such purposes. However, some are new crimes entirely.

Common cyber crimes include hacking of a computer device or network, stealing sensitive personal information (often financial details), fraud and cheating. These are just a few examples of many attacks which happen with the aid of technology and the internet. Some attacks are large-scale and sophisticated, requiring a clear understanding of banking institutions, their systems, fail-safes, security measures, etc.

For example, in 2018, the World Economic Forum noted that fraud and economic crime constituted a trillion-dollar industry and that in 2017, private companies spent a total of $8.2 billion on anti-money laundering strategies and systems alone.

Cybercrimes such as illegal trafficking and money laundering are on the rise, as many methods of payment, sale and overall exchange of currency have opened. New methods mean more paths for potential attacks. With an unyielding increase in digitization and automation of financial institutions and their systems, financial or economic crimes have become legion.

The blurring of the traditional division between a financial crime and fraud is also an aspect of recent origin. For instance, financial crime has generally consisted of money laundering, bribery, tax evasion and the like. Fraud, contrariwise, points to offences such as forgery, insider trading, deception, theft, credit scams, etc. But these boundaries are becoming less distinct and more entangled, in the sense that cybercrimes of an economic nature move between the spheres of both financial crime and fraud.

Conclusion

Economic offences have taken a different shape in the past two decades or so. With the advent and upsurge of the internet, access has increased – to financial institutions and to sensitive financial information of people. This has given rise to new risks in everyday transactions and businesses, of which not everyone is aware. The ease of use has made transactions seem trivial, but perhaps it is due to this familiarity that victims of economic offences suffer. The technology and ease we have should not be taken for granted. Other points are valid too, that technology and ways of exchange of currency are ever-evolving at a rapid pace and our own legislators and present legislations cannot keep up with the same, which results in more instances of such crimes. Sometimes, the perpetrators escape punishment. People with influence are another factor – they have a say over the flow of commerce and trade, they know the pulse of the market, and are able to manipulate the same to their unfair advantage. It is difficult to apprehend such individuals, due to their influence, but apprehensions must be made, sooner or later, because this cannot be left unchecked. The bottom line remains, be aware, be cautious; information is key to safety – both of the person and the society and nation at large.

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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Whether the job of a judge is onerous or pious

By

Diganth Raj Sehgal

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November 6, 2021

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This article is written by Srilakshmi S P, a student of JSS Law College, Mysuru. This article explains the job of a judge who is respectable and admired in India and the eligibility to be hired as a judge coupled with duties and responsibilities.

Introduction

Judges play a vital role in interpreting the sections of the statutes and articles of the Constitution. A judge is a person who can exercise and enforce laws within a limited jurisdiction. They hold the public office vested with the authority to hear, determine and preside over legal matters brought into the court of law. The term ‘Judge’ is defined in many statutes such as the Code of Civil Procedure, Indian Penal Code, Code of Criminal Procedure. Judges ensure that there is a fair trial and the verdict is delivered at the end of the case. Judges protect the dignity of the court in society without any bias and dicey situation.

Eligibility to become a Judge

The common criteria to become Judge are:

They must be citizens of India;
Should have LL.B/LL.M degree from a college recognised by the Bar Council of India;
If the appointment is through examination he/she should have secured a minimum of 55% in the final examination.

Eligibility of persons to appear for the exam

Advocates, Attorneys and Pleaders;
Fresh Law graduates;
Members of Ministerial Staff of High Court;
Members of Staff working as Legal Assistant or above in the Law and Judiciary Department in the Government;
Members of Ministerial Staff of the Government.

To become Chief Justice of India

Article 124(2) of the Constitution of India provides for the appointment of CJI.

They should be the senior-most judge of the Supreme Court and should be considered fit to hold the office.
The Union Minister of Law, Justice and Company Affairs should seek the recommendation of the outgoing Chief Justice at an appropriate time.

To become Supreme Court Judge

Article 124(2) of the Constitution of India provides the appointment of the Supreme Court Judge.

They should be a High Court Judge for 5 years or should practice as an advocate in High Court for 10 years.
If it appears to the President of India that they are an exceptional jurist.
They should be below the age of 65 years.

Article 128 of the Constitution of India provides for the attendance of retired judges of the Supreme Court. The Chief Justice of India with the consent of the President of India can appoint a retired judge of the Supreme Court or retired judge of the High Court as a Supreme Court judge if they possess all the qualifications to become a sitting judge of the Supreme Court.

To become High Court Judge

Article 217(2) of the Constitution of India provides the appointment of High Court Judges.

They should have held judicial office for 10 years in India. Judicial Office also includes Tribunals that requires special knowledge of the law.
They should practice as an advocate in the High Court or two or more of such courts for 10 years.
The Constitution has not provided any age limits for the retirement of the High Court Judge but generally, it is 62 years as mentioned in the High Court Judges (Salaries and Condition of Services) Act,1954.

For Subordinate Courts

Article 233 of the Constitution of India provides the appointment of District Court Judge

Direct Method

For the appointment of a district judge, the respective state governor makes the appointment in consultation with the High Court and State Public Service Commission. SPSC conducts the competitive exam for recruitment of the judges which includes Preliminary Examination, Mains Examination and interview.

Bar Council of India and all the State Bar Councils have strongly favoured 3 years minimum experience at the Bar to be prescribed for being considered eligible to sit for a Judicial Service Exam. The Andhra Pradesh Public Service Commission has notified the same on 3-12-2020 and the notification has been challenged in the Supreme Court of India through a writ petition.

Should be a practising advocate or pleader for 7 years.

Indirect Method

Regular promotion by merit-cum-seniority basis from civil Judges (Senior Division).
Accelerated promotion where competitive exams will be held among civil judges (Senior Division) with a minimum of five years of service.

As per Section 17 of the Code of Criminal procedure(CrPC), Metropolitan Magistrate and Additional Metropolitan Magistrate are appointed by the High Court of the respective State. Metropolitan areas are those areas where the population exceeds more than one million and the State government declares and notifies the same.

