Writ jurisdiction and environment protection : the forever friendship

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November 5, 2021

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This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article provides an understanding of the friendship that exists between writ jurisdiction and environment protection by means of case studies.

Table of Contents

Introduction

In the last few decades, the Indian courts have extended their support towards protecting the environment from degradation, pollution, ecological imbalance, and deterioration. The courts have recognized the right to live in a healthy environment as a fundamental right under Article 21 of the Indian Constitution, because of which writ jurisdiction has been enforced in frequent times. A lot of industries, tanneries, professions associated with environmental degradation such as mining, have been closed, advised, and directed by the courts to uphold environment protection as a serious issue. In many cases, it has been noticed that the Indian courts have referred to international conventions, treaties to explain the concept of sustainable development through their judgments. This article embraces such efforts by the Indian courts and intends to help the readers with a better understanding of the importance of writ jurisdiction in safeguarding our environment by means of notable case laws.

Writ jurisdiction and environment protection

A writ petition can be filed before the Supreme Court, and the High Court under Articles 32, and 226 respectively, in order to safeguard the fundamental right that has been infringed. Writ petitions have often been restored in environment cases since the right to a free and healthy environment has been an implied fundamental right recognized by Part III of the Constitution of India.

Subhash Kumar v. the State of Bihar (1991)

The Supreme Court of India in the well-known case of Subhash Kumar v. the State of Bihar (1991) clarified the fact that public interest litigation cannot include any personal interest of the person submitting a PIL before the court of law. In the present case, the petitioner had filed a writ petition before the top court by means of a PIL alleging that the respondents, TISCO were responsible for polluting the river Bokaro by discharging surplus waste in form of slurry as effluent from their washeries into the river thereby making the water unfit for drinking and irrigation purposes, and causing risk to the health of the people. The petition mentioned that the State of Bihar and the State Pollution Control Board had failed to take appropriate measures for the prevention of pollution and the State of Bihar had also granted leases on payment of royalty to various persons for collection of slurry. The petitioners had contended that Article 21 of the Constitution of India, 1950 includes the right to the enjoyment of pollution-free water and air, and this allows a citizen to invoke Article 32 for removing pollution.

After finding out that there existed no concrete evidence on the part of the petitioner which could support his allegations on the respondent, the Supreme Court observed that public interest litigation should only be resorted to by a person in order to protect the interest of the society. Enforcing personal interests by grabbing public interest litigation is an abuse of the process of the court of law, and therefore the same must not be entertained.

AP Pollution Control Board v. MV Naidu (1999)

A bench of Justices S.B. Majmudar, and M. Jagannadha of the Supreme Court of India while deciding on the case of AP Pollution Control Board v. MV Naidu (1999) accepted that the Precautionary Principle and the Polluter Pay Principle are significant parts of the environmental law of India. The respondent’s company was incorporated as a public limited company with the object of setting up an industry for the production of B.S.S. Castor oil came under the radar of the petitioner who contended that the respondent company could not have commenced civil works and construction of its factory, without obtaining the clearance of the petitioner.

The judgment of the Apex Court in this present case is interesting to note because of the following observations that have been made by the Court in light of the present case;

A suggestion regarding setting up of Environmental Courts on the regional basis with one professional Judge and two experts was provided to the Government of India concerning the increasing number of cases in relation to the environment protection involving assessment and evolution of scientific and technical data appearing before the Court.
The Supreme Court restricted its jurisdiction only to entertain appeals in cases mentioned in the previous pointer.
A need for amending the notifications issued under Rule 12 of the Hazardous Wastes (Management & Handling) Rules, 1989 was highlighted by the Supreme Court in this case.
A team of both judicial, and technical members are to be included appellate authority under the Water (Prevention of Pollution) Act, 1974, the Air (Prevention of Pollution) Act, and the appellate authority under Rule 12 of the Hazardous Wastes (Management & Handling) Rules, 1989, under the notification issued under Section 3(3) of the Environment (Protection) Act, 1986 for National Capital Territory and under Section 10 of the National Environment Tribunal Act, 1995 and other appellate bodies.
The principle of inter-generational equity was highlighted by this Court while reiterating the need for protecting the environment from degradation from the provisions of the 1972 Stockholm Declaration.
The respective state governments were directed to take adequate steps to communicate the present judgment to their respective State Pollution Control Boards and other authorities dealing with such subjects so as to adopt appropriate actions that can be taken expeditiously as indicated in this judgment.

Narmada Bachao Andolan v. Union of India (1998)

A well-known case that received worldwide attention in concern with the fifth largest river in India, Narmada knocked the doors of the Supreme Court of India by the name of Narmada Bachao Andolan v. Union of India (1998). The issue, in this case, was the construction of the Sardar Sarovar Dam on the Narmada river. The petitioners, in this case, had sought to contend that it was extremely necessary for some independent judicial authority to review the entire Sardar Sarovar Dam project thereby carrying out examination on the basis of the current best estimates of all costs (social, environmental, financial), benefits and alternatives in order to determine whether the project was required in its present form in the national interest or whether it needs to be re-structured for the future. The petitioners went ahead to point out that no work should proceed till environment impact assessment had been fully carried out and its implications for the project viability was being assessed in a transparent and participatory manner. This would therefore serve as a comprehensive review of the project.

The Supreme Court of India while disposing of the case laid down ten directions that were to be adopted by the respondent in the process of construction of the said dam;

The construction of the dam should abide by the directions provided by the tribunal;
Environment clearance was required to be given by the Environment Sub-group under the Secretary, Ministry of Environment & Forests, Government of India.
Clearance on the construction of the dam was to be given by the Relief and Rehabilitation Sub-group.
Permission as to whether the height of the dam could be raised beyond 90 meters was to be provided by the Narmada Control Authority, from time to time.
The states of Madhya Pradesh, Maharashtra, and Gujarat were to abide by the reports of the Grievances Redressal Authorities.
The Environment Sub-group was to continue monitoring and ensuring that all steps were taken not only to protect but to restore and improve the environment.
The Review Committee was to mandatorily meet whenever it was required to do so in order to solve unresolved disputes.
An Action Plan was to be implemented in order to ensure relief and rehabilitation of pari passu with the increase in the height of the dam.
The Grievances Redressal Authorities were provided with the necessary liberty in order to issue appropriate directions to the respective States for environmental protection.
Every possible measure was to be adopted to see that the project was to be completed expeditiously.

MC Mehta v. Union of India (2008)

The case of MC Mehta v. Union of India (2008), familiarly known as the Taj Trapezium case, involved the Supreme Court of India to direct the Uttar Pradesh government to implement protective measures for securing the environment that was being affected by the industries surrounding the Taj Mahal monument. With the monument being threatened with deterioration and damage not only by means of the traditional causes of decay, but also by changing social and economic conditions, and the latter being in a much more aggravated form in comparison to the former, it drew the attention of the top court. The major sources of damage caused to the Taj according to the petitioners are the chemical and hazardous industries and the refineries at Mathura. The particular matter contributing to the overall pollution, and degradation of the monument in totality was sulphur dioxide as was found by the Report of the Expert Committee called “Report on Environmental Impact of Mathura Refinery” (Varadharajan Committee) and was published by the Government of India in 1978. Further, the Apex Court had also taken note that due to the rapid industrial development in the Agra-Mathura region, acidic emissions have resulted into the atmosphere at an alarming rate thereby not only affecting the monument but also the people residing in the region. The directions that were given by the Court in light of this case as a part of the judgment have been listed below;

The Court ordered the setting up of the hydrocracker unit and various other devices by the Mathura Refinery so as to curb the growing degradation of the environment.
The Court directed the Mathura Refinery to set up a 50-bed hospital and two mobile dispensaries, so as to provide medical aid to people living around the refinery.
The construction of the Agra bypass to divert all the traffic which passes through the city was also directed.
The construction of Gokul Barrage for the supply of drinking water to the residents of Agra was ordered by the Apex Court.
The green belt was to be set up on the recommendation of NEERI.
The Planning Commission (presently the Niti Ayog) was suggested to sanction a separate allocation of land for the city of Agra and the creation of a separate cell under the control of the Central Government to safeguard and preserve the Taj.
Shops functioning within the Taj monument were directed to be closed.

Lafarge India Pvt. Ltd. v. Union of India (2011)

The High Court of Himachal Pradesh while deciding the case of Lafarge Emami Pvt. Ltd. v. Union of India (2011) took note of the danger possessed by environment clearance for the purpose of infrastructural development in the nation. Appeals were filed by the National Environmental Appellate Authority concerning the same. The petitioner company had contended in this case that the environment clearance was granted to the company following the process laid down by the Environment Impact Assessment. The Hon’ble High Court was of the view that even if the matter in concern was an administrative one, the doctrine of judicial review will be applicable as the administrative authorities are bound by the common law doctrines just like the judiciary.

Gulf Goans Hotel Company Ltd. v. Union of India (2014)

A bench of Justices Ranjan Gogoi and M.Y. Eqbal took note of an appeal filed by the Gulf Goans Hotel Company Ltd against the respondent, a non-Governmental body who had claimed to be dedicated to the cause of environmental and ecological safeguard, and well being of the state of Goa, in the present case of Gulf Goans Hotel Company Ltd. v. Union of India (2014). While deciding on this case also, the Apex Court took reference to international conventions and treaties, majorly focusing on Principles 7,11,14, 23, 24 of the Stockholm Conference. While dismissing the writ petition filed by the appellants, the Supreme Court of India noted that the respondents’ contention involved the well-being of a large number of people living in the state and their right to life under Article 21 of the Constitution. The Court further held that violation of Article 21 cannot be subjectively and individually determined when parameters of permissible and impermissible conduct are to be legislatively determined under Sections 3 and 6 of the Environment Protection Act, 1986.

Indian Council for Enviro-legal Action vs. Union of India (2011)

The Supreme Court of India made an extraordinary observation in the case of the Indian Council for Enviro-legal Action vs. Union of India (2011), a case which was breathing for over 15 years to reach a logical conclusion. This case sets a classic example of the abuse of the process of law by the respondent company. Familiarly known as the Bichhri village case, the present case shows the sanctity and credibility of the judicial system in general. The Apex Court directed that all chemical industries irrespective of their size should be allowed to be established only after taking into consideration all the environmental aspects that are to be abided by and monitoring their functions to ensure that they do not pollute the environment around them. Taking into account that most of the industries in association with this case are water-intensive industries, it was advised that the establishment of these industries in arid areas may also require examination, and appropriate directions were directed to be issued as per need, in accordance with Sections 3 and 5 of the Environment Act. It is the responsibility of the Central Government to mandatorily ensure that the directions given by it are implemented efficiently.

Conclusion

There exist a plethora of case laws that have been a guiding light for the citizens of the nation to extend their help towards environmental protection. Judicial interpretation of different existing constitutional provisions and environment legislations have been the only possible way to secure the environment for the coming generation. Important concepts like sustainable development, precautionary principle, polluters pay principle, intergenerational equity has seen the light of the day because of the decisions made by the Indian courts in connection with the environment. The power of the judicial precedents has been such that the entire environment law jurisprudence has acquired a shape due to the same. This article puts forth a list of seven necessary case laws that are to be well-acquainted with to understand the significance of environmental protection. With the development of the nation at its peak, one cannot ignore the relevance that the environment holds in modifying the development process.

References

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Effect of marriage on rape : can the offense of rape be waived off after marriage between parties

By

Sneha Mahawar

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November 5, 2021

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This article is written by Priyanshi Soni, a student of Symbiosis Law School, Noida. This article seeks to highlight the effect of marriage on rape and how marry-your-rapist laws are being questioned in today’s time.

