The Equality Act, 2010 : an evaluation

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October 27, 2021

This article is written by Anusha Misra from NALSAR University of Law. This article evaluates the Equality Act, 2010.

Table of Contents

Introduction

The Equality Act, 2010 was brought in not only to combine nine separate pieces of the UK’s discrimination law into one Act, but to raise the standard of protection from discrimination through harmonisation, simplification, and modification of equality law. Religion and belief are protected characteristics for the Equality Act, 2010 (EA 2010), under Section 10.

The Equality Act 2010 bars separation on the ground of religion or belief. This sounds direct enough in principle yet is tricky when it comes to implementation. In the working environment, there has consistently been some disarray about the degree to which an employee on the whole, correct to follow their beliefs may bargain the business choices of their boss, with high-profile council cases over such matters as the wearing of religious images. There seems, by all accounts, to be an extension for more disarray later on as the government may be encouraged by the Brexit vote.

People are shielded from immediate and backhanded segregation and provocation due to nine “ensured attributes”, including religion or belief, and exploitation. Insurance applies in the work environment, the arrangement of administration, and different settings, and is liable to characterized special cases. The Equality Act characterizes “religion or belief” comprehensively to incorporate any religion; any strict or philosophical belief; an absence of religion; and an absence of belief.

Is the approach to defining religion or belief in law justified

The meaning of religion or belief in the Equality Act is adequately expansive to guarantee wide insurance to numerous religions or beliefs. While the courts have here and there been needed to choose whether a representative’s perspectives add up to religion or belief as proposed by the Act, the Equality and Human Rights Commission (EHRC) doesn’t support the creation and utilization of a rundown of perceived religions and beliefs to build lucidity on which are secured under the law. The adverse consequence of presenting a limited rundown would in this way exceed the expanded sureness it may bring. It presumes that any absence of lucidity around what beliefs are ensured keeps on being handled through the advancement of case law, even though it flags that the EHRC will proactively search outfitting experiments to help or in which to mediate as an outsider.

As a model, it feels that the current case law meaning of belief, is that:

The belief should be truly held.
It should be a belief and not an assessment or perspective dependent on the current situation with data access.
It should be a belief regarding a significant and considerable part of human existence and conduct.
It should accomplish a specific degree of cogency, reality, attachment, and significance.

Bosses would most likely incline towards more noteworthy lucidity than is given by a case law approach, not least on account of the need to give clear direction to supervisors and workers, yet the EHRC’s remarks on the issues of thinking of conclusive articulations against a unique foundation where nature and appearance of religion and belief are continually in a condition of motion are presumably the right one.

Does the law sufficiently protect employees wishing to manifest a religion or belief at work

The current backhanded separation model and the idea of adjusting contending rights (where there is a clear struggle between people or between an individual and the public interest) gives adequate insurance to individuals showing religion or belief, and that no extra obligation of sensible convenience is required. In the last setting, it is established that there have been calls for Great Britain to follow the USA and Canada in putting a legitimate prerequisite on a business to oblige the strict acts of workers as long as this doesn’t make excessive difficulty for the business.

The Equality Act does not support an extra obligation of convenience

The Equality Act, the way things are, doesn’t keep a business from arriving at a convenience except if doing so would break separation law or other lawful necessities like wellbeing and security enactment. Employers should as of now consider genuinely every solicitation made for reasons identifying with religion or belief, both for great practice reasons and to stay away from the danger of backhanded segregation. They should possibly turn these down if they have target explanations behind their choice that can be supported, for instance, the effect of the solicitation on the business or clients, and have considered both the privileges of others and the effect on the individual making the solicitation even if there were an obligation of sensible convenience. The EHRC contends that it would never be utilized to allow prejudicial assistance arrangement or to permit business courses of action that could unfairly affect partners. Significantly, the EHRC states that the law ought not to be changed to allow people to quit work obligations, to accord with their strict or non-strict beliefs, where this has a real or expected adverse or prejudicial effect on others.

The European Convention on Human Rights’s view

The European Convention on Human Rights additionally takes the view that the courts found some kind of harmony in ensuring the strict opportunity of the people and forestalling oppression administration clients in the high-profile cases.

On the other hand, the EHRC thinks that, where a representative wishes to quit their functioning courses of action, and this won’t lead to apparent or real victimization of others or any real or expected adverse effect on other staff or to support clients, the business ought to consider the solicitation truly and ought to permit it except if there are target motivations not to do as such.

The EHRC’S suggestions

The legitimate structure ought to stay unaltered because the current model of segregation and the idea of adjusting rights in basic freedoms law gives adequate insurance to individuals showing their religion or belief.
An obligation of sensible convenience ought not to be brought into law.
Individual representatives ought not to be allowed to quit performing part of their authoritative work obligations because of religion or belief where this would oppressively affect others.

Numerous businesses would almost certainly favour more noteworthy clearness than dependence on case law, and a muddled “realities of the case” way to deal with the issues that can emerge around here. The EHRC’s suggestions will imply that clothing standards and their requirements stay a conceivably full region for businesses. It is conceivable that any future enactment on British qualities could propose more explicit necessities corresponding to public assistance workers over the wearing of certain garments, gems, and so on, though any such move would seem, by all accounts, to be in struggle with the methodology the EHRC keeps on preferring. Nonetheless, public area businesses might be diminished that the EHRC has dismissed the possibility of a sweeping, appropriate for singular representatives to quit performing part of their authoritative work obligations because of religion or belief, as the down to earth ramifications of a right (as far as running administrations with productivity and legitimate coherence) were conceivably disturbing.

The Equality Act and the Human Rights Act give adequate security to people with and without a religion or belief, religion or belief associations, and other ensured gatherings.

The meaning of religion or belief in the Equality Act is adequately expansive to guarantee assurance to numerous religions or beliefs. The current roundabout segregation model and the idea of adjusting rights in common liberties law where there is an obvious clash between people or between an individual and the public interest as of now give adequate assurance to individuals showing a religion or belief, and that no extra obligation of sensible convenience is required. Emphatically steady the view that the law ought not to allow people to quit work obligations, accord with their religion or belief see, where this has a real or expected inconvenient or prejudicial effect on others.

The current special cases permitted under the Equality Act in work for businesses with an ethos dependent on religion or belief, or the reasons for a coordinated religion, give adequate insurance to permit them to work in a manner that perceives the peculiarity of their religion or belief. Change is required in certain spaces, for example, the special cases allowed to deliberately controlled and intentionally helped schools by the SSFA in England and Wales.