As per Section 12 of the Code of Criminal procedure (CrPC) Chief Judicial Magistrate and Additional Chief Judicial Magistrate are appointed by the High Court of the respective jurisdiction.

As per Section 11 of the Code of Criminal procedure (CrPC), the Judicial Magistrate First Class and Judicial Magistrate Second Class are appointed. They are appointed by the State Government after consultation with the High Court of the respective State by notification.

The role of a Judge

To settle the civil disputes of two private parties.
To determine the guilt of the person charged with offences and to punish for the same.
To adjudicate the disputes between the State and the citizen.
Judges have the power of judicial review when the legislation goes beyond the basic spirit of the Constitution.
To interpret and construe the laws according to the statute passed by the legislature, so there is consistency with the law by filing omissions, correcting uncertainties and harmonising the results with the demand of justice through a method of free decision.

Court’s inference in a judge’s role

M.C. Mehta v. Union of India 1987

The Supreme Court in this case showed judicial innovation which showed that the judges leave their footprints on the sands of the nation’s legal history. A judge should be prepared to receive light from whatever source it comes from, build up its jurisprudence, evolve new principles and lay down new norms which would adequately deal with the problems which arise in an industrial economy.

Ram Murthy Yadav v. State of Uttar Pradesh and another 2019

The Supreme Court in this case held that during discharge of the judicial function, an error of judgment in deciding a criminal case will not lead to an inference of dishonesty or lakh of integrity. Only if it is found that the judgement was based on capricious grounds, vitiated by malafides, overlooks relevant materials, could there be limited scope for interference. Judicial service is not like any other service. A person discharging judicial duties acts on behalf of the State in the discharge of its sovereign functions. Dispensation of justice is not only an onerous duty but has been considered as akin to the discharge of a pious duty, and therefore, is a very serious matter. The standards of probity, conduct, integrity that may be relevant for discharge of duties by a careerist in another job cannot be the same for a judicial officer. A judge holds the office of public trust. Impeccable integrity, unimpeachable independence with moral values embodied to the core are absolute imperatives that bring no compromise. A judge is the pillar of the entire justice system and the public has a right to demand virtually irreproachable conduct from anyone performing a judicial function. Judges must strive for the highest standards of integrity in both their professional and personal lives.

Central Public Information Officer, Supreme Court of India v. Subhash Chandra Agarwal (2020)

It was held that a judge’s public fiduciary obligation towards the citizen includes a duty of loyalty, duty of care and the cluster comprising the duties of candour, disclosure and accounting. And it includes remaining impartial towards the litigants before them. The duty of care includes the expectation from judges to fulfil their responsibilities with reasonable diligence and to engage in reason-based decision making. The duty of disclosure and accounting includes maintaining judicial transparency and judicial honesty.

Judges’ duties and responsibilities

The main duty of the judge is to uphold the law and see justice is served.
A judge should discharge the duties without any ill-will, fear, favour or affection.
A judge should hear the allegation of both Plaintiff and Defendant in civil suits, and Accused and Prosecution in the criminal case.
A judge can question the witness during the testimony.
Judges should not act arbitrarily and should treat both parties equally and impartially.
A judge should give the fullest opportunity to the advocate to present the case.
Judges should respect the prerogative of the Bar.
Judges should not get influenced by any circumstances except law and justice.
Judges should avoid contestable manners or tone when there is a controversial case in the court.
A judge should have a calm temperament and should not interrupt the counsel and witness during the argument and examination.
Judges can also issue opinions and case decisions that set the precedent.

Benefits and allowances for Judges

Each Judge from higher courts and subordinate courts are eligible for benefits and allowances which are determined by the Parliament and State Legislature from time to time. Some of the benefits are:

Dearness allowance;
House rent allowance;
Travel allowance;
Electricity Bills;
Phone Bills;
Vehicle Maintenance;
Pension after retirement;
Grade pay and allowance;
A house to live in with a security guard.

The allowance, benefits and salaries of the Supreme Court Judges are provided in the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958, and for High Court Judges its provided under the High Court Judges ( Salaries and Conditions of Service) Act, 1954 which includes sumptuary allowance, leave allowances, extraordinary pension, exemption of payment of income-tax on certain perquisites and conveyance facilities.

Employment opportunities for a Judge

The judges act as presiding officers of the court to adjudicate the matters pending before the Court of law during their serving period.

After retirement, the job roles of the Judges are depending on their last served cadre of office.

Heads of Commission and governor of State.
Appointments are made in Tribunals, commissions, ad-hoc Committees, government positions like that of Lokayukta.
Appointments are made in the National Human Rights Commission, Consumer Disputes Redressal Forum, Armed Forces Tribunal, Law Commission of India.
Appointment in Dispute Resolution System like Arbitration.

Restriction of employment opportunity for judges

As per Article 124, any person who has acted as judge of the Supreme Court is not eligible to plead or act in any court or any authority throughout the territory of India.
As per Article 220, any person who has acted as a High Court Judge cannot plead in any court or authority throughout the territory of India except the Supreme Court.

First Law Commission,1955 made some recommendations in the report that:

Judges of the higher judiciary should not hold any government job after retirement.
If appointed they should keep in mind that their conduct even post-retirement is crucial to preserve people’s faith in the judiciary.

All India Judicial Service

Article 233 of the Indian Constitution provides for the setting up of AIJS. The main aim of constituting ALJS is to fill the vacancies in the judiciary and to settle the pending cases. But it faces many constitutional obstacles. The main advantage of the AIJS is that the more judges will be appointed as per the population ratio, there will be higher representation of the marginalised sections of the society, abled and accomplished persons will become part of the higher judiciary, it reduces corruption and nepotism in the judiciary. Some of the disadvantages are the basic idea of federalism will be violated as provided in the Constitution, which causes a language barrier as India is a linguistic country. The article does not provide for the appointment of judges through ALJS below that of a district judge. And lastly, the High Courts lose the power of controlling subordinate courts which affects judicial independence.