Table of Contents

Introduction

Codification of Indian Laws started in 1833 when the first Law Commission was formed under Lord Macauley, under the Charter of 1833. It was decided that the criminal law of the land will be divided into 2 codes – the Indian Penal Code, 1860, which was enforced in 1862, and the Code of Criminal procedure, 1861.

The present rape laws are considered to be too strict and biased towards women. Not only this, but the judgments delivered by courts in recent times also highlight a big issue of the coming of “marry-your-rapist” laws. Although these laws are not present in India, they are very much reflected in the mentality and decisions given by courts today. Such a law tries to absolve the heinous crime of rape. It is a serious concern as even the court at times becomes helpless as to whether they should interfere or not.

According to the UN’s Annual State of World Population Report, the Marry-Your-Rapist Law still exists. Countries such as Russia, Thailand, Venezuela allow absolving the accused if he agrees to marry the victim whom he assaulted. The law in Morocco was repealed following widespread outrage when a young woman killed herself after she was forced to marry her rapist. Jordan, Palestine, Lebanon, and Tunisia followed suit.

Rape laws in India

Rape is a very heinous crime prevalent in society. After the Nirbhaya case, many amendments were made to this law, including the term of punishment, changes in the Juvenile Justice Act, etc.

Section 375 of IPC defines “rape” as the act of sexual intercourse by a man on a woman without her consent or against her will. It is also considered rape when it is done with her consent but the consent obtained was with the use of force, fear of death, or hurt. Also, when she gives consent to the man believing him to be her lawful husband but in reality he is another man and that man knows this and still indulges in the intercourse, then it is said to be rape. Even when she gives the consent but it is due to unsoundness or intoxication or due to other reasons because of which she was unable to understand the consequence and the man indulges in sexual intercourse with her, then it is said to be rape. Protection is also given to the girl if she is below 18 years of age and indulges in sexual intercourse with or without her consent.

The exception to this Section is that when the sexual intercourse takes place between husband and wife, provided she is not below 15 years of age, then it is not rape. This is a controversial clause and lots of debate is going on regarding marital rape and around this clause.

Section 376 of IPC provides for ten years of imprisonment to life imprisonment to whoever commits the offense of rape.

Tuka Ram and Another vs the State of Maharashtra (1978) case led to widespread protests due to its controversial judgments. This led to the coming of the Criminal Law (Second Amendment) Act of 1983 which inserted a new Section 114A in the Indian Evidence Act of 1872 which stated that it shall be presumed that the victim did not consent if she states so. No further burden lies on the victim to prove that she did not give consent. Even the Supreme Court, in a number of judgments, has time and again held that the burden of proving that there was consent is on the accused and not on the victim. This applied to custodial rape cases. But, the application of this Section has been very weak at the end of the Cou r t.

In the IPC, Section 228A was added which makes it punishable to disclose the identity of the victim of certain offenses including rape.

How effective are the rape laws in India

Stricter laws

Due to public outrage, the rape laws are getting stricter with each amendment. In many countries such as Bangladesh, Pakistan, etc., harsh laws for rape exist, such as the death penalty. These laws, instead of being a deterrent, prove to be reducing the conviction rate. Many cases go unreported as the rapist tries to murder the victim in fear of getting punished. Even in many cases, the rapist is the one whom the victim already knows and so in fear of family embarrassment, the case goes unreported.

Statutory rape

As per Section 375 of IPC, any male who does sexual intercourse with a female below 18 years, with or without her consent, is said to commit rape. There is a big loophole in this law as if someone below 18 years indulges in sexual activity even with consent, then also the man can be convicted of rape. This ignores the reality of sexual activity as in today’s time, many minors indulge in these activities and that too with their consent, and then the male gets punished without any fault of his. These laws are used mostly by the parents of young girls.

Marital Rape

The only recourse available to women against marital rape is Section 498-A or the Domestic Violence Act, 2005. However, this only makes it a civil offense with a few civil remedies such as fines, protection, etc. Marital Rape violates the fundamental right to live with dignity under Article 21 and also the Right to Privacy regarding making sexual decisions. The distinction between married and unmarried women as per exception 2 of Section 375 of IPC also violates Article 14 insofar as the classification created has no rational relation to the underlying purpose of the statute.

“Marry-your-rapist” law in India

It is a kind of rape law depending upon the jurisdiction where the man who commits offenses such as rape, sexual assault, statutory rape, or other such crimes can be exonerated if he agrees to marry the victim. It is legal in countries like Bahrain, Syria, etc., but in India, no such concrete law exists to allow the same but the issue stems from deeper levels of societal and legal layers. Earlier, in old times, it was advocated that this law would protect the victim as well as the victim’s family from ignominy caused due to rape.

For example, in 2020, Orissa High Court granted bail to the accused under POCSO Act on the basis that he agreed to marry the victim. In another recent case, Supreme Court was hearing the bail plea of Mohit Subhash Chavan accused of raping a schoolgirl and so was charged under POCSO. He alleged that he was offered to marry the victim by the victim’s mother. There was a document made stating that the accused will marry the victim when she turns 18. He contended that when he refused to marry her, a case was filed against him. The Supreme Court then gave the option to him to marry her if he wants otherwise he will have to go to jail.

Cases of such sort highlight that there is a legal layer in India’s legal system as well, which supports the concept of marrying your rapist. Indian society has associated “rape” with shame and guilt and it considers the only way to shun away this shame is to marry their daughter to the one who raped her. They think that society will not look at their daughter with shame. This often undermines the will of the victim to fight and stand for justice. The victim is forced and made to believe that this is the only way and that fighting for this can even bring more embarrassment to the family. Thus, the consent to marry in such circumstances is mostly fabricated. These laws are being challenged and questioned heavily in the 20th century.

A new Act POCSO (Protection Of Children from Sexual Offenses) 2012 was made due to an increase in the number of crimes against children. This was gender-neutral and recognized all sorts of penetration and also included crimes such as child pornography, abatement to child abuse, etc. In a recent Madras High Court judgment related to the same, the accused was granted bail after impregnating a minor girl as he agreed to marry her. The FIR was filed under POCSO Act and the judge noted that if the accused fails to register for marriage then they will proceed against him as per the law.

What if the survivor herself wants to marry the accused, especially in the case of POCSO, or promise to marry? The main reasoning behind this is again, that the survivor thinks her lost reputation will be restored by marrying her rapist or will give her social acceptance. Her gendered conditioning assigns the act of loss of virginity as to traverse to eventual marriage.

Effect of marriage on rape

As per Article 21 of the Indian Constitution, the right to marry is a fundamental right of every citizen and the State and law cannot interfere with an individual’s decision to marry. So, as long as there is mutual consent between the victim of rape and the accused to marry, the court cannot interfere in the decision to marry or not. It is argued that courts can at least investigate if the consent is free of coercion, but it is said that investigation and marriage are separate things and courts cannot investigate into marriage.

It is the settled law that rape is non-compoundable offense i.e. non-negotiable in India. It was held in the Shimbhu v. State of Haryana (2013) that “rape is a non-compoundable offense and it is an offense against the society and is not a matter to be left for the parties to compromise and settle”. So, it can be said that in the cases of rape, there is no idea of a compromise that can be thought of. But, as we saw above in a recent case of the Supreme Court itself minimizing the punishment if the accused is ready to marry, shows that although marriage cannot completely waive the offense of rape, still the punishment can be said to minimize. This type of compounding of heinous offense is wrong, but if the victim herself gets ready to marry showing her consent, then the court remains with no evidence to convict the accused.

Albeit these judgments, the Kerala High Court decision in 2021 is a breath of fresh air as the court rejected the bail plea of a priest who was convicted of raping a young girl. Thus, it is clear that in cases where the charges of the rape have been proved, the Courts can and ought to take this recourse of blanket denial of marriage in such cases.

Conclusion

To conclude with suggestions, the grey area where the consent is given by the victim to marry the rapist, which is usually by coercion or fear, needs to be addressed by the courts. Although marriage is indeed a personal affair, if the marriage in question is regarding rape, then the investigation should be made allowed.

Recent guidelines given in this regard should be implemented accurately which say that the victim and the accused should not remain in contact, the victim should be protected, etc. apart from this, women NGOs should also keep themselves updated and interfere in these matters from time to time.

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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Right to repair movement around the world

By

Sneha Mahawar

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November 5, 2021

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This article is written by Ridhi Mittal, a student of Symbiosis law school, Noida. This article talks about the right to repair movement going around the world for the promotion of rules and legislations that introduce the right to repair laws.

Table of Contents

Introduction

Right to repair is a movement that started a long time back and is still in existence. This movement is introduced in the favor of those rules and regulations that play a major role in the introduction of the right to repair laws. The goal of this movement is to get companies to make spare parts, tools, and any information on how to repair consumer gadgets to increase their lifespan and to avoid them ending up in landfills. The idea behind the right to repair movement is that the one who creates should have the right to repair or get it repaired himself. This is a common concept in appliances and gadgets like cars, fridges, etc. but is a very recent concept in terms of advocates.

Right to repair movement

The idea for this movement originated in the USA where the Motor Vehicle Owners’ Right to Repair Act, 2012 required the manufacturers to provide the necessary documents and information to allow anyone to repair their vehicles.

When we talk about the right to repair movement we talk about decades of struggle of the advocates fighting for the rights of consumers to repair their products themselves. Whenever an individual buys any electronic gadget, like a smartphone, he tends to visit the repair center. This is because when the phone is new it functions great but as time passes, there are huge updates for installation, the battery becomes weak and the gaming console may require too many hard resets. When such situations are encountered by the consumers they are left at the mercy of manufacturers who make repairs inaccessible for most, by dictating who can fix your device and making it a pretty expensive deal. The question raised in this movement is why aren’t the consumers permitted to fix their gadgets themselves. The advocates are trying to pass effective right-to-repair laws. But this movement, although no surprise, has faced a lot of resistance from tech giants like Apple and Microsoft. This movement has its roots in the dawn of the computer era in the 1950s. This movement argues that these giant electronic manufacturers are encouraging a culture of ‘planned obsolescence’. This is a system whereby the design of any gadget is such that it lasts a particular time only and after that particular period it has to be mandatorily replaced.

Through this, another issue they raised is that it is creating pressure on the environment because replacing hundreds of thousands of gadgets after every certain period pollutes the environment and leads to wastage of natural resources. Manufacturing an electronic device is a highly polluting process. It makes use of polluting sources of energy, such as fossil fuel, which harms the environment. According to a New York Times report, Apple represents roughly 83 percent of its contribution to the heat-trapping emissions in the atmosphere throughout its life cycle. It’s about 57 percent for the average washing machine. Another reason for the advocates to start this movement is to help provide business to the small repair shops that constitute an important part of local economies. As talked about economically, when there is a monopoly of one person in the market, the prices are too high, sometimes even unaffordable, but if there is no monopoly then the price is the law as there is competition between people. To extract customers, the manufacturer keeps a lower price than the other. Therefore, involving small repair shops is a benefit to both customers and the economy.

Objectives

There is a right-to-repair advocacy group known as ‘The Repair Association’, which has several policy objectives. Some of which are as follows:

The consumer shall be well aware of his product. He should have complete knowledge and access to manuals, schematics, and software updates and to which the software license shouldn’t limit the transparency of the object in the sale.
The parts and tools to service devices, including diagnostic tools, should be made available to third parties, including individuals.
For a customer to install custom software, the government needs to legalize unlocking, adapting, and modifying a device.
The design and structure of the product should be such that repair is flexible and not rigid.

Other reasons or benefits in support of the right to repair laws are:

If the movement is successful the e-waste generated will be reduced. The mountain pile of electrical waste will tend to decrease in size.
In terms of money, it will be a great saving to the consumer pockets as the extra or unnecessary expenditure will be cut down.