Explanation of the law is needed through case law in a few regards, including the meaning of belief and the degree of opportunity of articulation and opportunity of thought, still, small voice, and religion corresponding to strict associations. For public area businesses, the main discoveries from the report are likely the support of the current case law way to deal with the prickly issues around representatives wishing to show a religion or belief at work (eg clothing regulations, the wearing of strict images, time off work and exceptions from obligations) and the need to assemble information and comprehension of the law around here, and trust in applying it accurately in viable everyday circumstances.

The last suggests that a lot of work should be done to prepare supervisors at all levels, so they have a superior comprehension of the standards which support the current legitimate structure and can apply them practically speaking (or, in any event, realize when to call for help in doing as such). Such preparation might be significantly more essential in the post-Brexit period, when there is a peril that media and political articulations could be confused by directors and workers, prompting unsafe choices which might be at odds with the law.

Conclusion

The Equality Act gives adequate assurance to people with and without a religion or conviction, religion or conviction associations, and other secured gatherings. The meaning of religion or confidence in the Equality Act is adequately expansive to guarantee insurance to numerous religions or convictions. The current roundabout segregation model and the idea of adjusting rights in common liberties law, where there is an obvious clash between people or between an individual and the public interest as of now give adequate assurance to individuals showing a religion or conviction, and that no extra obligation of sensible convenience is required.

References

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

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Drafting a security agreement with copyright as collateral

By

Shoronya Banerjee

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October 27, 2021

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International Commercial Contracts — Image Source - https://rb.gy/u3ibeg

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

Table of Contents

Introduction

Secured loans are those which are backed up by security and that security is known as collateral. For example, car loans. In a car loan, you have to put financial assets that you own, as collateral, so that if you are unable to pay back the loan, the bank can get its hands on the collateral. The financial assets can be house property, vehicles, insurance policies, etc. Whereas, unsecured loans are those which are not backed up by any kind of security/collateral, but you still have to pay interest for such loans. For example, personal loans. In a personal loan, there’s no such thing as collateral, it is given by financial institutions at a higher rate of interest.

The security agreement is a document that provides a lender a security interest in a specified asset or property that is pledged as collateral. It gives the legitimate assertion of surety to the creditor if there’s a default by the borrower. Grantor (who is a borrower as well as a surety) allocates, permits, and undertakes to the grantee (who is a lender) a security interest in that personal property which is called a guarantee. These security agreements can be used to describe a surety that is already possessed by the debtor. It can be an intangible surety or any after-acquired property.

Loans play a main role in growing/expanding one person’s business. Such loans can be secured and unsecured. If the loan is secured, this means that the guarantee is fixed to the repayment of a loan and that the lender may not be wholly at loss in the event of any default takes place. The main aim of this article is to make the concept of a security agreement with that of copyright as collateral as much clarity as possible.

What is a collateral?

Collateral can be defined to be of various types. An agreement for security can be oral. It can be oral if the collateral is already physically possessed by the secured party or by the lender.

Intangible goods

There can be a number of cases where the collateral can be intangible, for example, software rights or intellectual properties. It is extremely important to give a proper written description of intangible collateral.

Floating liens

These floating liens are expected to be seen in security agreements. Floating liens are not necessarily needed to be in the debtor’s possession at the agreement’s commencement time. It can include acquired property. It emerges from the disposition of collateral.

After-acquired property

After-acquired properties include any new property that is acquired or purchased after the signing of the agreement. For example, if your security agreement has any after-acquired property and your debtor promises you all the automobiles that are owned by the borrower, then even if the borrower purchases new automobiles after the agreement is signed, the agreement would be collateral.

Why do businesses use security agreements?

All the businesses rely on secured transactions for their growth to get creditors so that they can provide loans can be difficult for individuals many times. This security gives proper reassurance to the creditors that they are not going to suffer any loss. The debtor also gets benefited from the low-interest rate that is present because of the collateral. These agreements give us a legally binding document that outlines all the terms with respect to which the debt can be secured. It also includes all the remedies, in case the debtor defaults. Many businesses do this to assure they are not under any loss.

Examples of such guarantees are shares of livestock, stocks, etc. This agreement does not work to transfer any kind of interest in the real estate, but only in the personal property. The basic document that is used by the lenders to acquire a claim on the real property is a trust deed or a mortgage. This agreement lays down various different rights that are related to the collateral.

There are various challenges which the authorities face regarding the securitization of intellectual property; first of all, there is an inconsistency with the laws that prevail in the country or we can say that the intellectual property can be controlled either by the IP laws or by the acquired transactional laws. On the other hand, the identification of the security rights is important but some authorities do not acknowledge such security rights. Lastly, there are some fixed rules of law that limit the ability of an owner to design the security right in some definite types of IP.

These agreements can be oral, only if the acquired lender has the actual corporal ownership of the collateral. When the security remains in the physical ownership of the debtor, and if the security is non-physical, this agreement shall be in writing so that it can satisfy the precedents. This agreement must be verified by the borrower, which means that it must either be signed by the debtor or must have biometrics. There must be a reasonable explanation of that security and should have words showing the intention to create a lien.

Terms in a security agreement

A security agreement must contain the representation of the parties included, collateral as well as the statement of intent of providing the security interest alongside a sign from the parties. Nonetheless, there are various other terms present in such agreement:

Warranties : Warranties include conditions which are agreed upon by both of the parties.
Collateral description: The agreement must describe in detail about the property being held as collateral/security under this agreement. This can include the quantity of the collateral, categories of such security and description of the collateral by type.
Types of collateral: It can be of different types like stocks, bonds, inventory, accounts, etc and this should be described in this agreement.
Security interest : This must be used for completing such agreements. An interchange of value must take place, the borrower should relinquish the rights to security and also must be able to validate this agreement by way of a signature.
Priority : In case of several parties, priority must be given to the procured party which is involved in the agreement. Normally, the first secured party is given the priority over the other. The priority can be realised by filing a funding statement before the other parties.
Default : The agreement should interpret what would be viewed as a default. Like theft or inappropriate use of the security, neglection to bear by other commitments, or neglecting such evidence which provided security was incorrect.
Remedies : This segment can provide a solution for the depositors to redeem the forfeiture in case of non-payment from the debtor.

