2020 amendments to the Foreign Contribution (Regulation) Act, 2010 – UNHRC criticism of the law

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October 29, 2021

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This article is written by Nishtha Garhwal, a student of Alliance School of Law, Bangalore. This article discusses the 2020 amendments made to the Foreign Contribution (Regulation) Act, 2010, and how this has led to the concerns being raised by the United Nations Human Rights Council regarding this.

Table of Contents

Introduction

When the then Prime Minister of India, Indira Gandhi imposed an emergency in India in 1975, it denoted a defining moment in the nexus among the NGOs and the State as the detaining of many political pioneers and activists was done including the grassroots NGOs. An enhanced authority over the NGOs and their data was sought by the state. In 1976, the need for making preparations against foreign contributions which could destabilize the nation was contended by the state.

With a motive to expand the amount of funding and subsidizing that comes from foreign or overseas sources for the associations and people working in the crucial spheres of national life, the legislature of India presented the Foreign Contribution (Regulation) Act, 1976 which was an internal law made by the Ministry of Home Affairs. This Act was enacted on 31 March 1976 and was intended to ensure that strict control is maintained over any Non-Governmental organization or voluntary association receiving funds from abroad.

The Foreign Contribution (Regulation) Act, 1976 was amended in 1984 as per which all the Non-Governmental organizations were required to register themselves with the Ministry of Home Affairs.

However, in 2010 this Act was completely repealed and a new Act, that is, Foreign Contribution (Regulation) Act, 2010 (hereinafter referred to as FCRA) was enacted containing stricter provisions. After this, in 2020 this Act was further amended.

Foreign Contribution (Regulation) Act, 2010

The fundings or contributions from foreign sources to Indian associations are sought to be regulated by Foreign Contribution (Regulation) Act, 2010. The Act also seeks to ensure that the foreign contributions that may be damaging to the national interest are barred.

The primary intention of passing this Act was to ensure that Indian decisions are not influenced by unfamiliar assets. Any association that wants to get access to assets from a foreign source is required to enlist with the Ministry of Home Affairs of India and it is required to consistently submit a reviewed account every year and to notify all the details of any contribution that is made by an individual.

A check on the influence of foreigners on the Indian electoral politics or public servants for wrongful purposes that may be harmful to the national interest is also to be performed by this Act. In case, a person violates any provision of the Act, imprisonment of 5 years will be imposed as per Section 35 of the Act.

Although the Act is in relation to financial legislation, the legislation primarily focuses on internal security. Thus, it comes under the purview of the Ministry of Home Affairs and not the Reserve Bank of India.

Notable provisions under the Foreign Contribution (Regulation) Act, 2010

As per Section 2(1)(b) of the Foreign Contribution (Regulation) Act, 2010, any deliveries, transfers, or donations are deemed to be foreign contributions provided they are made from a foreign source which may include:

Any article which is not being given as a gift for personal use.
Any Indian or foreign currency.
Any foreign security that is been defined under Clause 2 (i) of the Foreign Exchange Regulation Act, 1973.

Any organization or association which is registered with the Ministry of Home Affairs and works for definite cultural, economic, social, religious, or economic purposes is eligible to accept and utilize funds from foreign sources provided it maintains a separate account containing the listing of all the donations that it received from overseas sources, gets it audit by a Chartered Accountant and submits it to the Ministry of Home Affairs every year.

However, some are barred from accepting and utilizing any foreign contribution which includes the Judges of the Court of law, candidates who are contesting elections, registered newspapers’ editors or publishers, Government servants, Members of the legislative assembly, and political parties.

In case the Ministry of Home Affairs believes that an organization is not neutral and is politically motivated, this Act allows the cancellation of the registration of such a Non-Governmental Organization (NGO). Under usual circumstances, the NGOs are granted a registration certificate that has a validity of five years.

Any person who has become defunct, their assets are required to be disposed of in a way that is prescribed by the government as per the provisions of this Act. The maintenance of a separate account needs to be done by the organizations in which the funds received from foreign sources are deposited. It should be noted that only the foreign contributions and no other funds shall be deposited in that account.

The prescribed authority needs to be reported by each and every bank about the received foreign remittances and other related details.

2020 Amendment to the law

On 20 September 2020, the Foreign Contribution (Regulation) Amendment Act, 2020 was introduced in Lok Sabha. The Act amended the Foreign Contribution (Regulation) Act, 2010. Some of the notable provisions that were amended by this Act are as follows:

The prohibition imposed on ‘Public Servants’ from receiving foreign contribution

This amendment was made with a motive to prevent any decision of a public servant from being influenced by foreign fundings. Certain people which includes the candidates contesting elections, editors and publishers of registered newspapers, judges, government servants, political parties, and members of the legislature were barred from accepting any foreign contribution in the earlier Act. However, the Amendment to this Act also added public servants under this list. A person who is involved in the government service and is remunerated by the government for performing the assigned public duty is said to be a public servant.

The prohibition imposed on the transfer of foreign contribution

As per the 2010 Act, unless a person has obtained prior authorization in order to receive a foreign contribution or has registered for the approval of a foreign contribution, no foreign contribution can be transferred to such a person. However, this provision has been amended by the 2020 Act for restricting the transfer of foreign donations to any other citizen. As per this Act, any organization, entity or registered business comes under the term ‘Person’.

Mandatory identification requirements for registration

Provided a central government certificate of registration has been obtained by a person and in case not registered, prior authorization has been obtained by them for accepting the foreign contribution, such a person can accept foreign contribution. The government specifies a manner in which a person seeking registration or its renewal or prior authorization for accepting foreign contributions can apply. The 2020 Bill adds that if any person seeking prior permission for registration or the renewal of registration needs to include the Aadhaar number as a document of identification for all its directors, office bearers, or key functionaries. This Amendment has been made in order to promote the utilization of the Aadhaar Card. This provision also makes all the data related to the NGOs that receive foreign contributions available to the government. In addition to this, in case the person is a foreigner, a copy of the passport or overseas citizen of India card must be issued for the purpose of identification.

Compulsory opening of the FCRA Account

As per Section 17 of the 2010 Act, a receiver of foreign contribution was permitted to receive foreign contribution in an account that could be opened in any of the scheduled banks. However, the amendment has been made by the 2020 Act to Section, as per which, acknowledgement of the amount received from foreign funds needs to be done in a single branch of a scheduled bank that has been specified by the central government, that is, State Bank of India, New Delhi by a registered person or a receiver of the foreign contribution. This account is designated as an ‘FCRA Account’. The account at this branch is meant for receiving only foreign contributions and no other deposits. However, for the purpose of utilization of the contribution, accounts can be opened in other banks also. The Amendment is intended to make the monitoring and regulation of the funds easy through centralizing the inflow of the contribution into a single bank.

Restriction imposed on the utilization of funds received from foreign sources

The Act amended Section 11 of the earlier Act and a new provision was included with this. It should be noted that the foreign contribution that is unreceived or unutilized shall be received or utilized with the prior approval of the government only. If permission has been obtained by a person under the FCRA for accepting and utilizing foreign contributions without government approval, the government has the power to prohibit such a person if the government believes that such a person has violated the provisions under the Act based on summary inquiry. An additional provision added by this Act is that even if a person has been allowed to receive foreign contributions earlier, the government has the power to restrict such a recipient from utilizing the unutilized foreign contribution. Such a measure can be utilized by the government if there are reasonable grounds for the government to believe that any activity in violation of the provisions under the Act has been undertaken by the recipient after conducting a summary inquiry. A change that has been done by the amendment in the earlier Act is that in the 2010 Act, a recipient could be restricted only if an actual violation of the provisions of the Act has been done. However, with the 2020 amendment, a recipient can now be restricted for preventive purposes also.

License renewal

Before the Amendment, all the people registered under the Act to whom certificates have been issued were required to renew their certificates within six months. However, with the amendment Act of 2020, certain guidelines were laid down where it was at the discretion of the government to renew the certificate on the conduction of an inquiry to ensure that the person who is applying for the renewal is not a fictitious person, is not prosecuted or convicted for causing communal tensions or for being involved in religion conversion-related activities and is not found guilty for misuse of funds.

Lowering the cap for utilizing foreign contribution for the purpose of administration

The Act permits a recipient to utilize funds for the purpose for which it has been received. A recipient is not allowed to use the funds for any other purpose than this. An amendment to Section 8 of the FCRA, 2010 has been made by the 2020 Act. Earlier the limit for utilizing the received funds for administrative purposes was 50% but now this cap has been reduced to 20%. This provision is aimed at discouraging the NGOs from utilizing funds for any other purposes than the purpose for which it has been received and encouraging them to spend the funds for achieving its required objective.

Giving up certificates

With the amendment, now if anyone wants to give up their certificate, such a person can be authorized by the central government to do so. Such an initiation can be done by the government provided there are reasonable grounds for the government to believe that no violation of the provisions of the Act has been done by such a person and a prescribed government authority has been vested with the authority to manage the funds of such a person.

Registration suspension

The term ‘Suspension’ here means that the funds cannot be received or utilized by a registered person. Section 13 of FCRA, 2010 was amended by the 2020 Act. Earlier the government had the authority to suspend the registration certificate of a person for up to 180 days on inquiry which has now been increased to a period of 360 days with the amendment. However, this provision faces criticism on the ground that if the registration cannot be canceled, it gives power to the legislature to keep the FCRA registration certificates under suspension.

Concerns of UNHRC with regards to FCRA

The amendment of 2020 to FCRA, 2010 has provided authority to the Indian legislature to restrict the utilization of foreign contributions. India has taken steps in order to restrict the funding from foreign sources received by the NGOs in India. Unconstrained powers have been granted to the Ministry of Home Affairs for disqualifying any NGO or association and for rejecting its renewal by this amendment.

Concerns were raised to this and to the activists being arrested in India by the United Nations High Commissioner for Human Rights, Michelle Bachelet. The Indian legislature was urged by the three experts of the United Nations Human Rights Council to repeal the FCRA, 2020 as it restricts the NGOs from having access to foreign contributions. The claim of the United Nations Human Rights Council is that FCRA, 2020 is not in line with the norms of the Human Rights Council. The stand of these experts was that without being exposed to excess restrictions on receiving foreign contributions, the defenders of human rights and civil society must be allowed to perform their important functions.

NGO funding and related controversies in India

The legislation worried the small as well as the large NGOs. The NGOs believed that they were being portrayed as wicked in the minds of the public by the legislation. In addition to this, the big organizations have to face strict conditions being imposed on the working expenditure and the transfer of funds were stopped from them to smaller organizations by the recent Amendments.

The registration of NGO Lawyers Collective was suspended by the government of India for six months. The founders who are also human rights lawyers, Indira Jaising and Anand Grover were alleged of utilizing the foreign contribution for other purposes than for which it was received and thus, violating the provisions under the FCRA.

Although evidence was presented by the NGO for proving that all the spendings by it were done as per the norms of the Act, the suspension was still applied. The experts at the United Nations Human Rights Council claim that in order to silence the criticism of the policies of the government by Lawyers Collective, their registration was suspended, and thus, the Suspension was politically motivated.

In September 2015, Sabrang Trust and Citizens for Justice and Peace, both headed by Teesta Setalvad, a human rights defender, were suspended by the government of India under the FCRA. It was claimed that the targeting of the lawyers collective’s founders was done by the government because they provided legal assistance to Teesta Setalvad.

In April 2015, the registration of Greenpeace India was also suspended by the government of the country for 6 months. The UNHRC has raised its concern earlier also on this to the government.

Viewpoints of some notable people on recent amendments

Air of mistrust created around the NGOs

The executive director of Population Foundation of India, Poonam Muttreja addressed the issues created by the recent Amendments at a webinar where she said that an air of mistrust has been created around the NGOs. Since the amended legislation portrays NGOs as wicked to the public, it will hurt the commitment-oriented civil societies.

The NGOs are not working for monetary compensation but they are working out of compassion. She also challenged the government authorities by raising the question of whether the government is feared by the NGOs because they raise voices and speak out on the most marginalized issues for which no data is available with the government.

The fact that instead of identifying individual NGOs who are not complying with the statutory regulations, the legislation establishes all the NGOs to be of the same nature has also been pointed out by her. There have been instances in the past where criminal investigations have been conducted against the organizations who had misused the funds and thus, it would not be difficult to do so now.

Issue of transparency in receiving funds for electoral bonds

It was lamented by Ingrid Srinath, the Director of the Centre for Social Impact and Philanthropy during the discussions of the Amendment Bill that although allegations were put on the NGOs for not disclosing or hiding its member’s identity, no evidence was given in order to prove so. She also questioned the targeting of only contributions from foreign sources and not the foreign direct investment despite the fact that the foreign direct investment is over fifteen times more than the foreign contributions. She also asserted that only around 4,000 organizations have received sub-grants among the 21,490 organizations that have licenses. If we consider the issue of administrative costs, only 1,803 organizations have been reported to have spent 20% of the foreign contributions.

It was said by Nityanand Rai, the minister of state for a home that the intention of the Amendments is to bring in transparency and prevent the mis-utilization of funds from foreign sources. However, the issue is also regarding the Rs 6,000 crore coming through the electoral boards and even from abroad that are not visible at all, and the Rs 9,600 crore coming to PM-CARES Fund which is also been funded by foreign sources but remains exempted under FCRA as contended by him.