Opposition

Giant tech industries have been lobbying against the right to repair movement. The giant tech companies include Apple, Microsoft, Tesla, Amazon, and many more. They oppose this movement by providing an argument that if they open their properties to a third party that will lead to their exploitation, and not just that, but also will endanger the security and safety of the devices. Companies like Microsoft and Google argue that giving them access and giving in on this movement would allow unvetted access to sensitive diagnostic information and software. Supporting this Elon Musk also said that such an act would lead to the weakening of the cybersecurity system and therefore become prone to attacks. Tesla even fought against the right to repair advocacy, stating that such initiatives threaten data security and cybersecurity. But Apple’s co-founder Steve Wozniak showed his support for the movement by saying that if it weren’t for this open technology world, he wouldn’t be where he is today. Other companies including Apple argued that they just want protection and safety, which otherwise will not be there, and as far as e-waste is considered they are working on reducing it. For instance, Apple expanded its free, independent repair provider program in 200 countries, and also the access to genuine spare parts, information on repairs, and tools for out-of-warranty repairs was extended. Microsoft too pointed out improving its battery and hard drive for its third-generation surface laptop.

Movement around the world

This right to repair movement is not based in any single state or country but spreads all around the world. There are several countries in the said movement. Some of them are the United States of America, the United Kingdom, and also unions like the European Union.

United States

The right to repair concept originated from the land of the United States. When Motor Vehicle Owners’ Right to Repair Act, 2012 was passed in Massachusetts, it required the automobile manufacturers to provide the necessary documents and information which would allow anyone to repair their vehicles. The State passed an amendment in the 2020 general elections to remove loopholes in the law that gave a window to companies like Tesla. This amendment requires manufacturers to support an open data platform by the 2022 release year. This will be accessible to the owners and independent repair shops through a mobile app or a similar means and provide the same information that their certified repair persons can access. Companies like Apple Inc. started fighting such bills in mid-2016 when a larger right to repair movement began. This movement was led by TRA (The Repair Association), gaining a boost from the farming sector as the farmers had the problem of not getting to repair their tractors by themselves. In 2017, the California-based company started offering battery discounts to affected users, which could have been avoided if Apple permitted third-party battery replacements, and last year Apple was fined $113 million under the accusation that it purposely, using an artificial method, slowed down the older models of iPhone. Recently, after Joe Biden signed Executive Order 14036, the Federal Trade Commission made a unanimous vote and enforced the right to repair as a policy. It mandated taking action against the companies that will limit the type of repair work that an independent repair shop can do.

United Kingdom

The right to repair laws in the UK were effective from July 1, 2021. This law includes all the electronic appliance manufacturers to provide the consumers with spare parts for getting the repair done either by themselves or by the local repair shops. For instance, a door hinge for a washing machine. Products like smartphones remain excluded from this set of laws. Also, they are required to make available certain complicated parts to the professional repair shops. This law gives a two-year grace period to come into compliance. This is a 2-year window for any manufacturer to amend or change whatever is required for him to completely abide by these rules. The introduction of these right-to-repair rules has been done for the prime objective of making the purchase of such products and their repairs easy enough for the buyer. They aim to extend its lifespan up to 10 years.

European Union

EU’s right to repair laws require manufacturers to ensure that electronic goods can be repaired for up to a decade. This was seen as a result of the legislation that was passed by the European Union parliament by voting in favor of establishing a more far-reaching and effective right to repair rules. They aim on reducing electrical waste caused and have been on a rise in the continent since the spike in manufacturing. In 2010, the trend of making repairs to devices spread from the east into Western Europe. In July 2017, the European Parliament approved recommendations regarding the passing of laws that will give consumers the right to repair their electronics. The ability to repair devices is seen by these recommendations as a means to reduce waste to the environment. One of the major areas to focus on under these recommendations was consumer appliances that include refrigerators and washing machines. The right-to-repair facets of appliances were a point of contention between consumer groups and appliance manufacturers in Europe, the latter who lobbied the various national governments to gain favorable language in the Directive. Therefore, in the end, the EU passed legislation in October 2019 that required manufacturers, after 2021, to supply parts to professional repairmen for a time of 10 years. In 2020, a new ‘circular economy action plan’ was drafted which included the electronic right to repair for EU citizens.

Conclusion

Right to repair laws is a movement by advocates against the high-tech giant companies to take the rights of repair from them. These companies, Apple, Google, Microsoft for instance, keep the rights to even the smallest of the defects to themselves and create a situation of monopoly in the market. This drowns the business of the small local repair workers thereby affecting economies. These repairs cost the consumer a lot which leads them to eventually withdrawing. Also, these companies manufacture such products that are short-term based and mandates the consumer to change the product in a couple of years which in return creates a lot of e-waste and harms the environment. The lawyers fight against both these issues of economic monopoly and negative effects on the environment. These huge tycoons have a reply to this movement and reason to support their resistance towards it. Leakage of harm to this data is something that isn’t acceptable and thus they would fight against the movement. Talking about the environment, they are taking certain measures to curb the environmental harm caused by these gadgets. Therefore, both sides have valid points and this decades-long movement is still ongoing. This movement is not limited to any one state but has spread all over the world and has also brought changes in the laws of countries like the USA and UK. organizations like the EU have also been a significant part of this movement ensuring the application of right-to-repair laws in the respective countries. Seeing the situation in other countries, it can be said that right-to-repair laws can be valuable in countries like India, where service networks are often spotty and authorized workshops are few and far between in the hinterland. India is known for its ‘jugaad’ and the informal repair sector is a very good example of it. But the quality provided by these jugaads is not very up to the mark therefore, bringing that right that to repair laws in India could improve the substantial quality.

References

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

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Analyzing the electronic contract communication : rise of E-contracts

By

Oishika Banerji

-

November 5, 2021

0

This article has been written by Mohd Aman Khan Afghani pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

As we know that the whole world is going through the most difficult time because of the prevailing Pandemic, due to this, many new ways have been discovered by people so that their work does not suffer due to the present situation. The present scenario has also changed the way people do business and enter into Business relationships. It can be seen that these days the classes are conducted online, most of the people are working from home, seminars are being held online and even the sensitive matters such as legal Contracts are made through online mode. So in short, it can easily be inferred that the Internet has become an integral part of everyone’s life, as it has come to the rescue of the people in these testing times. It can be said that the wide range of activities which are being done now with the help of the internet has made the old ways of doing the same activities redundant. The internet has an impact on the business activities and transactions which are being done by the people.

The term ‘Contract’ is defined in the Indian Contract Act, 1872, under Section 2(h), according to which, it is an agreement which is enforceable by Law. It is to be noted that the Indian Contract Act, 1872 does not specifically talk about the E-Contracts but the Indian Contract Act also does not prohibit the E-Contracts per se. It also must be noted that like any other Contracts, E-Contracts are also governed by Section 10 of the Indian Contract Act and thave to fulfill the requirements of Section 10 of the Indian Contract Act. So accordingly, the E-Contract has to be made through Lawful offer and acceptance, there should be a lawful object behind entering into an E-Contract, there should also be a lawful consideration, competent parties, free consent of the parties, the parties should intend to enter into a contractual relationship and the Contract should not be expressly void. So we can say that an E-Contract can be executed only when it fulfills all the above requirements given in Section 10 of the Indian Contract Act, 1872.

Understanding E-Contracts

E-Contracts can be said to be a division of E-businesses, very much like the Traditional business where the goods and services are exchanged for the price. E-Contract can be said to be a Contract that is made through the digital mode of communication. it is a type of contract which is made during E-commerce activities in which the interaction of the parties for entering into a Contract is being done through electronic means like Emails, or through recognized electronic agents. It is a contract that is shaped and is specific and is executed through a software system.

The Supreme Court in Trimex International FZE Ltd, Dubai Vs. Vedanta Aluminium Ltd, held that a Contract which is being entered into by or between the parties and the acceptance of the same is made through exchanging Emails, and it is recognized under the law

Main parties to an E-Contract

There are basically two main parties to an E-Contract, i.e. an Originator and the Addressee. An Originator as per IT Act is a person who generates, sends, transmits and stores any electronic message required to be sent, stored, or transmitted to some other person and does not include an intermediary. As per IT Act, an Addressee is a person who receives an electronic record sent by the Originator and also does not include intermediary.

Nature of E-Contracts

In E-Contract the parties do not meet each other physically.
Absence of Physical boundaries.
Handwritten signatures are not required, rather there is a recognized electronic agent.
Presence of Jurisdictional issues in case of breach of Contract.
Absence of single authority to look into the whole process exclusively.
Digital signatures are used and also electronic records as evidence in Court.

Subject matter of E-Contracts

Normally physical goods are involved where those goods are ordered online and the payment is also made online through the Internet and the delivery of those goods is made physically.
At times digital products like the Softwares can also be ordered.
Services like Electronic Banking, financial advice etc can also be its subject matter.

So some of the important aspects to understand E-Contracts are:

E-Contracts are being recognised under the IT Act:

Section 10A of the IT Act talks about the E Contracts. The aforesaid section talks about the validity of Contracts that are made by electronic means and also specifies that if the formation, acceptance or revocation of proposal are done in an electronic form or through some electronic means, then they cannot be said to be unenforceable. Section 4 of the IT Act also provides recognition to the E-Contracts.

Evidence Act also gives recognition to E-Contracts:

According to the Indian Evidence Act, the E-Contract has the same effect legally as it is there with the paper based Contract.

Indian Stamp Act recognition to E-Contract:

Stamp Act recognized E-Contracts. Although no specific provision is there, it still gives recognition to E-contracts. stamp duty had to be paid on the execution of the contract. both SignDesk’s stamp duty payment solution and stamp.it supports digital stamping and is currently in use by over 50 major Indian banks to pay stamp duty online.

Execution of E-Contracts

There are many options with the people to execute E-contracts which are:

Digital Signatures:

The Parties to the E-contract can get the Digital Signature for themselves and then they can use the Digital signature to sign the E-contracts. The Digital signature certificate is being issued by any licensing authority and is considered to be a secure electronic record under the Evidence Act and the IT Act.

Sharing of scanned copies of signed contracts:

The parties to the contract have another option available with them in which they can consider the option of circulation according to which their counsel shall prepare the execution versions of their Contract which are to be signed by the parties. In this, each party to the contract have to confirm through Email that they are willing and ready to enter into a Contract and then the Counsel will share the signature page to them of which the parties have to take a printout and affix their respective signature on those Signature pages and then they have to share those scanned copies of signature pages after signature to the Counsel and then the Counsel will verify them.

E-mail can be used to convey the acceptance of Contract:

The parties also have the option with them in which they can exchange the Emails with each other containing the confirmation of Contract acceptance.

Electronic signatures:

The parties also have the option to use Electronic Signature (E-Sign) for the purpose of executing the Contract. Once the Contract between the parties is being finalized by them, then the parties can use their E-sign to execute the contract.

Elements of E-Contracts

Offer:

The Advertisements which are there on the Website are normally considered to be an invitation to offer and when a person responds through an email or by filling a form for the same then it can be said to be an offer. Offer is one of the essential parts of any Contract.

Acceptance:

Contract is concluded when the offer is accepted. Here, the important thing is communication of Offer. So, the communication of offer is complete in case of E-Contract on the part of the proposer when it is put in the course of transmission to him and against the acceptor it is complete when it comes in the knowledge of the proposer, which means when the acceptance enters into the computer resource which is designated.

Consideration:

It is also one of the essentials. The Consideration is said to be paid when payment is made for the goods ordered or services availed through online mode.

Lawful object:

The object of E-Contracts should always be lawful, which means that they are not forbidden by law or illegal.

