Advantages of incorporation of a company over partnership firm

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November 4, 2021

This article is written by Hritika Jannawar, pursuing Diploma in General Corporate Practice: Transactions, Governance and Disputes from Lawsikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

To start any business is considered a mammoth of a task, but if a person is determined and certain in what fashion he wants his business to function in, half the battle is already won. Every entrepreneur has different needs in their endeavours. Some are more comfortable with mere Partnership while others want security and move ahead to adopt the Company model as the form for their business. While Company is considered the most favourable, still at the end of the day, it differs from entrepreneur to entrepreneur. This article at first discusses the nature of Partnership and Company and then dives into the Company’s advantages over Partnership.

What is a partnership firm?

It is a Business carried out by two or more persons and agreed to share profits. Owners of Partnership firms are individually known as Partners and collectively as a firm. In India, it is not mandatory to register a partnership firm. However, it is deemed beneficial to register the firm under the ‘Partnership Act, 1932‘ to avail the legal benefits. Meaning if a Partnership firm is not registered, it cannot file a suit against a Third Party and a third party can file a suit against the firm, and the firm cannot claim Set-off against the third party. The Partnership deed is what governs the business and relationship between the Partners. The Profits by Partners are shared in the proportion of ratios agreed amongst them, and if not directed by any ratios, they share profits in equal proportions. This type of business structure in India is not recognized as a separate legal entity, and hence the Partner’s liability in Partnership firms is unlimited.

What is a limited liability partnership?

Limited Liability Partnership is a Hybrid version of business Form. It consists of the characteristic nature of the traditional type of Partnership Firm as well as a Company. As a Company, the LLP is a Body Corporate forming a separate legal entity from its Partners, thereby limiting the liability of Partners. Like Partnership firms, the whole of the business is handled by the Partners directly and not corporate shareholders. An agreement between them governs the relationship of the partners. However, unlike Partnership Firm one Partner here is not responsible for the misconduct and negligence of the other Partner. The Minimum requirement of Partners herein is two, out of which one should be an Indian resident and no limit on the maximum number. It needs a Compulsory audit only if the contribution to LLP exceeds 25 Lakh or annual turnover exceeds 40o Lakh. The only disadvantage of LLP is that it is still considered less credible in India due to its close resemblance to Partnership Firm.

What is a company?

Company is a ‘Legal Corporation’ under whose name the business is carried out. It is a separate legal entity. To incorporate a company in India means to constitute a legal Corporation in India that strictly adheres to the provisions of the ‘The Companies Act, 2013‘. People who initiate the Company Set up are known as Promoters. As per the requirements of the promoters, they choose which type of Company they want to incorporate under the Act. Private Limited Company, Limited Company, unlimited Company, One Person Company, and Section 8 Company are the types of the Companies under the Act.

Other people involved in the business of the Company are the Directors (who manage the business of the Company) and the shareholders (who own stake in the Company)

Private Limited Company

Minimum 2 to a maximum of 200 members are required to constitute this type of Company. Shares of this type of Company cannot be traded publicly.

Company Limited by Shares – means a Company having a liability of its members limited by a Memorandum to the amount unpaid on the shares respectively held by them.

Company Limited by Guarantee – means a company has the liability of its members limited by Memorandum to the extent of such amount as agreed by the member to contribute at the time of winding up of the Company.

Unlimited Company –means a company does not have any limit on the liability of its members.

One Person Company

It is the new form of Company introduced with the advent of the Companies Act, 2013. In this form of Company, only a single person can form a Company as opposed to the incorporation of a Private Company or Partnership. Hence, it is favourable for entrepreneurs who want solely to control their business and not succumb to the risks of Sole Proprietorship. It forms a separate legal entity offering its members’ limited liability and continuity of business.

Limited Company

It requires a minimum of three directors and seven members are required to incorporate this type of Company. There is no limit on the maximum number of members here. This type of Company has more stringent compliance provided under the Act and other allied laws to follow when compared to Private Limited Companies. The Shares of this Company can be listed and traded on the stock exchanges freely, when listed it has to conform to the rules of SEBI (Securities and Exchange Board of India).

This type of Company is established for the promotion of objects such as commerce, Art, charity, Protection of the environment, etc. the profits out of this venture are applied for the promotion of these objects and intend to prohibit dividends to its members.

Advantages of incorporation of a company over partnership firm

Funding

For any business venture, the cornerstone of its building is funding. Acquiring funds for a company is more convenient as compared to a Partnership firm or LLP as they are seen to be less credible in India because they are seen as the extensions of their Partners only. Therefore, the Partnership firms are put under much scrutiny when accessing funds.

Companies as a Business form has two types of funding they could acquire

A) Equity and B) Debt (loans from Banks, other Creditors etc.).

When we consider equity, privately formed companies are again restricted to private members but could easily later transform into public Companies and get listed on the stock exchange to tap the market for public funding. IPOs, OFS, etc do it. It is where the Company offers the public number of shares in return for Money. Public Companies can also issue debentures both secured and unsecured to raise funds.

Partnership Firm, firstly, cannot access public capital and is considered less credible when accessing loans, making it a less favourable business vehicle.

Separate legal entity

A company is a separate legal entity as compared to a Partnership firm. Although LLP shares this quality with companies it still fails to meet the other advantages of the Companies as a Business form.

Owing to the fact that it forms a separate legal entity, it could buy, sell and own property. The Company can also be sued and sued in its name. This attribute of separate legal status has been also extended to One Person Company to support the entrepreneurs who can and want to single-handedly manage the business with the securities that Companies enjoy in the new Companies Act, 2013, which the Sole Proprietorship form of business lacked.

Limited Liability – In a Company as a business form is chosen, it effectively limits the liability of the member to its contribution (their investment in shares of the Company), as a company itself is a registered entity and forms a different juristic person. If a member purchases 5 shares worth Rs. 500 each, then his maximum liability shall be INR 2500. Now there is a perk for a member in the case of closely held companies i.e. in a Private Company if a member cannot discharge his liability in a situation he can always settle his dues at the time of winding up of the Company. While under Partnership, all the Partners are jointly and severally liable for every act done in the name of the firm, which leads to unlimited liability which is kind of a risk entailing position.
Perpetual Succession – In a Company even if the shareholder dies or is removed from the Company, the Company continues to exist. Changes in the management do not affect the identity of the Company. A company continues to exist until it is wound up, struck off or dissolved per applicable law. In the case of a Partnership Firm, unless the Partnership deed showcases any contrary intention, the firm is dissolved automatically on the death or insolvency of a Partner.
Transferability of Shares – Shares are like movable property. They provide security of liquidity to its holders. They can be sold in exchange for money. The only difference is that it can be easily transferable in a Public Limited Company. While it is restricted to an extent it is not entirely impossible in Private limited Companies, as it is a closely held company, the introduction of new authority in management due to the owing number of percentage is thwarted at times.
Expertise – In the backdrop of Company set up the management and ownership are two different concepts unlike in Partnership. Hence, the promoters or shareholders are open to hiring experts in the field to manage the aspects of business and drastically increase efficiency.

Conclusion

Every Business form has its own pros and cons; it is ultimately upon the entrepreneur to decide in which case the pros outweigh the cons for his business. The One Person Company is also an attractive prospect for an entrepreneur to keep the reins in his hand while enjoying the securities of the Company. There are few misconceptions about Company incorporation meaning limited personal liability of shareholder means whatever a shareholder does his personal assets won’t be touched, so this is a wrong notion, for instance, if he signs his own name for authorizing a company transaction or guarantees a loan in his name or commits fraud, he shall be personally liable. It is also considered incorporating and then running Company requires insurmountable paperwork. However, to an extent, it is true if directly compared to a Partnership whose greatest advantage is the ease of formation. Still, like it was mentioned earlier, the pros of Company formation are more than the cons. The procedure is also streamlined hence can be completed correctly and quickly. Also, both Companies and Partnership firms are taxed at 30%, in fact for certain Companies having turnover below the prescribed limit are taxed at a lower rate. Moreover, there is no limit for minimum turnover to incorporate the business as a Company. Perusing the aforementioned comparison it is possible to incline towards the prospect of incorporating a Company.

References

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All you need to know about the doctrine of ejusdem generis

By

Rachit Garg

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November 4, 2021

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This Article is written by Vibhanshi Shakya from National Law Institute, Bhopal and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders).

Table of Contents

Introduction

For knowing the meaning of the statute, the statutory interpretation is done by the Courts. There are many rules for the interpretation of the statutes. One of them is “the doctrine of Ejusdem Generis”. This doctrine is applied when there are some specified words which are been followed by the general words. If there is any ambiguity in the meaning of the general words then this doctrine is applied. This doctrine provides that the general words which follow the specified words will be restricts to the same class of the specified words. This is very important doctrine through which the purpose or the objectives of the statute can be achieved and a proper justice can be given.

In this Article, the following topics will be covered: what is interpretation of statutes and the rules of interpretations, then the meaning of ejusdem generis doctrine will be discussed and its necessity and when it is applied, next thing which is discussed is the essentials of the doctrine which will cover what conditions are necessary for its application, next the limitation of this doctrine is been provided so as to when is doctrine is not applicable. At last the improper use of this doctrine by the courts is been discussed that how courts does not use this doctrine properly sometime and thus justice is not provided.

Statement of problem

The Doctrine of Ejusdem Generis is a canon of interpretation, which is used by the Courts for providing the Justice, by interpreting according to the intention of the legislation so as to make the provision of legislation clear and unambiguous and thus fulfilling the purpose of the legislation. But the matter of concern is that whether the Courts are using the doctrine of Ejusdem Generis in a proper manner, to properly interpret the legislations and fulfill its purpose or the Courts are using this doctrine improperly where it is not required thus defeating the purpose and causing the miscarriage to the Justice?

Objectives

To understand the meaning of the statutory interpretation.
To understand the meaning of “Ejusdem Generis”.
To study the applicability and the non-applicability of the doctrine of Ejusdem Generis.
To study the cases where this doctrine were applied and where not.
To examine whether the Courts are using this doctrine in a proper manner or not.

Hypothesis

For the application of this doctrine the general words must follow the specific words and the specific words must necessarily constitute a genus/class
There must be an intention of the statute for restricting the general word to the genus/class of the specified words it follows.
As this doctrine has to be used very cautiously by the Courts but sometimes the Courts may not use this doctrine properly and apply it where it is not necessary thus defeating the purpose of the statute and causing a miscarriage to Justice.

Research questions

What is Ejusdem Generis?
When this doctrine can be applied and when it cannot?
Does the Court apply this doctrine of ejusdem generis properly or not?

Interpretation of statutes and rules of interpretation

“The essence of law lies in the spirit, not in its letter, for the letter is significant only as being the external manifestation of the intention that underlies it” – Salmond

Parliament creates the Law and then those Laws are interpreted by the Judges by the use of the canons of Statutory Interpretations. While drafting the statues draftsmen makes sure that those statutes are not ambiguous and clear. However, those statutes can include the words which have uncertain meanings and with the progression of the society, the old statutes may include words which are not used in the present day. Further, Parliament may have left some errors unnoticed. Hence it is required by the Judges to interpret the statutes.

The right understanding of the legislation is known as the Interpretation of statutes. For the determination of the intent of the legislation, this process is used. As the purpose of the Court is not only the reading of the legislation, but also to understand its intent and in a meaning way to apply it. The objective behind the statutory interpretation is to clarify the ambiguous words and their meaning, according to the intention of the legislation, which was not clear before the interpretation.

It is not expected by the Courts to arbitrarily interpret the stats. Hence, there are certain principles of interpretations, which are exercised by the Courts. These principles are sometimes called ‘rules of interpretation’ or ‘the canons of interpretations’. These rules of interpretations are:

Primary rules

The Literal Rule.
Mischief Rule : Heydon’s Rule
Golden Rule.
Harmonious Construction
Rule of beneficial construction
Rule of exceptional construction

Secondary rules

Noscitur a sociis

Ejusdem Generis
Reddendo Singula Singulis

In this Article, a further and detailed discussion will be on the “principle of ejusdem generis”, which is one of the principles of the rules of interpretations.

Doctrine of ejusdem generis

Meaning and definition

‘Ejusdem Generis’ is a Latin term and the meaning of it is “of the same kind and nature”.

According to the Black’s Law Dictionary (8th edition, 2004.), “the principle of Ejusdem Generis is where general words follow an enumeration of persons or things by particular and specific words. Not only these general words are construed but also held as applying only to persons or things of the same general kind as those specifically enumerated.”

This doctrine is also called Lord Tenterden’s Rule (See here), which is an ancient doctrine. The Doctrine of Ejusdem Generis provides that when a list of specific words are being followed by the general words, the general words are interpreted in a way so as to restrict them to include the items or things which will be of same type as those of the specific words. In other words, “where a law lists specific classes of persons or things and then refers to them in general, the general statements only apply to the same kind of persons or things specifically listed.” (See here) For example if a law makes reference to cars, trucks, tractors, bikes and other motor-powered vehicles, then the general word which is ‘other motor powered vehicles’ will not include any planes or ships because the specific words preceding are of the kind of land transports and when doctrine of ejusdem generis is applied then that general word will be restricted to includes the things of same category as that of the specific words.

In case of Evans v. Cross [(1938) 1 KB 694], the Court had applied the ejusdem generis rule. The issue was in relation to the interpretation of the word “other devices”. It was under the definition of “traffic signals” under Section 48(9) Road Traffic Act, 1930, to include “all signals, warning sign posts, signs, or other devices”. The Court held that a painted line on a road cannot be included in the “other devices” as a traffic signs because devices are here indicating a thing, whereas painted line on a road is not.

Need for the doctrine of ejusdem generis

The need for interpretation of statute by the doctrine of Ejusdem Generis arises when-

There is ambiguity in the language of the provisions of statutes, or
When in the provision, there is a possibility of two views, or
The meaning which the provision of a statute gives, defeats the purpose of the statute.

There is no need for the interpretation if in the language there is no ambiguity and it is clear. (See here)

WHEN APPLIED: Unless the context requires, the natural meaning should be given to the general words normally. In the case of Lilawati Bai v. Bombay State, 1957 Supreme Court (See here), the Court observed that “where the context and the object and mischief of the enactment do not require restricted meaning to be attached to words of general import, the Court must give those words their plain and ordinary meaning.”

But when on reading, it is found that there is some ambiguity in the provisions of the statute and the intent of the statute is to restrict the general words to the category of the specifics words, then this doctrine of ejusdem generis is applied. Therefore, when general words follows the specified words and those specified words have a genus/category then the general words will be restricted to the same genus/category. This is done because the legislation had shown it intention by using such words of class/category and is the Court will go in contrary to that intention and gives wider meaning to the general words then the purpose of the legislation will be defeated.

Ejusdem generis: a facet of noscitur a sociis

As been observed by the Court in the case of Maharashtra University of Health and others Vs Satchikitsa Prasarak Mandal & Others, 2010 Supreme Court (See here) “soccis” is a Latin word, which means “society”. “Noscitur a sociis” is a Latin maxim which means that “the term in a statute is to be recognized by the associated words”. The doctrine of ejusdem generis is a facet of Noscitur a sociis. “Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their color and their contents are to be derived from their context.” Same observation was been made by the Court in the case of Viscount Simonds in Attorney General v. Prince Ernest Augustus of Hanover, (1957) AC 436 at 461 of the report.

Essentials of the doctrine of ejusdem generis

In the case of Amar Chandra Chakraborty v. Collector of Excise, 1972 Supreme Court (See here) and Uttar Pradesh State Electicity Board v. Harishanker, 1979 Supreme Court (See here) the five essential conditions for the application of this rule were laid. “The conditions or the elements are as follows:

The statute contains an enumeration of specific words,
The subjects of enumeration constitute a class or category;
That class or category is not exhausted by the enumeration;
The general terms follow the enumeration; and
There is no indication of a different legislative intent.”

Thus, it can be seen that for the application of the doctrine of ejusdem generis, there has to an enumeration of specific words and those words should necessarily be of a class or a genus and there such genus or class should not be exhausted. Also such specific words must be followed by the general words. And most importantly there was no contrary intention of the legislation. That means that the intention of the legislation was there to restrict the general words by the doctrine of ejusdem generis.