The work of NGOs who work in remote areas will suffer

Harsh Jaitli, the chief executive officer of VANI which is an apex Indian body of voluntary development organizations has said that there are many NGOs that work in far-off and remote places that do not have access to any foreign funds. Therefore, various small and big organizations work hand-in-hand in order to ensure funding and growth and the new amendments would impact this, and such NGOs that work in remote places will suffer.

Whenever there are any floods or any other critical moments, for instance, the recent COVID-19 situation, a major role is played by the NGOs. In such situations, all the local organizations work along with the NGOs. Even if we look at the recent instances, the local organizations worked with the civil organizations for helping the migrant workers and in dealing with the situation created by the pandemic. The work of the NGOs was very much appreciated by the Prime Minister as well as the Niti Aayog. However, the recent amendments to FCRA have been made without any consultations from these NGOs.

The feeling of ‘Atma Nirbhar’ movement for women being hurt by the Amendments

The director of Madhya Pradesh-based Concept Society, Hemal Kamat has asserted that for over 15 years, her organization had been working with Adivasis as well as Dalit women. However, the recent Amendments have put the survival of NGOs in a position of danger. She called it ironic to say on one side that through the establishment of organizations, women must be made self-reliant or ‘Atma Nirbhar’ and on the other side make Amendments that are in contradiction with the self-reliance of women. As contended by her, there are a large number of people in these organizations who are working for a very small salary yet they are successful in bringing a big change to the lives of people and as the new Amendments reduce the limit of administrative costs from 50% to 20%, it would be very difficult to pay these people.

NGOs in states flooded with calls from concerned workers

The impact that the recent amendments have created can be most felt by the small NGOs that run in the states. The grassroots workers who feared that the latest modifications would deprive them of their livelihood had flooded the small NGOs with calls. In the states like Jharkhand, Odisha, and Chattisgarh A.K Singh, the founder and managing director of LEADS Trust had been working closely with the small NGOs. He asserted that at the time of COVID-19 when the NGOs and the government authorities are trying hard for working together in order to improve the lives of the people, it is very hurtful to see an Amendment coming like this. He further explained that all the organizations are not competent to raise funds in an equal manner and therefore, the funds are being raised by the large organizations which are passed on to the small NGOs that work among tribals and other unreached or backward sections of the society for the purpose of connecting them to the works of development.

Indian government’s stand on the issue

The Indian legislature gave its stand by pointing out the fact that between the period of 2010 and 2019, the funds received from overseas sources have doubled in the country. However, the problem is that these funds are not being utilized for the purposes for which the permission has been granted or for which they have been registered. Thus, the government of India clarified its stand by asserting that the amendment to the FCRA, 2010 has been made for streamlining the inflow of foreign currency.

The licenses of six NGOs were suspended by the Union Ministry of Home Affairs because the foreign contributions were being utilized by them for religious conversion-related purposes. Thus, the legislature in order to restrict the inflow of such uncontrolled foreign contributions in India and to restrict the utilization of these foreign contributions for unethical and illegal purposes proposed an amendment to the FCRA of 2010 as these things hamper the internal security of India. Therefore, the amount of transparency and accountability of foreign contributions has been increased by this amendment.

Conclusion

The legislation seeks to regulate the acceptance, and utilization of funding from foreign sources by individuals, associations, and companies, and to keep a check that the funds are prevented from being transferred to any other person. In addition to this, the limit for the utilization of contribution from foreign sources for administrative expenses has been decreased from 50% to 20%. The legislation also empowers the cancellation of the FCRA certificates by extending the previous 180 days period to beyond 180 days. The provisions also require the license to be renewed every six months provided the applicant is not a fictitious person, has not been convicted for triggering communal tensions, and has not been found guilty for diversion of funds. Many believe that the Amendment would cause an obstruction in research and would hamper the work of the NGOs in the country. In addition to this, it will also impact jobs.

The amount of foreign contributions received by the NGO has increased. In addition to this, the number of NGOs in the country have also increased and because of this, a lot of instances have occurred where these funds were being utilized for purposes other than for which it was received. Thus, there was a need for the government to control and restrict such practices.

The FCRA, 2020 is legislation that will help the government in ensuring that the funds that are received from foreign sources are utilized for genuine purposes only and to achieve the required objectives by NGOs in the country.

References

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5 best college admission essay writing services : comprehensive reviews

By

Rachit Garg

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October 29, 2021

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The admissions essay plays a huge role in applying to a prestigious educational institution. This work helps to understand how interested you are in getting the place you are applying for, what motives drive you. One wrong word in an application essay can put a cross on getting a tuition grant or a dream place.

If you want to create a favorable impression of yourself, ask for help in writing an admission essay from the experts. We have created a list of the 5 best admission essay writing services below to help you choose the best one for making your application writing easier for you.

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Timely Completion
Punctuality
Quality
Prices
Customer Reviews
Customer Rating
Plagiarism Rates
Content Authenticity
Search Engine Rating

Table of Contents

Here’s What You Should Look for in the Best Admission Essay Writing Company

An excellent application essay writing company will be able to deliver trustworthy, authentic, and timely essays, term papers, and case studies. Take a look at the list of the top reviewed essay writing companies for US students.

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What are the 5 Best Admission Essay Writing Services?

The best essay writing service delivers top-notch writing material and guarantees authenticity, and keeps their clients updated through effective communication channels. Here’s a list of the best essay writing service providers that may help you achieve your desired quality.

PaperHelp

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Pros

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Cons

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Pros

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Cons

Lack of Samples
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MyAdmissionEssay

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Pros

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Cons

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Evolution Writers

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Pros

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Cons

Rare chances of receiving a non-native writer for your project
Limited free revisions

Top FAQs for the Best Admission Essay Writing Services

Is It Worth It to go for Case Study Writing Services?

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How to Select the Best Case Study Writing Services?

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Conclusion

The admission process can be tough for many students. To enter the college of your dream, you need to produce an impressive admission essay. At this stage, many students turn to professional assistance. Essay writing services are more popular than ever before. With increasing academic pressure, especially during this pandemic, students and professionals are seeking resources to better utilize their time. By hiring professional college and essay writers to write papers for them, students and professionals are able to focus on more important tasks.

Top essay writing services are a relief for those who have tight schedules and pressuring deadlines. They offer quality work at your convenience and satisfaction. Most writing service companies don’t charge unless their customers are satisfied with the quality of their work.

Adding significant features such as free revisions, multiple edits, reviews, and writer-to-customer communication helps build up the profile of an excellent essay writing service. In addition, you should not forget that with the growing amount of data and research available, inexperienced writers find it hard to maintain relevance. Therefore, professionals offer guidance and help their customers improve their scores without any further academic pressure.

Although these services relieve the students and many other people of their academic burdens, some view them as a form of cheating. Regardless, citing the most valuable resources and learning from professionals is better than cheating or submitting plagiarized and inaccurate paper content.

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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What is the difference between auction and bidding : an overview

By

Oishika Banerji

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October 29, 2021

0

This article has been written by Jagrit Chawla pursuing the Diploma in Business Laws for In-House Counsels from LawSikho. This article has been edited by Ruchika Mohapatra (Associate, Lawsikho) and Prashant Baviskar (Associate, Lawsikho).

Table of Contents

Introduction

The terms Auction and Bidding are interrelated as both support the idea of selling a product to the public. Bidding involves the following process; a person offers a price which is to be known as a bid, the person who offers the price is called bidder and the entire process is termed as bidding. Bidding is basically used to determine the cost of a particular thing. The process of bidding generally takes place in situations where there is a large number of people showing willingness to buy a particular product or a service. Bidding is also used for determining the actual demand of a product in the market which helps in identifying its core value. Bidding is often used by various companies, industries and many small businesses for assessing the needs of the public at large. On the other hand, auction is the process that involves buying and selling of the commodities and offering them for bidding. Auction allows the general public to bid for the offered product and sell it to the highest bidder. Bidding is considered to be a subset of Auction. There exists a competition between bidders. The whole process starts with a relatively low bidding price, then as per the demand of the general public, the bidding price goes upwards. Once the price goes upwards in the process of bidding, it can’t fall downwards.

Meaning of auction

Auction simply means the process of buying and selling goods or services to the bidders. The main aim for the auctioneers is to sell the product/service for the highest price. The sole purpose for auction is to just increase the commodity value in the market so that the general public would be aware about the price structure of the product/services. Generally the auction takes place for the sale of antiques, rare products, or old collectible items.

Auction process

Before the start of the Auction process, the potential bidders or buyers are usually given a period of purview to examine and check the condition of the product. The period of examination is announced before the day of auction or a couple hours before the start of auction. After the potential buyers are done with examining the product for placing their bid, they have to get themselves registered with the auctioneer. The registration process may require the buyers’ details like identity proof, home address, Phone number, email address. Each and every bidder is given a unique card containing a number which is actually used to identify all the participants.

The duty of the auctioneer is to actually give a brief description for the sale of an item and start the bidding process with a price which he/she finds suitable to start with. Alternately, the seller may also set the minimum bidding price that they will accept, and from there the bidding starts. The bidders then start picking up their bids and call them out as per their willingness to buy that product. The auction process is adaptive in nature, meaning that subsequently comparing with the previous bid, the price of the new bid is slightly higher than the previous one. The bidder lifts up their card for announcing the bid price. The whole auction process ends when there are no more bids left and the last bidder who made the highest bid gets the item. The highest bidder completely takes ownership of the item after paying the price of bid.

What is bidding?

Bidding sampling means offering a price which is to be known as a bid, the person offering price is known as bidder and the whole process is called as bidding.

Bidding process

There are the steps for the bidding process which is as follows:-

Research and Planning

This step involves a thorough understanding of a particular product or the service which the bidder tends to acquire. For Businesses, if they want to bid for a particular item, firstly they need to ascertain their needs and wants systematically and then do a S.W.O.T analysis (Strength, Weakness, Opportunities and Strengths) for a better understanding for choosing an appropriate bid and buying it in the auction process.

Preparing the bid

Here in this step, there is a dire need to choose the correct bidding option. In bidding there is no going back, once the price is selected, one can’t change its price to a lower side than what was being offered previously.

Submitting the bid

This step involves the process of submitting the bid in the auction process. Here comes the point when the buyer needs to decide about whether to choose a particular pricing option or not. It is very essential at this point to make a note of every other competitive bidding option. When the two bidders get highly competitive, the buyer then stops thinking in a strategic manner and the emotions overpower the bidders.

Key differences between auction and bidding

Here are a few of the key differences between auction and bidding as follows:-

Difference in the meaning

Bidding:

Bidding involves the competitive edge of offering the stipulated pre-decided price for the particular item. It involves the willingness where the buyer shows in buying the commodity for a particular price by offering a bid or the price for the same. Bidding plays a key determining factor in deciding the demand and price of a particular item.

Auction:

Auction involves the process of buying and selling the product/service. The basic content for auction is to actually get the best value of the product and service sold. The only sole reason for putting any product or service at auction is to just get the highest price.

Traditional difference

Bidding:

Traditionally bidding is just a process for setting up the value of a product. It is nothing but the process of placing bids for a particular item.

Auction:

Auction provides the platform for bidding the goods and services, those who place the highest bid get the product.

Successive difference

Bidding:

Bidding is completed when the buyer accomplishes his/her desire of acquiring a particular product and service. The goal of bidding gets accomplished when the bidder is successful in winning a contract of a bid which is put in the auction process.

Auction:

The only motive of the auction is to actually call for the highest price for a good or the service. The Auction process is said to be successful when the auctioneer receives the highest price for the bidding process and not bids further left. So, achieving the highest bidding price of a product makes the auction successful.

Motive difference

Bidding:

The sole motive of bidding is to create competition among buyers. Bidding creates a healthy competition for increasing the value and demand of the product or the service.

Auction:

The basic purpose of auction is to create more demand for the particular commodity which tends to put the commodity in demand and supply. The auction process helps in understanding the needs and wants of the buyers, it also helps in setting benchmarks for the product for further selling purposes.

Value difference

Bidding:

A bid is actually made to achieve the highest value of a particular product in the market. The goal of the bidder is to get the item the lowest rate possible.

Auction:

It involves arranging the bidding process by the auctioneer to get the highest value for the product and services offered. Many times the companies also organize the auction fests for its products to get the best knowledge of the price of its products.

Conclusion

Auction and bidding is all about selling and buying the product at the right price for both the auctioneer and the bidder. Be it forward or be it reverse, but the motive behind buying and selling is the same. Auctioneer attempts to get the highest value of the product, while the bidder strives to acquire the product at a lower price. Some bids involve selling the product to those who bid for the highest price among other competitors. While in some cases, the auction is held for selling services to the general public at a particular stipulated price being offered by the bidders.

Some companies see auctioning as an opportunity to get real world data of the supply and demand of their products. Both Auction and Bidding are inter-connected with each other to know the best possible price of a product or a service.