Competent Parties:

Parties should be competent to enter into a contract, the essentials as given in section 10 of Indian contract Act.

Free Consent:

The Parties should give free consent to enter into a contract. It must not be coerced or undue influence.

Certainty of Terms:

The Terms of the E-Contracts should be reasonable and certain.

Kinds of E-Contract

They are mainly of Three types:

Shrink Wrap Agreements:

These are mainly the Licensing agreements which are used in software purchase.

Click Wrap Agreements:

These types of Contracts normally come into existence when the “I Agree” button is being clicked by the online buyer or the user. These types of Agreement require clicking on the screen icon as a signal of acceptance.

Browse Wrap Agreement:

These are those agreements that become binding on two or more parties through the use of the website. When a person is using a website then he is required to accept the terms of usage of that website.

Conclusion

In conclusion, it can be said that the laws prevailing in India are not at all reluctant or averse towards the idea of E-Contracts and the Courts in India has also upheld the validity of E-Contracts on numerous occasions with the only requisite that they are in conformity with the Indian Contract Act, but at times problems do arise in its execution. The present crisis has forced people to accept these E-contracts for building contractual relationships and the legal system in India has already given recognition to these E-contracts, therefore it can be concluded after seeing the present situation and how these E-Contracts help people in keeping their business going on that the E-Contracts will take over the Tradition modes of Contract formation and execution and this crisis has made the perfect platform for the same. It can be said that this Covid crisis has acted as a catalyst to the rise of E-Contracts.

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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How to build a career in IPR in India

By

Diganth Raj Sehgal

-

November 5, 2021

0

IPR globe_cmyk — Image Source: https://bit.ly/2ScewGU

This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It discusses in detail the scope of building a career in IPR, the different roles an IP attorney plays in the legal domain and the opportunities available in this field.

Table of Contents

Introduction

In today’s dynamic and competitive business environment and knowledge-based economy, intellectual property is the key element needed to maintain a competitive edge in the market. IP is an intangible asset that businesses can convert into usable resources to generate a competitive advantage. In today’s economy, IP is perhaps the most important asset that an organisation can possess.

In this article, we will be discussing various options to pursue a career in intellectual property rights. We will also be touching base regarding some details of the different examinations that law graduates can attempt in the field of IPR and the advantages that can be gained through these examinations.

The differentiating factor

When you are graduating out of law college or when you are thinking of changing your job or career while working in the corporate sector, one question you should always ask yourself or which you should always think in your mind is first, which is the best career option for me and second, in a country like India, where we have a large volume of students who graduate every year, it is very important to differentiate yourself from the rest of the crowd. How does one stand out of the crowd and how does one attract the attention of recruiters? Let us try and find answers to these questions.

IP as a career option

Let us try and understand some of the top reasons for choosing a career in Intellectual Property.

India : The global R&D hub

India currently ranks as the No. 2 destination for global corporations to set up their research and development centres. Traditional sectors like manufacturing, communications, health care and so on are seeing an increasing role of IP in business and its impact on their growth rates. IP is driving the biggest new developments in science, business, arts and other professions.

A plethora of job opportunities

You can work either in any product development company, hospitals, R&D labs, law firms or start-ups or even start your own IP company, independent IP litigation practice or secure jobs as IP agents in different industries.

According to the annual report published by the Office of the Controller General of Patents, Designs and Trademarks, in the year 2018-2019, the number of patent applications filed were 50,6569, the number of design applications filed was 12,585, the number of trademark applications filed was 3,23,798 and the number of copyright applications filed was 18,250. This data clearly shows the increasing demand for IP filing and the role an IP lawyer can play in this fast-paced world.

Courses on IPR

There are multiple courses that a law student can take part in to further a career in IPR. A few of these courses are enumerated below:

World Intellectual Property Rights	WIPO Distance Learning Courses on IPR
Udemy	IPR Certificate Course
FICCI	Online Certificate Course on IP
National Law School of India University Bangalore	PG Diploma in IPR
NALSAR University of Law Hyderabad	PG Diploma in IPR
Indira Gandhi National Open University New Delhi	PG Diploma in IPR
Hyderabad University	Diploma in IPR
Swayam	Online Course on IPR
Enhelion	Master Course in IPR
LawSikho	Certificate Course in IP Law and Prosecution
LawSikho	Diploma in IP, Media and Entertainment Laws

Top IP journals and blogs

Law students should try and publish their articles on the following blogs and research journals to further their career growth in the field of IP. The top IP blogs and research papers have been enumerated below:

Top IP Blogs	Top IP Research Journals
IPWatchdog	Supremo Amicus
Patently-O	Indian Journal of IPR:
Law360 \| Intellectual Property	Journal of Intellectual Property Studies: NLU Jodhpur
SpicyIP	NLIU Journal of Intellectual Property
Intellectual Property \| JD Supra Law News	NLSIU Journal

Role of IP professionals in the legal domain

Patents

A patent professional being an expert in patent law as well as science and technology shall have good opportunities not only in IP departments of any R&D oriented organisations but also in law firms.

Patent analytics is a very wide area where one has to learn skills to pull out relevant patents and use them for a specific purpose. Any research and innovation-based company would need skilled persons to conduct patent searches and perform other related roles and therefore learning these skills could be very useful to pursue a career in patents. Typically, in companies, professionals performing patent searches or drafting patent specifications are designated as patent analysts, patent scientists and patent engineers. The basic qualification for being a patent analyst may be a bachelor in science, engineering or biotechnology, or any other area of basic sciences or life sciences. They perform different searches such as assessing the patentability of an invention, checking for patent infringement, and so on.

Drafting and filing a patent specification

Patent specifications are one of the most complex techno-legal documents and one needs to be highly proficient in English and possess scientific knowledge and understanding in order to draft patent specifications.
Once a patent specification is drafted, it is required to be filed online along with various forms and the required fee.
One needs to have a thorough understanding of the Patents Act, 1970 to understand the right forms and fees.
In order to file a patent application in India, one needs to register his/her name as a registered patent agent by writing an examination called “Indian Patent Agent Examination” which is conducted once every year.

Patent prosecution

An examination report is issued by the examiner of patents after the examination of a patent application.
Understanding the objections of the examiner requires a lot of experience and knowledge of both the subject of the patent application and the process followed in the patent office.
Preparing a reply or response is also a very specialized skill and learning this skill adds a lot of value to the profile of the candidate aspiring for a career in IP.

Patent docketing

Docketing patents requires a thorough knowledge about the patent processes in different countries since requirements of fee and process may vary from country to country.
Few companies may have a large number of patents to be docketed and having expertise in the area of patent docketing can be a good career option.

Indian Patent Agent examination

The Controller General of Patents, Designs and Trademarks of the Government of India conducts the Patent agent exam once a year.
This exam probes the aspirants on their knowledge of the Patents Act and Rules in India and also assesses the drafting skills and interpretation of the patent specifications and other documents.
Recent graduates in streams of science, engineering and technology who have completed 21 years of age are eligible to apply for this exam.
Interested applicants wishing to apply for this exam are required to do so online on www.ipindia.nic.in.

Responsibilities of a patent agent

Reading descriptions and discussing details of inventions.
Undertaking searches to establish that inventions are different.
Produce detailed and clear specifications of the invention.
Submitting, defending and negotiating patent applications.
Providing associated legal advice to the clients.

Advantages of being a registered Patent Agent

A registered patent agent will be able to:

File and prosecute patent applications in India and Patents Cooperation Treaty, 1970.
Represent client(s) before the Controller of Patents and the High Court.
File appeals against the decisions of the Controller General of Patents under Patents Act 1970, Registrar under the Trademarks Act, 1999 and the Geographical Indications of Goods (Registration and Protection) Act, 1999 in the High Court.

Trademarks

What do trademark attorneys do?

Identify different trademarks of a company
Conduct proper trademark searches prior to the adoption or use of the trademark by the company.
Develop a strategy to file the trademark application.
Draft the trademark application and file it with the Registrar.
Respond to any objections or oppositions and ensure smooth registration of the trademark.

Role of trademark attorneys in law firms

Brand development and strategy

Help in the identification of an appropriate trademark for a brand and build a strategy for the registration and enforcement of the trademark by conducting proper trademark searches.

Protection

Conduct regular searches and protect the trademark from any future infringements.

Enforcement/prosecution

In case of infringement, ensure that suits are filed without undue delay and proper relief is sought for the loss caused to the client.

Commercialisation

Help unlock the full potential of a trademark by helping the client w.r.t franchising, licensing, assignment, and other commercial modes for exploiting the trademark.

Trademark Agent

A trademark agent is a person who specialises in trademark matters. They should have the knowledge about the registration process and have the capability of instituting suits for infringement of the trademark. The primary duties of a trademark agent are:

Help companies to identify and select trademarks that are suitable for their businesses.
Conduct trademark search to ensure that the selected trademark is unique and valid in the appropriate class.
Draft and file applications for registration of the trademark.
Ensure compliance requirements during filing and draft appropriate replies to objections or oppositions to the proposed trademark.
File suits against infringement of the trademark.

Trademark Agent Exam

The Institute of Patent Attorneys, India offers a 6 months distance learning program for candidates who wish to appear for the trademark agent exam.

Eligibility

Educational qualification: B.A, B.Com, B.Sc or any other degree holder.
Age limit: Age is no bar.

Syllabus

Questions from the Trademark Act and Rules: 100 Marks (Objective type).
Application process
For the registration and application form, an e-mail has to be sent to [email protected]

Copyright

What do copyright attorneys do

Draft and file copyright applications on behalf of clients.
Once copyright has been granted, keep reviewing the copyright journal from time to time to ensure there is no infringement.
In case of infringement, file suits against the unauthorised user and claim appropriate remedies.

Role of copyright attorneys in law firms

Drafting/filing

Draft and file copyright applications in accordance with the type of work created.

Protection

Conduct due diligence investigations and protect the copyright from any future infringements.

Enforcement/prosecution

In case of infringement, ensure that suits are filed without undue delay and proper relief is sought for the loss caused to the client.

Commercialisation

Help unlock the full potential of the copyright by helping the client w.r.t licensing, assignment, and other commercial modes for exploiting the trademark.

Copyright examiner

A copyright examiner is a person who examines the copyright applications that are filed and determines whether or not all the essential features required for the registration of copyright have been satisfied.

Appointment as copyright examiner

The Copyright Office releases a notification from time to time providing details for the recruitment for the post of copyright examiner.

Eligibility

Educational qualification: Degree in law
Work experience: Minimum two years experience as an Advocate
Age limit: Maximum 35 years

Application process

A scanned copy of the application form along with other requisite documents should be sent by e-mail to [email protected] with a copy to [email protected].
Once applications are received, an interview is conducted and candidates are selected on merit.

Designs, geographical indications, and other forms of IPR

Unlike the aforesaid three forms of IPR, the other forms of IPR see a lower number of registrations comparatively. However, every boutique IP law firm and the full-service law firm has a few members in their IP team to deal with registration, enforcement, and prosecution of these forms of IPR.

Teaching IPR

Teaching IPR in colleges and universities is an excellent career option.
In the majority of the engineering and biotechnology courses, IPR is one of the elective subjects.
Further, institutes conducting PG diplomas in IPR, LLB, and so on may have requirements for professors to teach IPR.

Intellectual property management

IP Audit involves assessment and review of a company’s IP (Intellectual Property), procedures to trace and protect the wealth of intangible assets followed by recommendations on how to improve the processes to safeguard and prevent misappropriation of sensitive forms of IP such as confidential information and trade-secret.
IP monetization and commercialization is a process of bringing patented products into the market. This could be an excellent career option for those who love to assess new technology and new markets.

Top IP law firms

According to the rankings of Chambers and Partners, the following law firms are ranked in the particular bands in India.