Conclusion

Thus becoming a judge is a prestigious and esteemed position in society. And it is also the best mode to serve the country by upholding the laws and Constitution of the country. The evolution of the judicial decisions in the recent past according to the facts and circumstances of the cases to the changing society have made a greater impact on building an honourable position of the Judges. By making difficult and suitable decisions the judges have retained the spirits of the people in the society.

References

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Consumer protection and e-commerce jurisprudence in India

By

Abanti Bose

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November 6, 2021

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This article has been written by Sagnik Mukherjee pursuing the Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

Sourav was on the search for a new laptop yesterday when he received a notification from an e-commerce platform for the upcoming Diwali Sale. His favourite Laptop was available at a massive discount as compared to the brick and mortar stores that he has been going back and forth trying to find the right deal on. Without wasting any further time, he quickly completes his purchase and soon receives the product. To his utter dismay when he opens the box, he finds the product he received is not the same as the one he ordered for. He quickly gets in touch with customer care and tells them all about this. The e-commerce platform takes note of the same conducts an internal investigation and within a few business days, replaces the product for Sourav with the one the order was originally placed for.

What you just read is a real-life example garnered from numerous unfortunate experiences. Albeit such incidents do not change or affect our perception of e-commerce to any major degree, yet millions of customers stand to be defrauded regularly from such bad actors on the internet marketplace. Where the average person would save up for the whole year and eagerly await a festive month for companies to offer discounts on products and be able to buy them at a price that would not break their bank. E-commerce has explosively disrupted this cycle. Now, discounts and sales are around every week. Coupled with various payment schemes, saving up for an entire year is too lengthy and too late to get your hands on the latest gadgets before your peers. Even the trouble of haggling and searching for your desired product in various shops or returning them in case of defects is a waste of precious time for most people. When deep discounts, quick doorstep delivery, easy exchange, hassle-free installations, cash backs etc. are offered to entice a customer, why would anyone even venture to think about visiting a brick and mortar store? Consciously or subconsciously, e-commerce has become an intrinsic part of our life.

However with such deep pockets and majority market shares, a certain tendency to dominate customers might seep in, and a state cannot be a silent spectator of such wrong actions towards its subjects. Even before the advent of e-commerce, decades ago the need for overwatch or judicial protection for the wronged customer was found to be necessary and thus the genesis of the Customer Protection Act of 1986. With the progression of the internet in the 1990s and the addition of e-commerce, in 1996 the first Model Law on E-commerce (MLEC) was adopted by the UN Commission on International Trade and law. The aim of MLEC was to usher the uniform standard of e-commerce law internationally and bring electronic transitions to be at par with paper-based transactions. India as a signatory member to the MLEC, enacted the IT Act of 2000 to facilitate e-commerce and e-governance in the country. The IT Act coupled with the Consumer Protection Bill lays down the necessary safety net to the disgruntled customer. We take this opportunity to dive into the present laws related to e-commerce, the safety of consumers and the jurisprudence that possibly went into shaping them into what they are today.

Jurisprudence in consumer protection

The colonial masters in their retreat from India left her in a tattered state. Dry of immediate sustenance requirements for its huge population, she gasped to feed her inhabitants daily. In a situation where the state is rattled with economic inequalities and a starving and ever-growing migratory population, the onset of acute shortage of essential commodities, coupled with adulteration and black-marketing which were experiencing an unchecked growth made matters worse. The Constitution’s enshrined Article 21 which guaranteed that all inhabitants of India should be able to live with human dignity and be free from all types of exploitations was brought in to combat the disparities. Thus the government in its attempt to prevent any further degradation adopted a “Socialistic” pattern of society where it strived to provide and maintain via various regulations a minimum standard of life for the economically weak or any other underprivileged class of people.

The preliminary steps taken by the government towards consumer protection apart from the socialistic approach came in the form of the enactment of the Banking Regulation Act. 1949, Forward Contracts (Regulations) Act 1952, The Prevention of Food Adulteration Act, 1954 and a slew of many more as such. A notable and early instance where the judiciary takes cognizance of the consumer’s plight and speaks about it is in the case of Raghubir Singh vs Thakurain Sukhraj Kaur, where it expresses that the rationale behind state offered protection is to avoid a consumer’s exploitation by the business community and its malpractices.

Today we stand far off from the ghastly pictures of the past yet it does not take a far fetched imagination for one to comprehend the potential risks still borne by customers where the very nature of transaction compels the customer to be in absolute dependence on the seller for the goods and/or services.

Jurisprudence in e-commerce

The 1990s promised a new horizon in the field of technology and commerce with the meteoric rise of the Internet. The corporations at Silicon Valley were patenting inventions by the dozen and it was only a matter of time till someone put together the ease and functional value of proliferation in the trade where new customer bases or business scalability could be reached via the use of the internet. But for this to be a frictionless process spanning international jurisdictions, there had to be a supervisory body that would present some form of a regulatory framework. Thus the United Nations Commission on International Trade Law (UNCITRAL) took up this task and gave a set of Model Laws for its signatory countries to ratify. It was aimed at removing any unnecessary obstacles to international trade which could have been caused by inadequacies and divergence in-laws over different geography.

The IT Act 2000 and the IT ACT Amended 2008 is India’s candidate to fulfil its signatory obligations. The Act introduced much-needed reforms and contained various salient features such as:

It gives legal recognition of electronic signatures, electronic filing of documents, keeping electronic records;
It facilitates electronic filing of documents with the Government agencies;
Provides legal sanction to fund transfers between banks and financial institutions electronically;
Provides remedy for breach of confidentiality and privacy as well as makes them a punishable offence with fine and/or and imprisonment;

However, the MLEC is a set of model laws that only provide a guideline or seed for its signatory countries. The signatory country can modify and bring in legislation that suits its demographics the best. Although it does often lead to strict and sometimes biased regulations to have to be followed by offshore business entities. For instance, the most recent one would be the change in Foreign Direct Investment (FDI) policy for e-commerce in India. The rationale behind the policy change is to protect the unorganized/small sellers of the country who cannot economically compete with major e-commerce entities, yet at the same time, it stunts the growth of such e-commerce entities that receive funding from offshore investors, thereby limiting potential market in sectors such as employment.