As can be seen from the above discussion the most two important elements for the application of the doctrine of ejusdem generis are: the specific words should constitute a particular class or genus and the intention of the legislation should be there for such restriction of the general words.

Class or genus of the specific words

In order to invoke the doctrine of Ejusdem Generis for its application, a distinct ‘category’ or ‘genus’ must be present. “The specific words must apply not to different objects of the widely different character but to something which can be called a class or kind of object” (See here). This implies that the enumeration of specific words preceding the general should necessarily constitute a distinct genus: it must be of some class. Then only after the application of ejusdem generis the general words can be restricted to the same class or genus.

In various ways, classes can be defined, however, in order to unlock the true value of this doctrine, the key is to make sure that the class which is identified should have some objective relationship with the purpose of the statute. If we say in a different manner, in the aim of the statute and in its subject (which are revealed in the intention of the legislation), the basis is there which determines which among various definitions of classes is correct.

There should be an Intention of the Legislation

Further, for the application of the rule of Ejusdem Generis, there should be an intention of the legislation for the same. Meaning that when the specific words were forming a genus or a class, followed by a general word and it can be seen that the intention of the legislation was there to restrict the general words to include the thing of same class as that of specific words. Hence, it is necessary that there was a clear intention of the legislation for interpretation its provision through doctrine of ejusdem generis.

Cases where doctrine of ejusdem generis was applied:

Siddeshwari Cotton Mills (P) Ltd v. UOI, 1989 Supreme Court (See Here)

In this case, the Supreme Court applied the rule of ejusdem generis while interpreting the general words ‘any other process’ under section 2(f) of the Central Excise & Salt Act, 1944 read with Notification Number 230 and 231 dated 15-07-1977. This general word followed the specific words which were “bleaching, mercerizing, dyeing, printing, water-proofing, rubberizing, shrink-proofing, organic processing”. The Court here by applying the doctrine of ejusdem generis held that “the specific words form a class of process which is importing a change which is of lasting nature. And therefore ‘any other word’ must share one or any other of that process/incident”.

Kerala Cooperative Consumers’ Federation Ltd v. CIT, (1988) 170 ITR 455 (Ker).

The Court in this case, interpreted the meaning of the phrase “‘Body of Individuals”, which was provided in the section 2(31) of the Income Tax Act. The phrase was alongside “‘Association of Persons”. The Court by applying the doctrine of ejusdem generis held that “Body of Individuals” will have to be understood with the same context, meaning and background which are provided to the words “Association of Persons”. In this decision, the court was required to interpret the meaning of the phrase ‘Body of Individuals’. It has said that in construing the words ‘Body of Individuals’ occurring in section 2(31) of the Income Tax Act along-side the words ‘Association of Persons’, the words ‘Body of Individuals’ would have to be understood in the same background, context and meaning given to the words “Association of Persons’.

Limitations for the application of doctrine of ejusdem generis

As it has been previously discussed, for the application of rule of Ejusdem Generis, some essential conditions are necessary to be fulfilled. Among which the most important are the existence of a genus/class in the specified words and that the intention of the legislation was there to read the statute in that way. The same has been held in two of the landmark cases mentioned earlier. From that it can be easily deducted that, when this doctrine is not applicable. The Doctrine of Ejusdem Generis cannot be applied in the following conditions:

If the general words are there before the specified words then this doctrine cannot be applied. Therefore it is necessary that specific words must be followed by the general words. Department of Customes Vs Sharad Gandhi, 2019 Supreme Court (See here)
If the specific words in the provision of the statute which are been followed by the general words do not form a distinct genus/class then this rule cannot be applied. As this is the most important factor to restrict the general word to the same genus of the specified words by using the rule of ejusdem generis. In the case of Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd, 1964 Supreme Court (See here), the Court stated that whenever the specific words are been followed by general words, the interpretation of ejusdem generis does not need to be applied. Before such interpretation, there must be a category or a genus constituted so that the general words with reference to it can be restricted, as intended.
Also the doctrine of ejusdem generis cannot be applied if the general word follows only one word as that one word cannot form a distinct class/genus.

However there is a exceptional instance to this that the general words if is following a one word genus which has been created by the court then that general word can be restricted to that genus of one word.

If the specified words exhaust the whole genus/class then this doctrine is not applicable and in these cases the general word will be given a wider meaning or a different genus/class as those specified words has already exhausted the whole genus and nothing would be left to be included in the general words.

The same has been laid in the “Principles of Statutory Interpretation by Justice G.P. Singh (page 512)”, that if the words preceding the general words not only forms a mere specifications of a class/genus but also it forms the whole description of that genus/class then this rule of ejusdem generis cannot be applied. The insurance in the ‘policy of insurance’, were been provided an option for he termination of the policy if they so desired “by reason of such change or from any other cause whatever”. Here the words “by reason of such change” can include any and each and every act which is done to the insured property, whereby the risk of fire increased. Here Lord Watson stated that, in the case, “In the present case, there appears no room for its application. The antecedent clause does not contain a mere specification of particulars but the description of a complete genus…”

If there is a contrary intention of the legislation for the application of the rule of ejusdem generis, then this rule cannot be applied. In many decided cases, it has been held that the doctrine of ejusdem generis is “not an inviolable rule of law”. It is “permissible inference in the absence of an indication to the contrary”. This doctrine is also one of the cardinal canons of interpretations and therefore, no interpretation of a statute can be done in a manner so as to cause a part of it “otiose”. The State Of Maharashtra vs Jagan Gagansingh Nepali, 2011 Bombay High Court (See here)

Cases where the doctrine of ejusdem generis was not applied

It is not necessary that whenever there are some specific words, followed by the general words, then the rule has to be applied. The conditions when this rule cannot be applied are being discussed. Hence when these conditions exist, the court does not apply this doctrine of Ejusdem ‘generis. This is a rule of interpretation which may or may not be applied, depending on the intention of the legislation and the other essential conditions.

Hamdard Dawakhana v. Union Of India

Here in this case the question was regarding the interpretation of the general phrase “any other beverages containing fruit juices or fruit pulp”. This was in the Fruit Products Order, 1955, which was passed under the section 3 of the Essential Commodities Act, 1955. Through the order the obligation was made that in fruit syrup, peonage of fruit juice should be 25. The contention made by the petitioner was that, to its product which is Rooh Afza, the order will not be applied because the order provided “squashes, crushes, cordials, barley water, barreled juice and ready-to-serve beverages or any other beverages containing fruit juices or fruit pulp”. Further by applying the ejusdem generis, the general phrase will be restricted to the specified words.

This contention was rejected by the Supreme Court and concluded that ejusdem generis rule will not apply here because the things mentioned before the general phrase does not constitute a distinct genus. Further it is clear from the context that there was an intention that all other beverages which contain fruit juice should also be included.

Jiyajirao Cotton Mills Ltd v. Madhya Pradesh Electricity Board

In this case the issue was regarding the interpretation of the general words “any other relevant factors”. Section 49 (3) of the Electricity Supply Act, 1948, empowers the electricity Board to fix deposit tariff for supplying electricity to “any person having regard to the geographical position of any area, the nature of the supply and the purpose for which the supply is required and any other relevant factors”.

Here the Supreme Court held that the doctrine of Ejusdem Generis cannot be applied because the words preceding the general words did not constitute a distinct genus/class.

Lilavati Bai v. State Of Bombay, 1957 Supreme Court (See Here)

Here in the case the issue was regarding the interpretation of the general word “or otherwise”. In the premises the widow of the tenant was residing. Under the section 6(4)(a) of Bombay Land Requisition Act, 1948, the respondent had requisitioned the premises. Thus, this requisition was challenged by the petitioner that the premises was not vacant. For this petitioner supported the contention by explaining the section which provided that “vacancy will exist when the tenant ceases to be in occupation upon termination of his tenancy, eviction or assignment or transfer in any other manner of his interest in the premises or otherwise”. The petitioner contended that by applying the doctrine of ejusdem generis, the general term must be restricted to the terms preceding it.

The Supreme Court by rejecting the contention held that the doctrine here cannot be applied because the words preceding the general tem does not form any identifiable genus.

Improper use of ejusdem generis: miscarriage of justice

The application of doctrine of ejusdem generis must be done very cautiously. As by using this rule there is a departure from the natural meaning of the words so that those meaning can be given to them which the legislation had intended so as to fulfill its purpose. This rule has to be on the basis of fundamental rule that “that the statutes must be construed so as to carry out the object sought to be accomplished”. Thus this rule requires that there must be a genus constituted by the specific words for which the general words would be restricted and if the context provides for any contrary intention so as to give the terms a wider meaning then this rule cannot be applied. Therefore, it should be applied cautiously as to where it must be applied and where not. If the conditions necessary for the application are there, then this rule can be applied. However, where the conditions are not been fulfilled and there exist those circumstances which were discussed earlier for non application of this rule, even after this if the Court applies this rule, then it will be a diversion from what the purpose of the legislation was and hence there will be a miscarriage of justice.

There are many instances where the Courts have improperly used the rule of Ejusdem Generis, even when it cannot be applied in those cases. Even when there was no distinct genus of specified words or when genus of specified words were been exhausted or when only one words was there before general words, the rule of Ejusdem Generis were been applied by the Courts. The Courts also applied this rule in some cases where there was no legislative intent to restrict the wider meaning of the general term.

The Courts by improperly using the rule of Ejusdem Generis, changes the whole meaning of the provision and thus defeat the purpose of the Act, as to the intent of the legislation. This results in miscarriage of Justice.

CASES:

State Of Bombay v. Ali Gulshan, 1955 Supreme Court (See Here)

The Supreme Court in this case held that the decision of the High Court was in error and therefore it rejected the decision of the High Court and concluded that High Court had not use the doctrine of Ejusdem Generis properly and the doctrine should not have been applied in this case.

The issue was regarding the interpretation of the general word “any other purpose” in the section 6 (4) (a) of the Bombay Land Requisition Act, 1948. The general words along with the specified words were “‘State Government may requisition for the purpose of State or any other public purpose”. Here the appellant contented that “under the provision the appellant was entitled to requisition premises for housing a member of the foreign consulate”. The High Court by applying the rule of ejusdem generis restricted the word “any other purpose” with the “purpose of state”. The Supreme Court here held that this finding of High Court is wrong in applying the rule of ejusdem generis and it further held that here “any other purpose” which is the general expression follow only one expression, which is “for the purpose of State”. Thus it does not form a distinct genus/class and therefore, the rule of ejusdem generis cannot be applied. Futrther, the Court observed that by the words used in the statute, the intention of the legislation was also clear to give the words their natural meaning, which means that the expression “ any other purpose” will also include “providing accommodation to a member of foreign consulate”.

Maharashtra University Of Health And Others v. Satchikitsa Prasarak Mandal & Others, 2010 Supreme Court (See Here)

The Supreme Court in this case held that the High Court was wrong in its Judgment by wrongly applying the doctrine of Ejusdem Generis when there was no room for its applicability.

The issue was regarding the interpretation of “teachers means full time approved Demonstrators, Tutors, Assistant Lecturers, Lecturers, Readers, Associate Professors, Professors and other persons teaching or giving instructions on full time basis in affiliated colleges or approved institutions in the university”. The High Court applied the Doctrine of Ejusdem Generis and concluded that unapproved teachers will not fall in the definition of teachers and thus under section 53, the Grievance Committee for taking cognizance of complaint, does not have jurisdiction for unapproved teachers as they have jurisdiction to take cognizance of the teachers defined in the Act. Thus, for respondents 5^th and 6^th (being unapproved teachers), the grievance committee has no jurisdiction to take complaints.

The Supreme Court held that the High Court wrongly applied the rule of ejusdem generis to the definition of teachers and not to include unapproved teachers in the definition. The Court further held that the definition of teachers is wide enough to include the unapproved teachers also. There is even a contrary intention of the legislation to not restrict the definition and first part of the definition includes the enumerated categories and the second part contains different category of persons. This intention is clearly indicated by the disjunctive “and”. Thus first part deals with the teachers mentioned in the enumerated category and the second includes the other persons who are teaching or instructing in affiliated colleges/ approved institutions in the University, on full time basis.

Further the Court held as there was a contrary intention, so the teacher definition will be given wide scope, which means rule of ejusdem generis will not be applied to restrict the definition of teacher to only approved teachers. If the restriction is applied, then the substantial part of the definition of teacher will be redundant. By doing this, it will be against the doctrine of ejusdem generis.

Conclusion

Ejusdem generis, which is one of the canons of the interpretation, is used by the Judges so as to clear the ambiguity in the provisions of a statute and further make it clear by knowing the intention of the legislature and thus properly fulfilling the purpose of the legislation. Here by applying the rule of ejusdem generis and removing the ambiguity by examining what the legislation intends, the justice is served by the Courts and thus, the purpose of the legislation is fulfilled.

However as had been already discussed earlier in the project this doctrine has to be applied very cautiously. Therefore the existence of the essential elements is necessary for the doctrine to be applied. It is necessary that the general words follow the specified words and the specified words to necessarily constitute a distinct genus/class. Further this doctrine is not an inviolable rule of law. Hence it cannot be applied when the intention of the legislation is contrary, means if the legislation intention is to give the general terms its wider meaning. Further the exceptions which are been discussed should also be kept in mind while applying this principle. Because if there is no genus of the specified words or the intention of the legislation was not to restrict the general term then this can lead to change in the whole meaning of the provision and will defeat the whole purpose of the Act.

However, it can be concluded from the cases discussed in the project that the Courts do apply this doctrine improperly even when in the provisions the applicability of this principle was not possible. The Courts apply this principle even when the specified words do not constitute a genus/class, or when the intention of the legislation was to give the general words its wider meaning. This step of the Courts can cause a great harm. It can change the whole meaning of the provision, thus applying it in the wrong manner and defeating the whole purpose of the legislation. Hence, it will cause a great miscarriage to the Justice. These mistakes can lead to the opposite of what the main objective of the doctrine of ejusdem generis was.

Therefore, it is very necessary that this doctrine should be applied very cautiously by the Courts by properly analyzing as to where this doctrine is to be applied and where not depending upon its essential element and exceptions.

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Everything about cybercrimes against women

By

Rachit Garg

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November 4, 2021

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

Table of Contents

Introduction

The computer-generated environment of the internet is referred to as cyberspace, and the rules that govern it are referred to as cyber laws. All users of this space are subject to these laws, as it carries a sort of global jurisdiction. Additionally, cyber law can be regarded as a branch of law which deals with legal issues arising from the use of networked information technology. The pandemic has been a trying moment for people all throughout the world. People experienced a variety of challenges, including a shortage of healthcare services, dissatisfaction and isolation during lockdowns, job loss and business income loss, and the loss of loved ones to this lethal infection. The COVID-19 pandemic has been proven to be a calamity, claiming countless lives and wreaking havoc on millions of people worldwide. Not only has the pandemic claimed millions of lives, but it has been a period of hardship for many people who have lost jobs or been forced to close their enterprises due to lockdown, for families who have lost the only earner in the household, for children who have lost both parents at such a young age, and many more. However, this is not the case! While people struggled and fought the pandemic, another tragedy spread like a virus, namely cybercrime and mobile crime. Meanwhile, while many used the internet and phone devices to keep themselves entertained and occupied throughout the pandemic, several people vented their irritation with the lockdown by abusing these tools and bullying others. Cybercrime involving the internet as a medium gained momentum and accelerated during the pandemic.

Cybercrime

Cybercrime is not specified in India’s Information Technology Act 2000 or any other law. Under the Indian Penal Code, 1860, and a number of other statutes, crime or offence has been carefully defined by listing specific offences and their associated penalties. Thus, cyber-crime might be defined as a synthesis of crime and technology. To put it simply, ‘any offence or crime that involves the use of a computer is a cyber-crime.’ Cybercrime refers to crimes committed over the internet in which the perpetrator, hidden by the curtain of a computer screen, is not required to make personal contact with another person and may not always disclose their name. In a cyber-crime, the computer or the data is the target, the goal of the offence, or a tool used to commit another offence by providing the necessary inputs. All of these types of offences fall under the broader term of cybercrime.