Five tips to draft IP security agreements

It needs to be checked that the collateral’s description must include everything that is associated with intellectual property, i.e., contract rights, licensing rights, film reels, distribution rights, all receivables and income, rights to sue if infringement is done, foreign rights, etc.;

After-acquired clause needs to be included in security agreement which consists of all “currently existing and acquired or created afterwards” Intellectual properties. It requires the borrower to get registered as soon as any new intellectual property is acquired or created as well as to inform the secured creditor of any new addition to Intellectual Property to allow the secured creditor to get its interest in collateral;
Rights of the secured creditor should be preserved so that the remedies can be effectively executed upon default, that is, if the borrower willingly agrees to cooperate with power of attorney to allow secured creditor to allot as well as register the rights after foreclosure.
It is required that the borrower timely files and pays all the maintenance fees which are required for the patents along with the renewal fees of trademarks. It is also required to notify the secured creditor regarding any kind of infringement litigation as well as to help the secured creditor in safeguarding the rights along with defending the litigation (at borrower’s expense), and
It also includes warranties in this security agreement with proper description that the borrower carries the good and marketable title, with no pending or previous assignments along with no previous security interests and the one that confirms the validity and proper enforcement of the intellectual property.

Security interests in the copyrights

The Copyright Act properly defines a system for capturing as well as transferring the ownership interests under copyright-protected works. Under this act, after copyright gets registered then a security interest could be implemented after getting the transfer recorded in the Copyright Office. In case of copyright remains un-registered, then the Copyright Act doesn’t serve the UCC regarding perfection along with a priority of security interests.

As an outcome, all the security interests under unregistered copyrights should be made free under Article 9 of UCC. After that unregistered work gets registered, then the Copyright Act automatically comes to application and all the security interests are then recorded again with the U.S. Copyright Office. It is also advised that depending upon the nature of work that is copyrighted, it is required that a borrower registers the copyrighted material by the Copyright Office and records security interest with UCC in the time when the application is pending. A secured lender can get a security interest recorded by the Copyright Office only after the copyright application is finalised.

Clauses of the security agreement

Representations and warranties

Each and every grantor shows and issues warrants to the collateral agent as well as the secured parties that:

They are subjected to liens that are permitted by Section 7.01 of credit agreement. Each grantor has some valid rights according to the Article 9 collateral according to which it grants the security interest as well as possesses full power with an authority to allow the collateral agent their security interest under Article 9 collateral. It is done to execute, to deliver as well as perform its necessary requirements according to the terms of the agreement, without proper consent or approval of another person other than that has been obtained.

(b) Perfection certificate needs to be duly prepared, completed as well as properly executed. It also needs to be stated that the information then set is completely correct and proper in all material aspects, except information that has the exact legal name of the grantor shall be correct with respect to the closing date.

Subordination

(a) In spite of all the provisions of the agreement, all rights of grantors of this insurance, contribution, or substitute as per the applicable law else it needs to be fully subordinated to complete payment and that too in cash of secured obligations. No failure from the side of the borrower or from the side of the grantor to complete the payment is required under the law, otherwise, it would restrict the obligations together with the liabilities of the grantor with respect to its necessary requirements, and then each grantor should remain liable to the full amount of all obligations of such grantor.

(b) Every grantor should agree upon any event of default after notice from the collateral agent. All indebtedness that is owed by any other grantor needs to be fully subordinated towards the complete payment in cash of secured obligations.

Transfer of rights

The agreement shall be binding on any successors of the parties. Neither party shall have the right to assign its interests in this agreement to any other party unless the prior written consent of the other party is obtained by that party.

Notices

All the communications along with the notices should be given in as stated under Section 10.02 of the credit agreement (except expressly permitted). All the communications together with notices to the borrower or any grantor should be given as per Section 10.02 of the credit agreement.

Termination or release

(a) The agreement, the security interest including all other security interests that are granted should terminate according to the secured obligations, and any kind of liens that arise should be automatically released after the termination of aggregate commitments and complete payment of all obligations (except (i) cash management obligations or obligations that are under the secured hedge agreements and are not yet due as well as payable and (ii) contingent obligations that are not yet acquired and payable) and the termination of all the letters of credit.

(b) The subsidiary party shall be released automatically from its obligations hereunder and security interest in the security of such subsidiary party shall be released automatically upon the fulfillment of any transaction, as a result of which such party quits to be a subsidiary of the borrower; provided that the moneylenders shall have ratified such transaction and terms of such sanction did not deliver otherwise.

(c) On any sale or any transfer by the grantor of any security which is granted under the credit agreement, or on the usefulness of any consent (written) to deliver the collateral interest which was granted.

Conclusion

The security agreement is helpful when the borrower intends to obtain the funding credits with the assistance of the copyright license. The agreement is used by some of the technology companies by mortgaging their software’s copyrights to acquire loans. Although these copyrights are subject matter to ending and relapsing under the copyright law, the moneylender can most of the time be left threatened if the mortgagor all of a sudden stops being the holder of the copyright mortgaged. Hence, it is necessary to draft this agreement with maximal vigilance and in such a manner that it matches the pertinent laws.

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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Negotiations and resolving conflicts

By

Oishika Banerji

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October 27, 2021

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

Table of Contents

Introduction

Negotiation can be seen often in our daily lives. A dispute or negotiation may occur when there is a conflict of interests, and both parties want to seek to communicate and find solutions rather than give in or break contact. Conflicts, whether with bosses, peers, subordinates, friends, or acquaintances, are something few of us enjoy dealing with. This is especially true when the argument escalates into a hostile situation involving high emotions. Conflict resolution can be emotionally tiring. As shown in the box below, there can be both positive and negative outcomes. It has the potential to be harmful, and may also be beneficial to you and your personal and professional relationships. The crucial thing is to handle the dispute rather than suppressing it or allowing it to spiral out of control. Many of us try to avoid conflict although conflict is an important part of creativity and inspiration in many situations.

Positive Outcomes of Conflict

Negative Outcomes of Conflict

1. can encourage us to try more to “win” 2. can promote commitment and group loyalty 3. can lead to innovative discoveries and new approaches 1. can encourage us to try more to “win” 5. conflict can reveal underlying concerns and facilitate transformation. 6. conflict can draw attention to fundamental issues and lead to a solution. 7. boosted energy level, making critical values apparent8. Conflict can sharpen our approaches to negotiating, persuasion, and competition.

1. can result in rage, avoidance, sniping, yelling, frustration, dread of failure, and feelings of inadequacy2. concealing crucial information 3. decreased productivity because of unnecessary conflict4. Career can be derailed; relationships can be ruined. 5. work habits can be disrupted. 6. consume a significant amount of time, resulting in a loss of productivity

Throughout your professional and personal life, you will be continuously negotiating and settling disagreements. Given that companies are becoming less hierarchical, less based on positional authority, and less based on clear lines of duty and authority, conflict is likely to become even more prevalent in the future. Negotiation abilities have been demonstrated to be one of the most important indicators of job success in studies. While negotiating is in some ways an art form, there are precise strategies that anybody can acquire. Understanding these approaches and honing your abilities will be crucial to your professional and personal success.