A confluence of two worlds

Let us take the case of Amazon Seller Service Private Limited vs Love Kumar Sahoo. Mr Sahoo ordered a specific brand of phone from Amazon. However, on receipt of the same, he noticed that its battery and some sensors were not functioning optimally. On raising the complaint to Amazon they replaced the defective phone. Yet, some other problem appeared and once again it was replaced. For the third time in a row, the already twice replaced phone experienced yet more defects. Utterly frustrated, Mr Sahoo asked for a refund to which Amazon responded by bringing up their non-refund policy which barred Mr Sahoo from a refund after 15 days of delivery of that article. Eventually, he had to knock on the doors of the District consumer forum for a resolution to his problems. However, this raised some pertinent questions. That is, the legality and extent of dominance a seller exercises for framing a blanket/biased/unfettered policy for refund/exchange of goods in e-commerce and the lacunae of protection of the Consumer in the IT Act. The IT Act is limited and focused on encouraging the growth of e-commerce nevertheless, it fails to pursue and protect the basic preconditions for such growth that is building trader and consumer confidence.

Where do we stand?

In the interest of this study, let us take a look at the global standard and practices when it comes to protecting consumers.

USA – The protection for consumers is dealt with by various patchwork of legislation. These include The Consumer Financial Protection Bureau, The Dodd-Frank Act, The Federal Trading Commission, The FDA , the state attorney etc. For instance under the Dodd-Frank Act which legislates the regulation of the financial industry in the hands of the government, defines a consumer as “an individual or an agent, trustee or representative acting on behalf of an individual” and under the Fair Credit Reporting Act (FCRA) it is simply stated as “means an individual” . This at first glance may seem to be counterproductive since there is bound to be collision and overlap of legislations, however this caters and covers a more extensive bracket of consumers. Additionally each enforcement agency gets a wide arsenal of tools to work with and can crack down on particular sectors.
Japan – There is an absence of a uniform code for consumer laws in Japan. The ruling act for instances on consumer grievances, is the Basic Act on Consumer Policies. The said act lays down the fundamental principles of consumer policy and the responsibilities of a business towards its customers. When viewed from the perspective of most countries where the court stands as the last defender of a consumer’s rights, the same is not true in the case of Japan. The laws are industry specific as per the category of businesses, which are regulated and interpreted by supervisory authorities and can be fundamentally classified as administrative laws overseen by a specialized body called the Consumer Affairs Agency.
United Kingdom – The lion share of rights and protections for a consumer in the UK is derived from the Consumer Rights Act 2015 (CRA) and other key sources being the Consumer Protection from Unfair Trading Regulations, Consumer Contracts Regulations, General Product Safety Regulations. The laws are well founded with distinct legislations for a plethora of scenarios and a skillful division of power to the enforcement agencies is observed. It houses some of the most amicable and statutorily backed redressal laws including damage and specific performance.
Russia – The legislation for consumer protection and rights is a labyrinth of complex regulatory acts and are diverse in nature. The main pillars that form the laws are the Civil Code of the Russian Federation and the Consumer Protection Act No 2300-1-FZ 1992. Other regulatory acts such as the municipal and criminal laws, business and administrative laws play a vital role too in shaping the rights for the consumers. Along with these federal laws, the Government Decrees are another safety net to ensure the consumers are not deceived of their rights. The consumer laws are placed in such high regards that it has been categorized as a mandatory norm of the Russian legislation and thus they apply to foreign companies irrespective of their legal presence in the State.

As we can infer from the above instances, the legislation protecting Indian consumers are at par with most global standards. We implement various proficient statutes as per the need and requirements of the market. Points of practical issues such as “defect” and “deficiency” which come up in standard consumer complaints have been defined and addressed by the legislation which further narrows the possibilities of abuse of consumers. Further, the central consumer protection authority has been delegated with the power to regulate and investigate issues, which in turn reduces the delay in the delivery of justice. However, it’s not all smooth sailing and there exist lacunae that require immediate attention. Except in one chapter the IT Act hardly takes any cognizance of the consumers as an entity. A glaring example of that would be the absence of any real IT service consumer in the Cyber Regulations Advisory Committee which advises the Central Government.

Overreaching effects

With the Ministry of Consumer Affairs publishing, the draft amendments for the Consumer Protection (e-commerce) Rules 2020-21 a certain proportion of uncertainty has sipped over the scene which may have far-reaching effects if brought into practice. Like America which has several intersecting state laws for a better degree of protection of its consumers, the Indian government has stepped in the same shoe and with the new draft brought forth several laws that intersect and transgress into the dominion of Competition Act 2002. It is without a shadow of a doubt that both the Acts have a place of their own in the legal system of the country and both keep the consumer as their priority, but reiterating the statutes of the Competition Act into the draft Consumer Protection Act does not seem to have a justifiable rationale behind it. Moreover, the draft rules impose severe restrictions on e-commerce entities, something that has already been objected to by the Australian government, and yet again it is unclear why and what is the object of the draft Consumer Protection Act by doing so. The draft rules if enacted will only create regulatory conflict and overstep the mandates of the Consumer Protection Act. The very fact that two distinct authorities have been allowed to wield the power in devising regulations for each of the legislations makes the intentions of the parliament crystal clear.

Conclusion

From the above discussion, we can draw a conjecture that the Consumer Protection Act 2019, the IT ACT 2000 and the IT ACT Amended 2008 has not been a halfhearted attempt to protect the consumers but have had significant thoughts and analytical deductions to encompass various scenarios that might befall a consumer and go as far as to even hold foreign business entities accountable even if they do not have a legal presence in the country for aggrieving a consumer. The laws are not perfect by any standard and they cannot be since it is always trying to play catch up with the dynamic field of technology. However, the need of the hour is to not only think ahead but use every day as a new opportunity to manage and strategise the legal crux that arises from development in the field of consumer and e-commerce business.