Cyber-law encompasses the following:

Cybercriminals
Signatures electronically and digitally
Intellectual Property
Protection of personal data and privacy

Victims of cybercrime

While men and adult were victims of numerous cybercrime schemes, women and children, as the most vulnerable members of society, became easy targets for cybercriminals during the pandemic. During the pandemic, women, particularly housewives and those who are frequent social media users, were exposed to such crimes. According to the 2021 National Commission for Women’s reports, the number of cybercrime incidents against women spikes during the lockdown time and then declines. In March 2021, the frequency of cybercrimes against women surged dramatically and continued to expand in April and May, when India was severely impacted by the second batch of covid-19, and nearly the entire country was subjected to stringent lockdown restrictions. Finally, as the second wave of pandemic subsided and lockdown limitations were lifted in June, the frequency of cyber-attacks instances began to reduce as well and continued to decline in July as lockdown limits were lifted. The number of women victims of cybercrime was very low in previous years but surged considerably during the pandemic and shutdown.

Cybercrimes against women

People were forced to use the internet for educational, leisure, professional, and social purposes throughout the pandemic and lockdown. Working women began working from home using laptops, smart-phones, and the web. Women who are still enrolled in school have been forced to use the web for online learning and other educational activities. Due to the fact that the majority of women were using social media websites and one or more online platforms for educational, occupational, and recreational purposes during this time period, the rate of cybercrime against women began to rise. Due to the fact that the entire country was on lockdown, criminals were unable to physically assault the victim, and thus began mentally and emotionally harassing them. The following are the most often encountered cybercrimes by women:

CYBER STALKING- It included contacting or attempting to engage with the victim via social networking sites or phone conversations despite her evident indifference, writing messages (often threatening) on the victim’s page, and persistently pestering the victims with e – mails messages/phone calls, among other things.
SEXTORTION- This is the most frequently committed cybercrime involving women during the pandemic period. The criminals began extorting or sexual favours from their victims by blackmailing them into disclosing their private photographs or modified images. By intimidating women, perpetrators sought sexual videoconferencing or letters from them in response to the pandemic frustration. Additionally, their lack of income emboldened them to extract money from victims by threatening them with their modified photographs.
CYBER HACKING- People began reading news online during the pandemic. There has been an increase in the number of instances of bogus news and information. The women became victims of cyber hacking after clicking on malware URLs that downloaded all their personal information on their phones, activated the microphone and camera, and captured their intimate photos and videos. Offenders then utilize these pieces of data and images to commit sextortion and other crimes.
CYBER-BULLYING- This would include posting false and misleading and abusive statements about the victims on social networking sites and demanding payment to have them removed, leaving hurtful comments on the victim’s posts, exchanging morphed/private pictures of the victims without her consent, and sending rape and death threats to the victim, among other things. A sort of harassment and bullying is committed through digital or communicative devices such as a computer, mobile phone, or laptop.
PHISHING- To earn money during the lockdown, criminals send bogus email messages with a link to a specific webpage in order to trick the victim into entering personal information such as bank payment information, contact information, and passcodes or with the intention of infecting the victim’s device with harmful viruses as soon as the link is opened. These emails and texts look to be real. The perpetrators then utilize the victim’s bank account and other private details to conduct suspicious transactions from the victim’s account to their own.
PORNOGRAPHY- Throughout the epidemic, perpetrators engaged in online sexual assault of women, morphing the victim’s image and utilizing it for pornographic purposes.
CYBERSEX TRAFFICKING- In contrast to sex trafficking, the victims has no direct interaction with the abuser. Cybersex trafficking occurs when a dealer broadcasts, records, or photographs the victim doing sexual/intimate actions from a central place and then sells the material on the internet to sexual abusers and purchasers. The offenders have sexually abused women by coercing, manipulating, and blackmailing them into becoming involved in cybersex trafficking.

Legal provisions

Although a full regulatory framework for laws regulating the cyber domain, including such activities, has not been drafted, certain legal remedies under various statutes can assist a victims of cyber violence.

The Indian Penal Code 1860

Prior to 2013, there was no law specifically addressing online abuse or crimes against women in cyberspace. Section 354A of the 2013 Criminal Amendment Act amends the Indian Penal Code, 1860 by adding Sections 354A to 354D.

Section 354A: A man who commits any of the following events – a demand or plea for sexual services; or displaying pornography against a woman’s will; or making sexual remarks – commits sexual harassment and may be penalized with stringent imprisonment for a period up to 3 years, or with a fine, or with both. In the instance of the first two, and with a period of imprisonment for a period of up to one year, or by a fine, or with the both.
Section 354C defines ‘voyeurism’ as the act of photographing and/or publishing a picture of a woman engaged in a private act without her consent. To qualify as ‘Voyeurism,’ the conditions must be such that the lady would “typically expect not to be seen, either by the offender or by any person acting at the perpetrator’s direction.” A person convicted underneath this section faces a fine and up to three years in prison on the first conviction and 7 years on successive convictions.
Section 354D added a stalking prohibition that includes online stalking. Stalking is described as an act in which a male pursues or contacts a woman despite the woman’s evident disinterest in such contact, or watches a woman’s cyber activity or usage of the Web or electronic communication. A man convicted of stalking faces up to three years in prison and a fine for the first offence, and up to five years in prison and a fine for successive convictions.

Apart from the specific revisions to the Code, there are a number of other laws within which cyber-attacks may be reported and the accused prosecuted. These include the following:-

Section 499: To slander, someone is to commit an act with the goal of slandering their reputation. When committed with the intent to injure the woman’s reputation, defamation through the publishing of immediate and clear representation of imputation is punished with imprisonment for a period not exceeding two years, a fine, or both.
Section 503: Threats to harm a person’s reputation, either to cause her panic or to compel her to modify her course of conduct about whatever she would normally do/not do, constitute criminal intimidation. The act of cyber-blackmailing a person, as was done in the aforementioned example, can be placed within the range of this law.
Section 507: This section establishes the maximum penalty for Criminal Intimidation committed by an individual whose identity is unknown to the victim. Any anonymous communication that constitutes criminal intimidation in violation of the preceding Section 503 is penalized under this section.
Section 509: Any individual who utters a word, makes a sound or gesture, or displays an object with the intent that such word, sound, gesture, or object is heard or seen by a female and insults her modesty, or intrudes on her privacy, may be charged underneath this section and sentenced to up to three years in prison and a fine. This section may penalize instances of sexual remarks or comments made over the Net, as well as other explicit photos and content that are forcibly transmitted over the web.

The Information Technology Act 2000

Section 66C– Identity theft is a punished offense under Section 66C of the IT Act. This clause would apply to instances of cyber hacking. Under this provision, anyone who uses another person’s electronic signature, password, or other unique identifying feature fraudulently or dishonestly faces up to three years in prison and a fine of up to Rs. one lakh.
Section 66E deals with a person’s right to privacy being violated. Capturing, publishing, or sending an image of a person’s private area without her agreement, or in circumstances that violate her privacy, is penalized by up to three years in prison and/or a fine.
Section 67 makes it illegal to publish, transmit, or cause the distribution of obscene content and punishes violators with up to three years in prison and a fine on the first conviction and up to five years in prison and a fine on the second conviction.
Section 67A makes the publishing, transmission, or facilitating the transfer of sexually explicit content a misdemeanour punishable by up to five years in jail and a fine on the first offence, and up to seven years in prison and a fine on the second conviction.

Indecent Representation of Women Bill 2012

This Bill controls and forbids obscene representation of women in advertising, publishing, and other forms of media. This Bill intends to widen the law’s reach to encompass audiovisual media and electronic materials, as well as dissemination of material via the Web and the depiction of women on the web. But this Bill has been withdrawn in July 2021.

Suggestions

Keep a watch out for insignificant/false phone/email messages.
Do Not Respond to emails that request personal information.
Keep an eye out for bogus websites that attempt to steal your personal information.
Pay close attention to the privacy policies posted on websites and included with the software.
Take care of your email address.
Utilize Secure Passwords.
If a victim is a victim of cybercrime, he or she should inform the nearby cyber cell or police department.
Additionally, a complaint may be made anonymously using the National Cybercrime Reporting Portal.

Conclusion

To summarize, while a crime-free society is impossible to achieve and only exists in fantasy, it should be a continuing effort to enforce regulations that reduce criminality to a minimum. Particularly in an increasingly technologically reliant world, criminality related to electronic law-breaking is certain to increase, and legislators must go the extra mile to keep impostors at bay. Technology is often a double-edged sword that can be employed for either good or evil purposes. To combat cybercrime against women, the Legal system has enacted a number of legislation. Thus, it should be the relentless efforts of rulers and legislators to assure that technology advances in a healthier way and is employed for legal and ethical economic growth rather than criminal activity.

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Case analysis : V.G. Santhosam & Ors v Shanthi Gnanasekaran & Ors

By

Shoronya Banerjee

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November 4, 2021

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This article is written by Vaibhvee Jangid, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho. This article has been edited by Aatima Bhatia (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

This case of V.G. Santhosam and Others vs Mrs. Shanthi Gnanasekaran and Others was decided in 2020 by Hon’ble Justice S.M. Subramaniam. It involves very important issues regarding whether an arbitrator can implead a third party to the arbitration proceedings or not and whether he can use inherent power under Order I, Rule 10 of Civil Procedure Code which is available to the civil courts? These all issues are analyzed in detail in this article.

Brief facts

These miscellaneous civil appeals arise out of the order passed by the sole arbitrator on 2/11/2019. The sole arbitrator compelled the first respondent Mrs. Shanthi Gnanasekaran to participate in the adjudicative process in the arbitration.

A partnership firm named M/s. V.G.P Beach housing was formed on 27/03/1979 by and between and between late Mr. V.G. Panneerdas, Mr. V.G. Santhosam, Mr. V.G. Selvaraj, Mr. V.G.P. Ravidas, and Mr. V.G.P. Rajadas. Then two more partners namely Mr. V.G.P. Babudas and Mr. V.G.S Rajesh were inducted on 16/12/1982 and thus every partner was entitled to 1/7^th of the net profits. The partnership deed stated that upon death of any of the partners, the nominees of the deceased partner would get absolute rights.

Thereby when Mr.V.G.Panneerdas died on 7/05/1988 his wife Mrs. Parijatham was appointed as the nominee and thus was the sole beneficiary of the rights of her husband. However, vide partnership deed dated 7/05/1988 the partnership firm was reconstituted with Mrs. Parijatham along with the original 6 partners and two more partners were added, were Mr. V.G.P. Prasaddas and V.G.P. Murphydas. Therefore, then every partner was entitled to 1/9^th share of the net profits.

Then when Mrs. Parijatham died on 25/08/1992 she nominated Mr. V.G.P. Ravidas as her nominee and thereafter the partnership firm was reconstituted according to the partnership deed dated 27/08/1993 which also inducted Mr. V.G.S. Vinodhraj as a partner in the firm and they all decided that each partner should get 1/9^th share only and then it can be said that Mr. Vinodhraj became the sole beneficiary of the 1/9^th share of late Mrs. Parijatham

According to clause 13 of the partnership agreement dated 27/08/1993, only the nominees would get the net profits. Mr. V.G.Panneerdas had constituted this firm with all the male members as his daughters were already married and living lavish lives. And also his sons for the past 37 years had been contributing to the revenue and the profits of the business.

However, the problem arose when Mr. V.G.Selvaraj, Mr. V.G.S Vinodhraj, and Mr. V.G.S.Rajeshbegan illegally started dealing with the firm’s property and thereby created many encumbrances over several properties which belonged to the partnership firm. Therefore the appellants in the present case approached the court to grant an interim injunction under Section 9 of Arbitration Act, 1996 restraining the aforementioned partners from encumbering the properties of the firm.

The court thereby granted the interim injunction and then the appellants further filed a petition under Section 11 of the Arbitration Act, 1996 for the appointment of the arbitrator, and thus retired justice K. Kannan of Punjab and Haryana High court was appointed as the sole arbitrator to adjudicate the disputes between the parties and thereby he impleaded the first respondent bypassing the order dated 2/11/2019. Therefore this led to the filing of these civil miscellaneous appeals under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996.

The main contention of the first respondent is that though she didn’t deny the reconstitution of the partnership firm several times before, she raised the issue that her father late Mr. V.G. Panneerdas would have included his daughters as well as the Partners in the firm, as his legal heirs are entitled to equal shares in the profits and in the business of the partnership firm. She also claimed that the entire partnership firm was intended to be run as a family business and that could very well be seen that at all the times when the partnership firm was reconstituted dated 25/08/1993, 27/08/1993, and 01/10/1994 only the male lineal descendants of Mr. V.G. Panneerdas, were made partners when they attained the age of majority- which is illegal and unlawful. She further claimed that if she is not made a party to the arbitration proceedings, an irreparable loss would be caused to her and her rights would be infringed. Her claim rests on the point that as a legal heir she is entitled to the profits of the business and the illegal selling of the properties by the male family members had led to the dispute between them.

Arguments

On behalf of the appellants

That the first respondent was not a party to the partnership agreement dated 27/08/1993 which is in dispute and thus she cannot be a party in the arbitration as well.
The dispute raised by the first respondent is barred by limitation, as the cause of action arose for the first time when Mr. Panneerdas died and a second time when Mrs. Parijatham died and the firm was reconstituted. And thus Section 113 of the Limitation Act, 1963 was applicable to the case.
They also contended that impleading the first respondent to the arbitration proceedings does not come under Section 17 of the Arbitration Act, 1996. and therefore the question of legal heirship does not arise as the nominees are the sole beneficiaries of their respective shares.
The nominees are not trustees that the first respondent thinks, as they are the beneficiaries according to the partnership agreement. The said question of legal heirs will subsist only upon the death of a partner without a nominee or in the case where a partner died intestate.
They also argued that since the daughters were already married and living lavish lives, constituting the partnership firm of only male members was valid and also they are the ones who have extensively contributed to the business and made goodwill in the market whereas the first respondent has done nothing in pursuant of it.
They also argued that the arbitral tribunal does not possess the power under Order I, Rule 10 of Civil Procedure Code which is applicable only in cases of civil court proceedings and thus the third parties cannot be impleaded as they were not the signatories to the arbitration agreement and thus their no right arises from it. And therefore they argued that the first respondent does not have locus standi as well.

On behalf of the first respondent

She contended that since she is a legal heir she is entitled to be impleaded and regarding the merits and demerits of the claim the arbitrator would decide during the arbitral proceedings and therefore there is no error as such in impleading the first respondent.
They argued that the impleading the first respondent cannot be termed as an interim measure of the tribunal under Section 17 of the Arbitration Act, 1996 and thus the civil miscellaneous appeals filed under Section 37(2)(b) is not maintainable.
Regarding the law of limitation, exclusion of her and the rights of all the other parties are to be decided during the arbitration claims when the issue of dissolution of the partnership is taken in the arbitral adjudication.
Also, the point of limitation would be decided by the arbitrator during the proceedings and thus the present appeals are untenable.
Chloro Controls India (P) Ltd vs. Severn Trent Water Purification Inc., held that it is not absolutely barred to not include third parties who were not the signatories to the contract as sometimes the claim is made against or by someone who is not originally named as a party. But yes the heavy onus lies on that person to prove in fact and in law.
Also, it was contended that the house property which stood in the name of their father was transferred to Mr. V.G.P.Ravidas by the sons of her father representing as the legal heirs and without obtaining no objection certificate from the daughters of Mr. Panneerdas. The respondent states that the properties were acquired during the lifetime of their father and he always intended to share the proceeds equally with all the family members as seen from the balance sheet filed during the lifetime of Mr. V.G.Panneerdas showing the share application money in the name of 15 family members.
She also had sent notices to the appellants for unlawfully withholding the rightful shares in the property of their father, which were ignored by the appellants.

Issues

Whether the order of the sole arbitrator of impleading the first respondent is maintainable?
Whether the principles laid down by the Hon’ble Supreme Court of India in the case of Chloro Controls India (P) Ltd vs. Severn Trent Water Purification Inc. (2013), would be applicable with reference to the facts and circumstances of the present case, which is a domestic arbitral proceeding and the dispute is among the partners?
Whether the arbitrator was right in using the inherent power under Order I, Rule 10 of the Civil Procedure Code for impleading a person?

Analysis of the judgment

In Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, it was said that the bifurcation of the subject matter cannot happen because this was not contemplated by the legislature while they made Section 8 of the Act.