What is conflict resolution?

Anyone with a basic understanding of what conflict is might probably come to the conclusion that conflict resolution aims to resolve the source of the dispute. However, this overly simplistic view ignores the process of conflict resolution. Worse, this perspective frequently relies on the previously noted premise that conflict is negative, emphasising the importance of avoiding conflict as a main way of resolution. True conflict resolution, on the other hand, refers to the process through which two or more parties come to a peaceful resolution to a problem. As previously said, conflict resolution is a process rather than an event, and it is best tackled through the use of conflict resolution and negotiating tactics. While avoidance fails to acknowledge the existence of a problem—and its potential negative consequences—accepted conflict resolution techniques attempt to reconcile the differences, incompatibilities, or violations that occurred with a resolution that allows all parties involved to move forward with a common goal.

What is the relation between conflict resolution and dispute resolution?

Negotiation, on the surface, appears to be quite similar to the broader concept of conflict resolution—a dialogue selected to resolve disagreements or conflicts or to reach an agreement between two or more parties. The two conceptions, however, exist independently, and one may have an impact on the other at any moment and throughout any conflict. Parties may, for example, encounter conflict throughout the negotiation process and want to resolve it so that negotiations can continue.

What are the primary causes of conflict?

Most confrontations are fuelled by conflicting interests (or what we believe are opposing interests). In today’s complex culture, we are confronted with these scenarios on a daily basis. The modern organisation introduces a whole new set of possible conflict triggers to the already existing list:

1. A battle for limited resources and time.

2. Uncertainty about responsibilities and authority.

3. Perceptional disparities, skill sets, mindsets, language difficulties, and individual differences.

4. Increasing interconnectedness as individual and group boundaries become increasingly blurred.

5. Incentive systems: we operate in settings where incentive systems are complicated and often conflicting.

6. Differentiation: the division of labour, which is the foundation of any organisation, causes people and groups to see situations differently and have distinct aims.

7. Equity vs. equality: There is a constant tension between equity (the notion that we should be compensated according to our respective contributions) and equality (the belief that everyone should have the same or similar outcomes).

The five modes of conflict resolution

It’s helpful to define our conflict responses along two dimensions: It’s helpful to define our conflict responses along two dimensions:

1. How important or unimportant it is to meet our own wants, and

2. It’s helpful to define our conflict responses along two dimensions:

The five dispute resolution modes are determined by the answers to these questions. None of them are “correct” or “incorrect.” There are times when any of these would be acceptable. If we are unable to drive to work, for example, we may determine that “avoidance” is the best option. Sometimes “avoidance” isn’t the best option. Collaboration, likewise, may be suitable at times but not at others.

Competition: Win-lose (distributive) bargaining

It’s crucial to you to meet your own wants; meeting the needs of others isn’t.

Integrative Collaboration (win-win)

It’s critical to meet both your own and the other’s demands.

Compromising:

It’s moderately vital to meet both your own and others’ needs.

Avoiding

You don’t care if your wants or the needs of others are met: It is unlikely that any action will be taken.

Enabling

Just yield (it doesn’t matter to you, but it does to the other person).

Most successful negotiators begin with a collaborative (integrative) or win-win bargaining strategy. Most competent negotiators would strive for a win-win outcome in which both parties feel they have won. Negotiations proceed considerably more smoothly when both parties believe they are in a win-win position or when both parties approach the negotiation with the goal of “creating value” or meeting both their own and the other’s demands.

We’ll concentrate on the two most troublesome types: collaborative (integrative) and competitive (competitive) (Distributive).

What are different types of negotiation?

Collaboration is the more significant of the two because most of your personal and professional negotiation and conflict resolution will (or should) be of this sort. This is because the majority of negotiations involve situations in which we desire or need to maintain a long-term connection with the other party. While it is important to develop skills in “competitive” bargaining (for example, when buying a car), or skills that allow us to satisfy our own concerns while ignoring the goals of others, this approach has a number of negative consequences in both our personal lives and our professional careers, particularly if we are to maintain a long-term relationship with the other person.

How to reduce already existing conflicts?

Organizations also take dispute resolution measures. The following is a list of some of these options:

Physical isolation,
Hierarchy (the boss makes the decisions),
Bureaucratic approaches (rules, procedures),
Integrators and third-party intervention,
Bargaining, and rotating members,
Interdependent tasks and higher-level goals (“We’re all in it together…”) intergroup,
And interpersonal training.

Negotiation’s rational and emotional elements

All discussions have two levels: a cognitive (substantive) decision-making process and a psychological (emotional) decision-making process. The psychological, as well as rational factors, are both likely to influence the outcome of a negotiation. In most cases, intangible components like:

Psychological factors that affect negotiations

How at ease each party is with the conflict.
Individual Perception.
Assumptions about the problem and the other party.
The attitudes and expectations.The decisions each part makes about trust, about how important “winning” is, how important it is to avoid conflict, how much one likes or dislikes the other; how important it is to “not look foolish.”

The “logical” element of the negotiation is rather simple to grasp. The “psychological” aspect is more difficult to grasp. We must mentally comprehend ourselves and our opponents. Most failed negotiations are the result of a failure to comprehend these psychological needs and challenges.

This is complicated by the fact that most workplace rules discourage the open expression of negative personal feelings. As a result, significant emotional pain is frequently conveyed and explained as a substitute concern. People frequently fabricate little arguments to justify an emotional confrontation with another person (Ware and Barnes).

Kinds of bargaining

All bargaining circumstances can be classified into one of two groups:

Distributive justice (also called competitive, zero-sum, win-lose or claiming value)

One side “wins” and the other “loses” in this type of bargaining. There are fixed resources to be distributed in this arrangement, and the more one obtains, the less the other gets. One person’s interests are at odds with the others in this situation. In this form of bargaining, the primary goal is usually to maximise one’s personal interests. Manipulation, forcing, and withholding information are all dominant methods in this mode. Because the goal in this type of situation is to enhance your own value while decreasing your opponent’s, this variation is also known as “claiming value.”

Integrative (collaborative, win-win or creating value)

There is a variety of resources to be shared in this type of bargaining, and both sides can “win.” The primary goal is to achieve the best possible results. Resolving a difference of opinion over where you and a friend wish to go to dinner is an example. Another scenario is dealing with a subordinate’s performance review or settling a situation involving a subordinate who consistently arrives late to work. Cooperation, exchanging knowledge, and reciprocal problem resolution are dominant strategies in this style. This style is also known as “generating value,” because the goal is for both parties to feel like they have more value after the negotiation.