References

https://www.merriam-webster.com/dictionary/bid

https://www.collinsdictionary.com/dictionary/english/bidder

https://corporatefinanceinstitute.com/resources/knowledge/finance/auction/

https://www.mstcindia.co.in/MSTC_Static_Pages/frontpage/Eauctionregistrationprocedure.htm#:~:text=1.,Terms%20%26%20Conditions%20(BSTC).

https://www.iosrjournals.org/iosr-jbm/papers/Vol18-issue7/Version-2/G1807024347.pdf

https://www.tutorialspoint.com/compare-bidding-and-auction.

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https://www.jstor.org/stable/2726107

Everything you need to know about IP in the Philippines

By

Oishika Banerji

-

October 29, 2021

0

maxresdefault — Image source: https://blog.ipleaders.in/intellectual-property-rights-claimed/

This article has been written by Eriobu – Aniede Onyekachi Ngozi pursuing the Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho. This article has been edited by Smriti Katiyar (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho).

Table of Contents

Introduction

The Intellectual Property Office of the Philippines (IPOPHL), is the government agency under the Department of Trade and Industry that is saddled with the registration of intellectual property (IP), conflict resolution of intellectual property rights administration and implementation of State policies IP to strengthen the protection of IP rights in the Philippines. The Philippines Intellectual Property Office (IPOPHL) maintains a Registry of Patents and Trademarks that are widely recognized in Southeast Asia and dates back to the Spanish and American colonial eras. It was established by the Republic Act No. 8293, known as the Intellectual Property Code of the Philippines that came into effect on January 1, 1998, during the administration of President Fidel V. Ramos. The IPOPHL has the unique characteristic of operating under the Office of the President and enjoys a level of impact and influence not achieved in many other countries.

Mandate & function

IPOPHL’s mandate forms the acronym DREAM and as such, it is called the DREAM mandate. IPOPHL mandates aim to achieve the following;

DEVELOPMENT-ORIENTED: Promote the use of patent information as a tool for technological development
REGULATORY

Examine applications and grant patents, or register utility models, industrial designs,
trademarks, geographical indication, and integrated circuits;
Help protect copyright by assisting in the facilitation of deposit of work with the National
Library
Register technology transfer arrangements
ENFORCEMENT

Undertake enforcement functions supported by concerned agencies such a the PNP, NBI, Customs, OMB, LGUs, etc.
Conduct visits during reasonable hours to establishments and businesses engaging in activities violating IPRs and provisions of the IP Code based on the report, information or complaint received by the Office.
ADJUDICATORY

Hear and decide cases relating to:
Violations of IP Rights
Cancellations and oppositions to registration
Compulsory licensing
Settle disputes involving technology transfer payments
POLICY-MAKING

Coordinate with relevant government agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual property rights in the country.
Develop and implement strategies to promote and facilitate technology transfer

Vision and mission

A progressive Philippines using intellectual property assets for inclusive economic and social development by 2030 with a Mission to build an inclusive IP system that serves the need of Filipinos.

The history

IPOPHL was initially known as the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), and was created through the executive order of President Corazon C. Aquino to revamp the Department of Trade and Industry. Between 1980 and 1997 the Technology Transfer Board was abolished and its function was absorbed into the BPTT. On June 6, 1997, the IP Code of the Philippines, Republic Act 8293 was signed into law but came into force on ist January 1998. This Code abolished the BPTT and established and vested the BPTT functions in IPOPHL. Between 2005 to 2009, the administration of Atty. Adrian S. Cristobal Jr, the second Director-General IPOPHL, office function and IP administration took a different turn leading to the achievement of the following;

A stronger IP policy-creation through the creation of a policy/international relations unit that became the country’s mission in Geneva and in DTI’s bilateral and multilateral trade negotiations for producing policy papers, comments on draft bills regarding IP rights.
The fortification of enforcement mandate of the IPOPHL through the establishment of inter-agency IP task force in 2008 which actively engaged the government’s law enforcement sector in the pursuit of counterfeiters and vendors of pirated goods
Designed a National Intellectual Property Strategy (NIPS) under the umbrella program of the DOST’s “Filipinnovation,” the country’s innovation strategy
Launched the Intellectual Property Fields Operations Unit to create the Intellectual Property Satellite Offices (IPSOs) to serve the needs of entrepreneurs, inventors, and IP creators.

With the Director General Atty. Ricardo Blancaflor (2010-2014), the IPOPHL witnessed;

The automation of the end-to-end processing of IP applications from filing to registration (publications, printing of certificates and post-registration/post-granting) known as the Industrial Property Automation System (IPAS) instituted in partnership with the World Intellectual Property Organization (WIPO).
The Innovation and Technology Support Offices (ITSOs) were initiated to spread its expertise and technical knowledge in patent drafting and search.

IPOPHL began deliberations with the Greenhills Shopping Center for a development-oriented methodology in decreasing the continued sales of counterfeit and pirated goods.
IPOPHL secured the support fund of P10 million from the Office of the President for the National Committee of Intellectual Property Rights (NCIPR)’s operational requirements. Leading to the seizure of its biggest haul of counterfeit and pirated goods, to a tune of P 13 billion. the removal of the Philippines from the USTR Special 301 Priority Watch List is cited as the most significant effort of the NCIPR’s,

Since 2015 till date, modernization had been the focus of IPOPHL leading to;

The launch of different online filing platforms such as; eTMFile, eLDFile and the eUMFI in 2016.
An improvement on TM classification was initiated by IPOPHL joining of sixty-two other countries to use TMClass which can translate terms in 42 different languages and;
IPOPHL became a World Intellectual Property Organisation (WIPO) designated State for the filing of international applications being the second of its kind in ASEAN.,
The online database of the Intellectual Property Office of the Philippines (IPOPHL), particularly for trademarks, is constantly updated as this is used to monitor filed applications.

IPOPHL is built on five core values;

JUSTNESS

It respects and promotes justness, equity and equality in the delivery of services and functions, concerning individual differences by gender, religious, social and political affiliation to ensure that nobody is deprived of their rights according to what is required by the law.

2. HARMONY AND TEAMWORK

IPOPHL promotes an environment where respect and recognition prevail through the provision of venue and mechanism for posting camaraderie among team members to enhance productivity and morale.

3. ACCOUNTABILITY

IPOPHL accepts with high responsibility and trust the consequences/results of one’s actions and decisions, guided by the government policies and rules on the use of government resources.

4. INTEGRITY

IPOPHL demonstrates moral courage, honesty and decency in the performance of duties, avoids conflict of interest, conforms with the professional code of ethics, practices openness and transparency, and serves as a role model for integrity within and outside IPOPHL.

5. EXCELLENCE

IPOPHL creates and sustains a culture of excellence in the organization. Domesticate QMS for continuous improvement in the work processes to deliver quality service and achieve high customer satisfaction. We seek and engage in activities that provide continuous career and self-development, a benchmark from global best practices and innovative approaches to meet the global standards in all aspects of IP services.

Through IPOPHL, the Philippines developed an IP legal framework that is international standards-compliant and has also assented to international agreements, conventions and protocols, such as:

Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (since 25 July 2012);
Patent Cooperation Treaty (PCT) (since 17 August 2001);
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (since 1 January 1995);
Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (since 25 September 1984);
Budapest Treaty on the International Recognition of the Deposit of Microorganisms for Purposes of Patent Procedure (since 21 October 1981);
Convention Establishing the World Intellectual Property Organization (the WIPO Convention) (since 14 July 1980);
Paris Convention for the Protection of Industrial Property (since 27 September 1965)
Marrakesh Treaty to Facilitate Access to Published Works by Visually Impaired Persons and Persons with Print Disabilities’ (since 18 March 2019) and;
Berne Convention for the Protection of Literary and Artistic Works (the Berne Convention) (since 1 August 1951).

Overview of the IPOPHL IP System

IPOPHL IP functions can be broken into three components:

Registration and protection system: This is the registration structure operated by IPOPHL for trademarks, designs and patents and related utilities that IPOPHL operates.
The commercialisation of IP: These are the various IP contractual agreements such as licenses, assignments, among others.
Enforcement: criminal and civil courts and administrative routes. The administrative process is through the IP Enforcement Office (IEO) of the IPOPHL. Once a complaint is filed with the IEO, right holders and their associates may coordinate with IEO in taking suitable action to enforce their IP rights. Administrative remedies are available through the Bureau of Legal Affairs (BLA) of the IPOPHL. The BLA has jurisdiction in administrative complaints about violations of IP rights with overall damages claimed that are not below Two Hundred Thousand Pesos (Php 200,000). It also has the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings.

The IPOPHL Intellectual Property Rights Enforcement Office (IEO), can also receive complaints involving outright counterfeiting and piracy via the applicability of these rules:

The IP Code – sets out the remedies available to the complainant;
Rules and Regulations on Administrative Complaints for Violation of Law Involving IP Rights (IPV Rules), as amended;
The Rules of Procedure for IPR Cases, which apply in supplementary character to the IPV Rules; and
The Rules of Court, which also apply in supplementary character to the IPV Rules. For cases filed with the IEO, the Rules and Regulations on Enforcement of IPOPHL apply.

The present

As part of its mandate, IPOPHL partners with other government agencies such as the Department of Trade and Industry (DTI) and the Department of Science and Technology (DOST), to create awareness of IP among entrepreneurs and micro, small and medium enterprises (MSMEs), associations, startups, creators and inventors, by elevating IP roles in the economic growth of the nation and wealth for right holders. They designed different IP training mechanisms fit for their needs;

IP Academy The Intellectual Property (IP) Academy: This academy is the national centre for the acquisition of IP knowledge, publication, research and development
WinIP: Women In IP, the pilot batch was inducted in June 2016. The host of women were pulled from the members of the agency of the National Committee on Intellectual Property Rights (NCIPR) with the intent to expand the scope to accommodate women from other government agencies, academia, research institutes, non-governmental agencies and the business sector.
Young IP Advocate (YIPA): This training program targets Filipinos in secondary schools and was launched in 2013. Its members include students from 77 schools spread across Cagayan de Oro, Cebu, Baguio, Metro Manila, Davao, and Iloilo, with IP clubs established in some of these schools intensifying campaigns on IP.
Learn, be Empowered, Adopt, and Profit from IP Virtually (iLEAP IP): This is an e-learning platform series on the basics of IP with Free weekly introductory webinars on trademarks, copyright, patents, utility models, and industrial designs. It targets the general public with resource persons from the DITTB and BCRR.
Trade fair: IPOPHL has been participating in trade fairs and exhibits since 2006, which targets MSMEs. It provides IP advisory services through Information officers designated in the IPOPHL booth during the event.
IP Awards: the GAWAD YAMANG ISIP IP Award is the most esteemed Intellectual Property award in the Philippines and it aims to encourage the innovative use of the IP system in support of the country’s creative industry and serves as an IPOPHL promotional tool in the creation of IP awareness, goodwill, and brand retention.

Innovative works

IPOPHL established the Communications and Marketing Office (CMO) to strengthen its online presence to adapt to new ways of communicating with the public as a service-oriented organization. This Unit is designated for creating and implementing awareness campaigns on the Social media accounts leading to IPOPHL’s online presence on; Facebook, Twitter, LinkedIn, and Instagram @IPOPHL and a Website: www.ipophil.gov.ph.
The IPOPHL also published the National IP Strategy (NIPS) in December 2019, which outlines the goals and strategies of the IPOPHL as an agency leading IP rights protection and supporting Philippine innovation and creativity. The NIPS publication came after the two innovation bills were signed into law in April 2019.
In November 2019, IPOPHL published comments on the proposed amendment to its last amendment to the IP Code which was in 2013. The recommended amendments included;

provision of landlord liability and contributory liability in case of trademark infringement, among others
the establishment of the National Council on Intellectual Property Rights, which reiterates the establishment and function of the NCIPR, through a legislative pronouncement as against an executive order, and
the creation of the Sub-Committee on Enforcement Intellectual Property Rights in the Digital Environment to address the need for digital IP enforcement.
IPOPHL’s Improvement of the Customs IP border protection system, with evidence of seizures of imported, counterfeited branded goods recorded with Customs towards a State free of counterfeited good is commendable.

Unfortunately, this was short-lived with the United States Trade Representative (USTR) Special 301 Report 2020 that cited the findings of the Organisation for Economic Co-operation and Development (OECD) that the Philippines is among the leading sources of counterfeit medicines distributed globally. In a similar publication, with the European Union Intellectual Property Office, OECD also mentioned the Philippines as a possible source of fake medicines, footwear, leather goods and bags.

Conclusion

It is no surprise the innovative activities of the IPOPHL earned it a WIPO designated state for the filing of international marks. It, therefore, follows that an IP Registry that initiates steps in the development of IP in compliance with the international best practices and line with the World Intellectual Property Organisation (WIPO) objectives and mandates will improve its performance index, participation at the international scene and secure a spot as a WIPO designated state or attract other WIPO partnerships and funding.

The IPOPHL maintains an uncommon nomenclature by operating under the Office of the President thereby relinquishing impact and influence not seen in most other countries. This should be emulated globally towards building a strong worldwide IP system. There should also be a broad scope in the mandates of IP state offices that are all-inclusive; registration, protection, enforcement, commercialization and policy creation among others. A deliberate government effort to back the mission and visions of IP state offices in curbing the evolving challenges in the IP sector. A special committee with the presidency as chairman should be set by countries to promote IP development and management. The IPOPHL no doubt is a state of the arts and has attracted to itself goodwill in nomenclature, structure and functionality.