References

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

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

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Non-payment of advances on costs in international arbitration

By

Abanti Bose

-

November 5, 2021

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This article is written by Snehil Balani, pursuing Certificate Course in International Commercial Arbitration and Mediation from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Before discussing in detail the branches (Advances on Costs), let us have a glimpse of the whole tree of ‘Costs’ in international arbitration. The 2015 Queen Mary University of London International Arbitration Survey mentioned “Cost as the worst characteristic of international arbitration”. Cost continued to be the worst feature in international arbitration as mentioned in the 2018 Survey. The high costs incurred by parties for resolving their disputes under the mechanism of international arbitration has led to this perspective of costs.

This article intends to discuss in detail the whole idea of advances on costs in international arbitration, starting from the reason on why advances are paid in the first place, rules under different arbitral institutions, and by the end discussing the repercussions, course of action in case of default by the party(s) in non-payment of advances.

Why are advances on costs paid?

First, a provisional advance on costs is supposed to be paid by the parties to cover the likely administrative costs of the institutions and the tribunal’s fees until the terms of reference are drawn up.

Article 24.1 of the LCIA Rules specify that advance payment for costs is made in order to secure payment of the Arbitration costs under Article 28.1 (Arbitration Costs and Legal Costs). The Schedule of LCIA Arbitration Costs provides for costs that can be directed by the LCIA court to be paid under Article 24.1 of the rules. These include administrative charges such as charges of the registrar/deputy registrar, counsel, case administrators, casework accounting functions. Also, a sum equivalent to 5% of the fee of the tribunal (excluding expenses) can be sought by the LCIA court under advances on costs.

Ideally, these advances on costs are to be borne by the parties equally, unless they agree otherwise or unless the arbitrator in the award assesses such expenses or any part thereof against any specified party or parties.

Why does a party default on the payment of advances on costs?

In the majority of the cases for non-payment of advances on costs, it is the defendant who does not fulfil its duty to pay advances. In very few cases the reason for non-payment is a financial burden. The majority of the time, non-payment of advances on costs is used as a tactic by the defendant to delay the process of arbitration as the arbitration cannot proceed without the advances which are used for the appointment of arbitrators and covering administrative costs.

This is very often used by the defendants to delay the process of arbitration because there are no penalties for non-payment of advances on costs as a party cannot be precluded from defending a claim or counterclaim. The general rule is that the arbitral tribunal does not care which party pays the advance as long as it is paid, and the non-defaulting party may pay the whole of the advance if it wants the proceedings to continue.

Provisions under different institutional rules

International Chamber of Commerce (ICC)

Provision: Article 37 of the ICC Arbitration Rules provide for “Advance to Cover the Costs of the Arbitration”.

Time: There is no specific time limit mentioned by the ICC Arbitration Rules under which the payment of advances of costs is to be made. Article 37(2) states that “As soon as practicable, the court shall fix the advance on costs”.

Chronological Procedure: After the payment of the filing fee by the Claimant, the ICC Secretary-General will request the claimant to make a payment called “provisional advance on costs”. The claimant is generally asked to pay the provisional advance within a 30-day period.

Consequently, the court will fix the full advances on costs. Article 16 of the rules provide that “The Secretariat shall transmit the file to the arbitral tribunal as soon as it has been constituted, provided the advance on costs requested by the Secretariat at this stage has been paid.”

Non-Payment of Advances on costs: Article 37(5) of the ICC rules provide that “In all cases, any party shall be free to pay any other party’s share of any advance on costs should such other party fail to pay its share”.

Singapore International Arbitration Centre (SIAC)

Provisions: The 2016 SIAC Rules expressly mention the advances on costs only under Schedule 1, under the sub-head SIAC-SIMC Arb-Med-Arb Protocol. Under para 12, it mentions that “Parties shall also pay to SIAC, upon request, an advance on the estimated costs of the arbitration (“Arbitration Advance”) as well as administrative fees and expenses for the mediation (“Mediation Advance”) in accordance with SIAC and SIMC’s respective Schedule of Fees (collectively “the Deposits”).”

The advance on costs for arbitration under SIAC is mentioned in detail under the “Practice Note 3 of SIAC on Case Administration, Appointment of Arbitrators & Financial Management for Cases under the UNCITRAL Rules 2010.” Points 20-26 provide for ‘Advances and Deposits’.

Point 20 reads “The SIAC shall collect advances and deposits from the parties towards the costs of the arbitration.”

Time: Points 22 and 23 provide that “The first tranche of advances and deposits shall normally be required from the parties shortly after the Registrar receives the request for administration. The Registrar may from time to time request further advances and deposits from the parties.” Thus, there is no specific number of instalments or time. It just mentions being paid ‘shortly after the request’.

Non-Payment of Advances on Costs: The Practice Note implicitly mentions that the non-payment by one party can be covered by the other party as it mentions under point 32 that “The parties are jointly and severally liable for the costs of the arbitration.” As the parties are jointly liable for the advances, they can be paid by one party on behalf of the other.

The London Court of International Arbitration (LCIA)

Provision: Article 24 of the LCIA Arbitration Rules provides for “Advance Payment for Costs”.

Time: Article 24.1 of the rules state that “The LCIA Court may direct the parties, in such proportions and at such times as it thinks appropriate, to make one or more payments to the LCIA (the “Advance Payment for Costs”) in order to secure payment of the Arbitration Costs under Article 28.1”. So, there is no specific time or instalments for payment of advances on costs. The tribunal can call upon the payment at such times as it deems fit.

Non-Payment of Advances on Costs: Article 24.6 of the rules provide that “In the event that a party fails or refuses to make any payment on account of the Arbitration Costs as directed by the LCIA Court, the LCIA Court may direct the other party or parties to effect a further Advance Payment for Costs in an equivalent amount to allow the arbitration to proceed (subject to any order or award on Arbitration Costs).”