Band 1	Band 2	Band 3	Band 4
Anand and Anand	Krishna & Saurastri	Khaitan & Co.	AZB & Partners
R.K. Dewan & Co.	Lakshmikumaran & Sridharan	LexOrbis	Luthra and Luthra Law Offices
Remfry & Sagar	Lall & Sethi	Obhan & Associates	ANA Law Group
	Rahul Chaudhary & Partners	S Majumdar & Co.	Chadha & Chadha
	Saikrishna & Associates	Shardul Amarchand & Mangaldas	Khurana & Khurana
	Inttl Advocare	De Penning & De Penning
	K&S Partners	Kochhar & Co
		S.S. Rana & Co.
		Singh & Singh
		Subramaniam & Associates
		W.S. Kane & Co.
		ZeusIP Advocates LLP

Conclusion

Whether a business is just starting or already running, IP is always part of the business. Every day businesses build goodwill and recognition linked to their brand product or service, this value builds up over time and is strongly linked to the IP assets of the business. Therefore, it is important to identify the IP assets early in the business. The success of any business depends on the commitment of that business to its IP assets.

With the value and importance of IP assets climbing up each day, the demand for IP professionals is also on a rise. As young lawyers, what we need to do is invest our time to understand IP and the time that we invest today will bring high returns in the future when we step into the legal domain as young, practicing IP attorneys.

References

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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Procedure for declaration and payment of interim dividend

By

Abanti Bose

-

November 5, 2021

0

Interim-Dividend — Image Source: https://rb.gy/i0pk64

This article is written by Mangalakshmi Teja Veluri, pursuing Diploma in Law Firm Practice: Research, Drafting, Briefing and Client Management from LawSikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

A profit of a company is distributed among the shareholders in proportion to the amount paid up on the shares held by them. This is called Dividend. it is usually payable for a fiscal year after the final accounts are ready and the amount of distributable profit is made. If the dividend is announced and paid in the middle of a financial year, such dividend is known as an interim dividend. As per the Companies Act, 2013, the term dividend is also inclusive of interim dividend. In this article, we look at the procedure for declaration and payment of Interim Dividend.

What is a Dividend?

A dividend is said to be a distribution of a Company’s profits in the form of cash or stock to shareholders in the company as determined by the Company’s Board of Directors.

What is an Interim Dividend?

As per Section 123(3) of Companies Act 2013, the Dividend which is declared between the 2 (two) Annual General Meetings is said to be INTERIM DIVIDEND.

Interim Dividend is always declared for the current financial year.

Why is Interim Dividend Declared?

When a company performs well and gains good profits in the current Financial Year and wants to share the profits of the same financial year’s till the quarter preceding the date of declaration of interim dividend to its shareholders then they do it through Interim Dividend.

Interim Dividend can be declared from the surplus in the Profit and Loss account and out of profits of the current financial year.

If the company is in losses during the current FY, then the Rate of Dividend will be the average dividends declared by the company during the 3 immediately preceding years.

Procedure to be followed for declaration and payment of Interim Dividend by Board of Directors

Initiate a Board of Directors Meeting as per Section 173 and SS-1, Companies Act 2013.

Listed Companies will inform about Stock Exchange in advance, prior to Board Meeting in which declaration of Interim Dividend is considered at least 2 days in advance excluding the date when Board Meeting Date was announced and date in which meeting will be held as per Regulation 29 of the SEBI (LODR) Regulations, 2015.
According to SEBI (PIT) Regulation, 2015 Listed companies need to intimate Stock Exchange prior to the close of the trading window as per their code of conduct.
Issue Notice to all the Board of Directors about the Board Meeting to their registered address at least 7 days prior to the actual day of the Board Meeting. In case of urgent business, shorter notice would suffice.
Along with the Notice attach the agenda and Draft resolution.
During the Board of Meeting consider all the detailed matters in regards to the declaration of the Interim Dividend.

As per Section 123(1)(a) – Make sure whether Companies financial position allows the Company to provide an Interim Dividend to be distributed out of the profits available after providing depreciation.
What percentage of profits are to be transferred to reserves?
To consider declaration of Interim Dividend to shareholders along with the source of payment.
Finalizing the list of shareholders for Interim Dividend to be distributed.
Opening Separate Bank Account in a scheduled Bank for making payment of Interim Dividend to the shareholders also to keep unpaid Dividend.
Deciding on the authority for signing the dividend warrants.
Printing dividend warrants.
Passing the Board Resolution for declaration of payment of Interim Dividend.

Within the 15 days from the conclusion of the Board Meeting circulate the Minutes of Meeting to all the Directors either in the form of mail/registered post/courier/hand for their comments also follow the prescribed procedure for preparing, circulating, signing, and Compiling of Board Meeting as per Secretarial Standards-1.
If any transmission/transfer of shares of the company has been lodged, then hold a board of directors meeting to get the approval for the same and the transfer of shares should be announced prior to the commencement of record date/closure of the books.
Prepare the dividend list from the Register of members or from the last date of the closure of the books containing the following details:
Name and the address of the Registered shareholders with their ledger Folio Number.

ii) No. of shares held and,

iii) Dividend Payable.

As resolved in the Board Meeting, open a Separate Bank Account with the scheduled Bank and deposit the Dividend payable amount within 5 days of the declaration of Interim Dividend.
Make sure the Dividend tax is paid to the Tax authorities within the stipulated time.
As per Section 123(5) within 30 days pay the Dividend declared by the company to its registered shareholders either by the Cheque or warrant or in any electronic mode.
Transfer the unpaid or unclaimed dividend to the Special account “Unpaid Dividend Account “within 7 days after the expiry of 30 days from the day of the Dividend declaration.
Within 90 days of making the transfer of unpaid or unclaimed to Unpaid Dividend Account then a statement needs to be prepared to contain the name of the shareholder, their known last address and unpaid dividend amount to each shareholder in Form No.5 INV and this needs to be published in the company website or also any website approved by the Central Government for this reason as per the Section 124(2).
As per Section 124(5) transfers all the unpaid dividend amount along with its incurred interest if any, to the Investor Education and Protection Fund after the expiry of 7 years from the date when the unpaid amount is credited to the Unpaid Dividend Account.
Any person who needs to claim the amount from the Unpaid Dividend Amount then needs to apply in the FORM IEPF-5 to the company.
All the shares in respect of which unpaid or unclaimed dividend has been transferred to Investor Education and Protection fund shall also be transferred by the company in the name of IEPF under Section 124(6).
The company will remit the amount to be deposited to the funds into specified PNB branches which are accredited banks of the Pay and Accounts Office of the Ministry of Corporate Affairs engaged by the MCA-21 system within 30 days of the timeline of such amounts being credited to the fund. Along with Challan, the amount will be tendered by companies to specified branches of PNB or to any authorized branches specified by MCA-21. The respective bank will give 2 copies of challan, a duly stamped token in confirmation of receiving the amount to the company as per Rule 5(1) and Rule 5(2) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. The amount can be remitted by Electronic Fund transfer as well as specified by Central Government in Rule 5(5) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.
As per Rule 5(3) and Rule 5(4) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the Company will file with the concerned Authority with 1 copy of challan indicating the deposit of the amount to the fund and fill in full details of the amount tendered including the details about the Head of the account to which it has been credited. Companies will submit all the details of such transfer in Form No. IEPF-1 along with challan to the Authorities within 30 days of submitting the challan.
Companies maintain a record consisting of the name, the last known address, amount, client Id or Folio Number, beneficiary details etc. Of the shareholders whose unpaid or unclaimed amount has been remained unclaimed or unpaid for a period of 7 years and which has been transferred to the Fund and authorities will have the power to inspect such record as per Rule 5(5)(c) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.
All the unpaid or unclaimed dividend shares which have been transferred to the IEPF shall also be transferred by the company in the name of Investor Education and Protection Fund as per Section 124(6).
In the next Annual General Meeting of the Company get the Confirmation on the Interim Dividend.

Key points

According to Section 124(4), any person who claims to be entitled to the money that has been transferred to the Unpaid Dividend Amount can apply to the Company for the payment to be claimed.
Following procedure needs to be considered when Companies are transferring shares to IEPF:

Companies should inform the shareholder at the latest known address regarding the transfer of shares at least 3 months before the due date of the transfer of the shares and same should be published in the Local widely popular newspaper informing the concerned that names of such shareholders along with their Folio Number are available on the company website and should specify the Website address.
Board of Directors will provide authority to the company secretary or to any other person to sign and approve all the necessary documents and then the shares will be credited to the DEMAT account of the Authority for the said purpose and this should be done within a period of 30 days of such shares which are in due to being transferred to the Fund according to Rule 6 of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.
If the shares are dealt with in a depository, then for the purpose of affecting the transfer:

The company needs to inform the depositary by the corporate action where shareholders have the accounts in favour of Authority for transfer.
On receiving the intimation, the depositor shall transfer the shares to the DEMAT account of the Authority. (According to Rule 6 (3)(c) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.)
If the shares are held in the physical form and if they need to be transferred then:

The Company Secretary or the person who is authorized by the Board of Directors will make an application on behalf of the concerned shareholders to issue a duplicate share certificate.
Under clause (a) on receipt of the application, a duplicate certificate will be issued to each such shareholder and the same will be recorded in the registers maintained for the same stating that the duplicate certificate is issued in the share certificate No and for purpose of the transfer to IEPF and “duplicate” word will be punched in Bold letters on the first page of the share certificate.
Details of every such share certificate issued shall be entered in a register of renewed and duplicate certificates maintained in Form No. SH-2 as specified in Companies Rule 2014.
The company should inform the depository in the corporate action way to convert all the duplicate share certificates into DEMAT form and to transfer in the favor of Authority once the duplicate share certificates are issued. (According to Rule 6 (3)(d) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016).

All the transfers should be made through the corporate actions by the company and should preserve the copies of its records (Rule 6 (4) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016).
Until the rightful owner claims the shares that have been transferred to the Fund all the voting rights will remain frozen.

Conclusion

Declaring and paying Interim Dividends to the Shareholders by the company will gain the trust of the Shareholders and will help to maintain a healthy relationship between Company and the shareholders. During the payment of Interim Dividends, Companies need to follow all the rules that are required so that there will be no hindrance.

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How to prepare for cross-examination : tips by eminent advocates

By

Diganth Raj Sehgal

-

November 5, 2021

0

This article is written by Yash Kapadia. This article acts as a guide when one is preparing for cross-examination of witnesses. The tips given in this article are words of wisdom from eminent lawyers in India.

Disclaimer: This article has been written by referring to various webinars that can be accessed online and due diligence has been given to the speakers.

Table of Contents

Introduction

“Cross-examination, — the rarest, the most useful, and the most difficult to be acquired of all the accomplishments of the advocate…. It has always been deemed the surest test of truth and a better security than the oath.”- Cox

Cross-examination is often considered to be the most challenging branch of the multifarious duties of the advocate. Great lawyers have often failed in it, while success has crowned the efforts of certain lawyers who might otherwise be regarded as a mediocre grade in the profession. Yet personal experience and the emulation of others trained in the art, are the surest means of obtaining proficiency in this all-important prerequisite of a competent trial lawyer.

Through this article, we shall enlist the tips and tricks on how to master the art of cross-examination which eminent lawyers have learnt through their decades of experience. However, it is important to note that these tips and tricks are not exhaustive in nature as cross-examinations are a double-edged sword. There is no hard and fast rule to master cross-examination but with these tips and tricks, one can definitely be ahead of the curve and be able to learn the approach one has to take to master this art which can make or break an entire case.

Statutory provisions on cross-examination

It is extremely important to understand that the main objective of cross-examination is to ascertain the facts, undisclosed ones or the ones which support the theory which has been put forth by one of the parties to the case.