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Law favors the vesting of rights and not divesting it

By

Sneha Mahawar

-

October 29, 2021

0

This article is written by Udita Prakash, a student at UPES, Dehradun, pursuing a BBA LLB course. This article deals with the transfer of property, which favors vesting not divesting.

Table of Contents

Introduction

Transfer means an act by which a property is transferred from one or more living persons to another. Such a transfer can take place in the present or in the future. This article deals with Section 26 of the Transfer of Property Act, 1882 (TPA, hereinafter) with a conclusive explanation of whether the law favors the acquisition of rights, not divestment. The explanation is cited clearly in this article, with clear examples and case laws to understand.

TPA can take place in the form of sale, exchange, gift, mortgage, lease, actionable claim, or charge under the TPA 1882. Law favors vesting and not divesting, as per Section 26 of the Transfer of Property Act, 1882 talks about the fulfillment of a condition which is precedent. The general principle says that when any transfer is made as per condition precedent, then transfer fails unless and until the condition will not be fulfilled. This section says that such a condition shall be assumed to be fulfilled if it is substantially complied with.

Therefore, for the applicability of section 26 of the TPA, 1882, a literal performance of the condition is not required. It is an application of the well-approved principle that the law favors early vesting of the estates and not divesting. The vested interest also includes the fact that the person has the expectancy to receive the property on the happening of an event. For example- A promises to transfer property to B on attaining the age of 24 years and the attainment of the age would vest the property on B.

Condition precedent to be fulfilled

Considering the concept of contingent interest, a condition precedent has to be fulfilled. For example- A promises to transfer his house to B in case he gets married with the consent of both C as well as D. Hence, in such cases the condition has to be fulfilled by taking the consent of both. However, D passes away before B gets married, and hence his consent cannot be taken in this case. Here B cannot fully comply with the condition that was set for by A. Obtaining the consent of C is the only possible situation. Hence, substantially the consent of C has been fulfilled, and hence it can be considered as the satisfaction of the condition that has been set. In case D was alive, and B had not taken his consent, then it would not be considered to be in compliance with the condition set for obtaining the house.

Example – X transfers Rs. 20,000 to Y, on condition that he shall marry with the consent of A, B, and C. C dies. Y marries with the consent of A and B. Here Y cannot fully comply with the condition since C is dead. But he has obtained the consent of A and B which is the only possible thing to do, and the intention of the transferor can be said to be, in substance, satisfied by such consent. The condition is, therefore substantially complied with but if C is alive and his consent is not obtained there would be no substantial compliance with the condition.

In a situation where conditions precedents are the conditions then it is very necessary to be performed before an interest arises. For example, O makes a gift of his property in favor of N, his wife, and also provides in the instrument that his son A will be entitled to the property after performing the obsequies on the mother. There is no provision in the instrument property regarding the enjoyment of the property in case the son dies before the performance of obsequies.

Condition precedent

A condition precedent is a legal term describing a condition or event that must come to pass before a specific contract is considered in effect or any obligations are expected of either party. When interest is created in the transfer of a property but the vesting of such interest is dependent on the fulfillment of a condition prior to the transfer, this condition imposed is called a condition precedent. In other words, the condition must be fulfilled before the transfer is executed by the transferor. Therefore, the interest is made to accrue before the completion of the contingency.

A condition precedent is a stipulation that defines certain conditions that must be fulfilled before the transfer is made.
Condition precedents are common in wills as well as in trusts.

Basically, it is that type of condition that has to be fulfilled before the transfer of the property. When interest is created but is to be vested only after the fulfillment of certain conditions set by the transferor, it is referred to as a condition precedent. Hence, the condition has to be fulfilled before executing the transfer.

Example- A agrees to transfer the property to B in case B goes to England to complete further education. In this case, the completion of the condition of going abroad to study will have to be done by B before the property is transferred to him by A.

Essentials

The condition imposed must be fulfilled before the actual transfer takes place. This is the most important as it creates the major difference between condition precedent and subsequent.
The interest created by the transferor gets vested to the transferee post the fulfillment of the condition that has been set up.
When the condition precedent becomes impossible or immoral to be performed the transfer will be declared void. It is so because setting up an impossible condition binds the transferee to a condition that will not be fulfilled at all. For example- B promises to transfer his house to A on the condition that he marries his sister to B. However, A does not have a sister, and hence the condition here is an impossible one, as A cannot fulfill the same under any circumstances. Such interest will be declared void.
When the condition imposed is substantially complied with, it is deemed to have been fulfilled. As was explained in the illustration above, and one person dies before taking consent, taking consent of the other person would mean substantial compliance of the condition presented.

Illustration

A agrees to transfer his property to B when B marries his son. Such a condition imposed should be fulfilled before the transfer takes place, hence it is known as a condition precedent. Therefore, the condition precedent is a state of affairs or event which is required before something else.

There may also be condition precedents in the ongoing life of a contract, which state that if condition X occurs, event Y will then occur. Condition X is the condition precedent.

If the condition becomes unlawful or forbidden by the law as it is immoral or can cause injuries to any person or property of the person then the transfer will be considered void. For example, X agrees to transfer his property to Y, if Y kidnaps Z. Therefore, the condition of murdering Z is unlawful as per the law, hence the transfer of the property is considered void.

Narayana Ayyar v. Subbraya Ayyar (1929)

Facts

In this case, the facts are that there was a will made by Narayana Ayyar stating that all the property will go to his wife and the son will get a vested interest in that property only when he will perform the funeral rights of his mother. This was mentioned in the clause of the will. But the son died before her mother.

Issue

The issue that was raised, who will get the property because vested interest will only be given if the condition was to be fulfilled.

Judgment

It was held by the court that the condition, in this case, is not a condition precedent and the son will get a vested interest in the property as he can claim the property as a matter of right. In real circumstances, the rule favoring the vesting of estates is a compressed statement of several separate but closely related sub-rules. If future interests are construed to become indefeasibly vested at the earliest possible time and when conditions are not readily implied and construed as narrowly as possible. It also says that future interests are characterized as defeasibly vested rather than contingent. If the transferee dies before the enjoyment of property, then interest is not defeated by the death, and the right to enjoy the property will be vested in the favor of the legal heirs of the transferee.

A minor cannot have any vested interest in the property as the minor cannot claim it as a matter of right until he attains the age of majority, till that time property will be in the possession of the guardian. An insolvent can have no vested interest in the property. Section 13 of the Transfer of the Property Act, 1882 states that any interest created in the favour of the unborn child is a person who does not have existence and is not counted as a living person. Vested interest creates a present right that is in effect immediately, although the enjoyment is postponed to the time prescribed in the transfer. It does not entirely depend on the condition as the condition involves a certain event. The death of the transferee will not render the transfer invalid as the interest will pass on to his legal heirs. Vested interest is a transferable and a heritable right.

Unlawful/ impossible conditions precedent

Under Section 25 when the condition imposed becomes impossible or unlawful or immoral to be complied with, the interest accruing in the transfer of such property dependent on the condition fails. That is, where the condition is void the transfer becomes void too. When the condition precedent becomes –

Impossible to be performed

A condition which no longer can be fulfilled in any circumstance is said to be impossible. A condition precedent may become impossible to be performed when the subject matter is destroyed or there is no means to fulfill such a condition etc. For example- A agreed to sell his property to B while putting a condition of B giving him a horse in return, But the horse died before the transfer could be made. Here it becomes impossible.

Unlawful

The condition is referred to as unlawful when it is of a nature that is forbidden by law or opposed by public policy. A transfer depending on unlawful or immoral conditions is also considered to be void in nature. For example- A agrees to transfer his property to B, provided B robs a bank. Here the condition precedent is theft, which is unlawful in nature. Hence it will be considered to be a void condition.

Doctrine of Acceleration

Let’s understand this with an example. M, V, A, S, and X. Let us assume that M has created an interest in the property for V for a lifetime, and after the death of V, the property will transfer to A, then to S, and then to X. Now in this chain, if ‘A’ dies, then instead of breaking the chain of transfer, the property will automatically transfer to S. In this way, the interest which ‘X’ will get is before the time in normal conditions when A would have been alive. So here, there is an acceleration in transfer for the transferee.

In cases where the prior interest fails (in the above example, A’s death), then subsequent transfer operates. The interest is accelerated. Ulterior disposition shall take effect on the failure of prior disposition. Section 27, paragraph 2 clearly provides that ulterior disposition will take effect in the case when prior disposition fails in the prescribed manner. The doctrine of acceleration is a rule of construction. When a prior transfer is dependent on the fulfillment or non-fulfillment of a condition and if the prior condition fails, then ulterior disposition shall take effect i.e. vested interest will be created of another person in whose favor the interest was created in the same transaction. In such a case ulterior transfer instead of failing is accelerated due to the failure of the prior transfer. Thus, it can be said that where interest is created on the transfer of property in favor of one person and an ulterior disposition has been created in the same transaction of the same interest in favor of another person, then if the prior transfer fails, then in such case, the ulterior disposition takes place upon its failure rather than ceasing the transfer at the stage of failure of a prior transfer.

Conditional transfer

The relevant provisions of conditional transfer are mentioned under Sections 25 to 34 of the Transfer of Property Act. The conditional transfer is a kind of transfer that is dependent on some conditions which are attached to it. That is the reason when the vesting of interest is created by way of transfer and it always depends on the fulfillment as well as non-fulfillment of a condition, it is only known as a conditional transfer. A condition that is attached to transfer will always depend on the happening as well as not happening of the event. The provisions for conditional transfer have been provided in Sections 25-34 of the Transfer of Property Act. Conditional Transfer as can be inferred from the name itself means a transfer that is dependent on a condition attached to it. That is when the vesting of an interest created by a transfer depends on the fulfillment or non-fulfillment of a condition. A condition can be a condition precedent, condition subsequent, or conditional limitations.

Conclusion

It can be concluded that law favors vesting and not divesting. The general principle is that where a transfer is made on a condition precedent, the transfer will fail unless the condition is first fulfilled. It is very necessary in order to fulfill those conditions as once the condition is fulfilled then it will become vesting and the person would be able to enjoy his or her rights over that transfer. Once the condition is fulfilled then no one can take the right of ownership, possession, or enjoyment from the person.

The Transfer of Property Act favors vesting interest and not divesting, and the same can be inferred from the provisions that have been elucidated in the Act. This can be observed for both vested as well as contingent interest that is transferred to the transferee based on different provisions.

References

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Critical analysis of cyber crime in India

By

Sneha Mahawar

-

October 29, 2021

0

This article is written by Srishti Sinha, a student at the Institute of Law, Nirma University. This article deals with the laws governing cybercrime and landmark judgments related to cybercrime in India.

Introduction

As technology advances, humans have become reliant on the internet for all of their requirements. The internet has provided us with quick access to everything while being seated in one location. Every imaginable thing that one can think of can be done through the medium of the internet, including social networking, online shopping, data storage, gaming, online schooling, and online jobs. The internet is used in nearly all aspects of life. As the internet and its associated advantages grew in popularity, so did the notion of cybercrime. Different types of cybercrime have evolved with the increasing dependency on the internet. There was a dearth of understanding about the crimes that might be perpetrated over the internet a few years ago but today in terms of cybercrime, India is not far behind the other countries, where the rate of occurrence of cybercrime is also on the rise.

According to the r eport of Norton Lifelock, a cybersecurity software company, in the last 12 months, 27 million Indian adults have been victims of identity theft, and 52 percent of people in the nation are unaware of how to defend themselves against cybercrime.

Further, on August 30, 2019, the Ministry of Home Affairs launched the National Cyber Crime Reporting Portal to offer people a centralized system for reporting all sorts of cybercrime occurrences online, with a special focus on cybercrimes against women and children. According to the statistics of the portal, 3,17,439 cybercrime events and 5,771 FIRs have been recorded in the country since its establishment up to February 28, 2021, with 21,562 cybercrime occurrences and 87 FIRs in Karnataka and 50,806 cybercrime incidents and 534 FIRs in Maharashtra. We can see from the data that the number of victims of cybercrime is not a small figure hence, cybercrime is an issue of serious concern.

Cybercrime : an overview

Cybercrime is defined as illegal behaviour involving a computer, a computer network, or a networked device. Most, but not all, cybercrime is conducted by profit-driven cybercriminals or hackers. Some cybercrimes target computers or devices directly in order to harm or disable them, while others target computers or networks in order to disseminate malware, unlawful information, pictures, or other things. Some cybercrime targets computers in order to infect them with a computer virus, which subsequently spreads to other computers and, in some cases, whole networks.

How do cybercrimes work

Cybercrime may start everywhere there is digital data, opportunity, or motivation. From a lone user engaging in cyberbullying to state-sponsored attackers, cybercriminals come in many shapes and sizes. Cybercrime does not happen in a vacuum; it is, in many respects, a dispersed phenomenon. That is, hackers frequently enlist the help of other parties to execute their schemes. This is true whether it’s a malware developer selling code on the dark web, a distributor of illicit medicines utilizing cryptocurrency brokers to keep virtual money in escrow, or state threat actors stealing intellectual property through technological subcontractors. Cybercriminals employ a variety of attack vectors to carry out their cyberattacks, and they are always looking for new ways to achieve their objectives while evading discovery and prosecution.