Critical Points: Integrative/Win-Win Bargaining

Prepare a strategy and stick to it: Separate individuals from the problem by being clear on what is essential to you.

Emphasise on win-win situations:
Rather than focusing on positions, consider your passions.
Create Options for Mutual Gain: Before selecting what to do, generate a variety of options.
Aim for a result that is based on some objective criterion.
Consider the situation of the other party:
Pay close attention to the negotiation’s flow.
Take intangibles into account.
Use Active Listening Techniques.

Conclusion

While conflict can certainly stall negotiations, the end agreement remains within reach with the implementation of the above conflict resolution and negotiation strategies. Approaching negotiations and conflict resolution as part of a process instead of a one-time event allows both to work in tandem, enabling navigation of conflicts as they arise. Through continuous communication, active listening, and the development of a deep understanding of mutual needs, all parties involved can work together towards an integrative solution.

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:https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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

How to draft an airtight Arbitration Clause : an overview

By

Oishika Banerji

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October 27, 2021

0

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

Table of Contents

Introduction

Whenever there are two or more parties involved in any transaction, disputes are bound to occur. Some disputes get resolved amicably, and some might get worse over a period of time. Thousands of contractual / non-contractual disputes arise around the world everyday and if all of them are to be settled by the courts, it will take years to finalize them. In such a scenario, the Alternative Dispute Resolution (ADR) methods viz. Arbitration, Mediation and Conciliation play a vital role in the settling of these disputes out of the court. Amongst the available ADR options, ‘Arbitration’ is the most widely and commonly used legal method of dispute resolution.

However, it is very important that while drafting the Arbitration clause one should ensure that it is done without leaving any room for misinterpretation and is airtight to make it more efficient for dispute resolution.

Definition and principles of Arbitration

Definition

As per the Britannica Encyclopedia, “Arbitration is a nonjudicial legal technique for resolving disputes by referring them to a neutral party for a binding decision or award”.

Principles of arbitration

Arbitration is consensual

The parties involved agree mutually to go for resolving the dispute with the chosen Arbitration method.

Arbitration in neutral

Due to the involvement of a neutral third party (which is chosen by the parties) involved in the dispute, an unbiased decision can be anticipated. In addition, parties while negotiating the Agreement get the chance to choose the type of Arbitration, governing law, language, and the place of Arbitration.

Arbitration is confidential

If a dispute between the two famous corporations goes to court, media attention is inevitable. On the contrary, Arbitration and its result can be managed to be delivered in a strictly confidential manner. Sensitive information remains intact and within the walls of the disputed parties

Freedom of appointment

Parties get to choose which and how many Arbitrators they want to appoint to resolve the dispute.

Essentials of drafting an airtight Arbitration Clause

Following elements shall be essentially included while drafting the Arbitration Clause or while proceeding for the Arbitration:

Type of Arbitration

Out of the total 4 available types of Arbitration viz. Ad hoc, Institutional, Contractual and Statutory, it is crucial for the parties to agree upon the procedure of the Arbitration to be followed for resolving the dispute.

In Ad-Hoc Arbitration, parties at their will, have the option to alter or customize all of the below mentioned essentials of the Arbitration.

In Institutional Arbitration, worldwide or national organizations / institutions are approached by the parties to resolve their dispute. Some of the international parties are International Chamber of Commerce (ICC), the London Court of Arbitration (LCIA), Singapore International Arbitration Centre (SIAC). However, Parties have to pay standard fees to such organizations.

In Contractual Arbitration, the parties while entering into the Agreement make the provision that mentions the method of resolution in the event of a dispute, and to which arbitrator the dispute shall be referred to, etc. Everything related to Arbitration is well thought and agreed over before signing the Agreement.

In Statutory Arbitration, as the name suggests, the parties have to follow the legal arbitration proceedings of the law of the land where the work is being executed. Unlike the above three (3) types of Arbitration, this type offers very limited to no freedom to customize the elements of Arbitration.

Threshold of Arbitration

The triggering point to refer to the dispute for Arbitration shall be definite. Usually, parties in dispute first try to resolve the dispute amicably, and without the involvement of any third party, due to the cost and time involved and to keep the confidentiality of the information. Typically, parties take a month or two to resolve the dispute without the involvement of any third party.

Appointment, qualification procedure and Numbers of the Arbitrators

How the arbitrator will be appointed, from where the Arbitrator(s) should be, having what qualifications (such as techno-commercial background, IP related knowledge, etc.) and in how many numbers (typically 1 or 3) shall be clearly defined in the Clause.

Seat or Place of Arbitration

The place or seat where the dispute shall be presented to the Arbitrator(s) shall be negotiated between the parties. However, due to the costs involved in setting up the Arbitration, it is recommended to define the place of Arbitration in the Agreement itself.

Rules of Arbitration

Rules to be followed for arbitration whether as per the law of the land or as per the international laws shall be mandatorily specified in the Agreement. Which rules to be followed plays a crucial role in obtaining the result of the dispute. There are sets of rules defined by most of the nations for internal disputes and international bodies such LCIA, SIAC etc. for international projects and businesses.

Scope of the Arbitration

Which issues can be referred to the Arbitrator(s) and which cannot be, shall also be defined in the clause. Personal disputes cannot be resolved through the Arbitration scope meant for commercial dispute resolution. However, parties generally choose not to bind themselves with such definitions and generally keep the clause open so that any type of commercial dispute arising out of the transaction can be referred to the Arbitration.

Cost Obligations

In the event a dispute is referred for Arbitration, how the cost will be distributed/divided amongst the parties, equally or in an agreed ratio or it is to be totally incurred by the party who is referring the dispute to Arbitration.

Time period of the result

The limited timeframe within which the Arbitrator(s) shall perform its obligations and announce the result of the dispute.

Appeal

In general, the result of the Arbitration is enforceable by law, however, a provision can be made in the Agreement, that in the event if any of the parties is not satisfied with the result from the Arbitration, shall have the right to take the result one step above or to the court or at any other institution shall be specified.

Governing law

While reviewing the arguments and determining the result of the dispute the governing law can totally turn the result of the Arbitration into something other than anticipated as the Arbitration procedural law can be very different from the governing law in an Agreement.

Language

Defining the Language (the principal method of human communication’) of Arbitration will also be beneficial for the parties. It clarifies the common language which shall be followed in the Agreement, to study the arguments of the parties and to declare the result understandable to the parties in dispute.

Confidentiality

Whether in the dispute or not, the parties and the Arbitrator shall always maintain Confidentiality, or the principal characteristic of the Arbitration will not be met.