In Indowind Energy Ltd v. Wescare (I) Ltd, the supreme court held, where there was no arbitration agreement between Wescare and Indowind, then the latter’s claim cannot be a subject matter of reference to an arbitrator. This can be understood from a plain reading of Section 7 of the Act itself. The same decision was reiterated in S.N.Prasad v. Monnet Finance Ltd., the case was related to guarantee, where the guarantor was to be impleaded as a party in the arbitral proceedings but was not made a party because he was not a party to the loan agreement signed between the lender and borrower. The loan agreement contained the arbitration clause and thus the guarantor was not a party to the agreement.

According to the Redfern and Hunter on International commercial arbitration, they have said that the agreement must be in writing as affirmed by Section 7 of the Arbitration and Conciliation Act, 1996 so that it is properly established that through this agreement the parties would refer their case to a private forum for dispute resolution and excludes the power of adjudicating of the national courts. However, this doesn’t exclude the non-signatories to the agreement as according to the evolving concept of business around the world and also according to the “group of companies” doctrine provided in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) supra, pursuant to which “the duties or any benefits arising out of the arbitration agreement may be extended to the other people as well connected to the actual parties by way of general rules of private law, succession, assignment, agency…”

Section 7(1) of the Arbitration & Conciliation Act, 1996 defines Arbitration agreement as “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of…..” and thus the first respondent cannot be impleaded in the arbitral proceedings. Also according to section 7(4), if an arbitration agreement is in writing, a third party cannot be subjected to application. Only in exceptional situations or cases where the rights of the parties are flowing under the arbitration agreement, third parties can be subjected to arbitration. The exceptions have to be examined by the court by determining the direct relationship, if any, of the third party/parties with the signatory parties.

The arbitrator is not empowered to implead a person by exercising the inherent power and the wide power under Order I, Rule 10 of the CPC because the right to implead a person can be allowed under Section 17(1)(ii)(e) of the Act but it is also said that the power is to be exercised within the ambit of the Act and cannot be exercised to include inherent power under Order I, Rule 10 of CPC. Thus the arbitrator cannot exercise wide power as it is beyond the scope of the arbitral proceedings and the Act itself. This was understood from the case of Transcore v. Union of India. The sole objective of the ADR mechanism is to reduce the burden on the courts but that does not mean to usurp the power of the civil courts by the arbitral tribunal. Section 16 of the Act cannot be interpreted to include that the arbitrator can implead any person to the arbitral proceedings according to the competence of the arbitral tribunal to rule of its jurisdiction.

The order of the arbitrator to implead the first respondent would be characterized as an interim measure under Section 17(1)(ii)(e) of the Act, which states that this interim measure of protection may appear to the arbitral tribunal to be just and convenient. (Though subsequently, the court has held that the arbitrator cannot implead a third party) And thus the civil miscellaneous appeals under Section 37(2)(b) are maintainable. The reason for this was that no order of the arbitrator can remain without remedy as there is no express provision regarding impleading a third party in the proceedings. And thus it would fall under Section 17(1)(ii)(e).

There is no express provision in the Act that covers other departments other than the disputes that are covered under the arbitration agreement because there cannot be a splitting of the cause of action. The point that the first respondent not being a partner and claiming her right to inheritance as a legal heir in her father’s property, the partnership firm was reconstituted several times after that but as only the nominee would be getting all the share in the profits and therefore the first respondent does not fall under dispute to be adjudicated by the arbitral tribunal.

Decision of the court

As per issue 1, the first respondent claimed the right of inheritance through her father Mr. Panneerdas, and her capacity as a legal heir. Then she can claim such right in the competent civil court and establish her rights by evidence and not in the arbitration proceedings because the arbitration agreement is a contracted thing and otherwise it would lead to submerging of the rights of the inheritance of properties and the disputes that are within the scope of the contracted arbitration agreement. Thus the arbitrator cannot implead a person by Order I, Rule 10 of the CPC as this would lead to widening of the power of the arbitrator which would defeat the scope of the Act itself where the parties must refer to arbitration when they have already decided on it while forming the contract. Thus the order of impleading the first respondent as a party was rejected by the court.

As per issue no.2, though in the opening of this case itself the apex court has talked about widening the scope of arbitral proceedings. The supreme court unambiguously held that any third party cannot be impleaded in the proceedings unless there are some exceptional circumstances, such as where there are multi-party agreements with intrinsically interlinked causes of actions and more so where the performance of the ancillary agreements depends upon the proper execution of the principle agreement. These circumstances would mostly arise in multinational companies, and in businesses. And thus such exceptional circumstances are also exceptions in domestic arbitration but the parties who are filing an application must establish such intrinsically interlinked causes of actions for participating in the adjudication process. And thus the above-mentioned case may not be applicable with reference to the facts and circumstances of the present case.

As per issue 3, the arbitrator was not right in using such a wide power under Order I, Rule 10 of CPC that is given to civil courts, and thus the arbitrator cannot implead a person when its right flows from the contractual basis and as the power of the arbitrator is statutory in nature, therefore, the inherent power cannot be vested. And thus adjudication of the civil rights of the first respondent shall be done by a competent court of law and not the arbitral tribunal. And thus the adjudication must be done within the parameters of the disputes raised by the parties in the arbitration agreement. And also in accordance with Section 7 of the Act, the first respondent was not a signatory to the partnership deed and as the arbitration agreement must be in writing and signed by the parties to the agreement, this could not be established by the first respondent and thus she is not a party to the arbitration proceedings.

Further the other very valid ground for not allowing an arbitrator to decide on the civil rights of the parties is, the ADR mechanism though in vogue nowadays cannot be used against the competent civil court of law as the arbitrators are appointed according to the contract between the parties and the parties give them the remuneration and thereafter they act as a neutral third party but this would be a gross misuse of the law if the civil rights are also adjudicated by the tribunals as then it would be exercising the inherent powers of the civil court. It would be an infringement of the constitutional structure of the judicial system.

Conclusion

Through this case, we understood that the arbitrator does not possess inherent power under Order I, Rule 10 of the Civil Procedure Code, and thus cannot implead a party in arbitration proceedings. The arbitral tribunal can adjudicate only those disputes that the parties had intended to do so under the contract and not the civil rights of the parties. Thereby the first respondent in the present case seeking to claim the right of inheritance through her father late Mr. Panneerdas had to file a case in a competent civil court of law and not in the arbitration proceedings.

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

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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An overview of the Factoring Regulation Act, 2011

By

Sneha Mahawar

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November 4, 2021

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factory-licence — Image source:: https://cutt.ly/7xV2hwT

This article is written by Bhavyika Jain, a Student of Symbiosis Law School, NOIDA. This article explains the Factory Regulation Act, 2011, the rules and amendments made to it, and all aspects related to it.

Table of Contents

Introduction

The Factoring Regulation Act of 2011 established a cohesive legal framework in India for the first time, governing all aspects of factoring operations and codifying laws applicable to them. The fundamental goal of this act is to tackle the payment delays and liquidity issues that micro, small, and medium-sized businesses encounter, and to also establish a framework that will allow for easy accessibility to working capital financing. The Act also removed stamp duty on factory transactions in order to stimulate more transactions by eliminating the burden of excessive duties that otherwise would have applied to moveable property transfers.

On January 22, 2012, the Central Government published the Factoring Regulation Act, 2011. Factoring firms other than banks, government companies, and others would be required to register with the Reserve Bank of India (RBI hereinafter) as NBFCs and be subject to Reserve Bank prudential requirements.

Definitions

A factor in Section 2 is a non-banking financial company, as defined in Section 45-I(f) of the Reserve Bank of India Act, 1934, that has been granted a certificate of registration under Section 3(1), or anybody corporate established under an Act of Parliament or any State Legislature, or any bank or any company registered under the Companies Act, 1956 engaged in factoring business under Section 2(i).

Section 2(j) of the Factoring Regulation Act of 2011 defines factoring business as “the business of acquiring receivables of assignors by accepting assignment of such receivables or financing, whether by way of making loans or advances or otherwise against the security interest over any receivables,” but it excludes:

1. Credit facilities offered by a bank in the ordinary course of business in exchange for receivables as collateral.

2. Any activity relating to the production, storage, supply, distribution, acquisition, or control of agricultural products or goods of any kind, or any activity relating to the commission agent or otherwise for the sale of agricultural produce or goods of any kind, or any activity relating to the production, storage, supply, distribution, acquisition, or control of such products or goods, or any activity relating to the provision of any services.

Section 2(p) defines “receivables” as all or a portion of, or an undivided interest in, any right of any person under a contract, including an international contract, where either the assignor, the debtor, or the assignee is located or established in a state outside India; to payment of a monetary sum, whether such right is existing, future, accruing, conditional, or contingent arising from and including.

Factor registration

Every factor must submit an application for registration to the RBI in the prescribed form and format. A company registered as an NBFC and existing at the time of the commencement must apply to the RBI for registration as a factor before the end of the six-month period following the commencement and, notwithstanding anything contained herein, may continue to operate as a factor until a certificate of registration is issued to it or rejection of the application for registration is communicated.

Every applicant for a certificate of registration as a factor shall comply, for the purposes of registration, with all requirements to be fulfilled by an applicant for a certificate of registration as an NBFC under the RBI Act 1934, and all provisions of the Act that relate to NBFC registration shall apply mutatis mutandis.

Assignment of receivables

An assignor may assign any receivable due and payable to him by any debtor to any factor, or assignee, for such consideration as the assignor and the assignee may agree upon, and the assignor must disclose to the assignee any defenses and right of setoff that the debtor may have at the time of such assignment.

Upon the execution of an assignment in writing, all rights, remedies, and any security interest created over any property exclusively to secure the due payment of a receivable shall vest in the assignee, and the assignee shall have an absolute right to recover such receivable and exercise all of the assignor’s rights and remedies, whether by way of damages or otherwise, whether or not notice of assignment is given.

Non-applicability of the Act

Section 31 of the Act states that the provisions of this Act shall not apply to any assignment of receivables arising under or from any of the following transactions:

1. A merger, acquisition, or restructuring of business activities, or a sale or change in the ownership or legal status of the business;

2. A transaction that takes place on a stock market or a commodity exchange;

3. Financial contracts governed by netting agreements;

4. Foreign exchange transactions except for receivables in any foreign currency;

5. Money in the bank;

6. A letter of credit or a third-party assurance;

7. The selling of products or services for personal, family, or household use;

8. Securitization transactions.

Rights and duties

The rights and obligations of the parties to a contract for the assignment of receivables are addressed in the Act. The debtor has the right to notice of assignment before the assignee makes any demand on the debtor, and until the debtor receives notice, the debtor is entitled to make payments to the assignor in respect of the assigned receivable in accordance with the original contract, and such payment fully discharges the debtor from corresponding liability under the original contract.

When a notice of assignment is served, the debtor must:

Notify the assignee of any deposits or advance payments on account made to the assignor prior to receipt of the notice of assignment, and provide any other information relating to the receivable to the assignee as and when requested by the assignee;
Unless he makes the payment due on the assigned receivables to the assigner, he will not be entitled to a legal discharge of his liability in respect of such receivables.

When a debtor makes a payment to an assignor that reflects payments due on an assigned receivable, the payment is deemed to be for the assignee’s benefit, and the assignor is deemed to have received the payment as a trustee of the assignee, and the assignor is compelled to pay the assignee.

If the assignor of the receivable is a micro or small business, the debtor’s obligation to make payments due on assigned receivables is governed by the requirements of Section 15 and Section 17 of the Micro, Small, and Medium Enterprises Development Act, 2006, which deal with late payments. In the event of a payment delay, the assignee is entitled to interest for the time of delay and must take action under the terms of the Micro and Medium Enterprises Development Limited Act, 2006 to recover the interest and pay it to the micro or small business.

Registration of assignments

The registration of assignments is covered in Chapter V of the statute. The procedure for registering assignments and matters related to them is as follows:

The factor must file the particulars of every transaction in his favor with the Central Registry established under the SARFAESI Act, 2002 within 30 days of the date of such assignment in Form 1 and pay a fee of Rs. 500/-;
A record called the central register shall be kept at the Head Office of the Central Registry for entering the particulars of the transaction relating to assignment or a loan;
The factor must file a satisfaction in Form II with a fee of Rs. 250/- when the allotted receivables against the debtor are realized.
The SARFAESI Act’s provisions for transaction registration will apply here as well.

Inspection by the general public

On payment of a stipulated price, the central registry in electronic form shall be open for examination by any person via electronic media during business hours as specified by the central registry.

Wrongdoing and penalties

Being defined under Section 22 of the Factoring Regulation Act it states that, if a firm or an officer of the company fails to register assignments, the company and any officer of the company who fails to register assignments will be fined up to Rs.5000/- per day the default persists. If any factor fails to comply with any RBI directive, the RBI may impose a penalty of up to Rs.5 lakhs, plus an additional punishment of up to Rs.10,000/- for each day the default continues.

If any person violates, attempts to violate, or aids and abets the violation of any provision of the Act or any rules issued thereunder for which no specific penalty has been given, he will be punished by imprisonment for a term not exceeding one year, a fine, or both.

Recent amendments made to the Act

The Factoring Regulation (Amendment) Bill,2020, expected to take effect in 2021, will:

Increase credit opportunities for small enterprises by allowing them to access cash from 9,500 nonbank financial institutions. The Rajya Sabha reforms will boost the economy by enabling a more efficient working capital cycle for micro, small, and medium businesses.
Raise the number of NBFCs that provide factoring services from seven to over 9,500. Factoring is a transaction in which a company sells its customer receivables to a third party, or a “factor,” in order to get funds.
All NBFCs will now be able to factor in and participate in the TReDS (Trade Receivables Discounting System) for discounting Ministry of Micro, Small & Medium Enterprises’ (MSME) invoices.
The Bill aims to provide a strong monitoring mechanism for the factoring ecosystem, and it will give the Reserve Bank of India the power to regulate the factoring industry.

MSMEs frequently have delays in receiving payment for their bills for serving numerous buyers.

According to the Parliamentary Committee’s findings, this results in working capital being locked up and MSMEs’ productive operations being hampered. The government’s proposed modifications aim to address these concerns by allowing additional types of NBFCs to engage in factoring activity. In India, factoring credit accounts for only 2.6% of total formal MSME lending. Only around 10% of the receivables market is now handled by formal bill discounting mechanisms, with the balance being serviced by traditional bank cash credit overdraft arrangements.

Conclusion

While the Factoring Act is a significant piece of legislation, its Achilles heel has always been the restrictions it imposed on the types of businesses that could engage in factoring, particularly its odd treatment of non-banking financial companies (NBFC), a key form of the lender in India. Several requests for action have already been made and heard, but in light of the COVID-19 epidemic, the necessity to reform the Factoring Act has taken on a new urgency. One of the urgent issues that the Government is focusing on in combating the COVID-19 pandemic is measures that can be taken to encourage the provision of finance to and to generally boost the MSME sector – amending the Factoring Act to broaden the scope of lenders who can engage in the factoring business is low hanging fruit, and now would be the ideal time to put it in place. Given the constraints imposed by the Factoring Act’s original wording, any amendment introduced should ideally provide flexibility for new classes of lenders to be permitted to engage in factoring on a case-by-case basis through government/ RBI notifications, without the need for further legislative amendments.

References

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Need for the third phase of federalism

By

Shoronya Banerjee

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November 4, 2021

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Legal-concept — Image source - https://bit.ly/3CI9vLq

This article has been written by Vishal Kumar, an Advocate at the Patna High Court.

Table of Contents

Introduction

Loksatta calls for re-imagination of governance in the country, with much greater flexibility for states and local bodies to self-govern themselves. The Union-state relationship has become one of the core issues ahead of the next general election. Part of the rhetoric is political hyperbole and electoral posturing, and it is sharpened by the Bharatiya Janata Party’s (BJP’s) continuing expansion of its political footprint, and its take-no-prisoners approach to electoral battles. However, this climate gives us an opportunity to examine our federalism beyond partisan politics. We are approaching the third phase of federalism since the founding of our republic.