Malware and other forms of software are frequently used by cybercriminals, but social engineering is typically a key component in the execution of most types of cybercrime. Phishing emails are a key component of many forms of cybercrime, but they’re especially crucial in targeted assaults like business email compromise, in which an attacker impersonates a firm owner through email in order to persuade workers to pay false bills.

Types of cybercrimes

Cybercrime can be conducted by targeting anything useful for a person or a country and hence, cybercrimes are divided into certain types. Let us have a look at these types accordingly.

Identity theft

When a criminal obtains access to a user’s personal information, they can use it to steal money, access private information, or commit tax or health insurance fraud. They can also use the individual’s name to create a phone/internet account, organize criminal activities, and claim government benefits in your name. They might do so by breaking into users’ passwords, stealing personal information from social media, or sending out phishing emails.

Phishing

Hackers send malicious email attachments or URLs to users in order to obtain access to their accounts or computers in instances of such attacks. Many of these emails are not identified as spam because cybercriminals are getting more established. Users are duped into clicking on links in emails that suggest they need to change their password or update their payment information, allowing thieves access to their accounts.

Social Engineering

Criminals use social engineering to make direct contact with you, generally via phone call or email. They generally act as a customer service person in order to earn your trust and obtain the information they want. This information can include your passwords, your employer’s name, or your bank account number. Cybercriminals will gather as much information about you as possible on the internet before attempting to add you as a buddy on social media sites. They can sell your information or open accounts in your name after they obtain access to an account.

Cyberstalking

Cyberstalking is something in which the criminals stalk you on your social media accounts to gather your private information so that they can use that information to get benefits in your name. They can gather your information in a number of ways. They could do so by gaining access to users’ credentials, stealing personal information from social media, or sending out phishing emails. Threats, libel, slander, sexual harassment, and other activities to control, influence, or intimidate their victim, are all examples of this type of behaviour.

Botnets

Botnets are networks made up of infected machines that are managed from afar by hackers. These botnets are then used by remote hackers to transmit spam or attack other computers. Botnets may also be used to conduct harmful operations and serve as malware.

Prohibited content

In this type of cybercrime, the cybercriminals share those contents which are offensive and highly disturbing. Here, offensive and disturbing content is not only limited to sexual activities but also includes violent videos, criminal videos, and videos related to terrorist activities. This sort of information may be found on both the public internet and the dark web, which is an anonymous network.

Cybercrime under IPC and the IT Act

There are a lot of statutes and regulations enacted by various authorities that penalize cybercrime. The Indian Penal Code, 1860 (IPC) and the Information Technology Act, 2000 (IT Act) both penalize a variety of cybercrimes and unsurprisingly, many clauses in the IPC and the IT Act overlap.

Laws governing cybercrimes in India

Cybercrime refers to illegal activities in which a computer is used as a tool, a target, or both. Traditional criminal actions such as theft, fraud, forgery, defamation, and mischief, all of which are covered under the Indian Penal Code, might be included in cybercrimes. The Information Technology Act of 2000 addresses a variety of new-age offences that have arisen as a result of computer abuse. The Indian Penal Code 1860, the Bankers’ Books Evidence Act 1891, the Indian Evidence Act 1872, and the Reserve Bank of India Act 1934 were all swiftly amended by the IT Act. The Amendments brought under the Sections of these Acts were to make them compliant with new technologies. By establishing stringent legal recognition, these modifications attempted to tone down all electronic transactions/communications, bringing them beneath the radar.

Landmark judgments

The following judgments are the landmark judgments on cybercrime in India. The first cybercrime occurred in 1992 when the first polymorphic virus was released. The case of Yahoo v. Akash Arora (1999) was one of the earliest examples of cybercrime in India. The defendant, Akash Arora, was accused of utilizing the trademark or domain name ‘yahooindia.com,’ and a permanent injunction was sought in this case. The case of Vinod Kaushik and others v. Madhvika Joshi and others (2012) is the other example in which the court held that according to Section 43 of the IT Act, 2000, accessing the e-mail accounts of the spouse and father-in-law without their consent is prohibited. In 2011, a decision was reached in this matter. All of these instances deal with the question of how cybercrime has evolved, with a focus on India.

CBI v. Arif Azim (Sony Sambandh Case) (2013)

In 2013, India had its first cybercrime conviction. It all started when Sony India Private Ltd, which owns the website www.sony-sambandh.com and targets Non-Resident Indians (NRI), filed a complaint. NRIs may use the service to transfer Sony items to friends and family in India after paying for them online.

The firm guarantees that the items will be delivered to the intended recipients. In May 2002, someone using the name Barbara Campa went onto the website and bought a Sony Color Television and cordless headphone. She provided her credit card information and asked for the items to be sent to Arif Azim in Noida. The credit card company cleared the payment, and the transaction was completed. The products were delivered to Arif Azim after the business completed the necessary due diligence and inspection processes.

The firm took digital photos of Arif Azim accepting the package at the time of delivery. The transaction was completed at that point, but after one and a half months, the credit card company told the firm that the purchase was illegal since the true owner had denied making it. The firm reported internet cheating to the Central Bureau of Investigation (CBI), which opened an investigation under Sections 418, 419, and 420 of the Indian Penal Code. Arif Azim was detained once the incident was examined. Arif Azim obtained the credit card number of an American national while working at a contact centre in Noida, which he abused on the company’s website, according to investigations.

In this one-of-a-kind cyber fraud case, the CBI retrieved the colour television and cordless headphone. The CBI had enough evidence to establish their case in this instance, therefore the accused acknowledged his guilt. Arif Azim was found guilty under Sections 418, 419, and 420 of the Indian Penal Code, marking it the first time that a cybercriminal has been found guilty. The Court, on the other hand, believed that because the accused was a young kid of 24 years old and a first-time offender, a compassionate approach was required. As a result, the Court sentenced the accused to a year of probation. The decision has enormous ramifications for the entire country. Apart from being the first cybercrime conviction, it has demonstrated that the Indian Penal Code may be effectively used for some types of cybercrime that are not covered under the Information Technology Act 2000.

Pune Citibank Mphasis Call Center Fraud (2005)

In 2005, $ 3,50,000 was fraudulently moved from four Citibank accounts in the United States to a few fake accounts over the internet. The workers won the clients’ trust and got their PINs under the idea that they would be able to assist them in dealing with tough situations. Instead of decoding encrypted software or breaching firewalls, they were looking for flaws in the MphasiS system.

According to the Court, the defendants, in this case, are MphasiS contact centre ex-employees. Every time an employee enters or exits, they are examined. As a result, the staff had the numbers memorized. SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, was used to transmit the money. Unauthorized access to the consumers’ electronic accounts was used to commit the crime. As a result, this case is classified as a “cybercrime.” The IT Act is wide enough to cover these types of crimes, and any IPC infarction involving the use of electronic documents can be prosecuted on the same level as crimes involving traditional materials.

Because of the kind of illegal access that is involved in committing transactions, the Court determined that Section 43(a) of the IT Act, 2000 is relevant. The defendants were additionally charged under Sections 66 of the Information Technology Act, 2000, as well as Sections 420, 465, 467, and 471 of the Indian Penal Code, 1860.

Nasscom v. Ajay Sood & Others (2005)

The National Association of Software and Service Companies (Nasscom), India’s largest software association, was the plaintiff in this lawsuit. The defendants ran a placement firm that specialized in headhunting and recruitment. The defendants prepared and sent emails to third parties in the name of Nasscom in order to collect personal data that they might utilize for headhunting reasons. According to the Court, the plaintiff’s trademark rights were recognized by the High Court of Delhi, which issued an ex-parte ad interim injunction prohibiting the defendants from using the trade name or any other name that is confusingly similar to Nasscom. The defendants were also barred from claiming to be affiliated with or a part of Nasscom.

During the process of search, the defendants, under whose names the illegal emails were sent, were revealed to be fake identities fabricated by an employee on the defendants’ orders in order to evade detection and legal action. The defendant was liable to pay damages to the plaintiff for violating his trademark rights.

This was the landmark case in which the Court declared that “phishing” on the internet is an illegal activity and entails injunction and recovery of damages.

Poona Auto Ancillaries Pvt. Ltd., Pune v. Punjab National Bank, HO New Delhi & Others (2013)

In 2013, Maharashtra’s IT secretary Rajesh Aggarwal ordered Punjab National Bank (PNB) to pay Rs 45 lakh to the complainant Manmohan Singh Matharu, MD of Pune-based business Poona Auto Ancillaries, in one of the biggest compensation awards in a judicial adjudication of a cybercrime case. After Matharu responded to a phishing email, a fraudster deposited Rs 80.10 lakh from his PNB account in Pune. Since he reacted to the phishing email, the complainant was requested to share the blame, but the bank was deemed responsible owing to a lack of appropriate security checks against fraud accounts created to deceive the Complainant.

State of Tamil Nadu v. Suhas Katti (2004)

The lawsuit stems from an obscene, defamatory, and harassing remark against a divorced lady that was posted on a Yahoo chat group. The accused also forwarded emails to the victim seeking information using a fake email account he created in the victim’s name. Due to the publishing of the message, the lady received a slew of unpleasant phone calls from people who thought she was soliciting.

The defendant paid the fine and was sent to Chennai’s Central Prison. This is the first case in India to be convicted under Section 67 of the Information Technology Act of 2000.

Conclusion

The IT Act and the Rules promulgated thereunder regulate the cyber law regime. When the IT Act is unable to provide for any specific sort of offence or if it does not include exhaustive provisions with regard to an offence, one may also turn to the provisions of the Indian Penal Code, 1860. However, the current cyber law system is still insufficient to cope with the wide range of cybercrimes that exist. With the country advancing towards the ‘Digital India’ movement, cybercrime is continuously developing, and new types of cybercrime are being added to the cyber law regime on a daily basis. So, there is a need to bring some amendments to the laws to reduce such crimes.

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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Defamation suit by Dolce and Gabbana

By

Sneha Mahawar

-

October 29, 2021

0

This article is written by Sarthak Kulshrestha, a student of B.A. LLB. from Jagran Lakecity University, Bhopal. The article gives an overview of defamation and deals with the defamation suit filed by Dolce & Gabbana against the owners of Diet Prada.

Table of Contents

Introduction

A defamation suit has been brought by the Italian fashion corporate giant, Dolce & Gabbana (D&G) against two U.S fashion bloggers, Liu and Schuyler who have re-posted the alleged inconsiderate racist comments of one of the D&G designers. The lawsuit has been filed due to the publication of such comments through Instagram posts, videos, etc. by Diet Prada which a lot of people shared and the same spread hate against the D&G brand. This injured the reputation of the Italian brand as claimed by its owners.

The suit has been filed in an Italian Court under which Dolce & Gabbana has sought $600 million as damages from the defendants. This article will give clarity as to what defamation is, and explain the entire case in detail with the discussion about the contentions of both parties.

A brief on defamation

Defamation is a legal term that means the act of disrupting someone by attacking his/her well-established reputation in society. This is characterized by the publication of a false statement about a person and communication of the same to any third person to bring him/her to disrepute.

A suit of defamation is generally filed when a false statement is published by a person without the knowledge of the person about whom such a publication is made. A very important element of defamation is that mere causing hurt to another person’s feelings does not defame the person unless his reputation is injured. For example, Mr. A makes a derogatory remark about Mr. B in front of his colleagues, which hurts the feelings of Mr. B but his reputation is not at all damaged in the eyes of other people present there, so in such a case defamation suit cannot be filed against Mr. A as his remark did not injure the reputation of Mr. B which is a necessary requirement of defamation.

It is to be kept in mind that self-publication doesn’t count. For example, after a private conversation, the plaintiff tells everyone that he knows about the conversation with the defendant, in such a case, because the plaintiff self-published the false statement, the element of publication of a statement is not satisfied. The defendant must be the person who made the statement. However, there is an exception known as the repeater rule which says that if someone repeats a defamatory statement, the repeater is also liable for defamation.

Another example, suppose a stranger overhears the conversation accusing the plaintiff of murder. Following the eavesdropping, the stranger then sends an email, quoting what was said. In such a case the stranger is liable for defamation because he is a repeater.

There are two legal sub-categories of defamation or they can also be called the two forms of defamation, they are:

Slander, and
Libel.

Slander is characterized by the oral publication of a defamatory statement in the presence of a third person that ultimately injures the reputation of such a person. The speaker of such a statement is supposed to know or should have known that statement is false to classify it as slander. In a case of slander, the burden of proof lies on the plaintiff.

This means that the defendant does not have to prove the truth in the remarks he made, instead the plaintiff has to prove that the defamatory statements that were made against him by the defendant were false.

On the other hand, libel is a form of defamation that takes place by the communication of defamatory remarks against someone expressly in writing, pictures, signs, or in any other physical form which ultimately diminishes the reputation of the person and exposes him/her to public hatred.