Hong Kong International Arbitration Centre (HKIAC)

Provision: Article 40 of the HKIAC Administered Arbitration Rules provides for “Deposits for Costs”. Article 40.1 states that “As soon as practicable after receipt of the Notice of Arbitration by the Respondent, HKIAC shall, in principle, request the Claimant and the Respondent each to deposit with HKIAC an equal amount as an advance for the costs”.

Time: Article 40.4 of the rules set the time limit for payment of advances on costs to be 30 days.

Non-Payment of Advances on Costs: Article 40.4 states that “If the required deposits are not paid in full to HKIAC within 30 days after receipt of the request, HKIAC shall inform the parties in order that one or another of them may make the required payment.”

American Arbitration Association (AAA)

Provision: Rule 56 of the AAA Commercial Arbitration Rules and Mediation Procedures provide for “Deposits” and states that “The AAA may require the parties to deposit in advance of any hearings such sums of money as it deems necessary to cover the expense of the arbitration, including the arbitrator’s fee”.

Non-Payment of Advances on Costs: Rule 57 of the AAA rules mention the “Remedies for Non-Payment” and states that “If arbitrator compensation or administrative charges have not been paid in full, the AAA may so inform the parties in order that one of them may advance the required payment”.

Nature of payment of advances on costs

There has been a difference of opinion among various judgments as to the nature of the payment of advances on costs. Majorly the conflict is between two approaches i.e., (i) The Contractual Approach, (ii) The Procedural Approach. But, a third approach can also be seen in some cases which are known as (iii) The Good Faith Approach.

The Contractual Approach

Supporters of this approach opine that the obligation to pay advances on costs is a contractual obligation that arises from the parties’ agreement to arbitrate. As it is further to the arbitration agreement, the parties contractually agree to comply with the applicable arbitral rules, including the obligation to pay their respective shares of the arbitral institution’s advance on costs. Therefore, a respondent’s failure to pay its share of those costs is a breach of the arbitration agreement.

Under the contractual approach, the obligation to pay advances on costs is owed by the parties towards each other as it arises from the parties’ agreement itself.

ICC Case No. 15506 (2009) supported the contractual approach and stated “the arbitral tribunal considers that the Claimant rightly points out that since the Rules were adopted by reference in the Contract through the adoption of the arbitration clause, they have contractual value and bind the parties. Thus, [the parties] undertook to comply with them, including the obligation imposed on them by Article [36(2)] to each pay half of the advance on costs.”

The Procedural Approach

Proponents of the procedural approach believe that the obligation to pay advances on costs does not arise from the parties’ agreement, rather it arises from the provisions of the institutional rules to which parties have subjected themselves to be governed. It is considered to be an obligation towards the arbitral institution which is owned by each party.

Under this approach, no-obligation flows (for the payment of advances on costs) from one party to the other party.

In ICC Case No.12491 (2004), the tribunal decided that the consequences for non-payment of the advances on costs were strictly procedural.

The major issue with the procedural approach: The procedural approach provides that the obligation for payment of advances on costs is owed by the parties towards the arbitral institution. So, in a case where a party defaults the payment of advances on costs, almost all the major institutional rules provide for the payment to be made by the non-defaulting party on part of the defaulting party in order to proceed with the arbitration. The non-defaulting party makes the payment on the part of the defaulting party and the arbitration continues.

The issue arises when the non-defaulting party seeks reimbursement for the advances on costs it made on behalf of the defaulting party. Now, if the procedural approach is adhered to, the obligation was towards the institution, and the same has been complied with as the institution has received its whole share of the advances on costs. And as there was no contractual obligation between both parties, the tribunal cannot direct the non-defaulting party to pay back to the non-defaulting party.

The same was seen in ICC Case No. 12948 (2004). The arbitral tribunal held that it did not have the power to order the respondent (defaulting party) to make payment to the ICC as the latter had already received the advance on costs in its entirety.

Thus, the obligation towards the ICC was fulfilled and no further action could be taken by the arbitral tribunal as it adhered to the procedural approach.

The Good Faith Approach

The duty to pay the advances on costs is considered to be a good faith obligation by a few arbitral tribunals. Parties have a devotion to further the proceedings in good faith.

This view was noticed in the ICC Case No. 16812 (2011), where the arbitral tribunal held that “the reciprocal obligation of the parties to pay half of the advance on costs each does not only result from the application of the Rules, to which the parties are contractually bound. It also results from the parties’ obligation to execute their agreements in good faith”.

Possible scenarios in case a party defaults payment of advances on costs

1) The first option available to the non-defaulting party is to pay the defaulting parties to share and to seek reimbursement at the end of the proceedings in the final award.

2) The second option available to the non-defaulting party is to pay the defaulting parties to share and to seek an interim measure that directs the defaulting party to reimburse its share immediately.

3) The third option available to the non-defaulting party is to not pay the defaulting party’s share, but to seek, instead, a partial award or procedural order requiring the defaulting party to pay its share to the institution.

4) The fourth option available to the non-defaulting party is to not pay the defaulting party’s share, which will eventually result in suspension or termination of the arbitration, or the claims will be considered withdrawn from the arbitral institution. The same is incorporated under Article 37.6 of the ICC rules, Rule 34.6 of the SIAC Rules, Article 24.8 of the LCIA Rules, Article 40.4 of the HKIAC rules and Rule 57(e) of the AAA rules.

In circumstances where a case is considered withdrawn (as mentioned above), a party usually goes to the state courts to get the dispute resolved. When a non-defaulting party approaches the state courts, the defaulting party raises an issue of jurisdiction as the parties’ agreement proved for resolving the dispute through arbitration. The result is then that the claimant has no other choice than to further pursue the arbitration or relaunch it by paying the advance on costs in full.

A similar situation was seen in the case of BDMS Limited vs. Rafael Advanced Defence Systems [2014] EWHC 451 (Comm.).

In this case, BDMS paid its part of the advance, but RAFAEL was only willing to pay its part of the advance if BDMS would provide adequate security for costs. BDMS was not willing to fulfil the condition put forth by RAFAEL and also was unwilling to pay the other half in order to continue the arbitral proceedings. Further, the claim was withdrawn and brought before the high court. RAFAEL raised the issue of jurisdiction. BDMS raised the issue that non-payment on part of RAFAEL was a repudiatory breach arising out of the parties’ agreement.