First phase

The traumatic events surrounding the partition of India and fears of Balkanization made our founding fathers opt for a highly centralised Union. States were given a well-defined legislative and executive jurisdiction in the Seventh Schedule of the Constitution. Institutions like the Finance Commission, Election Commission, and Supreme Court were created to ensure some degree of fairness in dealing with the states. However, an appointed governor as head of state with discretionary powers, Article 356, the All India Services, Planning Commission, the introduction of licence-permit-quota- raj- eroded the states’ powers significantly. Habitual abuse of Union’s powers for partisan political gain, frequent dismissal of elected state governments, Union’s near-complete control of public and private investments, excessive discretion of the Union in resource transfers, the internal emergency that made India a de-facto unitary state, and mass dismissals of state governments in 1977 and 1980 led to serious friction.

Second phase

In the second phase, powerful leaders like N.T. Rama Rao, Ramakrishna Hedge, Jyoti Basu, Biju Patnaik, and M. Karunanidhi emerged to rally people around federalism and states’ rights. A series of developments- the S.R. Bommai case verdict (1994) making abuse of Article 356 largely a thing of the past, successive Finance Commission reports on resource transfer, end of licence raj, a decline of discretionary public sector investments, the rise of regional parties, and the abolition of Planning Commission- helped create a more balanced federal India.

For example, according to revised estimates of 2017-18, half of the Union expenditure of around Rs. 22 trillion has been transferred to states. Of the total resource transfers, 69.4% is by Finance Commission devolution and grants, and the bulk of the rest is under centrally sponsored schemes. Indian federalism has matured quite a bit, and the states have far greater control of their economic and political management than in the earlier phase.

Third phase and future

However, serious structural problems remain. States and local governments have responsibility for most of the things people need and expect from the government on a daily basis- water supply, electricity, sanitation, drainage, police, courts, roads, traffic, schools, colleges, healthcare, and myriad public services. Our politics is centred around the states, and national verdicts are generally a mere aggregate of states’ verdicts. In all elections from panchayat to Parliament, people essentially vote for or against leaders and parties at state level, and punish them for failure to deliver.

The national government is largely notional for most people most of the time. States exercise real power, and yet are severely constrained in delivering outcomes. In the first five decades after independence, federalism was eroded by the Union’s arbitrary and partisan exercise of power. Now, the Union government has much less discretion compared to the earlier period; and yet, states are severely constrained in fulfilling their obligations to people.

These fetters are no longer partisan politics; they are structural and constitutional. A rigid, uniform political model imposed on all states and local governments disregarding local needs, a dysfunctional bureaucracy protected by Article 311, the generalist, all-purpose All India services that do not bring specialized skills required to manage various services and enjoy a monopoly of all key public offices, the well-intentioned, but poorly drafted Part IX of the Constitution that created over-structured, under-powered local governments that failed to take root as the third tier of federalism, needless rigidity in Union legislation on subjects like education with resultant failure to improve outcomes despite the vast expenditure, and the continuing archaic anachronistic role of nominated governors are making states and local governments dysfunctional.

The results of our governance failure are catastrophic. Despite our self-image, immense potential, and many obvious strengths, our outcomes as a nation are far from satisfactory. Out of the 49 relatively large nations with the gross domestic product (GDP) exceeding $200 billion, India ranks at the near bottom on most indicators of basic amenities, infrastructure, education, and healthcare, in the company of Pakistan, Bangladesh, and Nigeria. Our people deserve more, and we as a nation have far greater potential unfulfilled. This calls for a more nuanced third phase of federalism while preserving and strengthening the nation’s unity and integrity, our constitutional freedoms, checks and balances, and democratic accountability.

In no other democracy does the federal constitution impose a uniform structure, electoral system, and bureaucratic apparatus on states and local governments. Even small unitary states like Britain, Scotland, Wales, Northern Ireland, and London city have their own electoral systems different from the Westminster model. In the US, each of the 50 states has its own constitutions and structure of government. In Australia too, each of the six states and two self-governing territories has its own constitutions. In Germany, every Land (State) has its own constitution with the power and flexibility to design its own governance structure. In Canada, the 10 provinces have the right to decide on the electoral system, the form of government, and the local governance structure.

Conclusion

The time has come for India to move to the third phase of federalism. Many of our states are larger than 90% of nations on earth. We need to allow each state to have its own model of governance, bureaucracy, and local governments, but with firm, safeguards to preserve national unity, separation of powers, fundamental rights, and democratic accountability. The one-size-fits-all model cannot deliver the desired outcomes of prosperity, elimination of poverty, and national greatness in a vast and diverse nation of 1.3 billion people. We need more flexible federalism, strengthening India’s unity and integrity, and allowing us to fulfill our potential.

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UCC : a rational choice of historical significance

By

Oishika Banerji

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November 4, 2021

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Uniform Civil Code — Image Source - https://rb.gy/zc7rgd

This article has been written by Vishal Kumar, Advocate, Patna High Court.

Table of Contents

Introduction

Article 44 of the Constitution of India lists Uniform Civil Code as one of the Directive principles of state policy. Directive Principles of State policy, which comprises the Part IV of the Constitution of India, are guidelines for the State and Central governments to help them in framing laws and policies. However, these Directive Principles “shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws”, according to Article 37 of the Constitution which talks about the application of the Principles contained in Part IV.

In India, there are different sets of laws for different communities pertaining to personal matters like marriage, divorce, property, adoption, inheritance and maintenance. The Uniform Civil Code implies covering all these personal laws into one unified set of secular law, that will be applicable for each and every citizen of India irrespective of his/ her religious community. However, in India, Goa is the only state to have implemented the directive principle on the Uniform Civil Code and converted it into a law called the Goa Civil Code or the Goa Family Law. It is the set of civil laws that governs all the Goans irrespective of the religion or the ethnicity to which they belong.

History

The debate over constitutionalising the requirement for a Uniform Civil Code (UCC) began even before partition. Discussions began in the sub- committee on Fundamental Rights, which met between February and April 1947. Demands for a uniform civil code came not only from extreme Hindu nationalists, but from Modernists as well. Minoo Masani, a Parsi- member of Congress from Bombay, and Amrit Kaur, a Christian- member of Congress who represented CP and Behar, jointly demanded that the provision be included in the justiciable part of the constitution so that it could be enforceable by court. They argued that “One of the factors that has kept India back from advancing to nationhood has been the existence of personal laws based on religion which keep the nation divided into watertight compartments in many aspects of life.” However, the majority of sub-committee members opposed this demand, and the provision was recommended to be incorporated in the Directive Principles section of the constitution.

During discussions in the Constituent Assembly, the dispute over the fundamental question of the relationship between unity and uniformity was only one aspect of the debate. The second aspect is related to the role of the constitution in promoting social, religious and cultural reforms. On the one side stood people, who wished to use the legal power and status of the constitution to modify religious customs and advance secularization and legal uniformity among all religious groups. On the other side were those who believed that a constitution should reflect the spirit of the nation as it currently was and should not impose deep social and cultural changes.

The Hindu viewpoint was probably best put forth by KM Munshi who said, “There is one important consideration which we have to bear in mind- and I want my Muslim friends to realize this- that the sooner we forget this isolationist outlook on life, it will be better for the country. Religion must be restricted to spheres that legitimately appertain to religion, and the rest of life must be regulated, unified and modified in such a manner that we may evolve, as early as possible, a strong and consolidated nation. Our first problem and most important problem is to produce national unity in this country…There is no use clinging always to the past. We are departing from the past … we want the whole India to be welded and united together as a single nation. Are we helping those factors which help welding together into a single nation, or is this country to be kept up always as a series of competing communities?” B. Pocker Sahib Bahadur, a Muslim League representative from Madras replied: “there are ever so many multitudes of communities following various customs for centuries or thousands of years. By one stroke of the pen you want to annul all that and make them uniform.” Pocker Bahadur also attacked the uniform civil code as representing the tyranny of the majority. The standards of which community, he asked, would be taken as the basis for the uniformity of the code?

Naziruddin Ahmad, a Muslim representative from West Bengal, warned against overly radical constitutional provisions: “I have no doubt that a stage would come when the civil law would be uniform. But then that time has not yet come. We believe that the power that has been given to the state to make the Civil Code uniform is in advance of the time… What the British in 175 years failed to do or were afraid to do, what the Muslims in the course of 500 years refrained from doing, we should not give power to the state to do all at once. I submit, sir, that we should proceed not in haste but with caution, with experience, with statesmanship and with sympathy.” Ahmad stressed the importance of obtaining consent of the communities whose religious laws would be affected by the new code: “The goal should be towards a Uniform Civil Code but it should be gradual and with the consent of the people concerned.” He therefore recommended that the decision regarding the application of a uniform civil code should not be entrenched in the constitution but should rather be left to Parliament, which could obtain the consent of the communities through their representatives.

Eventually, the framers agreed with the draftsmen and decided to include the reference to a uniform civil code in the “Directive Principle of State Policy” as Article 44. It provides that “the State shall endeavor to secure for the citizens a Uniform Civil Code throughout the territory of India.” Dr Ambedkar, the chairman of the Drafting Committee, explained that the provision merely required the state to “endeavor to secure a civil code for the citizens of the country. It does not say that after the Code is framed the state shall enforce it upon all citizens.” Ambedkar stressed that Parliament would retain the authority to implement this policy recommendation, and that it was “perfectly possible” that it would decide that “in the initial stage the application of the Code may be purely voluntary.”

Present day

Many critics see the UCC debate, in the Constituent Assembly, as a missed opportunity to provide a clear and unambiguous definition of India’s identity as a Hindu or a secular nation. But the Assembly’s decision regarding Uniform Civil Code may also be seen as a deliberate decision to defer controversial choices between rival sets of beliefs and commitments. The assembly sought to assuage the fears of minority groups under conditions of deep mistrust between religious communities. The Assembly’s decision also represents the drafter’s acknowledgment in the moderate pace by which Indian national unity would emerge. The Assembly recognized the limitations of constitutional provisions in the face of the complicated societal reality which the constitution is expected to reflect. For this reason, it preferred to follow an incrementalist rather than revolutionary constitutional approach. The Assembly transferred the decision regarding the secular identity of the state from the legal back to the political arena, leaving the decision on whether and how to implement its recommendation to future parliamentarians.

The Supreme Court first directed the Parliament to frame a UCC in the year 1985 in the case of Mohammad Ahmed Khan v. Shah Bano Begum, popularly known as the Shah Bano case. In this case, a penurious Muslim woman claimed for maintenance from her husband under Section 125 of the Code of Criminal Procedure after she was given triple talaq from him. The Supreme Court held that the Muslim woman have a right to get maintenance from her husband under Section 125. The Court also held that Article 44 of the Constitution has remained a dead letter. The then Chief Justice of India Y. V. Chandrachud observed and quoted: A common civil code will help the cause of national integration by removing disparate loyalties to law which have conflicting ideologies. After this decision, nationwide discussions, meetings, and agitation were held.

The then Rajiv Gandhi led Government overturned the Shah Bano case decision by way of Muslim Women (Right to Protection on Divorce) Act, 1986 which curtailed the right of a Muslim woman for maintenance under Section 125 of the Code of Criminal Procedure. The explanation given for implementing this Act was that the Supreme Court had merely made an observation for enacting the UCC, not binding on the government or the Parliament and that there should be no interference with the personal laws unless the demand comes from within.

The second instance in which the Supreme Court again directed the government of Article 44 was in the case of Sarla Mudgal v. Union of India. In this case, the question was whether a Hindu husband, married under the Hindu law, by embracing Islam, can solemnize second marriage The Court held that a Hindu marriage solemnized under the Hindu law can only be dissolved on any of the grounds specified under the Hindu Marriage Act, 1955. Conversion to Islam and Marrying again would not, by itself, dissolve the Hindu marriage under the Act. And, thus, a second marriage solemnized after converting to Islam would be an offence under Section 494 of the Indian Penal Code.

Justice Kuldip Singh also opined that Article 44 had to be retrieved from the cold storage where it has been lying since 1949. The Hon’ble Justice referred to the codification of the Hindu personal law and held, where more than 80 percent of the citizens have already been brought under the codified personal law there is no justification whatsoever to keep in abeyance, any more, the introduction of the ‘Uniform Civil Code’ for all the citizens in the territory of India. The Supreme Court’s latest reminder to the government of its Constitutional obligations to enact a UCC came in July 2003 when a Christian priest knocked the doors of the Court challenging the Constitutional validity of Section 118 of the Indian Succession Act. The priest from Kerala, John Vallamatton filed a writ petition in the year 1997 stating that Section 118 of the said Act was discriminatory against the Christians as it imposed unreasonable restrictions on their donation of property for the religious or charitable purpose by will. The bench is composed of Chief Justice of India V.N. Khare, Justice S.B. Sinha and Justice A.R. Lakshmanan struck down the Section declaring it to be unconstitutional. Chief Justice Khare stated that, we would like to State that Article 44 provides that the State shall endeavour to secure for all citizens a uniform civil code throughout the territory of India It is a matter of great regret that Article 44 of the Constitution has not been given effect to. Parliament is still to step in for framing a common civil code in the country. A common civil code will help the cause of national integration by removing the contradictions based on ideologies.

Conclusion

Thus, as seen above, the apex court has on several instances directed the government to realize the directive principle enshrined in our Constitution, and the urgency to do so can be inferred from the same. Seven decades after the Constituent Assembly, the questions raised in the debates have not withered away. The Constitution makers deferred some questions to the wisdom of a future day, when a consensus could emerge. I leave it to you to judge whether we have indeed ceased to be a divided society. You are needed to be certain that a consensus has indeed emerged, that would validate a common civil code, which would be welcomed by all. Any forcible imposition, is more likely to exacerbate those fissures, that our constitution makers have so deftly, sewn together. Making mandatory, what has hitherto been merely obligatory, may seem to be the path of virtue, but is often the cause of many schisms.

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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The line between right to privacy and freedom of speech in the digital media

By

Sneha Mahawar

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November 4, 2021

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right to privacy — Image Source: https://bit.ly/2KMWUgo

This article has been written by Sneha Jaiswal, currently pursuing BA LLB (Hons.) from Christ (Deemed to be University), Delhi NCR. The notions of the Right to Privacy and Freedom of Speech and Expression are discussed in this article. It also seeks to draw a line between the two notions by emphasizing the necessity of balance.

Table of Contents

Introduction

Surveillance over private information or data by any individual, government, or other entity is an infringement as well as a breach of the fundamental Right to Privacy. The government, for instance, deploys tools to monitor and restrict anti-government websites. Security services listen in on activists’ phones and examine their communications. States reportedly complained about subversive content on various platforms like Facebook’s wall, as a result of which the company took it down. User data, including IP addresses, location data, and communications logs, is sent up to law enforcement authorities by the search engine. The government monitors phone calls and internet users in bulk.

Each of these activities jeopardizes an individual’s ability to express oneself as well as their right to private life and communications. In this sense, privacy and freedom of speech are two sides of the same coin, each one is necessary for the other’s enjoyment. To establish and communicate one’s political, religious, or ethical ideas freely, one needs an independent and private place free from government, private sector, or other citizens’ intrusion. Infringements on the right to privacy, such as physical or online surveillance, monitoring of communications or activities, and government intervention into personal, family, or home matters, restrict an individual from enjoying their freedom of expression.

The article serves as a timely reminder of the significant ramifications of surveillance for civil rights, especially considering the frequency with which governments spy on journalists, hack into emails, or demand user data from social media platforms. This broad surveillance is much more than merely acquiring data on citizens. It’s also about regulating our behavior and words, as well as concealing ideas and thoughts.

The line between public and private thoughts and expression has blurred as a result of technological advancements; courts throughout the world are grappling with how to classify social media thoughts and blogs, as well as how to look upon data like location, IP addresses, and cookies. Today, more than ever, privacy and freedom of speech are tightly linked; a violation of one may be both the cause and the result of a violation of the other.

An unbreakable bond between the Right to Privacy and Freedom of Expression in the digital age

In the digital era, freedom of expression and privacy are mutually reinforcing rights. Both are necessary foundations for free and democratic societies, as well as one of the most basic prerequisites for their growth and self-fulfillment. Freedom of expression and opinion must be recognized and maintained in order for democracy, accountability, and good government to prosper. The Right to Privacy is also a significant shield against governmental and corporate authority in the modern-day.