In the present case, Dolce and Gabbana filed a suit of defamation characterized as libel against the owners of an Instagram page, Diet Prada, that caused a loss in revenue after it published a critical post about the brand. The counsel of Diet Prada had to contemplate much on the communication and style of the content of Diet Prada’s posts, just because of the complexities present in Italian law. Italian law includes the communication of the fact to the plurality of the people which injured the reputation of the plaintiff. Italian courts also consider social utility and restraints, which means that the information must be passed in a civilized manner that does not violate the minimum dignity of human beings.

Facts of the present case

In the year 2018, Dolce & Gabbana started one of its advertising campaigns for the runway show in China. The advertisement came into controversy on the grounds of cultural insensitivity which proved to be offensive for the Chinese folk. The controversial advertisement was featuring a Chinese woman in the attire of the Dolce & Gabbana brand who was shown trying to eat Italian cuisine viz. pizza, spaghetti, and cannoli with the help of chopsticks. A man was speaking in the Mandarin language in the background of the video but in a condescending tone. A lot of Chinese people found it very disrespectful and mindless. The Dolce & Gabbana brand presented the advertisement exhibiting the cultural differences between Italian and Chinese styles in a humour play, but it did not please the Asians, especially the Chinese people.

After a short period, some racist and anti-Asian remarks originated from the official Instagram page of the Dolce & Gabbana brand, which were purported to be made by Stefano Gabbana in a private chat. The designers claimed that their account was hacked. Later, both the designers, Domenico Dolce and Stefano Gabbana released a video in which they attempted to cart off the allegations and apologized for the insensitive comments about Asians. They also clarified that they respect the Chinese culture and did not have any intention to ridicule the Chinese culture or style through their advertisement as a medium.

As a result of the backlash, the show of Dolce & Gabbana was cancelled which was supposed to be organized in November 2018 in Shanghai. Not only was the show cancelled, but also the retailers revoked Dolce & Gabbana merchandise. Later, the Italian firm faced a boycott in Asia.

Right from the advertisement controversy to the boycott which the Italian brand faced in Asia, an influential Instagram fashion account, Diet Prada was vigilantly observing the backlash which the brand faced. And not so surprisingly, it was Diet Prada who broke the news about the contentious advertisement video. When Diet Prada released a set of direct messages via Instagram, it showcased Stefano Gabbana saying racist things. It did not paint Stefano Gabbana in a good light and the whole circumstance led to a huge loss of money for Dolce & Gabbana. A lot of esteemed celebrities cancelled their campaigns with Dolce & Gabbana. Stefano Gabbana defended the leak of such racist comments by saying that their Instagram account was hacked but due to the same, the reputation of Dolce & Gabbana was injured to a great extent. The people started riots in China, destroyed and looted the D&G showrooms across the country.

The posts of Diet Prada with the trending hashtag #boycottdolce on its page were seen by a lot of people and a kind of chain reaction of such posts started. People shared many posts, made videos on YouTube and other platforms, and shared it a lot. Following this, Dolce & Gabbana had to take down the video of the advertisement from all their social media pages.

Defamation suit

There was the cancellation of the runway show, many big celebrities from the brand also distanced from the brand, and also the reputation of Dolce & Gabbana was also damaged in such a big market of China. All of this allegedly happened due to the Instagram posts of the fashion watchdog, Diet Prada. Thus, the Italian brand opted to file a defamation suit against the Tribunale di Milano against Diet Prada operators, Tony Liu and Lindsey Schuyler.

In the defamation suit filed in 2019, D&G asks for over $600 million in damages from two U.S. fashion bloggers who reposted the comments. The owners of D&G have alleged that Diet Prada on its Instagram page, having more than 2.5 million followers, has uploaded posts consisting of serious and repeated defamatory content. This was aimed to damage the reputation of the Italian brand and the lawyer of Dolce & Gabbana maintains the legality of the damages in a broken-down form, as $450 million to reinstate the brand image that was intact before 2018, € 3 million as damages. At the same time, Dolce & Gabbana also claims that Mr. Gabbana was damaged in his capacity for €1 million as a result of Diet Prada’s allegedly defamatory attack on the brand. Apart from this, the brand also seeks $8.6 million for the cancellation of the show in Shanghai, another 8.6 million for personnel expenses, and 89.6 million for lost sales in Asia between November 2018 and March 2019 due to the spread of outrage against the brand among Asians.

The defamation lawsuit is seen as outrageous at different levels by the supporters of Diet Prada who are defending Liu and Schuyler. And through an Instagram post, Diet Prada broached the news about the lawsuit filed against them by D&G. They said that they seek the protection of Asians in the western world and are a stopper on anti-Asian or racist opinions, and for that very purpose they uploaded the posts which seemed objectionable to D&G. They emphasized their freedom of speech and expression in defense.

Previous instances of controversies related to D&G

In defense, Liu and Schuyler lodged a reply that foregrounded some past instances when Dolce & Gabbana had been involved in controversial advertisements or promotions. Diet Prada defended their action of criticizing the Italian brand with the help of such instances. In its 2007 gang-rape advertisement, D&G depicted women as helpless victims, and also shows violence linked with fashion.

Another instance is of an advertisement of D&G, in which a woman was depicted as victimized by the dominance of men over her, just to include violence in the fashion industry. Apart from these instances, Diet Prada also highlighted the tax evasion scam of D&G when the duo was sentenced to prison for 20 months as they have been avoiding 200 million Euros ($276 million) in taxes. They paid their taxes in Luxembourg and handed over 40 million Euros to the Italian taxman. The frankness of Diet Prada regarding the important issues and their influence on social media invites criticism for insensitive and unethical advertisement campaigns of various brands.

Jurisdiction of the lawsuit in question

The counsel for Liu and Schuyler argues upon the incapacity of D&G to sue the owners of Diet Prada individually. They claim that the posts which are being considered as objectionable by the plaintiff are not attributed to the owners of Diet Prada (defendants) in the case, but their corporate entity, THEDIETSODA LLC. The counsel for Liu and Schuyler said that the lawsuit is not valid since their corporate entity has not been named as the defendant.

The jurisdiction is also in question as per the counsel for defendants. It is contended that the plaintiff company is Dolce & Gabbana U.S.A. Inc., and the defendants, owner of Diet Prada, are also based in the U.S.A. So, Liu and Schuyler maintain that the case, if it has to be filed for alleged defamation, the same has to be done in the United States and not in Italy. They have asked the Court to ponder upon the lack of jurisdiction for an Italian Court and give the declaration of the jurisdiction in favour of a New York forum or, in favour of Shanghai forum.

Conclusion

The defamation suit against the owners of Diet Prada is in itself questionable because after the advertisement was derogated on a large level, D&G designers issued a public apology for the same. But still, they filed a defamation suit seeking a huge amount of damage of $600 million. This step of Dolce & Gabbana is seen as a way to silence Diet Prada. The problem in the lawsuit is that D&G did not sue not Diet Prada, the company but they sued the two individuals who own it, and that doesn’t seem justified. There is a considerable difference between the cases when a company is sued and when the individuals are sued. As in this case, if D&G just sued Diet Prada, the company, then if they lose, they would have to pay $600 million and since it does not have enough funds, the company would have gone bankrupt and that is the worst which one can imagine. But when the individuals are sued, as D&G has actually filed the suit against them, and the individuals lose, then the plaintiff can go for the recovery of their personal assets and recoup the funds. That is not at all justified and may prove to be troublesome for both individuals.

Therefore, if D&G proves that their Instagram account was hacked and they did not mean to give such comments, then Diet Prada owners would be left with no choice but to accept the orders of the Court. However, if the jurisdiction concerning the matter shifts and TheDietSoda, the corporate entity of Diet Prada is adjudicated as the defendant in the case, then Diet Prada could be saved from the excessive demands of the big fashion corporate, Dolce & Gabbana.

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.

Sarvesh Bisaria vs Anand Nirogdham Hospital Pvt Ltd : case analysis

By

Oishika Banerji

-

October 29, 2021

0

This article has been written by Alfaiz Nizami pursuing the Diploma in Business Laws for In-House Counsels from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho).

Table of Contents

Introduction

“It is not the enactment but the observations of the laws, that creates the character of the nation” – Calvin Coolidge.

India is becoming a hub for start-ups and businesses but whenever there is some consideration there is bound to be a dispute. The shoulders of the Indian judiciary, especially High courts and Supreme court are burdened with cases related to negotiable instruments. From time to time courts have been giving landmark judgments related to this law, so that the subordinate courts are able to deal with matters concerning negotiable instruments in a more steady and efficient manner. Article 227 in the Constitution of India has the power of superintendence over all courts by the High Court throughout the territories correlation to which it practices jurisdiction. However, its decisions are seen kept at equal footing by the courts of other states most of the time. In the present case Sarvesh Bisaria vs Anand NirogDham Hospital Pvt Ltd, the High court of Delhi passed a landmark judgment concerning a criminal case filed u/s 138 of negotiable instruments act, 1881 (hereinafter be referred as “act”). The judgment clarifies a principle of cognizance, that is, a mere cognizance by metropolitan magistrate u/s 138 of the act would not automatically follow a decree against the accused. In this article, I will discuss the brief facts of the above case and analyze the judgment of the Honorable High court.

Brief facts of the case

The plaintiff states that the plaintiff and respondent knew each other well and had family/friendly relations with each other. In lieu of such friendly relations the petitioner:

Rendered a loan of Rs 18 ,000,00 to Shri Hari Om Anand (hereinafter be referred as the ‘respondent’) (managing director of the respondent)/ (sole proprietor of Anand Medical store) – 6^th November, 2015
Rendered another loan of Rs 3,20,000,00 to respondent –
The plaintiff was also rendering legal consultation to the respondents.

According to the petitioner, the respondent issued six cheques after deducting TDS. The plaintiff filed a criminal complaint under Section 138 of the Negotiable Instruments Act after the cheques were dishonoured on presentation due to a lack of funds. The plaintiff also claims that a notice was sent dated 6th April, 2019, however the respondent did not reply to the notice.

Thereafter, a criminal case was initiated under Section 138 of Negotiable Instruments Act by the plaintiff(Sarvesh Bisaria) against the respondent (Anand NirogDham Hospital Pvt Ltd), along with the Managing Director and other directors of the respondent.

While the case was pending on the summons stage, the plaintiff sent a Demand Notice on 10th August, 2019 thereby claiming Rs.1,50,00,000/- along with the unpaid TDS of Rs.15,00,000/- and interest. However, the respondent failed to reply to this notice as well.

Therefore, a suit for recovery was filed of Rs 1,65,75,000/- under Order XXXVII of the Code of Civil Procedure, 1908.

The respondent after a fresh notice/summon was served on him, finally appeared and furnished a corporate guarantee with immovable property documents. The court thereby lifted the restriction on his bank account.

This petition before the hon’ble court has been filed challenging the two orders of the trial court in which comprise:

Permission to place photocopies of the immovable property as security deposit was granted by the trial court – dated 18^th January, 2020.
Permission to defend the case was granted to the respondent – dated 24^th January, 2020.

The relief sought for order dated 18^th January, 2020 was satisfied by the order dated 4th December, 2020, when a fixed deposit of Rs 1.5 was deposited.

Issue

Whether the trial court was right in accepting the photocopies of the immovable property as security deposit?

Whether leave to defend should be granted?

Legal provisions

Following are some sections that were referred to in the study of the case-

Section 138 of the Negotiable Instruments Act

Section 138 of the Negotiable Instruments Act is a penal provision that deals with the punishment of dishonour of cheque due to non-payment or insufficient balance. It defines negotiable instruments as “a promissory note, bills of exchange or cheque payable either to order or to bearer”. A negotiable instrument is a written document that guarantees its bearer the payment on demand.

According to Section 138 of the act, in order for a cheque to be considered as dishonoured it

must satisfy the following conditions:

A person must have drawn a cheque for payment of money to another for the discharge of any debt or other liability;

That cheque has been presented to the bank within a period of Six months (i.e., 180 days);

That cheque is returned by the bank unpaid, either because of insufficient funds or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;

The payee makes a demand for the payment of the money by giving a notice in writing to the drawer within thirty (30) days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

The drawer fails to make payment to the payee within fifteen (15) days of the receipt of the notice.

The cause of action arises only when the drawer of cheque fails to make payment within 15 days of the receipt of the notice.

Section 251 in the Code of Criminal Procedure, 1973

Under Section 251 in the Code of Criminal Procedure, the accused is brought before the Magistrate and the facts of the case of which he is accused are stated to him. He is asked if he pleads guilty or has anything to say in his defence, but it shall not be obligatory to frame a formal charge.

Arguments by the petitioner’s side

The petitioner’s counsel argued before the court that the signature of those six cheques are not disputed in regard to which the proceedings u/s 138 are pending. He further argued that a cognizance has been taken by the court and a notice u/s 251 crpc has also been served therefore it is to presumed that the accused is guilty and suit should be decree under order XXXVII CPC.

Arguments by the respondent’s side

The respondent’s counsel argued that the leave to defend was granted rightfully to them. He claims that the cheque book was issued in 2013, and the six cheques were plainly in the custody of the plaintiff for several years, indicating that they were offered as security rather than for any legal duty. There was no document to establish a lawyer-client relationship, and no retainership agreement had been submitted, thus the petitioner’s assertion that he was entitled to Rs.1.50 crores for legal help is ambiguous.