The court took the contractual approach and determined that the obligation to pay advances on costs is a contractual obligation arising out of the parties’ agreement. But, the breach in the present case is not a repudiatory one because non-payment on part of RAFAEL was conditional as it was willing to pay if adequate security of costs were provided.

And the court determined that non-payment of advances on costs do not make the arbitration agreement inoperative and BDMS could bring the same claim to arbitration again.

Reimbursement of substituted payment

In cases where the non-defaulting party pays the other half of the advances on costs on behalf of the defaulting party, it can either be recovered as an award or as an interim measure (procedural order).

The primary advantage of an award over a procedural order is that an award can generally be enforced more easily in domestic courts than in a procedural order.

The advantage of an interim measure over an award is that it can be issued more quickly. In cases where the non-defaulting party is under some financial burden and needs immediate reimbursement, an interim measure can be sought to reimburse the payment made by it on behalf of the non-defaulting party.

Another analogy is made for determining whether to pass an award or an interim measure for reimbursement of advances on costs. This analogy is in relation to the contractual or procedural approaches discussed above.

The authors believe that a tribunal’s decision to order reimbursement should take the form of a partial award, rather than a procedural order if it decides that the obligation to pay the advance on costs is contractual. This is because the tribunal would be ruling on the substantive rights and liabilities of the parties, and such a decision requires a detailed level of reasoning.

On the other hand, if a tribunal considers the matter to be procedural, it would be more appropriate for it to direct reimbursement by way of a procedural order. The issues in point would not be substantive, and whilst the tribunal would need to explain how it reached its decision, it would not have to provide the detailed reasoning expected in an award.

Nature of reimbursement

The nature of reimbursement also depends upon whether the breach is considered to be a contractual breach or a procedural breach.

If it is considered to be a contractual breach then damages for breach of contract are awarded. For instance, in ICC Case No. 13290 (2008), the tribunal noted that “the claimant was effectively forced to pay the respondent’s share of the advance on costs so that the arbitration would proceed’, and found that the amount paid by the claimant equated to the damage that it suffered as a result of the respondent’s breach of contract.”

If it is considered to be a procedural breach, then it is hard to claim damages on the basis of breach of contract because, under the procedural approach, there is no obligation towards the other party of payment of advances on costs. For instance, Partial Award No. 2 of June 1, 2004 in ICC Case No. 12491 held that the claimant did not suffer any damage as a result of its payment of the entire advance; that the allocation of costs would only be known upon the arbitral tribunal’s costs award; and that the payment of a deposit could not result in damages claim.

Reimbursement of substituted payments is more straightforward in arbitrations governed by arbitral rules which explicitly permit the tribunal to grant such relief. For this reason, LCIA tribunals are likely to render partial awards in this regard at the request of the non-defaulting party.

Conclusion

In case of default by a party for non-payment of advances, the best possible way is to get going and pay on behalf of the defaulting party. This does not further delay the process of arbitration and the amount paid can be recovered by way of an award or an interim measure, depending upon the scenario of the case. If the non-defaulting party is not in a hurry to get the reimbursement due to financial constraints it is suggested the reimbursement is sought by an award as it is easily enforceable.

A bird’s eye view of non-payment of advances on costs shows that ‘it is all about perspective’. If the nature of reimbursement is considered to be a contractual one, then it determines what kind of order needs to be passed in order to get the reimbursement (award) and what kind of remedy will be provided under the order (damages for breach of contract). The same changes if it is perceived that nature is procedural.

References

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Difference between total consideration, total purchase price and net purchase price

By

Rachit Garg

-

November 5, 2021

0

M&A (1) — Image source- https://rb.gy/nf1em6

This article.has been written by Ravi Ranjan Singh, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. It has been edited by Tanmaya Sharma (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

The fundamental financial aim of shareholders contemplating the sale of a firm should be to maximise the amount of money they get overtime as a return on their investment. The essential factors of valuation, such as enterprise and equity values, multiples, and goodwill, must be understood to predict a sale’s cash flow. The purpose of this essay is to identify these components, explain how they work together, and provide advice to individuals who are considering an M&A deal.

What is the total enterprise value?

It is the market worth of a company’s total assets that are used to calculate Total Enterprise Value (TEV). The Market Approach is the most often used approach for calculating TEV. By adding a multiple to the company’s yearly sales or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), the TEV is computed this way. TEV is often computed in the absence of a transaction by extrapolating multiples from comparable publicly traded or private firm transactions.

Equity Value: All assets of the corporation are valued, but only by common equity owners – (shareholders).

Enterprise Value (EV): It is the value that ALL investors place on the company’s fundamental activities (equity, debt, etc.).

So, beginning with the equity value, compute Enterprise Value:

If the items reflect additional investors or long-term financing sources (such as debt investors or preferred stockholders), they should be included in the list (Capital Leases, Unfunded Pensions)
If the item is unrelated to the company’s primary business operations, remove it from consideration (side activities, cash or excess cash, investments, real estate, etc.)

What factors go into determining the multiples in an M&A deal?

During an M&A transaction, multiples are defined by the values set by prospective purchasers and their estimations of the target company’s future cash flow and profitability. Prospective purchasers’ appraisals provide an assumed multiple based on their acquisition prices and EBITDA (earnings before interest, taxes, depreciation, and amortization) of the firm. For various reasons and expectations, different types of purchaser’s value things differently. Strategic purchasers are frequently concerned with the return on their investment as it compares to their own cost of capital inside the organisation. They look for synergies, cost reductions, and new market possibilities as part of their investigation. The cash flow potential of an investment is evaluated by financial purchasers, such as private equity firms, to reach a specific return on equity in light of a capital structure that comprises both debt and equity.

What Is the relationship between the purchase price and cash proceeds?