In a criminal trial, Section 138 of the Indian Evidence Act, 1872 (“IEA”) deals with the order of examinations. It is stated therein that cross-examination is preceded by examination-in-chief. Examination-in-chief as described in Section 137 of IEA is the examination of a particular witness by a party who has called that witness to give evidence. This is then followed by cross-examination and then re-examination, if necessary.

In civil trials, the Code of Civil Procedure, 1908 is referred to in order to understand the procedure for cross-examination. Order 18 precisely deals with the entire procedure that needs to be followed for the examination of witnesses.

How to master the art of cross-examination

When we talk about the art of cross-examination, it is crucial to remember that it is a double-edged weapon. Various lawyers ask relevant questions that help them build and win their case whereas at certain times wrong questions are asked which lead to overturning the entire case in the opposite party’s favour.

As spoken by Mr. Ashok Arora (Advocate and Secretary, Supreme Court Bar Association) in a webinar, one should master the facts and the laws involved. The following were certain tips recommended to keep in mind.

The purpose of doing the cross-examination must always be kept in mind. In civil cases, it is preferred to not dig deep into admitted facts of the opposite party if they are in your favour.
However, always be ready with Plan A, Plan B, Plan C and so on, meaning that one must be prepared for all situations as even one answer can demolish the line of cross prepared by the counsel arguing.
With respect to the chronology of witnesses, a general approach is that if there are two witnesses then an endeavour must be made to cross-examine both of them on the same day. The purpose of the prosecution is to make sure witnesses contradict each other and the same can be done on the same day.
Also, the investigating officer must examine after all witnesses have been cross-examined. This is done so that one can compare and ask for clarifications from the investigating officer. All in all, he also pressed on the need to enhance and work on one’s personality while cross-examining a witness and keeping the purpose of what is needed from the witness very clear.
By quoting his experience of cross-examining the legendary Ram Jethmalani, Mr. Arora stated that no question is less meaningful or wastes the court’s time if, according to you, it leads you closer to ascertaining various facts. Lastly, he asserted that each question of cross-examination is extremely important and one mistake can create unreasonable situations. However, in order to avoid this, one must know every fact and the law at the back of his hand.

Justice A.V. Chandrasekhar (Former Judge, Karnataka High Court), whilst remembering his days as an advocate in this webinar, stated the following about cross-examination:

The art of cross-examining cannot be acquired in a day or two, it takes time and effort applied consciously by the lawyer to master it.
He stated that one must make a list of questions and mark the ones which the lawyer is sure what the answer would be. Then mark the ones which the lawyer has a doubt about and prepare further questions in order to ascertain more and more facts that have not yet been discovered.
One has to thoroughly read the case papers if one is appearing for the Plaintiff and in case one appearing for the Defendant then one must understand the case put forth in the pleadings and documents filed and marked exhibits.
If one has to cross-examine a witness who will be examined to support the case of the prosecution then one must know how he is connected to the accused, if so then in what manner.
Every witness’s background must be referred to in all scenarios.
He stated that one must be as brief as possible, ask plain questions and ask only leading questions.
Never ask a question you don’t know the answer to or know the consequences of the answer.
Lastly, on no account a lawyer must quarrel with a witness. Utmost respect must be given to the witness and our goal must be to ascertain the truth. Avoid repetition of questions and make sure that the witness is not given any sort of opportunity to summarise the case. All in all, for the readers, this is probably one of the best webinars on cross-examination on Youtube.

Certain pointers for an effective cross-examination were laid down by Mr. Amish Aggarwala, Central Government Counsel and Disputes Lawyer at the Supreme Court of India in an interactive session hosted by Lawsikho. They are as listed below:

Always assume that the investigating officer who has recorded statements under Section 161 of the CrPC is never actually recorded verbatim.
Keep in mind to pick out facts recorded by the investigating officer which contradict themselves when one is cross-examining the same witness and investigating officer. There are various intricacies one can catch in such situations.
When one wants to prepare for cross-examination, read judgements that have discussed the particular offence which relates to the matter at hand. Study how the court has dealt with the testimony, not necessarily the High Court or Supreme Court but Trial Courts as various aspects are taken into account and on record. Try to use the relevant information and use it in the cross-examination.
Ask for depositions from colleagues or certified copies of depositions can be applied in a case disposed of matters from the courts.
Do not refrain from asking the most basic questions. Even one piece of information given under cross-examination can contradict any disclosed facts on record and can turn around the case or at least raise questions on the character of the witness.

In this webinar, Senior Advocate Mr. Ramesh Gupta gave a brief overview of the relevant sections dealing with cross-examination, examination-chief and dealing with evidence. He further gave practical tips on how to master the art of cross-examining. A summary of what he stated is as follows:

One must understand what is evidence and be well versed with the Indian Evidence Act, 1872.
As a defence lawyer, the only tool available with the defence to discredit the prosecution’s case is by cross-examination. The basic structure and foundation of the prosecution case must be demolished by contradicting various disclosed facts.
Pick out every point in the facts and any part of the pleadings which is disputed and make sure that questions relating to them are asked in the cross-examination proving them to be in the arguing counsel’s favour.
In the case of arguing as a defence lawyer, one must understand the “why” is that particularly relevant to be asked. Only if it is necessary to obtain information from a witness only then that witness must be cross-examined.

How to conduct a virtual cross-examination

This subject was taken up by renowned advocate Mr. Garv Malhotra, Partner of Skywards Law in a webinar held amidst the ongoing COVID-19 pandemic.

He stated that cross-examination of witnesses on the screen may lead to the re-birth and metamorphosis of this practice into a completely new art form. There are new things to be learned. Cross-examination through virtual hearing is an evolving topic even though many people still prefer physical hearings. However, virtual cross-examinations look nothing like you see in the movies. It is a very calm and composed process that has a question and an answer. Nonetheless, there are very few high pumped adrenaline heated moments but they are few and far between. Many witnesses can be examined on more mundane points. However, people still prefer examining key witnesses in person because of the ability to note the witnesses’ body language, demeanour and various other factors.

Even some sort of guidance based on limited experience on this topic is still better than no guidance on how to do this sort of examination well. In this respect, Mr. Malhotra shared a few points to keep in mind while doing a witness examination on the screen which are as follows:

The witness usually appears bigger and closer than how it happens when you are doing the examination in a physical hearing. In a physical hearing, usually, the witness is standing or sitting on the other side and you are from a distance examining them whereas in a virtual hearing one does have the witness right in front of them and they can probably bring the camera closer further when the counsel starts off according to their preferences and advantages. The facial expressions and uneasiness portrayed on-screen too are very impactful.
When one is doing a virtual cross-examination, it is extremely important to ensure that the oath is administered to the witness. The reason is, sometimes the counsel may forget this in virtual settings and one has to remind the witness that he or she is under oath at a particular time in the news only to realise that one has forgotten to administer the oath.
It is extremely important to be well organised with the documents in soft copy. Especially the ones which the witness is going to be asked to refer to. Very often one wants to draw the attention of a witness to a document to verify a sign or a particular part of a document.
Keep your eye on the Tribunal, either by yourself or through any of the colleagues involved in the matter.
What one must keep in mind is that the goal is to convince the tribunal and not the witness.
If a witness is freezing on technical questions or if one is apprehending that someone is feeding the witness answers during the virtual hearing, one must mention the same to the tribunal and sometimes one can read the same into the live transcript which can be used at the time of closing submissions.

Conclusion

What we derive from some insightful and knowledgeable advice and tips from eminent trial lawyers is that excelling at cross-examination is no cakewalk. Probably, it is one of the most difficult areas to master one’s art of advocacy in. However, the same can be done with hard work and consistent efforts. Being in the habit of reading all documents relating to the case, being updated with the recent landmark case laws keeps one ahead of the curve when approached to appear for cross-examination.

With respect to virtual hearings and cross-examinations, we are probable that there is a shift taking place in the way hearings are being taken forward by adapting to technology and with technology always getting better, we are left to see if the future of cross-examining can be done at a larger scale than today in the future.

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Mutual funds compensation diluted by SEBI

By

Abanti Bose

-

November 5, 2021

0

SEBI (REIT) Regulations — Image source : https://bit.ly/35SA8Qc

This article is written by Alefiya Giletwala, pursuing Diploma in Law Firm Practice: Research, Drafting, Briefing and Client Management from LawSikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Mutual funds pool the resources from small and individual investors together and invest them in securities, bonds or other assets. Investing in Mutual funds has increased participation in the financial markets.

Mutual Funds in India are governed by the Securities and Exchange Board of India (SEBI) with the exception of Unit Trust of India (UTI). Its objective is to protect the interest of investors in securities and to promote the development of and regulate the securities market.

In pursuance of its objective, it issued a circular dated April 28, 2021, called ‘Alignment of interest of Key employees of Asset Management Companies (‘AMCs’) with the Unitholders of the Mutual Fund Schemes’ to align the interest of the investors with that of the asset management companies by mandating the fund houses to invest a fifth of fund managers and other senior officials’ salaries in their own schemes.

Meaning of mutual fund

A mutual fund is a company that pools money from many people and invests it in assets like bonds, securities, etc. It is a professionally managed investment program that is funded by shareholders trading in diversified holdings.

A mutual fund is an actual company that has a CEO, Board of Directors, fund managers, auditors, and other employees and is also an investment, where the mutual fund investors are the owner of both; the company and its assets. An average mutual fund holds many different securities which result in the mutual fund shareholders gaining important diversification at low prices.

A person who invests in shares of only one company is at risk of losing a lot of money as opposed to somebody who invests in a mutual fund. For instance, consider an investor who has bought only Hindustan Unilever stocks before the company went into loss, the probability of him losing a great deal of value is high because all of his money is attached to one company. A different investor who has bought shares in a mutual fund that happens to own only some of the Hindustan Unilever stock before the company has had a bad quarter, he would lose significantly less because Hindustan Unilever is just a small part of the fund’s portfolio.

Role of Securities And Exchange Board of India (SEBI) viz-a-viz mutual funds

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India Act was passed in the year 1992 aiming to provide for the establishment of a Board to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith. SEBI formulates policies and regulates mutual funds to protect the interest of investors. The Securities and Exchange Board of India first formulated the regulations for mutual funds in the year 1993 which resulted in the entry of mutual funds sponsored by private sector entities into the capital market. The SEBI (Mutual Funds) Regulations, 1993 was fully revised in the year 1996 and a new comprehensive SEBI (Mutual Funds) Regulations, 1996 came into being and have been amended thereafter from time to time. To protect the interest of investors, SEBI keeps issuing guidelines to the mutual funds whenever required.

SEBI (Mutual Funds) Regulations, 1996

SEBI formulated and issued SEBI (Mutual Funds) Regulations, 1996. All mutual funds whether sponsored by the public sector or private sector are governed by the same set of regulations.

The regulatory requirements are similar for all these mutual fund entities and all are subject to inspection and monitoring by SEBI.

SEBI (Mutual Funds) (Second Amendment) Regulations, 2021

The recent amendment to the regulations made the following changes:

Insertion of sub-regulation (16A) after sub-regulation (16) of regulation 25

Sub-regulation (16A) provides that the asset management company (AMC) will mandatorily have to invest such amounts in such schemes, based on the risks associated with the schemes, as the Board may specify from time to time.

The addition of sub-regulation (16A) makes it compulsory for the fund houses to invest in their schemes.

Deletion of sub-regulation (4) of regulation 28
Substitution of regulation 76 (Action by Board)

Mutual funds compensation diluted by SEBI

Prior to the passing of the SEBI (Mutual Funds) (Second Amendment) Regulations, 2021, fund houses were not mandated by law to invest in their schemes. Sub-regulation (16A) of regulation 25 was added by this amendment which now makes it compulsory for fund houses to invest in their schemes.