The counsel further argued with respect to the payment of 30 lacs for legal consultancy to the petitioner, by stating that the payment was not made by the hospital but from the account of Shri Hari Om.

Judgment

The court after examining all the issues held that:

The petitioner’s grievances on the order dated 18^th January, 2020 are no longer valid as an FDR for a sum of Rs 1.5 crores has been furnished.

The issue with regard to leave to defend is also settled, as the plaintiff himself has admitted in his plaint regarding loans being rendered to the respondent. Therefore, the fact that there is some business transaction is not disputed. However, the plaintiff has contended that the loan is a separate transaction and not to be confused with the legal consultancy fees. The court observes that this matter needs to be dealt in the trial.

Whether the invoices raised were for legal consultancy fees is also a matter which needs to be proved in trial.

The Hon’ble court has justified its order and stated:

“With regard to the submissions made by the learned counsel for the petitioner/plaintiff, on taking cognizance of an offence by the learned MM under Section 138 of the N.I. Act automatically a decree against the respondent/defendant should follow, cannot be accepted, as cognizance leads to trial and the accused can also get acquitted”

Therefore, the petition was declared devoid of merit and got dismissed.

Analysis and conclusion

The Hon’ble Court was right in dismissing the petition as the case involves issues related to facts and not law. Therefore, there was no ground for the trial court to not allow the leave to defend to the respondent. The liability of the parties needs to be decided through trial. It is to be followed as a principle that mere cognizance of a criminal complaint u/s 138 of the act will not render a decree against the accused. According to Section 143(3) of the Act, trials are to be completed within 6 months. If the facts of the case prima facie establish existence of dispute, then the courts should follow the procedure established by law and give their judgments based on evidence placed on records.

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Everything you should know about the immigration laws of Canada

By

Diganth Raj Sehgal

-

October 29, 2021

0

foreign-trained-lawyers-in-Canada-NCA-photo — Image source - https://bit.ly/3j4sHcQ

The article is written by Harmanpreet Kaur from Amity University, Kolkata. The article will give an insight into the immigration laws of Canada.

Table of Contents

Introduction

Immigration policy is a decisive element of a country’s policy-making and development process. In each country, immigration has evolved through history that has reflected the nation’s historical development. However, the immigration policy not only reflects the past or historical development of a country or a nation, but it also precisely adjusts and balances contemporary, social, economic, and political events and developments. The globalization of trade, capital, and talent has contributed to the transformation of the concepts of immigration policies and systems related to governance, integration, and citizenship.

All around the past decades, the countries in the world have witnessed a skyrocketing increase in the number of immigrants. The period from 1960 to 2005 has witnessed an increase of about two hundred million migrants worldwide. Predominantly, Canada is the country that has attracted the highest number of immigrants in its provinces because of the adequate sophisticated standards of living. The Canadians have embraced immigration with a sort of civility and open-mindedness, and this act has either been envied or has been respected and accepted by all the other countries. Other foreign and neighboring countries have made efforts and given commitments to immigration post the World Wars to ensure security to the civilians and the foreign nationals. Canada has retained a high level of immigration without any anti-immigrant backlash at the grassroots levels. According to the study conducted in 2010 by Transatlantic Trends, Canada had admitted the highest number of immigrants in the last 20 years. According to recent reports by Statistics Canada study, 82 percent of the entire growth in the population has been due to immigration. The immigration policies have been praised by countries because of the introduction of new laws and legislation for the immigrants by the government, thereby contributing to the nation’s economic and social development. The article will throw light on the Canadian immigration laws.

Understanding the meaning of immigration

The dictionary meaning of immigration states that “it is the act of travelling into another country for permanent residency”. In other words, it refers to the process in which the individuals of a native nation-state migrate to a foreign nation-state either to become a permanent resident, temporary resident or to obtain citizenship of that particular nation-state. The process of immigration would be of great importance and benefit to that particular nation-state in terms of social, cultural, and economic variations. According to a 2015 report, the United States of America had a larger immigrant population than any other country. The new statistics Canada study of 2020 had estimated that Canada’s population grew by 76,000 in the initial months of 2020. Consequently, there was an increase of about 82 percent in the population in Canada by immigration.

Immigration law

The laws that exclusively govern the immigration of a particular nation are referred to as the immigration laws. They incorporate national statutes, regulations, and legal precedents that govern immigration and deportation from a country. Canada has had a long history of legislation for immigration.

Legislation governing immigration in Canada

The laws that govern immigration in Canada can be referred to as Canadian immigration laws. Canada has had a long history of laws and legislation concerning immigration since 1869. The immigration laws and legislation in Canada have evolved and changed with the changing times in society. The change in laws is affected by social, cultural, and political reliance. The change in laws has been occurring since the 19th century, which was either due to discrimination based on race, and national origin or any other determining factor. The immigration laws have been reformed to promote cultural diversity among the Canadian immigrants.

Let’s take a look at the immigration laws in Canada.

The Immigration Act, 1869

The Immigration Act, 1869 was the first legislation introduced by the Parliament of Canada in 1869. The Act was introduced with the main aim and objective to ensure the safety of the immigrants during their transit to Canada and to provide protection to the immigrants from any kind of exploitation on their arrival. But the Act was not a successful one as it failed to comply with the provisions of equality in the 19th century.

The Royal Commission on Chinese Immigration, 1885

The Royal Commission on Chinese Immigration Act was passed by the government in 1885. The main aim and objective of the Act were to regulate Chinese immigration to Canada. The Act prohibited the entrance of Chinese immigrants to Canada. They were restrained from entering the provinces of Canada because the Canadians believed that the Chinese laborers and workers were immoral, prone to diseases, and were incapable of assimilation.

The Chinese Immigration Act, 1885

The Chinese Immigration Act, 1885 was passed based on the recommendations from the Royal Commission on Chinese Immigration Act, 1885. The Act was the first segment of the primary legislation that proposed provisions excluding immigrants based on ethnic origin i.e., to exclude the Chinese from entering the territory of Canada. The Act also aimed to reduce the number of Chinese immigrants in the provinces of Canada.

The Immigration Act, 1906

The Immigration Act, 1906 was introduced by the Parliament with more restricted policies of immigration. The Act enumerated the categories of the immigrants that were to be prohibited from entering the provinces of Canada, formalized the processes of deportation, and allocated the government with the authoritative powers and abilities. The Act did not specify the provisions restricting immigrants based on culture, race, and caste, but accorded the federal government with the powers to prohibit any classes of immigrants to the provinces of Canada.

The Immigration Act, 1910

The Immigration Act, 1910 was passed in the year 1910 by the Canadian Parliament. The Act was passed to expand the list of prohibited immigrants to Canada. The federal government was formulated with the discretionary powers and functions to make indiscriminate laws concerning immigration and deportation. The Act also introduced the concepts of domicile, permanent residency, and deportation in the immigration laws of Canada.

The Naturalization Act, 1914

The Naturalization Act, 1914 introduced more stringent measures for naturalization in Canada.Naturalization is the legal act in which the non-citizens of a country acquire citizenship or nationality per the laws of that particular nation. The basic rights of a citizen include the right to enter or leave that particular nation-state. The Act introduced the concept and process of naturalization. The advantage of naturalization was that it would give the same rights and privileges to the immigrants after they get the status of a Canadian citizen and was also given the power to vote. The secretary of state was given the authority to make decisions related to naturalization and had discretionary powers in terms of granting certificates or revoking citizenship if obtained by fraud.

The Immigration Act Amendment, 1919

The Immigration Act Amendment, 1919 was amended after the First World War due to the social and economic turmoil. The government added more confining restrictions to the immigration policy to protect the country from the threats and other perils from the other native and neighboring countries. The Act also prohibited the immigrants from entering Canada who fought against them during the First World War.

The Canadian Citizenship Act, 1947

The Canadian Citizenship Act, 1947 was introduced to provide citizenship to persons regardless of their country of origin i.e, the immigrants. The main aim of the Act was to alleviate the racial and ethnic tensions in Canada and to foster a sense of unity and brotherhood among the civilians of Canada. It specified the criteria for citizenship and also stated the provisions that would lead to the revocation of citizenship.

The Immigration Act, 1952

The Immigration Act, 1952 was passed to provide a more recognized framework to the Immigration Act, 1910. It introduced and reinforced the powers of the federal government and established the Ministry of Citizenship and Immigration which was granted with the mandatory powers and functions.

The Immigration Act, 1976

The Immigration Act, 1976 was introduced by the Parliament in 1976. The Act was the foundation of the immigration laws in Canada. The Act outlined the fundamental principles and objectives of immigration policy. It also categorized the ‘refugees’ as a class of immigrants who should also be allowed in the provinces of Canada.

Present legislation governing Immigration Law in Canada

Immigration and Refugee Protection Act, 1976

The Act was repealed and enacted in the year 2002 to provide comprehensive protection to the immigrants. It is an Act introduced by the joint efforts of the administrative departments of immigration i.e, the Refugees and Citizenship Canada (IRCC) and the Canada Border Services Agency (CBSA). It is the primary legislation that was enacted to regulate the provisions of immigration to Canada. The objectives of the Act included providing economic, social, and cultural benefits to the immigrants.

Important terminology

Immigrant

The term ‘immigrant’ is not defined under any of the immigration laws of Canada. It is defined as the person who migrates from their native country to another foreign nation-state in search of a job, education, and other opportunities. The intention to migrate from one country to another can be either for a long-term basis, short tenure or to acquire the status of a permanent resident.

Citizen

The term ‘citizen’ is defined under the Citizenship Act, 1947. It can be defined as an individual who is the permanent resident of that particular nation-state and has been accorded all the rights and privileges by the government. The person acquires the status of a citizen in Canada either by birth or by the process of naturalization.

Permanent resident

The term ‘permanent resident’ is defined under Section 2(1) of the Immigration and Refugee Protection Act, 1976. It can be defined as the term in which the people from other countries have been accorded all the rights and privileges as similar to that of the citizen. The permanent resident is a person from another country and has been given permanent status by the immigration policies of Canada. If the permanent resident commits any illegal act or gets involved in any of the criminal charges, then they can be deported by the government authorities and agencies.

Temporary resident

The term ‘temporary resident’ has not been defined in any of the Canadian immigration laws. It can be defined as the person who has been permitted to reside in Canada for a limited period. The students, workers, and the labour forces have been given the status of temporary resident. They are the ones temporarily working in Canada, either with or without work permits. If the temporary resident works in the country without registered working permits, then they can also be deported by the government agencies and authorities.

Foreign nationals

The term ‘foreign nationals’ has been defined under Section 2(1) of the Immigration and Refugee Protection Act, 1976. They can be defined as individuals who are not citizens of Canada and have not even acquired the status of a permanent resident. This can even include government agencies and entities who are barred from doing business in Canada.

Refugee

The term ‘refugee’ has been defined as the person who migrates to another country with the fear or threat in their native country due to any social, religious, nationality, or political problems.

Visa

In general, a visa is defined as the endorsement given by the government stating that the individual has met all the requirements for being permitted in Canada following the laws and policies. The visa acts as a seal of approval for the citizens.

Current immigration policies

Immigration takes place either to seek opportunities or if an individual is under any threat or fear. The statistics show that annual immigration i.e, immigration in Canada from 2000 to 2020 has been increasing, which has increased the ratio of population in Canada. The report of 2019 shows that 21.5 percent of the people living in Canada are immigrants with the status of permanent residents.

Immigration in Canada can be classified into:

Family reconciliation

Any person or foreign national can qualify or can attain the status of a permanent resident. Permanent residency can be obtained if any foreign national has any kind of relationship with an already well-settled citizen in Canada, who has obtained Canadian citizenship either by permanent residency or by naturalization under the immigration laws in Canada. The permanent resident then has the beneficial right to act as the sponsor, i.e, he can sponsor his family, relatives, or any other closed ones who want to attain the status of a permanent resident or become a citizen of Canada. The eligibility of the sponsor to bring their family members or relatives depends on the age, residence, his or her economic conditions and stability, and a well-established way of living.

Economic immigration

The immigration process in Canada has been proclaimed and praised and has acted as a model for other countries. Any foreign national can qualify for permanent residency if they want to become economically established and stable in Canada. A foreign national who wants to acquire the status of a permanent resident is to be evaluated on his professional background or education. There are various pathways through which the immigrants can be admitted economically. The government has initiated various programs through which he foreign nationals can apply for permanent residency or the status as a permanent resident. The government has initiated various comprehensive programs that include a long testing and biometric screening or a provincial nominee program.

Protected persons and refugees

The refugees have also been categorized as the persons who are made liable for immigration. They are allowed to settle in Canada and can be classified into two categories namely:

The government-assisted refugees, who should be granted immigration as specified by the United Nations High Commission for refugees based on location, vulnerability so are liable to receive government assistance, and
The privately sponsored refugees are the refugees brought to Canada by the appropriate government organization assuming legal responsibility.

According to the Canadian immigration law, the refugees have been referred to as the types of immigrants that are classified to acquire the status of a permanent resident.