The acquisition price is often not defined by non-operating assets or liabilities like cash or interest-bearing debt. Although the TEV is often used in agreements to describe transaction value, in reality, the purchase price is a recalculated value that reflects the fact that the sellers keep whatever cash they receive at closing but are still liable for any outstanding debt with the firm. The terms “debt-free” and “cash-free” are often used in purchase agreements to describe the purchase price. Since most buyers are mainly interested in acquiring a company’s functioning assets (inventory, accounts receivables, real estate and equipment, etc.), this approach makes sense (accounts payable, warranties, etc.). To create cash flow, these assets are used as net operating assets. Also, it’s difficult for a buyer to take on bank loans and other obligations when ownership changes.

Is there anything else that affects how much money I get in the end?

In addition, sellers should think about other things that might impact the amount of money they get at closing, such as taxes and escrows, earnouts, and seller notes. In addition, most negotiations contain a mechanism for adjusting the purchase price after the contract closes for occurrences that cannot be quantified. When calculating the value of a purchase, buyers believe the seller will provide a certain amount of working capital after closing. The purchase price may be modified up or down as an equalisation mechanism if the actual working capital differs from the objective. Suppose a substantial unexpected payment from a client occurs on the day of closure, turning a receivable into cash and reducing the working capital supplied to the buyer. A well-designed process would guarantee that neither party benefits nor are hurt by such an occurrence, for instance.

Considering these procedures well in advance of final agreements is critical; one bidder may not provide shareholders as good of a bargain as another with a lower working capital aim. Post-closing adjustments have caught many sellers off guard, so tracking “cash at the close” before consummation, as well as before and after, is a smart idea.

Components of purchase price allocation

Net identifiable assets – The whole worth of an acquired company’s assets minus the total amount of its liabilities is known as net identifiable assets. It’s important to keep in mind that “identifiable assets” are things that have a definite worth at a certain period and whose advantages can be identified and adequately evaluated. The book value of assets on the acquired company’s balance sheet represents the net identifiable assets. You should know that identifiable assets might contain both physical and intangible assets, depending on your situation.
Write up – A write-up is an adjusting increase to the book value of an asset that is made if the asset’s carrying value is less than its fair market value. The write-up amount is determined when an independent business valuation specialist completes the assessment of the fair market value of assets of a target company.
Goodwill – Net asset value (assets fewer liabilities) is the difference between the acquisition price and the goodwill of the target company. Goodwill is calculated as the purchase price less the fair market value of the acquired company’s assets and liabilities.

An example of allocation of the purchase price

Company A just paid $10 billion for the acquisition of Company B. After the acquisition is completed, Company A, as the buyer, must apply current accounting principles to the purchase price allocation.

In the book, the assets of Corporation B are worth $7 billion, but the liabilities of the company are worth $4 billion. That leaves us with $3 billion as the estimated worth of Company B’s net identified assets.

Company B’s assets and liabilities were valued by an impartial company valuation expert, who came up with an estimate of $8 billion. To bring the book value of the company’s assets up to its fair market value, this conclusion means that Company A needs to record a $5 billion write-up ($8 billion – $3 billion).

Finally, because the purchase price paid ($10 billion) exceeds the total of the net identifiable assets and write-up ($3 billion + $5 billion = $8 billion), Company A must register goodwill. This means that Company A has to account for $2 billion of goodwill ($10 billion minus $8 billion).

The disarray

The issue is that many sites claim that Enterprise Value is what it “actually costs to purchase a firm.” This is not accurate. However, this isn’t always the case; certainly, Enterprise Value is occasionally more affordable, but this is dependent on the deal’s conditions and the Enterprise Value goods themselves. If you want to own 100 per cent of a corporation, you’ll have to pay 100 per cent of its common shares, we KNOW WITH ABSOLUTE CERTAINTY. This means that in an M&A transaction, the Purchase Equity Value acts as a kind of “floor” for the purchase price.

However, to arrive at the “actual price,” should you include the debt, preferred stock, and other financing sources of the seller and remove the whole cash balance?

In this article, we’ll focus on two of the issues with that strategy:

THE FIRST PROBLEM IS: Does taking on debt raise the price of a home?

Debt may be “assumed” (maintained) or “refinanced,” depending (replaced with new debt or paid off).

No increase in the amount the buyer “actually pays” the seller due to assumed debt. Cash is used to pay Off debt, which increases the amount paid by the buyer.

Replacing existing debt with the new debt: Increases how much the buyer “truly pays,” yet the buyer does not pay extra cash.

THE SECOND PROBLEM IS: Does paying with cash truly save money?

After purchase, a buyer cannot just “take” the full cash balance of a seller — all businesses need a certain “minimum cash level” to continue running, paying the bills, and so on. That sum of money is truly a vital asset for the company’s day-to-day operations.

For the sake of simplicity, we disregard the minimum cash requirement and instead deduct all cash from the total. Hence, even in an M&A transaction, a firm running on its own always needs a certain minimum amount of capital.

Complications of Other Sorts

The buyer will always have to pay transaction fees; they’re always there (lawyers, accountants, bankers, etc.).

For example, unfunded pensions, capital leases, and other types of obligations are sources of concern. Change of control doesn’t necessitate payment or repayment of these, Consequently, even though they are included in Enterprise Value, they may not affect the price.

Consider the possibility of using both buyer and seller cash to finance a transaction. Therefore, the actual amount paid could not even be close to the equity value or enterprise value of the seller.

The verdict

A company’s “value” must be distinguished from the ‘actual price paid.’ When it comes to valuation, Equity Value and Enterprise Value are helpful. However, they aren’t as helpful when trying to figure out what a company is worth.

It depends on the conditions of the agreement whether the true price paid is between the Equity Value and Enterprise Value, above them, or even below them — owing to the handling of debt and cash, fees and obligations that do not affect the cash cost of making the deal.

Language like “Including the assumption of net debt” refers to the estimated Purchase Enterprise Value, which is calculated as Purchase Equity Value + Debt – Cash, in the transaction agreement.

However, it does not reflect the price paid by the buyer; rather, it is a method for valuing the transaction and obtaining multiples such as EV / EBITDA.

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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