While freedom of expression is essential for diverse cultural expression, creativity, and innovation, as well as the development of one’s personality through self-expression, the right to privacy is equally important for ensuring the individuals’ autonomy, facilitating the development of their sense of self, and enabling them to form relationships with others. In order to practice true freedom of speech, particularly online, privacy is also required. Individuals who lack privacy are unable to think and talk freely, as well as develop their voices.

Individuals would be unable to build their sense of independence without freedom of expression. Respect and preservation of human dignity, as well as people’s capacity to live freely and interact with one another, are at the heart of the protection of fundamental rights. Simultaneously, one person’s right to free expression may infringe on another’s right to privacy, and vice versa. Digital technologies heighten this tension. While digital technologies have considerably expanded the possibility for abuses of the right to privacy on a scale historically unprecedented, they have also greatly enhanced the opportunity for freedom of speech and information sharing.

Personal information may be gathered and made available across borders on an unprecedented scale and at a low expense for both corporations and authorities, digital technologies pose major challenges to the enforcement of the right to privacy and associated rights. Simultaneously, the application of data protection laws and other measures to preserve the Right to Privacy might have an excessive impact on legitimate speech.

The rights to freedom of expression and privacy are essential foundations of an open and democratic society, as well as basic conditions for its progress and enjoyment of other human rights and fundamental freedoms; recognizing that the protection of the Right to Privacy is a necessary precondition for the meaningful exercise of the right to freedom of expression.

Conflict between the Right to Privacy and Freedom of Speech and Expression

The Right to Privacy and Freedom of Expression are quite often interrelated rights; however, they might come into conflict in certain circumstances, such as when privacy claims are used without justification to prevent the dissemination of information about individuals in order to limit reporting on matters of public interest and to avoid public scrutiny, or deliberately mislead others. At the same time, acknowledging that the unwarranted revelation of private information may impinge severely on the Right to Privacy, particularly of individuals in vulnerable situations.

In order to promote a transparent framework for the protection of both freedom of expression and privacy rights wherever they conflict particularly in online space, one must take into consideration the relevant provisions of the Universal Declaration of Human Rights (UDHR), the International Covenant on Civil and Political Rights (ICCPR), the African Charter on Human and Peoples’ Rights, and the American Convention on Human and P eoples’ Rights; the European Convention on Human Rights and the EU Charter of Fundamental Rights and Freedom.

The Internet is a global resource that should be managed in the public interest. Digital technologies have greatly enhanced freedom of expression and access to information while also posing significant challenges to the protection of individuals’ right to privacy and personal data. There are various issues regarding the serious risks posed to the right to privacy of an individual and their personal data when enormous data is released for societal benefits.

Importance of data protection concerning the Right to Privacy

Individuals must be involved in decisions about their data, and states and companies collecting and recording personal data must be transparent about the data they hold, follow fair and lawful processes for the collection, use, retention, and security of that data, and ensure that personal data collected for one purpose is not used for another. The data protection legislation may be misused in order to prevent, halt, or limit the lawful public conveyance of personal data at the expense of personal data access and the greater public interest.

Freedom of Speech in India

In India, freedom of expression is not unlimited. While our Constitution guarantees freedom of speech and expression, it also imposes “reasonable restrictions” on this fundamental human right. Before 2015, the legislation divided online and offline expression into two categories. Anyone who uploaded anything that was extremely offensive, inconvenient, harmful, menacing, or insulting in nature may be imprisoned for up to three years under Section 66A of India’s Information Technology Act, 2000. In a historic decision in Shreya Singhal vs Union of India (2015), the Supreme Court of India knocked down this draconian clause for violating the constitutionally given right to free speech and expression.

In this case, the Supreme Court absolved content hosting platforms such as search engines and social media websites from constantly monitoring their platforms for illegal content, enhancing the existing safe-harbor protection or legal protection given to internet companies for content posted by their users. “Only authorized government authorities and the judiciary might lawfully request that internet companies remove information”, according to the Court. This was a watershed moment in India’s online free-speech legislation, as content hosting platforms are the gatekeepers of digital expression. The right to freedom of expression refers to the ability to express oneself without interference, and it is unaffected by any exceptions or restrictions.

Written and spoken communications, the media, public protest, broadcasting, creative works, and commercial advertising are all protected under the Right to Freedom of Speech. There is no such thing as an absolute right. It comes with unique duties and may be restricted for a variety of reasons. Restrictions might be imposed on access to particular websites or the promotion of violence.

Can the right to freedom of opinion and expression be limited

Media is used to communicate sentiments, ideas, and perspectives; on the other hand, it is also used to create a foundation of opinions on various concepts such as regional, national, and worldwide principles. As a result, millions of people’s thinking abilities are influenced by the media. Press freedom is seen as a cornerstone of democracy. In today’s India, there are four pillars. After ensuring Article 19 (1) (a) of the Constitution, which protects the right to freedom of expression, the fourth pillar, the media, was formed. The role played by the media is crucial; it works as a watchdog. It aims to bring to light all of society’s flaws by raising awareness with the goal of correcting them. The press is, after all, a source of information for individuals. “The press is for them, the only window which opens upon the world, the sole means of escape through the prison whose walls are private interests, personal ties, and domestic concerns.”- (Justice George). It is, therefore, in the interest of the people to ensure the freedom of the press for it is the best guarantee of their freedom.

However, with the freedom to press comes the right to privacy, which may be infringed upon. With the media’s growing roles and duties in daily life, it is more important than ever for the media to understand its limits. The media has a responsibility to uphold the dignity of persons by respecting the privacy of others. Article 21 of the Indian Constitution guarantees the “right to privacy” of individuals. Despite India having freedom of speech and expression, it is subject to reasonable restrictions under Article 19(2) of the Constitution. As a result, freedom of speech and expression is limited. The limitations must be followed in order to preserve integrity.

Right to Privacy in India

It became a fundamental right, people’s Right to Privacy was inherent in their right to life and personal liberty under Article 21. The Right to Privacy entails the ability to be left alone. It might be argued that privacy and freedom of speech are two sides of the same coin, one of which is required to enjoy the other. This is because an individual’s right to freely create and express political, religious, or other opinions necessitates privacy and a secure private space free from government and other intrusions.

Invasion of one’s Right to Privacy, such as phone tapping, electronic or physical monitoring, and interference into one’s personal space, prevent one from exercising their Right to Freedom of Speech. Any country that is serious about promoting the right to free expression must also take the right to privacy seriously.

Complete State control and dominance are hindered by the fundamental wall of privacy. The social compact will be shattered without it, and people will be unable to realize their democratic rights to participate, develop, grow, and think. Citizens who are unable to create or transmit private ideas without the intrusion of the state will be stripped of their human dignity as well as their Right to Privacy. The capacity to freely think and communicate ideas is fundamental to who we are as people.

Article 19(1)(a) of the Indian Constitution guarantees freedom of expression. Article 19(2) contains restrictions on the exercise of freedom of expression that the state can enforce in the interests of the state’s sovereignty and integrity, security, friendly relations with foreign states, public order, decency or morality, or in relation to contempt of court, defamation, or incitement to an offense. When it comes to the Right to Privacy and the Right to Freedom of Speech, there has always been a basic concern regarding the relative importance of privacy and expression. Even when a person’s freedom to express ideas interferes with another’s Right to Privacy, an open democracy honors that right.

Reasonable restrictions – Article 19(2)

Fundamental rights are never bestowed in absolution in any democratic country where they exist. Every fundamental right must be limited in a fairway. The Right to Privacy is not absolute, and it can be legitimately limited for the purposes of preventing crime, disturbance, or protecting one’s health or morality, as well as the preservation of others’ rights and freedoms. With the rise of terrorism and associated activities, every government is doing everything it can to combat the problem. The limits on clause 1 of Article 19 are stated in clauses 2 to 6 of the same Article of the Indian Constitution. The limitations of Article 19(1)(a) are discussed in detail in Article 19(2). The First and Sixteenth Amendments to the Constitution, which were ratified in 1951 and 1963, respectively, modified Clause 2 to allow the government to impose limits on Freedom of Speech and Expression.

Grounds on which Freedom of Speech and Expression & Right to Privacy can be restricted

The Indian Constitution’s clause (2) of Article 19 restricts free expression under the following headings: state security, friendly relations with a foreign state, public order, decency and morality, contempt of court, defamation, incitement to a crime, and India’s sovereignty and integrity.

Privacy is a relatively new notion in the legal system that is continuously evolving. It is difficult to define privacy, particularly in legal terms. The Right to Privacy is a critical component in safeguarding people and the foundations of individuality. The Right to Privacy is not explicitly mentioned in the Indian Constitution. However, Article 21 explains the scope of the Right to Privacy which says that “No person shall be deprived of his life or personal liberty except according to the procedure established by law.”

The judiciary interprets the Article widely and considers it to encompass the Right to Privacy. The case Kharak Singh v. State of Uttar Pradesh and Others (1962) marked the beginning of the Right to Privacy. The Supreme Court recognized “The Right to be left alone” in the case of Govind v. State of Madhya Pradesh (1975) and, for the first time, the Court noted that the Right to Privacy is not clearly stated in the Indian Constitution. Following the cases, the Court expanded the scope of the Right to Privacy to encompass the right to life and personal liberty. As a result, under the Indian Constitution, the Right to Privacy is a fundamental right that must be respected in all circumstances and can only be restricted if there is a compelling conflicting interest that outweighs it.

Role of the media

At this time, we can see how the media has become unpredictable as a result of over-commercialization, and how it has gone past the bounds of its freedoms by infringing on people’s Right to Privacy. The Right to Privacy has a solid legal foundation; it is a fundamental, inherent, and unalienable right. In the case of Labour Liberation Front v. State of Andhra Pradesh (2004), Andhra Pradesh Court expresses a similar point of view- “Once an event involving a notable person or institution occurs, the media goes into overdrive, leaving very little time for the prosecution or the courts to investigate the matter”.

The role of the media has recently grown to hazardous dimensions, to the point where it is invading people’s privacy. In the world of journalism, the abuse of technical developments and unhealthy rivalry led to the obliteration of standards and obligations to the noble profession. The Right to Free Speech and Expression, which is the cornerstone of journalism, is often abused. It must not be forgotten that only those who exercise restraint may successfully utilize their rights and freedoms. Freedom of the press was taken into consideration with regard to the Right to Privacy of an individual, according to a judgment in the case of R. Rajagopal and Others v. State of Tamil Nadu and Others (1994). There is no express provision in the Indian Constitution regarding the Right to Privacy. It is a considered right under Article 21 of the Constitution. The Right to Privacy, which is intertwined with two other basic rights, must be considered in the context of Articles 21 and 19.

In the case of Rajat Sharma & Anr vs Ashok Venkatramani & Anr (2019), in the pretext of presenting the anchorless news channel Zee Hindustan, the advertising takes aim at famed TV journalist Rajat Sharma. It alludes to Rajat Sharma, India TV’s chairman, and editor-in-chief, and implies that his popular long-running show Aap Ki Adalat would no longer be watched. Mr. Sharma filed a permanent injunction lawsuit against Zee Media as a result of this advertising. The Court upheld well-known principles of celebrity rights and the right to publicity. The court found that the aforementioned advertisement was unlawful on its sight and that the balance of convenience favored the plaintiff. The court restrained Zee Media to stop publishing an advertisement in the name of Rajat Sharma. This case also shows the importance of balance between the Right to Privacy and Freedom of Speech and Expression.

Considering the fact that the press plays a significant role in public welfare, it must work properly. The problem is that the Right to Privacy is not a positive right; it only exists when it is violated. Judgments have been the only way for the law to grow. When it comes to public security and safety, the Right to Privacy is frequently infringed. In our lives, the media infringes on our Right to Privacy. There is a contradiction between media activity and the Right to Privacy.

To summarise the basis, it declares a conflict between the public’s right to know and their Right to Privacy invasion. With power comes responsibility, and the rights given under Article 19 (1) (a) of the Constitution come with a responsibility not to break the law. As a result, human dignity and privacy must be maintained when enjoying media freedom. The existing image of the Right to Privacy is hazy and needs to be examined. A credible press sends information into the public realm that must be verified, but all that is required is to demand privacy and legal standards, which appear to exist nowhere in reality.

Implications of crossing a line between the Right to Privacy and Freedom of Speech and Expression

The freedom to express oneself cannot be truly appreciated when the most private and hidden aspects of one’s life are exposed to the potential of intrusion. Instead, people begin to be concerned that their thoughts, words, and interactions will be intercepted and analyzed. Individuals’ capacity to freely transmit and receive information and knowledge is hampered by restrictions on the content they may access on the internet. Individuals may be de facto or in fact, excluded from key social spheres if they get identified themselves online or in a condition of using internet or phone services that may limit their rights to expression and information, and that can also aggravate social disparities. Infringements on one’s privacy, therefore, restrict free expression, leading people to filter their messages and limiting their capacity and desire to join and interact.

Infringements on one’s right to privacy and one’s right to free expression have a cascading effect on one’s right to freedom of association and assembly. The monitoring of communications allows the government to learn about and examine relationships and exchanges that people would otherwise prefer to keep private. Surveillance may have an influence on people’s capacity to freely express their ideas, it may also have an impact on who they may communicate those opinions to. Individuals’ ability to organize is also limited; where previously membership lists were sometimes required to intimidate individuals into joining organizations, it is now possible to discern their interests from online activities, location data from their mobile and related internet services, or the use of scanning technologies to identify all people within a given physical space.

Certain groups are more susceptible to abuses of their right to free expression, privacy, and information than others. Journalists rely on privacy protection to receive and seek information from confidential sources, such as whistleblowers since it allows them to operate in an environment free of authority. Source protection has long been recognized as an essential component of the Right to Freedom of Speech. The presumption of source protection cannot be maintained in an environment where monitoring is prevalent and unfettered by due process or judicial scrutiny. Without thorough and public documentation of its use, as well as established checks and balances to avoid its misuse, even a restricted, non-transparent, unrecorded presidential use of surveillance may have a chilling impact.

Remedy for protection of privacy

As a signatory to the United Nations, India has incorporated nearly every principle into its legal structure. In Article 12 of the Universal Declaration of Human Rights (UDHR), privacy is declared to be the most fundamental requirement. However, Freedom of Speech and Expression was only a portion of Article 19, and it came with limitations under Article 19(2). Despite the fact that libel and slander have no place as limitations, the press has the freedom to use their power in an immoral manner.

The right to propagate, including the freedom to circulate, was recognized in the case of Romesh Thappar v. The State of Madras (1950), where the Court declared that the press had the right to spread. The Right to Press arose from the aforementioned factors. However, because the Right to Privacy does not have an autonomous standing in our Constitution, it is placed alongside the Right to Freedom of the Press. This might be because the Right to Privacy is not clearly stated in the Constitution, and enshrining its breadth in Article 21 does not give it justice. Article 21 can function as an interim measure however in order to offer a remedy, protection of the right to privacy is required, and the inclusion of slander i.e. false or defamatory verbal or oral statement and libel i.e. false and defamatory written or published statements as restrictions may broaden the reach of the UDHR’s principles.

Role of Indian judiciary in check and balance

India prohibits the infringement of the Right to Privacy through its various legislations. The instrument is the Indian Penal Code (1860), the Code of Criminal Procedure (1973), and other laws that restrict freedom of expression in India. The government can declare some publications “forfeited” under Section 95 of the Code of Criminal Procedure. The Right to Privacy is a fundamental component of the Right to Life, according to the Court in R.Rajagopal v. State of Tamil Nadu (1994) and People’s Union for Civil Liberties v. Union of India (1996).

In the case of Titan Industries Ltd. vs M/S Ramkumar Jewellelrs (2012), the Delhi High Court said that, when a renowned person’s identity is exploited in advertising without their consent, the objection is not that no one should commercialize their identity, but that the famous person should have the right to decide when, and how their identity is utilized. The right to publicity includes the ability to govern the commercial use of one’s identity. The principles laid down here were reaffirmed in the case of Rajat Sharma & Anr vs Ashok Venkatramani & Anr (2019).

The need for privacy is a natural instinct for all humans. In reality, establishing separate boundaries with near-perfect isolation is a fundamental demand of a person. In its broadest sense, privacy refers to nondisclosure of information, sexual affairs, corporate secrets, and the lack of observation by others.