Consequences of not having an Arbitration Clause

In the absence of an Arbitration clause, parties will have to approach the court to resolve the dispute. Around the world, there are already numerous civil, criminal, and commercial issues pending in the court which remain unresolved due to the procedural limitations of the courts.

In today’s globalized business world, organizations are spreading their businesses across every other country, if the Arbitration clause is not present in the Agreement or it is poorly drafted the consequences can be devastating for the organizations. Such organizations will have to undergo lawsuits or litigations of every other country to resolve their disputes. The laws that governs arbitration in India are;

Indian Contracts Act, 1872;
Arbitration and Conciliation Act, 1996.

Conclusion

Arbitration is a key dispute resolution method to resolve any commercial disputes as the parties do not have to approach the court which saves time and money, and further can save the business relationship between the parties. In Arbitration, parties in dispute settle their arguments by accepting the decision made by a neutral third party in accordance with the facts and arguments provided to them by the parties involved in the transaction.

While drafting the Arbitration clause, if any of the aforementioned essentials are missed, a dispute may occur. It is important to discuss beforehand which details are to be chosen and followed and which are not. Therefore, it is important that parties must discuss and include such clauses in the Agreement.

Furthermore, it is recommended that while drafting the Arbitration clause, the nature of the Agreement, work scope, work location, registered offices of the parties, the amount of the Agreement, etc. all shall be thoroughly thought over.

References

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

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Need to identify oxygen concentrators and pulse oximeters as essential commodities under the Essential Commodities Act, 1955

By

Sneha Mahawar

-

October 27, 2021

0

This article is written by Nishtha Garhwal, a student of Alliance School of Law, Bangalore. The article describes the situation where the public displayed its anger when there were many instances of hoarding and black marketing of essential medical devices like oxygen concentrators and pulse oximeters and the different legislations that were passed by the government amidst the pandemic to regulate and monitor such illegal activities.

Table of Contents

Introduction

India witnessed a surge in the number of COVID-19 patients leading to a huge demand for medical devices like oxygen concentrators and pulse oximeters. However, there was a shortage in the supply of these medical devices which created huge anger among the public. The health infrastructure was overburdened and the situation got worse when the manufacturers and importers took advantage of this shortage and started black marketing and hoarding of the medical devices and equipment that were required for the treatment of COVID-19.

Many manufacturers started hoarding oxygen cylinders, oxygen concentrators, and other crucial medicines which were then sold at inflated prices. There were many attempts to turn the situation of misery in India into a profit-making means. In such a critical scenario, it becomes essential for the government to take steps to prevent such attempts.

The Essential Commodities Act, 1955 makes it possible for the government to control and regulate the prices of any commodity that has been declared as ‘Essential Commodities’ under the Act. However, oxygen concentrators and pulse oximeters have not yet been notified as an essential commodity under the Essential Commodities Act, 1955.

Provisions under the Essential Commodities Act, 1955

The Essential Commodities Act, 1955 is a provision that empowers the government to classify any commodity as ‘Essential commodities’ and on such a classification, the government can issue directions in order to regulate and control the prices at which such commodities can be bought or sold. The withholding of an essential commodity’s sale which is usually kept for sale can also be prevented by the government by the virtue of this Act.

Section 3 of the Essential Commodities Act,1955 makes a provision for the central government to control an essential commodity’s production, supply and distribution and ensure its equitable distribution at fair prices. This Act primarily aims to protect the public interest. Section 2A of the Essential Commodities Act, 1955 defines ‘Essential Commodity’ as being the one specified in its schedule. Drugs that are defined in Clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940 are the first entry to this schedule. As per Clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940, if some medical devices perform the function of preventing, mitigating, and treating a disease when externally or internally applied on the human body or an animal, they will be considered as drugs. However, a notification issued by the Ministry of Health and Family Welfare, extended this Sections scope in February 2020 to also include medical devices that help in diagnosing, preventing, alleviating, or treating any injury or disease or that help in investigating, supporting or sustaining life.

Government can control the prices of an essential commodity as per Section 3(c) of the Essential Commodities Act, 1955. Prohibition can be made by the government for the hoarding of any ordinarily sold essential commodity by the virtue of Section 3(e). In case anybody holds or intends to hold the stocks of an essential commodity, orders can be passed by the centre to them and they can be asked to sell all these stocks or a part of them to a government authority or a government-controlled corporation as per Section 3(f) of the Act.

In case of violation of any provision under the Essential Commodities Act, 1955, a person will be exposed to imprisonment which may not be less than 3 months and may extend up to 7 years including a fine as per Section 7 of the Act.

National Pharmaceutical Pricing Authority (NPPA) and some notable provisions and legislations

Although oxygen gas, cylinders and some other crucial medicines have been classified as ‘Essential Commodities’ under the Essential Commodities Act, 1955, the law is still ambiguous when it comes to medical devices. However, apart from the Essential Commodities Act, 1955, there are some other legislations that are responsible for monitoring and regulating the price of medical devices and medicines.

The Ministry of Chemical and Fertilisers controlled National Pharmaceutical Pricing Authority (NPPA) issued the Drug Prices Control Order (DPCO), 2013 through which a limit on the prices of drugs was placed and these drugs included several medical devices and medicines. The NPPA is empowered to set the maximum prices for drugs and make rules for controlling prices. It also has the authority for monitoring the current prices without setting limits.

The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980 is another provision of law in order to monitor black marketing. Government officials of the rank of District Magistrate, Police Commissioner, or Secretary of the state Government have the authority that if a person acts in a prejudicial manner to the maintenance of supplies of commodities which are essential to the community, they can pass orders for the preventive detention of such a person. Therefore, this Act makes a provision for the preventive detention of anyone who intends to commit or provoke someone to commit an offence punishable under the Essential Commodities Act, 1955. If anyone could be dealing in commodities classified as ‘Essential Commodities’, this provision of preventive detention also applies to such a person. However, for these legislations to be applicable, the commodity must be declared as an essential commodity by the government.

As per an order issued by NPPA on 31 March 2020, the medical devices are reclassified as drugs that are sought to be regulated by the Drug Prices Control Order, 2013 along with the Essential Commodities Act, 1955 and this provision is meant to ensure and monitor that any manufacturer or importer do not sell any medical device at a price which exceeds 10% of the Maximum Retail Price (MRP) during a year. A penalty will be imposed in case of its violation.

An office memorandum (OM) was issued by NPPA on 29 June 2020 following this order for maintaining the MRP of pulse oximeter and oxygen concentrators. All the manufacturers and importers were issued with a notice wherein under the DPCO,2013, they had to submit MRP details.