The Securities and Exchange Board of India issued a circular on the 28th of April, 2021. This circular aims to align the interest of Asset Management Companies with that of the investors, that is, the unitholders. The rationale for issuing such a circular is evident. SEBI under its objective, is protecting the interest of the investors in securities and promoting the development of and regulating the securities market by mandating AMCs to invest in their schemes.

Alignment of interest of key employees of asset management companies (‘AMCS’) with the unitholders of the mutual fund schemes

The circular was issued by SEBI on April 28, 2021, to align the interest of the AMCs with that of the investors, therefore it is also called ‘alignment circular’. The AMCs and the key employees are responsible for the management of risk-return profiles of the schemes. The Circular provided for the following:

Manner of dilution of compensation

According to the circular, a part of the compensation of key employees of the AMCs shall be paid in the form of units of the scheme. Minimum of 20% of the salary/ bonus/ perks/ non-cash compensation (gross annual CTC) net of income tax and any statutory contributions like NPS and PF of the key employees shall be paid in the form of units in the mutual fund schemes in which they have a role or an oversight.

Such compensation has to be proportionate to that Asset Under Management (AUM) in which the employee has a role/ oversight. Exchange-Traded Funds (ETFs), Index Funds, Overnight Funds and existing close-ended schemes are therefore excluded.

The employee can withdraw its investment after a minimum period of 3 years from the date of the investment or the tenure of the scheme, whichever is less.

In the case, where the key employee manages only a single scheme or a single category of schemes, he will have a choice to invest 50% of the aforementioned compensation by way of units of those schemes whose risk value as per the risk-o-meter is equivalent or higher than the scheme managed by such employee and 50% by way of units of the scheme or category managed by him.

Redemption

Redemption is not allowed before the lock-in period attaining the age of superannuation as defined in the AMC service rules. However, in case of employees facing emergencies or on humanitarian grounds, it can have a provision of borrowing from the AMCs against such units. The key employee shall be free to redeem the units in case of retirement on attaining the superannuation age except for the units in close-ended schemes. They shall remain in until the tenure of the scheme is over.

Clawback

In the case where the key employee is found guilty of violating the Code of Conduct, fraud, gross negligence, such employee shall be subjected to clawback, meaning, the AMC shall retrieve the unit paid out to such key employee, thus the units will be redeemed and the amount shall be credited to the scheme.

Oversight

The AMCs and Trustees are responsible for ensuring and monitoring respectively the compliance of the provisions of this circular. The quarterly CTR and half-yearly trustee report must mention any non-compliance in this regard.

On the website of the AMC, under the provisions of this Circular, the aggregate of the compensation paid in the form of units to the key employees shall be disclosed by every scheme.

Exemption

Key Employees having role/ oversight only over Exchange-Traded Funds, Overnight Funds, Index Funds, and existing close-ended schemes shall be exempted from the provisions of this Circular.

This Alignment Circular was to be applicable with effect from July 01, 2021. However, the date of its implementation was extended to October 01, 2021, based on the feedback received from the representatives of the Mutual Fund industry and other stakeholders.

Clarifications with respect to the Circular dated April 28, 2021 (Alignment Circular)

SEBI issued on September 20, 2021 clarifications with respect to Circular dated April 28, 2021, on ‘Alignment of interest of Key Employees (‘Designated Employees’) of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund.

Following are the changes that the clarifications Circular dated September 20, 2021, with respect to the Alignment Circular as specified by SEBI:

The nomenclature ‘Key Employees’ has been replaced with ‘Designated Employees’.
‘Paid in the form of units’ will be read as ‘mandatorily invested in units’. Such investments shall be made on the day of the payment of salary considering the previous month’s AUM for apportioning the investments across various schemes.
An employee who is below the age of 35 years and who is not the CEO, Head of any Department or Fund Manager will be called ‘junior employee’. The implementation of the provision under para 2(i) of the Alignment Circular for junior employees will happen in a phased manner:

10% in the first year, that is, from October 01, 2021, to September 30, 2022.
15% in the second year, that is, from October 01, 2022, to September 30, 2023.
20% from the third year onwards, that is, from October 01, 2023.

Thus, all junior employees shall mandatorily have to invest 20% as specified under para 2(i) of the Alignment Circular from October 01, 2023, onwards.

This phased implementation will cease to apply from the date such an employee attains the age of 35 years.

Designated employees other than junior employees will mandatorily have to invest 20% as specified in the Alignment Circular.
CTC will not include superannuation benefits and gratuity paid at the time of death/retirement and the value of interest on loan availed of by the designated employees against the units from the AMC.
It has also clarified that the designated employees will have the option to set off their existing investments, if any, as against the fresh investments as required in the same scheme. They may also set off their units for which the lock-in period has expired as against the fresh investments required to be made in the same scheme as provided by the Alignment Circular. Such units will be locked in for the further period of 3 years or tenure of the scheme, whichever is less.

Only fund managers will be required to invest in the fund of fund schemes.
In case of death of the Designated Employee, units allotted in pursuance of the Alignment Circular shall be released from the mandatory lock-in period.
The modalities with respect to close-ended schemes mentioned in para 7 of the Alignment Circular is as follows: the required investment in close-ended schemes will be made in the units of open-ended schemes having risk value equivalent to or higher than mandated close-ended schemes.

Conclusion

A mutual fund like its name suggests is a financial vehicle that clubs funds from people and invests them in securities, bonds or other assets. Investing in mutual funds has significantly contributed to the development of the Indian economy.

SEBI is the regulatory body of mutual funds in India. Its objective is to protect the interest of investors in securities. In pursuance of its objective, it issued an Alignment Circular, mandating the fund houses to invest a fifth of their compensation in the form of units in the mutual fund schemes they have a role/ oversight.

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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Going public through SPAC : regulatory challenges in India

By

Abanti Bose

-

November 4, 2021

0

letter-blocks-read-spac-special-purpose-acquisition-company (1) — Image Source: https://rb.gy/wyw3fv

This article is written by Sachi Bhiwgade, pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

An initial public offering (“IPO”) is commonly used by businesses to raise funds, gain resources to grow their operations, etc. To achieve these goals, companies are now increasingly pursuing mergers with special purpose acquisition companies (“SPAC”) rather than a typical IPO. Despite the fact that SPAC has been around for many years, it has seen a surge in popularity from start-ups and investors alike in recent years. Recently, India’s biggest renewable power company, ReNew Power was listed on Nasdaq in the US by merging with RMG Acquisition Corp. II, a US SPAC.

SPACs are common in developed jurisdictions such as the United States, Singapore, United Kingdom and are increasingly being demanded to be permitted in India. Currently, in India, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 do not allow for the listing of blank check companies. However, The Securities and Exchange Board of India did appoint a panel of experts in March this year, to investigate the viability of adopting SPACs in India in order to keep up with the developing market environment. A consultation paper was also published by the International Financial Services Centre Authority (IFSCA) with respect to SPAC listing. The IFSCA (Issuance and Listing of Securities) Regulations, 2021 was brought into force on 16th July 2021. Despite the implementation of the IFSCA Regulations, there are still legal obstacles in the way.

How does SPAC work?

For understanding how a SPAC works we need to know what is meant by a Special Purpose Acquisition Company or a “SPAC”.

Basically, a SPAC is a “blank cheque” or a “Shell” company that is set up solely for the purpose of raising capital through an IPO and effecting a merger with a private company to enable it to go public later. SPACs are usually formed by financial institutions or private equity funds and do not have any commercial purpose.

The sponsors/ investors who incorporate the SPAC are tasked with identifying the target within a 24 to 36 months’ time frame and investing the IPO proceeds there. This is, however, subject to the approval of the shareholders, otherwise, the SPAC shareholders have the option of redeeming their shares rather than participating in the merger, in which case they will receive their entire investment back. If a SPAC fails to complete an acquisition within the set time frame, the money, together with any interest generated, is returned to investors. Thus, giving the investors a choice to exit if they do not approve a deal.

When the necessary approvals are obtained, the SPAC and the target business merge to form a publicly traded operating company, also known as a “De-SPAC” transaction.

The stakeholders involved in a SPAC are:

The Sponsors: The sponsors generally are experienced professionals who initiate the SPAC procedure by creating a business and working with an underwriter to prepare the SPAC to go public by an Initial Public Offer. They follow the standard filing method but because there is no active business the process of filing is quick and simple. They are required to complete the acquisition within 2 years.
Targets: The majority of SPAC targets are start-up companies that have gone through the process of venture capital. The companies at this stage are looking for possibilities like going public through a traditional IP or obtaining extra capital from institutional investors or PE firms. Several advantages may be available to target companies as a result of a SPAC transaction. For starters, a SPAC purchase enables a private firm target that is otherwise prepared for an IPO to essentially go public without having to hire underwriters or produce a prospectus to sell its shares to the public. SPACs may be a more appealing option than these time taking options.

Why do companies opt for SPAC over IPO?

SPACs have been seen as less expensive and provide an alternative option for private entities to go public through an IPO. SPACs raise money primarily from public equity investors and have the ability to de-risk and speed up the IPO process for their target firms. The benefit to a target company is the reduced time and effort required to go public. The rise in popularity of SPACs in 2020 may be attributable in part to their shorter time frame for going public, as many companies opted out of traditional IPOs due to market volatility and uncertainty caused by the pandemic.

Another advantage is that because a SPAC has a limited time window for executing a deal, the target company’s owners may be able to negotiate effectively and probably at a higher price when selling to one.

The profit potential for sponsors, adequate risk-adjusted returns for investors, and a relatively appealing mechanism for raising funds for targets are all benefits of successful SPACs.

Regulatory challenges in India

SPAC transactions in India are not protected by a specialised legislative framework, and present regulatory laws provide substantial hurdles. The following are some of the regulatory challenges that need to be addressed:

Companies Act

A SPAC is usually allowed 24 months to complete the process of business combination in the United States. However, as per Section 248 of the Companies Act, 2013, a company’s name can be removed by the Registrar of Companies for failing to commence its operations or business within one year of operation. Since SPAC’s do not have any actual running business they are considered as shell companies and run a risk of getting the name struck off in India. This is also because many firms have created shell companies in the past to launder money and avoid paying taxes which has particularly barred SPAC investment in India. Additionally, SPAC might take anywhere from 24 to 36 months to complete, the sponsors require this time to pick the most advantageous target and perform due diligence. Further, the directors or promoters are also at risk of disqualification for non-compliance. This creates a significant barrier for SPACs in India.

Furthermore, as per Section 4 of the Companies Act, for the purpose of incorporation, the Memorandum of Association (MoA) shall specify the object for which the company is incorporated. Since SPAC does not have a defined business purpose it is impossible to meet this criterion.

SEBI (ICDR) Regulations

The listing requirements of SEBI include as per Regulation 6, for the company to have for the preceding 3 years “(a)net tangible assets of at least 3 crores; (b) average operating profit of at least 15 crores; (c) net worth of at least 1 crore rupees.” A SPAC entity will be unable to make an IPO in India due to a lack of operating income and net tangible assets.

Cross Border norms

The RBI has enacted a number of regulations if the merger between SPAC firms and the target is a cross-border merger. Section 234 of the Companies Act requires that if a foreign company wishes to merge with an Indian company, it has to obtain prior Reserve Bank of India (“RBI”) approval. Similar requirement of prior RBI approval is also mentioned under Rule 25A of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

Further, any merger with a foreign entity requires the compliance of Foreign Exchange Management (Cross Border Merger) Regulations, 2018 Regulations, which provides that in case of an outbound merger, all properties, assets, liabilities and employees of the Indian company are required to be transferred to the foreign entity. Shares of the combined entity will be distributed to the shareholders of the Indian target, either as part of the merger consideration or as a share swap. Further, the transaction has to be under the prescribed limits under the Liberalised Remittance Scheme (LRS) which requires that the fair market value of shares acquired by Indian shareholders overseas combined to fall within the limit of USD 250,000 every financial year and the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004. Additionally, a sanction from the National Company Law Tribunal is also required.