Before coming to the end, it is very essential to illuminate focal shine towards the background of Right to Privacy with regard to today’s perspective in brief. Previously, the Right to Privacy was not recognized as a fundamental right in the Indian Constitution. Since neither the Constitution nor any other legislation in our nation specified the notion of privacy, it is only the responsibility of the judiciary in our country to recognize it. In reality, this notion is still in its very early stages of development. However, if we look at numerous legislations in our nation to see where the notion of privacy stands, we will discover numerous measures that have been established to preserve privacy. Not only that, but Dharma Shashtraas’ ancient law also acknowledged the notion of privacy. In fact, the law of privacy has been well-explained in historical legal texts.

In the Arthashastra, Kautilya lays forth a step-by-step method for ensuring the Right to Privacy while ministers are consulted. However, the concept of “private” has never been defined in either ancient or modern law. It gives great joy that our judiciary’s developing trend of new constitutionalism validates the necessity for legislation that protects one’s privacy and dignity. Furthermore, the Right to Privacy is recognized and protected in Article 12 of the Universal Declaration of Human Rights, Article 17 of the International Covenant on Civil and Political Rights, and Article 8 of the European Convention on Human Rights.

There are now situations where businesses monitor all of their workers’ emails. It is a flagrant violation of the Right to Privacy. Furthermore, many cell phone providers launched a tracking system in which the user’s phone displays the name of the location everywhere he or she goes. This gives the impression of being followed or stalked. It’s a classic instance of arbitrary limitation of one’s freedom of movement. In any case, the Right to Privacy will inevitably have to be developed on a case-by-case basis. Even if the Right to Personal Liberty, the ability to freely roam within India, and the freedom of expression form an independent right to privacy, it is an emanation from them that may be described as a fundamental right, but the right is not absolute.

Conclusion

Both the rights are meant to assist individuals in holding government officials responsible and transparent. The majority of problems may be solved by enacting explicit definitions in law, guidelines, procedures, and supervision systems. Due diligence would verify that the definitions of personal information under the access to information and data protection regulations are consistent. To balance these rights and guarantee that data protection and the right to freedom function in combination, appropriate institutional structures, and public interest criteria should be established. The public authorities should interact with applicants in a courteous manner, with the public interest at the forefront.

References

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Roe v. Wade : a case analysis on providing adequate constitutional protection

By

Sneha Mahawar

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November 4, 2021

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This article is written by Surbhi Jindal, a law student at Dr. B.R. Ambedkar National Law University, Sonipat, Haryana. The article attempts to discuss the case of Roe v. Wade, in light of providing adequate protection of constitutional rights exhaustively.

Introduction

Since ancient times the condition of women has remained filthy. She has been treated as property, leaving her devoid of her fundamental rights. And today, even in a democracy, if she had been given rights, whole-hearted attempts have been made to render her devoid of rights.

A recent example is Texas abortion laws that have led to the public getting enraged. The present law is in clear violation of the Supreme Court’s 1973 case of Roe v. Wade. Through this article, we shall analyze the case of 1973 and see how the present law violates it.

Case analysis of Roe v. Wade

Case name	Roe v. Wade
Case year	1973
Case citation	410 U.S. 113
Jurisdiction	USA
Bench strength	9
Number of opinions	3
Case matter	Right to privacy and abortion, bodily integrity, and human dignity

Facts of the case

The Appellant in the present case was Norma McCorvey (named Jane Roe in court documents). Jane Roe was a pregnant woman who wished to obtain an abortion. She approached the Texas District Court on behalf of her and other related women in 1969 to prevent the enforcement of Texas laws that criminalize abortion except that were performed for saving a woman’s life.
The case was filed under the first, fourth, fifth, ninth, and fourteenth Amendments.
At that time, abortion could legally be undertaken in Texas only when it was medically advised by the doctors, to save the life of the pregnant woman. On this basis, Roe was not permitted to have an abortion as there was no threat to her life. She pleaded it as an unwanted invasion of her right to privacy granted under the fourteenth amendment of the U.S. Constitution.
Previously, she had given birth to two children, but they were given up for adoption. She wanted to terminate her third pregnancy. There were two options with Roe, either to travel to the places where it was safe and legal to abort or to pay hefty fees to doctors for performing the abortion secretly.
Since Roe was an impoverished woman with a weak financial status, either of the options was not feasible. She was even unsuccessful in getting an illegal abortion, and after that, she was referred to Texas Attorneys Sarah Weddington and Linda Coffee. These two attorneys were interested in challenging the Texas abortion laws.
Therefore she approached the Court demanding the right to abort her third child. In 1970, the District Court of Texas ruled that the abortion laws were illegal, and they inherently violated the constitutional right to privacy under the ninth and fourteenth amendment. It further ruled that the Statute was vague, unconstitutional, and infringed the Appellant’s Ninth Amendment rights.
Based on it, the Court granted declaratory relief but refused to grant an injunction. Henry Wade, the district attorney of Dallas County, said that he would continue to prosecute the doctors who would continue performing abortions.
The Appellant appealed in the U.S. Supreme Court against Henry Wade, seeking injunction enforcement and demanding the abolition of unconstitutional Texas laws related to the right to abortion. In the meantime, Roe gave birth to her third child and put it up for adoption.

Issues involved

The issue involved before the U.S. Supreme Court are described here as follows:

Whether the U.S. Constitution recognizes women’s right to privacy under the fourteenth amendment’s due process clause countries have the right to abort come under the ambit of the right to privacy?
Whether the right to abortion is an absolute right granted to women, and to what extent is the State’s interference permissible?

Contentions raised by parties

Various contentions were raised by both parties in the case of Roe v. Wade. However, the main arguments presented are summarised here as below:

Contentions by Texas

The first contention raised by Texas was that it had the right to reserve matters about health, protection of parental life, and maintaining medical standards.
It had the exclusive right to regulate the abortion of a woman because the 14th amendment protects the fetus.
Protecting parental life since conception is the State’s primary interest.

Contentions by Roe

Texas law unreasonably interferes with the individual’s right to liberty under the 14th amendment.
Texas law invades and infringes on women’s rights such as marital, familial, and sexual privacy guaranteed under the bill of rights.
The right to abortion is absolute, and women are entitled to end it as and whenever they choose to do so.

Judgment of the Court

The U.S. Supreme Court, while dealing with the issues involved, made a clear distinction between the arguments. It held that the women’s right to privacy was recognized under the due process clause of the fourteenth amendment. Though the due process clause doesn’t explicitly mention the right to privacy, the Hon’ble Supreme Court recognized the right by tracing the history before the case.

Before the advent of Roe’s case, the Supreme Court held that “in a Constitution for a free people, there can be no doubt that the meaning of ‘liberty’ must be broad indeed.”

Hence, keeping in mind all the aspects, the Court ruled that the right to privacy extends to the woman’s right to control her pregnancy. The right to abortion was a fundamental choice of women protected under the fourteenth amendment of the U.S. Constitution. The hon’ble Justices acknowledged that if a woman is forced to continue with an unwanted pregnancy, it poses a lot of risk to women’s physical and mental health.

The Court disagreed with the State’s argument that constitutional protection begins at the outset of conception. Instead, it said that the term ‘person’ is not defined anywhere in the U.S. Constitution. It only provides for the protection of born or naturalized persons.

After examining similar cases, the Court found that unborn children have never been recognized as ‘persons’ under the Constitution and hence are not entitled to protection under the law. To determine the status of an unborn child under the law as a person, different views were taken into account to discuss when life begins.

According to the Jewish faith, it is believed that life begins at birth, while according to the catholic faith, life begins at conception. Doctors are inclined towards the view that life begins somewhere before birth.

But the Court refused to incline towards the view of any particular faith. Instead, it said that “[W]e do not agree that, by adopting one theory of life, Texas may override the rights of the pregnant woman that are at stake.”

The Court refused to agree with the second issue on whether the women’s right to abortion is absolute. The Constitution doesn’t recognize the right to privacy as a fundamental right. The State has the adequate power to put regulations on the rights for the smooth functioning of the society.

The most significant impact of this judgment was that it created a framework for striking a balance between the interests of the State and women’s rights. The Court duly acknowledged that the rights of pregnant women might conflict with the State’s right to protect human life. Keeping in mind the interests of both parties, the Supreme Court divided the pregnancy into three 12-week trimesters.

Let us understand this in detail:

First trimester

In the first trimester of pregnancy, the State has no right to regulate abortion, except that the pregnancy procedure has to be performed by a licensed doctor, in a medically safe condition.

Second trimester

In the second trimester of pregnancy, the State has the right to regulate abortion if the regulations are reasonable, either directly or indirectly related to the health of a pregnant woman.

Third trimester

In the third trimester of pregnancy, the woman’s right to privacy falls behind the State’s right to protect human life. The State may prohibit abortions unless and until they are necessary to save the life or health of the woman.

Related cases

Roe v. Wade was not the last case when the Supreme Court held that women’s privacy rights are tied to abortion. Indeed, there were cases in the later years where the Court recognized the right to privacy with the right to abortion. It created some modifications in the framework developed in Roe. Let us understand the significant changes.

Planned Parenthood v. Casey, 1992

The Supreme Court of the U.S., while deciding the case of Planned Parenthood v. Casey, 1992, acknowledged that women do have the right to abortion embedded in the right to privacy under the fourteenth amendment. But revisiting Roe’s case, they created modifications in the framework.

It said that the State should regulate abortions not based on the three 12-week trimester system. It instead created a standard based on ‘fetal viability’ to regulate abortions. Fetal viability is the fetus’s ability to survive outside the womb. The viability of a fetus is usually for around seven months, i.e., 28 weeks, but it can also be 24 weeks.

Whole Woman’s Health v. Hellerstedt, 2016

Whole Woman’s Health v. Hellerstedt, 2016 is another case where the Supreme Court evaluated the State’s power to regulate abortions. The history of the point is that in 2013, Texas passed a law that placed restrictions on the abortions centres in the State. One requirement was that abortion providers had to have to admit privileges not more than 30 miles away.

Admitting privileges meant that the doctor could accept patients to the hospital as if the doctor was an employee over there. Secondly, the doctor’s wish was to treat his patients without consent from the other doctor at another hospital.

The law enacted had such a significant impact that the abortion clinics in the district reduced from 42 to just 19. The case reached the Supreme Court, where the bench of 8 Justices was present to hear the case. In a 5-3 decision by Supreme Court, it was held that States are not allowed to place restrictions on abortion clinics because it creates an undue burden for women seeking an abortion.

June Medical Services v. Gee, 2020

This particular case relied on the Whole Woman’s Health case. In this case, also, it was challenged that admitting privileges for the abortion providers is unconstitutional. Chief Justice John Roberts, considered a conservative justice, joined the four liberal justices to strike down the Louisiana Statute.

The majority in the case observed that abortion was one of the safest medical procedures, and putting an outright ban on it would lead to nothing but infringement of women’s right to privacy and would cause more trouble to them.

Public reactions to the case

The case of Roe v. Wade was one of the significant judgments in the history of the U.S. Some of them viewed it as a case of judicial activism, meaning that the judges’ decision was based on their own opinion rather than on the prevailing laws. Those who supported it believed that this case was a classic example of preserving women’s rights and freedom.

On the other hand, the opponents believed that the U.S. Constitution does not explicitly state abortion rights. Hence it is only the State who should regulate the matters related to it. As we looked earlier, catholic people believe that life begins at conception, similar to the view of few people. To advance this argument, they assert that since life begins at conception, the unborn’s rights should be protected.

While writing the judgment, Justice Harry Blackmun said that the issue of abortion is highly debatable because different people have different opinions across the world. Besides this, it also depends upon when an individual’s life begins: at conception, or after being born.

While dealing with the issue, the Supreme Court jotted a few lines that summed up why the issue of abortion does not see the exact contours of ending discussion.

“One’s philosophy, one’s experiences, one’s exposure to the raw edges of human existence, one’s religious training, one’s attitudes toward life and family and their values, and the moral standards one establishes and seeks to observe, are all likely to influence and to The state one’s thinking and conclusions about abortion.”

Why is the case significant in the U.S. history

Interestingly, many people believe that Roe’s case legalized abortion. However, that’s not the case. Roe’s case created a framework for striking a balance between the rights of women and the State. It led to the determination of the State’s limit to interfere in the women’s right to abortion under the right to privacy.

This decision of the Supreme Court has remained one of the significant judgments that led to the recognition of women’s right to abort the child. Because before Roe’s case, abortion was not legal until it was done to save the life and health of women. But after this judgment, something was at least done to regulate the abortion sector in Texas so that it doesn’t violate any party’s right.

A few opponents of abortion assert that strict abortion rules should be brought in place. However, they have not been able to ban abortion outright but have some restrictions limiting conducting abortions. This issue is the most debatable one not only in the U.S. but across the world.

But undoubtedly, the case of Roe v. Wade has left the carbon footprints of recognizing abortion as a legal activity under the Constitution.

What is the present status of abortion laws

Texas has brought a new abortion law, also known as Senate Bill 8, that nearly bans abortions. The law prohibits abortion mainly after six weeks of pregnancy, with no exceptions to the cases of pregnancy resulting from rape and incest.

Interestingly, the law has a very different provision. The citizens will enforce the law and not the State. This means that a citizen can sue a clinic if they are found violating the law. If such citizen is successful in conviction, they will be awarded $10,000 per illegal abortion.

Another interesting thing is that the law does not sue patients but only the doctors, staff, and even the patient’s Uber driver. The persons have the potential to become defendants in such a case.

The law violates Roe v. Wade, which upheld the women’s right to abortion as a constitutional right. The other precedents of Texas make the present law unconstitutional. Biden’s administration is to ask the Supreme Court to stop the enforcement of the law. President Joe Biden is highly determined to fight for America’s constitutional rights.

Conclusion

Women have the right to make choices regarding whether she wants to have a child or not. Of course, there must be some restrictions on women’s rights as well. Whether life begins at conception or after birth is a question that may never be answered due to prevailing beliefs in society. But ultimately, between the pendulum of this question and ideas, the child suffers the most.

The State has the right to protect the health of its citizens. It has the right to make decisions on matters about the health and life of citizens. But one must understand that they should be reasonable. The recent law of Texas on abortion is an example of the same. Why should a woman compromise her rights? She, too, has the right to do whatever she wants. This law inherently bans abortions nearly after six weeks.

What if, by that time, women don’t even know about their pregnancy? She will not have a chance to abort, and hence her right is inherently violated by the same. Also, if a woman is raped or incested, it is not her mistake to get pregnant. Why should she not be given the choice of aborting? She must be kept in exceptions, but this is not with the present law enforced in Texas.

This is a complete injustice to the women and their rights under the Constitution of the U.S. The administration must take adequate steps to protect the constitutional rights of privacy since the fundamental and constitutional rights of a person act as a tool for the nation’s growth.

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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Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

Vigil mechanism and whistle-blower policy in India

By

Diganth Raj Sehgal

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November 4, 2021

0

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

Introduction

Brief background

The term vigil means the purposeful surveillance to guard and observe. So, the purpose of vigil mechanism policy works on the meaning of vigil.

Every company should adhere to a code of conduct and some commitment while operating its business. Some essential commitments such as maintaining the higher standards of moral, legal, and ethical conduct in its business operation. In order to maintain these standards, usually, companies attempt to protect their employees, directors and members against any victimization or harassment at the workplace. Every company make sure that not a single employee, member of the company suffers from any misconduct, unfair treatment or discrimination. And thus, companies encourage them to speak out their concern without any hesitation or fear of any unfair treatment or whatsoever. Therefore, companies are required to comply with certain rules and regulations on the moral, ethical, and legal grounds.

Types of whistle-blowers

There are eight types of whistleblowing which are mentioned below-

Internal: When a whistle-blower reveals wrongdoings to higher-ranking authorities in the firm. Disloyalty, improper conduct, indiscipline, insubordination, and disobedience are common topics for internal whistleblowing.
External: whistle-blowing occurs when wrongdoings are disclosed to those outside the organisation, such as the media, public interest groups, or law enforcement agencies.
Alumni: When a former employee of the organisation acts as a whistle-blower, it is referred to as Alumni whistleblowing.
Open Whistle Blowing: This type of whistleblowing occurs when the whistle-blower’s identity is revealed.
Personal: When an organization’s wrongdoings solely affect one person, whistleblowing is referred to as personal whistleblowing.
Impersonal: When the wrongdoing is done with the intent of harming others, it is referred to as impersonal whistle-blowing.
Government: When information is made public about wrongdoings or unethical activities by government officials.
Corporate: When a disclosure regarding wrongdoings in a business corporation is made, it is referred to as corporate whistle blowing.