On 26 September 2020, an order was issued by NPPA. As per this order, medical oxygen will be considered as an Essential Public Health Commodity. The pricing limit was also set by this order for Liquid Medical Oxygen (LMO) at Rs. 15.22 per cubic metre and for the Oxygen Inhalation cylinder at Rs. 25.71 per cubic metre. Further, this order was extended for another six months in March 2020.

The Navneet Kalra Case

An FIR was filed against a Delhi-based businessman Navneet Kalra on 5 May 2021 under the following provisions:

Section 3 of the Essential Commodities Act, 1955 empowering the government to control the production, distribution and supply of the commodities notified as ‘Essential Commodities’.
Section 7 of the Essential Commodities Act, 1955 is about penalty in case of violation of anything mentioned under the Act.
Section 3 of the Epidemic Diseases Act, 1897 is about the penalty for not complying with any provision mentioned under the Epidemic Diseases Act, 1897.
Section 420 of the Indian Penal Code, 1860 which is about cheating.
Section 188 of the Indian Penal Code, 1860 which is the provision for an order duly promulgated by public servant being disobeyed.
Section 120(B) the Indian Penal Code, 1860 which is about the criminal conspiracy.
Section 34 of the Indian Penal Code, 1860 which is about common intention.

He was arrested by the Delhi Police and all the oxygen concentrators from his restaurants were seized. He was alleged of indulging in black marketing of thermal scanners, oxygen concentrators and N-95 Masks by the Delhi Police.

The contentions of Navneet Kalra in his defence were that the Sections under which the FIR has been filed against him are not attracted because oxygen concentrators and thermal scanners have not been declared as ‘Essential Commodities’ under the Essential Commodities Act, 1955. Thus, all the allegations against him cannot stand.

However, the Delhi High Court rejected anticipatory bail to the accused. The Court had a different view and it relied on the five notifications.

The five notifications that were referred by the Court in the Navneet Kalra Case is as follows:

The NPPA issued an office memorandum on 29 June 2020, through which, all the manufacturers and importers were directed to ensure that they do not increase the MRP of oxygen concentrators and pulse oximeters by more than 10% in one year.
The Ministry of Health and Family Welfare issued an office memorandum on 11 February 2020. As per this, all medical devices for the purpose of controlling the quality and monitoring the price, are to be regulated by the government as drugs.
The 31 March 2020 Notification issued by NPPA was referred to in the NPPA’s 29 June 2020 office memorandum. All the medical devices were to be regulated and governed by the Drugs Price Control Order, 2013 as per this notification. This permits the monitoring of the MRPs of all the medical devices by the government.
Notification issued on 30 April 2021 which made an allowance for the imports of oxygen concentrators for personal use under the category of gift through the post, e-commerce portal or courier.
An Order passed on 7 May 2021 by the Drugs Control Department directed the retailers, distributors and wholesalers not to sell certain commodities at a price exceeding the MRP and to keep away from black marketing.

The Delhi High Court after referring and citing these notifications said that oxygen concentrators come under the definition of essential commodities. In addition to this, the Court pointed to the fact that concerned authorities were never informed by the accused regarding the labelled or pasted MRPs over the boxes of the oxygen concentrators.

Navneet Kalra being a very influential person, there was a possibility that he may tamper with the evidence and influence the witnesses. Thus, on these grounds, anticipatory bail was rejected by the Delhi High Court.

The different interpretations

The Delhi High Court relied on the office memorandum issued by NPPA on 29 June 2020 in order to reject anticipatory bail to Navneet Kalra. However, the District Court of Dwarka while hearing a case regarding the oxygen concentrators being seized after it was alleged that they were being hoarded and sold at an inflated price, the Principal District and Sessions Judge at Dwarka specifically pointed out that the government has not declared oxygen concentrators as essential commodities in any case.

In this case, it was held by the Court that since oxygen concentrators have not been notified as ‘Essential Commodities’, thus, the provisions of Section 3 and Section 7 of the Essential Commodities Act, 1955 are not applicable.

However, the police of many states have considered Section 3 and Section 7 of the Essential Commodities Act, 1955 while registering FIRs against people hoarding and indulging in black marketing of oxygen concentrators, pulse oximeters and other important medical devices important for the treatment of COVID-19.

‘High time’ that MRPs be fixed : HC

The steps taken by the government as of now are not adequate as hoarding and black marketing of medical devices is still happening. An extremely inflated price is being demanded and charged by the manufacturers and retailers as there has been no fixed price set by the government.

In the case of the Prag Ice and Oil Mills and Another v. Union of India (1978), and Nav Bharat Oil Mills and Another v. Union Of India (1978) it was held that an order by the government in order to fix the price of an essential commodity has to be presumed constitutionally valid.

Section 3 of the Essential Commodities Act,1955 is specifically made to protect the interest of the public by making the essential commodities available to them at fair prices. Under the Kerala Essential Articles Control Act, 1986, an order has been passed by the Kerala Government in order to fix the pulse oximeter’s price.

In the light of the situation created by the pandemic being worsened by the hoarding and black marketing of essential medical devices, the Delhi High Court asserted that its high time to fix the MRPs of the oxygen concentrators, pulse oximeters and all the other devices that are crucial for the treatment on COVID-19 so that all the malpractices like hoarding and black marketing of these devices could be restricted and controlled.

The Delhi High Court even questioned the Centre and the Delhi Government for not declaring essential medical devices under the category of ‘Essential Commodities’.

Need to list oxygen concentrators and pulse oximeters as essential commodities under the Essential Commodities Act

The COVID-19 pandemic created a situation of panic and chaos and in such a scenario, the Government of India under the virtue of the Essential Commodities Act, 1955, utilised its discretionary powers and notified face masks and hand sanitisers as ‘Essential Commodities’. This was, however, done temporarily. Therefore, once these were supplied adequately at fair prices, they were removed from ‘Essential Commodities’.

Although monitoring of inflation in prices has been done by the government, the two essential medical devices, that is, oxygen concentrators and pulse oximeters have not been classified as ‘Essential Commodities. Therefore, the discretionary powers that are available to the government under the Essential Commodities Act, 1955 have yet not been utilised to notify oxygen concentrators and pulse oximeters as ‘Essential Commodities’. Considering that there is increased hoarding and black marketing of these essential medical devices, steps to declare medical devices like oxygen concentrators and pulse oximeters as ‘Essential Commodities’ is the need of the hour.