Since the main aim for a SPAC is to speed up the IPO process and eliminate procedural obstacles, this is another problem for SPAC acquisition. Hence, numerous regulatory checks imply more time to complete the transaction which defeats the purpose for which SPAC entities are formed.

Conclusion

For a growing number of private companies, merging with a SPAC rather than issuing an IPO is a viable option for raising money. Given India’s startup ecosystem being the third-largest in the world, the Indian government allowing greater foreign investment through SPACs will have enormous potential. SPACs have the ability to assist Indian companies with international finance and therefore, there is a need for a formal framework in India to allow SPAC transactions to take place in a meaningful fashion, due to regulatory impediments. It is pertinent for India to learn from other jurisdictions and develop a comprehensive SPACs structure in order to remain competitive.

References

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Dispute mechanism under a lease : an overview

By

Rachit Garg

-

November 4, 2021

0

RERA — Image Source - https://rb.gy/rycm9x

This article has been written by Khan Saba, pursuing a Certificate course in Real Estate Laws from LawSikho. It has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Every contract includes a system for dispute resolution as an important element of it. The contract or agreement presents a means of resolving a problem that may reasonably be expected. Arbitration, mediation, and conciliation are just a few of the well-known dispute resolution procedures.

Additionally, a lease agreement could include these Dispute Resolution Mechanisms, which are now legally binding, and if no such method is specifically named in the agreement, the dispute can be addressed through adjudication.

The question arises is there any dispute mechanism resolution available for lease or not? According to the Arbitration and Conciliation Act, 1996, there is no demarcation between as to what matters are arbitrable and which are non – arbitrable. But the apex court in many cases cleared, interpreted, and laid down certain tests and points to clear the confusion of it, for e.g. Four-Fold test laid down by the apex court.

The Transfer of Property Act, (TPA) of 1882 governs leases, and they are discussed in detail in Chapter V of the Act, which runs from Section 105 to Section 117.

What is Lease?

As described in section 105 of Transfer of Property Act, 1882 An agreement to lease property is a handover of the claim to use and benefit from the land for a stated amount of time, expressly or by implication, or in indefinite period, in exchange for a premium paid or vowed, or in concern of money, a percentage of crop production, facility, and every other valuable items, to be deemed at regular intervals or on defined periods to the lessee by the lessor, who acknowledges the handover on the terms agreed to by the lessor.

The terms lessee, lesser charge, and lease are defined. — The transferor is referred to as the lessor, the transferee is referred to as the lessee, the valuation is referred to as the premium, and the amount, portion, service, or other object to be supplied in exchange for the transfer is referred to as the rent. So, to brief it up, For the purposes of this definition, a lease is an agreement in which one party promises other side for right to use property or land in exchange for a fee and for a determined period, that is termed as both parties enter into a lease agreement, which outlines the terms and circumstances of the agreement between the two parties. The lessor is the person or entity that owns the leased premises or property. The lessee is the party who agrees to accept the subject premises.

What is the Difference between lease & leave & license agreement?

Section 105 of the Transfer of Property Act and Section 52 of the Indian Easements Act talks about lease and license, respectively.

Unlike a leave and license arrangement, a lease establishes a stake in the property.
Leases provide tenants complete ownership, whereas leave and license agreements merely allow them to use part of the premises.
Leases aren’t revocable, but licenses are.
The lessor does not have control over leases, whereas it does with licenses.
Leases can be transferred, but not licenses.
In contrast to licenses, a lease creates rights that can be passed down through generations.
The selling of property to a third party does not impact a lease. Unlike with a license that terminates immediately upon transfer of ownership, it remains in effect while the property changes hands, and the buyer must wait until the amount of time specified in the lease agreement has expired before he can take possession.
A lessee has the legal right to safeguard the property he or she is leasing. A licensee, on the other hand, has no legal standing to justify his or her ownership because he or she has no ownership interest in the land.
Unlike a licensee, a lessee in respect of the land has the right to any changes or additions that are made to the property.

What are the possible disputes that may happen?

To understand what disputes may arise, we need to first understand the concept of Right in personam and Right in rem.

Right in Rem

It implies that the right is available against the entire world, and that nobody has the authority to interfere with it. For example, say A owns a residence in which he has entire control over the property. He has a Right in Rem in regards to the residence, and no one has the authority to interfere with his ownership rights.

Right in Persona

It indicates that the right that is accessible against the individual who is performing the task that is enforced upon only that one specific individual. Those who enter into an agreement are granted Rights in Persona under the Indian Contract Act. Consequently, the parties involved in the contract are only able to enforce their contractual rights against one another. As an illustration, C received a loan from A. The right to reclaim the money belongs alone to A, and not to the rest of the world collectively.

The most frequent and possible disputes that arise from it is Tenancy – Landlord dispute which is resolved through the medium mostly of arbitration the SC has given its view in many cases regarding the same for e.g.,

In Navrang Studios case, the Supreme Court of India remarked that the dispute between landlord and tenant is the matter of Right in Rem, and it concerns the general public, and as a result, the tenancy issues are not arbitrable and still the issue being that whether the disputes regarding the same are arbitral or not which will be further discussed by help of the Supreme court cases.

Why do we need a dispute mechanism?

The need for a dispute mechanism in lease started from the “Booz – Allen case” where it was stated that the disputes concerning removal and tenancy were not arbitrable. Generally speaking, leases are regulated by the Transfer of property Act, 1882 (often known as the “TOPA”). According to Section 8 of the Arbitration and Conciliation Act (“Act”), “even though there is a dispute settlement agreement between the two parties, and even though the conflict is encased by the arbitration clause, wherever the civil suit is subject to review will be reluctant for a provision of Section 8 of the Act, to pertain the arbitration proceedings if the source material of the suit is competent of being resolved through negotiation or mediation.”

Non-arbitrable disputes were classified into the following categories by the Judge:

i) rights and responsibility problems emerging out of felonious violations;

(ii) marital conflicts involving divorce, legal dissociation, compensatory damages of conjugal protections, and custody of children;

(iii) insolvency and closing down issues; and

(iv) eviction or eviction-related issues;

The court further interpreted and discussed the principle of Right in Rem and Right in persona which is discussed in aforementioned subheading. Explaining it further the court held that historically, all issues involving rights in personam have been arbitrable, but all disputes involving rights in rem must be decided by judicial and public forums because they are unsuitable to private arbitration. This isn’t, however, a hard and fast rule that can’t be bent. All challenges pertaining to inferior personal rights originating from superior real property interests have often been regarded as arbitrable.”

When it comes to lease agreements it is governed by special statutes like the Rent Control Act which differs state to state. However, there are contradictory rulings from various High Courts on the topic about whether lease agreements controlled by the TOPA can be subjected to arbitral proceedings, which is a tricky concern in the eye of law.

Landmark Judgement & key observation

Booz-Allen & Hamilton Inc v. SBI Home Finance Ltd & Others

The issue that emerged before the Apex Court in this case was that whether a conflict involving a mortgage should be resolved through arbitration or litigation. Specifically, an application was submitted under Section 8 of the Arbitration and Conciliation Act, which dealt with the redemption of the mortgage in this particular instance. While commenting on the issue, the apex Court went into greater detail on the idea of “arbitrability of conflicts,” including the breadth and essence of such a concept. The apex court went over three components of arbitrability that are related to the competence of the Adjudicating Authority in this instance. The court found that the fundamental concept is that every civil or business issue that can be resolved by a judiciary is in principle, accessible to arbitration, excluding those cases in which the authority of an arbitral tribunal is limited by legislation. In addition, it included a number of suggestions of non-arbitral problems, which included the relevant studies:

The following types of cases are heard in court:

basic rights and responsibility issues arising from or relating to felonious offences;
marital conflicts involving relationship breakdown, legal separation, compensatory damages of conjugal protections, custody of the children;
guardianship conflicts;
insolvency and winding-up disputes;
intestate succession disputes; and
eviction or tenancy landlord matters, which are controlled by special statutes of states in which the tenant is protected from forced removal and only the defined courts are granted jurisdiction to hear the matters.

Himangni Enterprises v. Kamaljeet Singh Ahluwalia

The Apex Court has clarified that conflicts involving tenancy and eviction are not subject to arbitration. Moreover, according to the Highest Court, while tenancy issues are arbitrable under the Transfer of Property Act, some lease disputes that are governed by specialized tribunals have been granted authority to determine the particular rights of both the parties involved.

Vidya Drolia & Ors. v. Durga Trading Corporation

The ultimate word play regarding the dispute mechanism system was completed in this case ruling. Earlier decisions made it plain that landlord-tenant conflicts are not arbitrable under the law, as previously stated. Nevertheless, in this case, following a thorough discourse and a thorough recognition of all arguments, the Supreme Court examined the appropriateness of the margin established under the Himangini Enterprises as well as the verdicts on which it relied, namely, Nataraj Studio and Booz Allen, before reaching a decision. The Court established a four-fold test for determining whether the relevance of a dispute in an arbitration clause is arbitrable or not in order to resolve the issue. Non-arbitrable disputes are those in which the parties cannot come to a mutually agreeable resolution through arbitration. The four-fold test were as follows: –

The issue at hand is around right in rem, which is distinct from inferior right in persona, which is derived from right in rem.
The dispute’s issue area affects a third party’s right, demanding decisive adjudication
The state’s sovereign and interests of society functions are at issue in this case
Binding legislation prohibits arbitration of the dispute’s subject matters.

Critical Analysis

In light of the above rulings, we can deduce that the highest Court has explicitly said that a quarrel between a tenant and a landlord is arbitrable only if the issue is not addressed by a rent control legislation. As a result, the approaches adopted for a matter to be exempt from arbitration:

A specific legislation governs the subject matter
Specialized legislation provides procedural safeguards to renters. These specific legislations give certain tribunals special authority to handle disputes.
Even when the rights of third parties aren’t directly involved, the right in rem is affected by any dispute.
Binding legislation has explicitly forbidden any mention of adjudication in an issue area that has any connection to a state’s autonomous or interests of society. Since there is no rent control legislation covering the grounds, a disagreement between an owner and a tenancy over the same could be referred to as non-arbitrary. However, in order for an arbitration court to hear these issues, a language requiring arbitration must be included in the lease agreement.

Conclusion

Landlord and tenant disagreements are widespread, and they usually result in a lengthy legal struggle that costs a lot of money and wastes both parties’ important time. It’s a joy to both landlords and tenants alike that the Apex Court recently handed down its decision in Vidya Drolia case. Well now they can quickly and easily go through all the arbitration proceeding. However, it’s important to proceed with caution when interpreting this ruling because it only applies to certain articles of the TOPA and not to all lease disputes. Because of this ruling, not all disputes will be resolved through arbitration. There is still no way to arbitrate disputes involving Right in Rem or any of the other requirements specified above

References

Transfer of Property Act, 1882, No. 04, Act of Parliament, 1882
Natraj Studios (P) Ltd v. Navrang Studios & Ors. (1981 AIR 537)
Booz Allen & Hamilton. Inc v. SBI Home Finance Ltd & Ors., Civil Appeal No. 5440 of 2002.
Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 (India).
Vidya Drolia & Ors. v. Durga Trading Corporation Civil Appeal No. 2402 of 2019

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