Whistle-blowing policy : An overview

History of term “whistleblowing”

The idea of whistleblowing had been in the practice since long back. During the time of Kautilya, the idea similar to the whistleblowing had appeared. Although the term whistle-blowing is recent word added in the vocabulary but the phenomenon is not new one. The strategy of kautilya resembled with the vigil mechanism. The strategy of Kautilya states that- “Any witness who supplies data about extortion and on the off chance that he/she prevails with regards to demonstrating it, will get the reward of one-6th of the sum being referred to; or if the source is an administration worker, he/she might get one-twelfth of the sum for a similar demonstration.”

Whistleblowing had also been discussed in ancient Greece for generations. In his speech against Leokratis, Lykourgos, the Athenian orator, said: “Neither laws nor judges can bring any results until someone condemns the lawbreakers.”

The word whistle-blowing was coined by Ralph Nadar, a civil activist in the 1970’s. Officially, Whistleblowing is defined as “making a public-interest disclosure.” It usually occurs when an employee reports to a public entity, usually the police or a regulatory commission, that their employer is engaging in illegal behaviour. A whistleblower discloses information about workplace malpractice that he believes violates the law or jeopardizes the well-being of others, and speaks out in order to expose corruption or threats to the public or the environment.

Brief discussion of Sarbanes-Oxley Act, 2002

The Sarbanes-Oxley Act of 2002 was enacted by the United States Congress on July 30, 2002, to enable investors protect themselves from misleading financial reporting by corporations.

This Act is also called as SOX Act of 2002 and corporate responsibility Act of 2002. This Act brought new strict reforms for existing securities regulations and imposed resilient penalties on lawbreakers.

The Act of Sarbanes-Oxley Act of 2002 came into existence after the financial scandals in the early 2000s. The companies include in the scandals were publicly traded companies such as Enron corporations, Tyco international plc, and WorldCom. As a result of these high-profile scams, many investors have lost faith in the reliability of company financial statements, and many have called for a rewrite of decades-old legal requirements. The name of the Act was derived from the two names- Sen. Paul S. Sarbanes and Rep. Michael G. Oxley

This act mandates to every listed companies in US to have whistle-blowing policy in place. The main objective of the Act was to protect the investors through improving the transparency, disclosure norms, and reliability of every information of the companies.

Similarly, The UK has also enacted the public interest disclosure Act, 1998 to prevent the companies’ employees from discriminating against the whistle-blowing employees.

Applicability of Sox Act in India

This Act is followed by Indian companies with two-folds.

First of all, Indian companies which are listed in US stock exchanges, are required to comply with the requirement of this Act.
Secondly, Section 404 of the Sox Act is also incorporated in the provision of corporate governance in India. And section 404 requires Management’s appraisal of the effectiveness of the internal control framework must be included in all annual financial reports.

Process of whistle-blowing

There is no procedure provided under Indian law for companies when faced with such situations. It is driven by the policy, where such policy exists. However, when a whistle-blower complaint is received, it is generally evaluated and investigated basis the nature of issues raised. In a general manner, companies follow the procedure which is explained below-

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Procedure

Concerns should be raised voiced as soon as they arise. Concerns can be expressed verbally, but they should better be expressed in writing or via email, together with any relevant background and history, as well as any witnesses.
The concern is immediately forwarded to the compliance officer.
After that, an investigation will be conducted. It is not advisable to conduct one’s own investigation because this may result in the destruction or contamination of evidence, as well as putting one’s own safety at danger. If the matter is serious and grave in nature, the investigation officer is appointed in that case.
Following the inquiry, the whistleblower will be informed of the findings and the next steps, which may include doing nothing or following the disciplinary procedure in its entirety. However, due to the necessity for confidentiality, one may not be given much information.
If the whistleblower believes that his/her complaint has not been effectively addressed or that wrongdoing is still occurring, he/she should contact an Executive Director, the Head of Internal Audit, or the Audit Committee Chair.

Steps followed

To create a policy and a monitoring system.
If applicable, publish the details of the vigil mechanism on its website and in the board’s report.
To appropriately protect persons who use the whistle-blowing mechanism from being victimized.
In the event of repeated frivolous allegations, the audit committee or the nominated director (as applicable) will be empowered to take appropriate action.

Some important points while complying with this policy

Whistleblowers are urged to sign their names to any disclosures they make. Concerns reported anonymously will be examined by the compliance officer at its discretion, considering the following factors:

The seriousness of the issues raised.
The concern’s trustworthiness.
The chance of attributable sources corroborating the accusation.

The compliance officer will regard all such disclosures as private and confidential. The identity of the person making the claim may be kept secret as long as it does not obstruct or obstruct any investigation. The investigation process, on the other hand, may expose the source of the information, and the person who made the disclosure may be obliged to submit a statement as part of the evidence.
Individuals who make malicious charges, i.e. ones that are untrue, may face formal action under this policy (such as disciplinary action for employees or volunteer status review process for volunteers).

Importance of whistle-blowing

Encourage employees to report any ethical or legal infractions they become aware of to an internal authority so that quick action can be taken to address the issue.
To reduce the risk of damage to the company that can occur when employees evade internal controls
To demonstrate to employees that the company is serious about following the rules of conduct.

Some cases of whistle-blowers in India

There are some cases of whistleblowing in India. But, due to the lack of appropriate legislation for the whistle-blowers, they were murdered.

Satyendra Dubey

Facts of the case-

The first Indian whistle-blowing case was seen in the NHAI project. The whistle-blower, Satyendra Dubey was 31 years old IIT Kanpur engineer graduate and IES officer, who was employed at the National Highway Authority of India (NHAI). While he was engaged in the “golden quadrilateral” national project and was given the charge of releasing funds for constructing the highway. The contract of construction was based on forged documents and the contracting firm, L&T had been sub-letting the contract to the local mafia with lacked and low technology. And everyone seemed to be engaged in “loot of public money”.

In the year 2002, Satyendra Dubey wrote a letter to the project director of NHAI and supervisor of contract but they overlooked it. Then, he wrote the same letter to PM and requesting anonymity while taking into account the threat and trouble he may face; in the second letter.

But, the PMO handed over those two letters to the ministry of highway and road transport without any investigation. More than 8 officials scanned and passed to NHAI. Unfortunately, NHAI did not respond to it and Satyendra Dubey was shot dead in the year 2003.

Aftermath-

Nearly 50,000 citizens filed petitions demanding to investigate the case. In 2004, the Supreme Court of India urged the Central government to put in place “administrative machinery for acting on allegations from whistleblowers till a legislation is enacted” in response to a petition filed following the infamous murder of an NHAI official.

In response, the government issued the ‘Public Interest Disclosure and Protection of Informers Resolution (PIDPIR)’ . The Central Vigilance Commission (CVC) was given the authority to act on allegations from whistleblowers as a result of this resolution. But the jurisdiction of this committee was limited only to the extent of central government employees, companies and authorities owned by the government.

ICICI Bank and Chanda Kochhar case

Recently, in the year 2012, the ICICI bank and the business dealings of Kochhar family had come under the regulatory glare of SEBI and other agencies after a report made by the whistleblower to the government agencies. The main issue was that Kochhar family had some quid pro quo in its dealings with the now-bankrupt Videocon group.

Facts of the case-

The CEO and Managing director, Chanda Kochhar was part of sanctioning loan to the Videocon group as well as recommending committee in the proposals made by Videocon. Finally, the group was granted a loan worth 1875 cr. And most of these loans were in complete violations of banking regulations and ICICI bank policies. Out of the loan of 1875 Crore, worth 64 Cr. Loan to kochhar firm was part of a quid pro quo deal.

The whistleblower-

The shareholder, Arvind Gupta was the whistleblower in this case and said- “although many companies that received loans from ICICI Bank went bankrupt, Ms Kochhar found a “new way” to profit from the situation. “As a shareholder, I felt that these are things people must know. So I informed everybody. I would like the government to look into foreign funding in Indian companies because Chanda Kochhar’s case is just the tip of the iceberg,”

Aftermath-

Furthermore, he filed an FIR against the Chanda Kochhar, who was alleged to commit the fraud. This was one of the most widely publicised complaints in the country, prompting multiple law enforcement agencies, including the Enforcement Directorate, the Central Bureau of Investigation, and income tax authorities, to initiate civil and criminal proceedings against the then-Chairman.Finally, in the year 2020, the Chanda Kochhar resigned from the post.

Sun pharma

Facts of the case

In another case, a whistleblower at a major pharmaceutical firm complained to the SEBI about possible financial irregularities at the firm. The claims were eventually found to be without merit by SEBI. However, the company’s price experienced significant swings as a result of the lawsuit. Whistleblower accusations have also plagued a number of other institutions, including private banks, financial institutions, auditing firms, and consulting firms. All of this is in the public domain, and it’s most likely just the tip of the iceberg.

Aftermath-

The Securities and Exchange Board of India said in a series of statements that Sun’s senior management, led by billionaire founder Dilip Shanghvi, will pay a total ₹2.36 crore ($323,886) “without admitting or denying the findings of fact and conclusions of law.” Shanghvi himself will pay ₹62 lakh.

Provisions of the whistleblowing/vigil mechanism in India

Legal reforms relating to whistleblowing

For public servants-

In 2001, the Indian Legislation Commission proposed that a law protecting whistleblowers be enacted in order to combat corruption. It had also written a bill to address the problem.

In the year 2004, the government notified the resolution, “Public Interest Disclosure and Protection of Informers Resolution (PIDPIR)’ and in response to this resolution, the Central Vigilance Commission (CVC) was established only to protect the government employees.

The Second Administrative Reforms Commission’s report from 2007 also urged that a separate statute be enacted to protect whistleblowers.

India has enacted the Whistle Blowers Protection Act, 2014 (“Whistle Blowers Act”), which is applicable only to public servants. It was enacted with the intent to establish a mechanism to:

receive complaints relating to disclosure of any allegation of corruption, wilful misuse of against any public servant;
to inquire or cause an inquiry into such disclosure; and
to provide adequate safeguards against victimization of the person making such complaint.

The Whistle Blowers Act may be utilized by any person to make a public interest disclosure.An amendment to the aforementioned Act was proposed in the form of the Whistleblowers Protection (Amendment) Bill, 2015 (“Amendment Bill”).The Amendment Bill sought to, inter alia, incorporate necessary safeguards against disclosures that may prejudicially affect the sovereignty and integrity of the country, security of the State, etc.However, the Amendment Bill was not passed by the Rajya Sabha and consequently, it lapsed.

For listed companies-

Companies Act-

It is mandated by Section 177 of the Companies Act, 2013 and Companies Rules 2014, that every listed business establishes a surveillance mechanism for directors and employees to report any frauds or misappropriations in a stipulated. As a result, the corporation has established a code of conduct for its senior management executives and other top management personnel, which outlines the criteria for their code of behaviour.

The purpose of the whistleblowing mechanism is to strike a balance between law and morality by forcing employees to recognize their societal responsibilities. A good policy could close the gap created by the fear of punishment from powerful people if unfavourable information is revealed. Employees are frequently threatened with losing their jobs and exploited if they choose to speak out against corporate wrongdoing. Due to secrecy requirements in their job contracts, they are even more afraid of reprisal.

Applicability-

According to sub-Section (9) of Section 177 of Companies Act, 2013 along with Rule 7 of companies (meeting of board and its power) Rules, 2014 following companies are required to follow these provisions and establish the vigil mechanism/whistleblower policy-

Every listed company;
Every other company which accepts deposits from the public;
Every company which has borrowed money from banks and public financial institutions in excess of Rs. 50.00 (Fifty) Crores.
Vigil mechanism/whistle blower policy facilitates the employees and directors to approach the chairman of the audit company in case of any grievance.

Companies that are required to form an audit committee must use the audit committee to carry out the vigil mechanism, and if any of the committee members have a conflict of interest in a given issue, they must withdraw themselves and the rest of the committee will handle the situation.

For other corporations, the Board of Directors shall appoint a director to serve as the audit committee, which will serve as a vigil mechanism to which other directors and employees can submit their concerns. It includes suitable safeguards against victimization of employees and directors who use the Vigil mechanism, as well as direct access to the chairperson of the Audit Committee or the director chosen to act as the Audit Committee in extreme circumstances. The presence of the mechanism can then be properly conveyed within the organization once it has been developed.

The corporation must disclose the details of the Vigil mechanism’s establishment on its website if one exists, and in its annual report.

If a director or employee files many frivolous complaints, the audit committee or a director has chosen to serve on the audit committee may take appropriate action against them, including reprimand.

SEBI regulations-

The Securities Exchange Board of India (“SEBI”) has mandated that every listed company should have a whistle- blower policy and make employees aware of such policy to enable employees to report instances of leaks of unpublished price sensitive information.Listed companies are required to make a disclosure of material events to the stock exchange(s) pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”).

In August 2003, SEBI amended Clause 49 of the Listing Agreement to incorporate these recommendations for companies.

Regulation 18 of the SEBI (LODR) Regulations contains the substance of Clause 49. All publicly listed corporations are required by the Listing Agreement to adopt a whistleblower policy. It gives employees a way to report any type of misappropriation, fraud, or actual and unethical behaviour to the Board.

Moreover, an employee who wants to report any form of fraudulent behaviour or malpractice in the company must be granted access to the company’s Audit Committee, according to these clauses. Following that, the corporation must communicate this information to all of its personnel.

Moreover, the company must affirm that it has not denied any person to access the audit committee and protected the whistle-blowers from unfair treatment. Such affirmation shall form the part of the annual report of corporate governance.

The Regulation 18 standards are intended to instil a sense of responsibility in a company’s employees and to inform them that it is their right and privilege to remain vigilant. Employees have the right to blow the whistle against illegal acts, and the company promises to safeguard such employees from any type of harassment or termination.

With effect from December 2019, the SEBI has also introduced a reward mechanism for incentivizing ‘Informants’ to report violations of insider trading laws to SEBI.

In the year 2021, SEBI has also increased the reward for whistle-blowers on insider trading to make it more attractive. SEBI has increased the reward payable to whistle-blowers under its prohibition of insider trading regulation from 1 crore to 10 crores in order to encourage whistleblowers to come forward to the regulator.

It includes adequate protections against victimisation of employees who use the system, as well as direct access to the Chairman of the Audit Committee in extraordinary circumstances. The presence of the mechanism can then be properly disseminated within the organisation once it has been formed.

For private employees-

There is no specific law on whistle-blowing applicable to private employers in India. Some progressive companies have incorporated whistle-blowers policy or vigil mechanism scheme as part of extending their global policies which include individual employees or groups of employees and in some cases even third parties. The purpose of any whistleblower policy is to encourage employees to report matters without the risk of subsequent victimization, discrimination or disadvantage.

Conclusion

Conclusive remarks

Despite being regarded as one of the best methods for ensuring corporate governance, whistleblowing in India has yet to move forward. Although, Clause 49 of Regulation 18 under SEBI (LODR) 2015, and Companies Act, 2013 mandates the listed companies in India to formulate whistle-blowing policy in place. But these authorities have still not elucidated the concrete format for constructing the vigil mechanisms.
Moreover, there is no mandatory provision for private companies. As a result, only few private companies set up the vigil mechanism at their discretion and thus, private companies’ employees are deprived of the whistleblower policy and have a high probability of being treated unfairly if they act as whistle-blower, in absence of a vigil mechanism.
Furthermore, the whistleblowers Act, 2014, though passed in Lok Sabha but could not approved in Rajya Sabha. Thus, it could not come into force. Therefore, we need a strong and concrete law for the protection of whistleblowers.

Suggestions

Appropriate legislation must be enacted to protect innocent whistleblowers, and the 2015 Amendment Bill’s proposed dilution of the act must be abandoned.
Strengthening the whistle-blower protection mechanism will help to ensure that democracy’s integrity is protected, cherished, and upheld.
The government should now need to pass the Whistleblowers Act and develop a solid regulatory regime to safeguard whistleblowers in order to sustain this balance.