Immigration on the humanitarian grounds

The Canadian immigration laws also legalize and grant permanent residency to individuals on humanitarian grounds i.e., if the individual is going through any kind of hardship or his life is under any kind of risk.

Illegal immigration to Canada

Illegal immigration is an act of a person who enters the boundary of a foreign country illegally, with a wrongful intention of not being a Canadian citizen or a permanent citizen. The person illegally entering the provinces of Canada violating his native country’s domestic laws and the immigration laws and the international law, can be faced with the negative consequences of deportation. The illegal immigrants enter the provinces of Canada by a travel visa but remain permanently beyond the limited period of stay. The illegal immigrants are then deported back to their native nation-states by the Canadian government and authorities. The reports show that approximately 5,00,000 undocumented people are residing in Canada violating the rules, regulations, and the provinces of international law. The people residing in Canada illegally have either entered by fake marriages, travel visas, or through water borders.

Role of the government in enforcing Canada’s immigration laws

The immigration laws in Canada are mainly enforced and governed by the two federal governments acting at the central level to regulate all the activities related to immigration.

Immigration Refugees and Citizenship Canada (IRCC)

The Immigration Refugees and Citizenship Canada(IRCC) is responsible for the enforcement and implementation of all the laws related to immigration and citizenship in Canada. The administration body plays a very important role in facilitating the arrival of immigrants, protecting the refugees and the immigrants, granting citizenship to the immigrants residing in Canada, and also has the responsibility of issuing documentation and certifications to the Canadians and the immigrants.

Canada Border Services Agency (CBSA)

The Canada Border Services Agency (CBSA), is an administrative body that has the authority for the implementation of all the border services, customs, statutes, and conventions and helps in enforcing the immigration laws in Canada i.e, keeps a check over whether the laws are being implemented accurately. It also facilitates the circulation of legitimate immigrants and travellers and fair trade and service.

The administrative departments of IRCC and CBSA work with the Royal Canadian Mounted Police (RCMP), the Canadian Security Intelligence Services (CSIS), and the Ministry of Public Safety and Emergency Preparedness for the implementation of the laws of immigration in Canada.

Enforcement measures

Enforcement measures are thus required for protecting the residents of Canada from any kind of threat. The measures apply to:

People who are not citizens of Canada.
A person who has citizenship under their native states i.e, supposedly a registered Indian under the Indian acts.
Persons who have violated any of the immigration laws of Canada or the Immigration and Refugee Protection Act (IRPA).

The enforcement measures can be conducted in Canada against the immigrants if the illegal activities take place outside or inside the provinces and at the ports of Canada.

Outside the province of Canada

The people who want to immigrate to Canada must apply for a visa for their immigration to Canada. Their visas must be legalized by the government. They will not be granted a visa if found inadmissible.

Inside the province of Canada

If the immigrants residing in Canada commit any kind of crime or are found violating the laws of the nation-states, the government has the power to arrest, detain or even deport that particular immigrant to their native states.

Ports of Canada

The government has the power to refuse the entry of inadmissible people in the provinces of Canada if the immigrants are found with false documentation of travel or have been suspected of any kind of illegal activities.

Confiscation directives

The immigrants cannot be allowed to enter the province of the nation-state of Canada if they are considered inadmissible by the authorities at the supreme level. The immigrants are found to be inadmissible:

If they have any criminal records in the past or are suspected criminals and are trying to enter the provinces of Canada to escape from the clutches of the stringent laws and policies.
If they have been diagnosed with any disease and can pose a threat to public health in Canada.
If the documents are found to be false, or their visas have expired and are still residing in the provinces.

If the authorities and the government agencies detect any kind of mishappenings on the part of the immigrants that violated the rules and regulations of the Canadian immigration laws, they are ordered for removal that can be either made as a departure order, a deportation order, or an exclusion order.

Immigration to Canada in 2021

The government of Canada has taken initiatives and announced several immigration policies for the people who wish to migrate to Canada in 2021 to slow down the spread of the coronavirus. Immigration is not easy and a person has to go through various phases to get approval for their immigration.

There are various policies that can be undertaken by an individual to immigrate to Canada to secure permanent residency.

Express Entry Program

The government has announced a programme under which an individual might be granted the status of a skilled worker and had been given the right to work and reside in Canada. This has been acknowledged under the Express Entry Program concept. The scheme has given the authority to the Citizenship and Immigration Canada (CIC) to examine, recruit, and select immigrants who are skilled and have the appropriate requirements under the federal economic immigration programmes. The concept has also allowed particular provinces and territories to use the system effectively to recruit suitable persons to meet labour market demands.

Family class sponsorship

Family class sponsorship is the cornerstone of all the other immigration policies in Canada. The scheme gives the allowance to the permanent residents of Canada to sponsor their respective family members and relatives to settle on a permanent basis. To qualify for the sponsorship programme, the person has to be a permanent resident of Canada. The sponsor gives the right to sponsor the individual’s children who are under the age of 22. The grandparents or the parents can only be allowed for sponsorship under the Super Visa category.

LMIA work visa

The people who want to immigrate to Canada can get secured jobs, or any kind of work and apply for a work visa and then immigrate to Canada. The LMIA work visa is the process in which the individual after securing a job offer applies for an LMIA through the Portal of service Canada and then subsequently applies for a work permit after getting the approval from LMIA. The person can even be granted the status of a permanent resident in Canada through the process.

Provincial nominee programs

The program has been introduced by the provincial states of Canada like Alberta, Ontario, and British Columbia to make immigration possible to Canada through a fast and speedy process. The policies have stated that the members should reside in the respective provincial states through which they have been granted immigration.

Canada investor immigration

The policy is applicable for individuals who have their businesses overseas. The benefit of announcing this policy is that individuals can invest in the Canadian economy which can contribute to the overall growth and prosperity of Canada. This includes two kinds of investor programs in Canada namely:

The Federal Investor Program, and
The Quebec program.

Conclusion

Consequently, immigration has transformed the very concept of Canada. Immigration has confined the demography of Canada, which was once a monocultural landscape and had historical dualities but has been turned into a cosmopolitan scope of cultures, colors, and connections with striking implications of national unity and social identity. The laws, legislation, and programs for Canada’s immigration are recognized as a model to emulate and are widely appreciated all over the world by other nations. It has offered a principled and transparent approach for attracting immigrants from neighboring countries all over the world, barring the unwanted and unwashed.

References

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What is the procedure for the takeover of listed companies

By

Abanti Bose

-

October 29, 2021

0

This article is written by Aswathy, pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. The article has been edited by Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

The takeover means gaining control or ownership, either through shares or voting rights, of a target entity. Acquisition or takeover of unlisted companies is not substantially regulated as such takeover only affects a limited number of private persons involved in the companies, and such transactions are mostly confined to contractual arrangements between the acquirer and the target. This is however not the case when it comes to the acquisition of listed entities. Listed entities have the larger public as their members in the form of shareholders, and such membership itself is constantly changing owing to ease of transferability of shares. A large number of people in various capacities may be affected by such a move, and therefore it is important to ensure investor protection when the change in control of a listed company takes place, that is, the takeover of a listed entity.

The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as the “Takeover Code”) was introduced with this in view. The Takeover Code covers within its framework matters relating to the acquisition of shares, voting rights, or control over a listed entity, and applies to both direct and indirect takeover/acquisition of control in a listed company. However, it is to be noted that it does not apply to the acquisition of a company that has been listed but has not made a public issue on the institutional trading platform of the stock exchange.

Understanding the parties to a takeover

Acquirer

The term is specifically defined in Regulation 2(1)(a) of the Takeover Code as “A person who, directly or indirectly, acquires or agrees to acquire, whether by himself or through or with persons acting in concert with him, shares or voting rights in, or control over a target company.” Therefore to be an ‘acquirer’ there has to be a clear intention to acquire shares, voting rights or control over a target company. Acquirer need not necessarily be one person; if a group of persons set themselves out to acquire shares voting rights or control in a company, they will be considered acquirers or persons acting in concert.

Persons Acting in Concert (PAC)

Persons acting in concert refers to those persons who share the common goal of acquiring shares in the company and who cooperate for the acquisition of such shares, voting rights or control in the company. Certain persons are deemed to be PAC in the eyes of law, such as holding and subsidiary companies, companies with common management, directors and key managerial personnel, and promoters and persons belonging to the promoter group. Other categories of persons who shall be deemed to be PAC are laid down in Regulation 2(1)(q)(2).

Target

The target or target company, in terms of Regulation 2(1)(z) of the Takeover Code refers to a company or body corporate including a statutory corporation whose shares are listed on a stock exchange which the acquirer seeks to take over. It is pertinent to note here that the Takeover Code applies only to listed entities, and therefore the requirement for target companies would be to have their shares listed on a stock exchange. This is simply because a change in ownership of shares would result in a change in persons exercising voting rights in the company, and hence, a change in control.

The open offer process

One of the most important steps in the process of takeover as per the regulations laid down in the Takeover Code is the obligation to make an open offer. An ‘open offer’ is an offer by the acquirers to buy shares from the shareholders of the target company. The intent behind such a mandatory requirement to make an open offer is to provide an exit opportunity to those shareholders of the target company who do not wish to continue with the company post takeover, owing to a change in control. When a person seeks to acquire up to 15% of the shares of a listed company, this triggers the requirement to make an open offer. The open offer must be then made to purchase an additional 20% of the company’s shares from the existing shareholders.

Following are the definitive steps of the Open Offer process:

i) Appointment of a merchant banker and opening a depository account for shares tendered.

ii) A public announcement has to be made specifying the details of the proposed acquisition transaction, and therefore the intention to acquire shares of the target company by means of an open offer.

iii) Further, a detailed public statement is to be made containing all relevant details of the open offer, in a bid to enable the shareholders to make an informed decision about the offer made to them. The detailed statement has to be made within five working days of the initial public announcement.

iv) Lastly, the letter of open offer is made to the identified shareholders of the target company by the acquirers in order to purchase their shares. The acquirer is required to submit a draft of the same to SEBI first for its comments and must be dispatched only after incorporating the SEBI’s comments if any. This is to be done within five working days from the date of the detailed public statement.

v) A due diligence certificate needs to be submitted to SEBI along with the above draft letter of the open offer.

vi) A schedule of the upcoming events pertaining to tendering must then be advertised, one working day before the commencement of the tendering period.

vii) Not later than twelve working days from the date of receipt of the comments on the draft letter of open offer from SEBI, the tendering period shall commence.

viii) Tendering period shall close after ten working days.

ix) Immediately after the closing tendering period, an escrow account is opened wherein the acquirer shall deposit the consideration to be paid to the shareholders.

x) All remaining obligations are to be completed by the acquirer within 10 working days, including payment of consideration.

Unsuccessful open offers

Sometimes, open offers may not be successful. Failure of an open offer takes place when shareholders do not surrender their shares in response to the open offer. Such a failure can happen in the wake of competing offers when such competing offers are for a higher price. The original offer is then likely to fail. Withdrawals of open offers is another instance that may occur. Such an instance will lead to unique consequences as laid down in the Takeover Code, as it provides very limited circumstances allowing withdrawal of an open offer. Only exceptional circumstances such as the death of an acquirer or refusal of statutory approvals are recognised grounds for the same.

An announcement is to be made by the acquirer, in the same newspaper used for public announcement, about such proposed withdrawal, citing the grounds and reasons for doing so. Such announcement is to be made within two working days, and the stock exchanges are also to be intimated about such withdrawal. The target company and the public shall be informed of this development by such stock exchanges.

Penalties for non-compliance with the regulations

The Takeover Code has laid down certain mandatory obligations to be met by the acquirer, the target company, as well as the manager to the open offer. However, non-compliance with these requirements or failure to comply shall attract certain penalties as laid down by SEBI. SEBI may be direct as follows:

The acquired shares may be directed to be divested,
An investor protection fund may be set up wherein the proceeds of a directed sale of shares will be transferred,
The target company may be asked not to give effect to any transfer of shares,
The acquirer will not be permitted to exercise his rights such as voting rights which comes with the acquisition of shares,
Persons can be debarred from dealing in securities or accessing capital markets.
SEBI may determine the open offer price in accordance with the Takeover Code, on which the acquirer will have to make the offer,
Any disposal of assets of the target company or its subsidiaries will be directed to be put on hold unless so mentioned in the letter of offer,
If the acquirer has failed to make an offer or made a delayed open offer, he may be asked to pay interest on the offer price.
In the event that the acquirer fails to carry out the payment of the open offer consideration, he can be directed not to make such an offer or not to enter into a transaction that shall trigger an open offer in the first place.
The person who has control over any target company may be directed to cease and desist such control.
Shareholding of acquirers and persons acting in concert may be brought down to the maximum permissible non-public shareholding limit by ordering divestiture that shall result in the same.

Conclusion

Shareholding of firms and business owners has a huge influence on today’s corporate world. In a progressive country, good corporate governance is critical. Again, the idea of control has become a multifarious problem in recent years and as a result, the SEBI has chosen various approaches and established laws that would appeal to investors and ensure seamless functioning in a country’s corporate governance, and the Takeover Code is one such commendable and successful move in this direction.

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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