Conclusion

In the situation of panic and shortage of essential medical devices created by the pandemic in India where people were fighting for oxygen, some manufacturers attempted to turn this situation into their profit by indulging in black marketing and hoarding essential medical devices. Since there was no MRP fixed by the legislative body for selling these medical devices, manufacturers exploited people by charging exorbitantly high prices. Though some measures were taken by the government to prevent such illegal activities, still they were not adequate.

The health emergency in India should convince the government to use its discretionary powers granted by the Essential Commodities Act, 1955 and classify medical devices like oxygen concentrators and pulse oximeters as ‘Essential Commodities’. This is the only means by which their hoarding and black marketing could be prevented so that the public can have access to them at reasonable prices.

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:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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Is it legal for an employer to make it mandatory for employees to take the vaccine

By

Sneha Mahawar

-

October 27, 2021

0

This article is written by Vanya Verma from O.P. Jindal Global University. This article focuses on whether an employer can make it mandatory for its employees to take the COVID-19 vaccine and questions pertaining to the same as well as the stance of the Meghalaya High Court on mandating vaccination.

Table of Contents

Introduction

Following the second wave of COVID-19, the situation in India has significantly improved, prompting large firms to expect a gradual return to normalcy, which includes the establishment of new workplaces. While there are conflicting reports in the media about a third wave, and a huge portion of India’s population remains unvaccinated (including those who refuse to get vaccinated), various forums are debating the need for vaccination of workers who may return to work. According to statistics, the Government of India was able to vaccinate around 85.6 Crore individuals with the COVID-19 vaccine out of which only 22.4 Crore (as of 26th September) are fully vaccinated, still, a huge portion of the population is yet to be vaccinated.

The Ministry of Health and Family Welfare (“MOHFW”), Government of India, issued the “Liberalized Pricing and Accelerated National COVID-19 Vaccination Strategy,” which states that beginning May 1, 2021, every citizen over the age of 18 must be vaccinated. On May 21, 2021, employees’ family members and dependents over the age of 18 were allowed to be vaccinated at the workplace.

Following the announcements, a number of employers throughout India began recommending their staff to be vaccinated, even if their return to work was delayed or staggered. Vaccination camps were also held at various companies’ workplaces to get personnel vaccinated. Companies like Reliance Industries claimed to have given at least one dose of vaccine to 98 per cent of their staff. Employees at several companies were given incentives to get vaccinated. However, because a segment of the Indian population is still hesitant to get vaccinated, there have been instances of employees refusing to be vaccinated, apparently for a variety of reasons, including a violation of their right to privacy, the right to choose their own medication, or the right to religious freedom and religious beliefs, among others.

Given the government of India’s aim for all Indians to be vaccinated, and employers seeking to open workplaces, the subject of whether employees can be required to get vaccinated is regularly asked.

It’s worth noting that, in response to multiple inquiries, the MOHFW issued Frequently Asked Questions (FAQs) on COVID-19 vaccine in December 2020, clarifying that the vaccination (for COVID-19) is voluntary. MOHFW further noted that receiving the entire COVID-19 vaccine regimen is recommended for protecting oneself against the disease and limiting the transmission of the disease to close contacts such as family members and acquaintances.

Questions pertaining to vaccination at the workplace

Is vaccination mandatory and can employers mandate that their employees get vaccinated

No. The Ministry of Health and Family Welfare recently released FAQs stating that COVID-19 vaccination is optional. Furthermore, no government law or notification has been issued that allows employers to make it necessary for their employees. As a result, entities cannot make vaccination mandatory for their employees on legal grounds. To protect its already existing and vaccinated employees, the employer can include a term or condition in its new employment contract that requires new employees to produce their vaccination certificate as an obligatory document for employment.

How can an employer regulate the vaccination of its employees if vaccination cannot be mandated

Employers cannot force employees to be vaccinated, but they may always encourage and educate them to do so in order to enhance workplace health.

Can an employer mandate an employee to produce a vaccination certificate as proof of vaccination before allowing them to enter the workplace

Such a mandate might be included in the employer’s internal policy, making it a general obligation of the employee to the workplace’s well-being and ethics. The employer can require an employee to submit a vaccination certificate for the employee to visit the workplace; however, it is important to note that the vaccination certificate falls under the category of “medical records,” and thus falls under the category of “sensitive personal information” under Section 3 of the Information Technology (Reasonable Security Practices) Act (“Rules”).

As a result, all certifications submitted by employees, as well as any associated information, must be processed and stored in accordance with the Rules. Furthermore, prior to submitting such a vaccination certificate, the employer must always get the employee’s express consent. Further, employers should not be overly strict in requiring proof of vaccination as a record of admission into the workplace for employees who can show sufficient reason/medical proof to explain their refusal to be vaccinated.

Is paid time off mandatory for employees who are scheduled to get vaccinated

There is currently no law requiring employers to provide paid time off to employees who are scheduled to receive the vaccination. Employers, on the other hand, are always encouraged to encourage their employees to be vaccinated.

Can an employer be held liable for vaccination-related negative effects in any circumstance

If an employee is vaccinated solely because he or she is required to return to work after the vaccination, the employee is likely to initiate a lawsuit against the company, seeking medical expenses or other damages for any medical adverse effects. However, because vaccination is a personal choice, and the employer’s requirement for the purpose of visiting the office does not in any way jeopardise the employee’s employment, the chances of the employer being found guilty are less. However, if the employee can show in court that the employer made it mandatory for the employee to get vaccinated and that the employee had no other choice but to get vaccinated, the employer may be held liable. As a result, it’s best if employers make it clear that vaccination is optional rather than mandated.

What are the rights of the employer if an employee refuses to take the vaccine voluntarily

It is important to note that a company cannot fire employees for declining to take the vaccine. Employers, on the other hand, have the authority to refuse such employees admission to the workplace, as long as the employees’ rights and obligations under the employment agreement are not jeopardised. Employers can also reward employees who have been vaccinated while refusing to reward employees who refuse to acquire the vaccine. Walmart, for example, is rewarding employees who can show proof of vaccination with a $75 bonus.

Can an employer organise a vaccination drive for its employees at their place of business

The government of India released a “Guidance on COVID-19 Vaccination at Work-Places (Government and Private)” that allowed workplaces with around 100 eligible and willing beneficiaries (workers) to hold COVID-19 vaccination sessions (to facilitate optimal utilisation of vaccine dosage and reduce wastage). While the instructions specify that the District Task Force, led by the District Magistrate, and the Urban Task Force, chaired by the Municipal Commissioner, will identify such places of employment, employers can also approach the officials on their own to be considered. Such employees must register on the Co-WIN platform to demonstrate that they are willing vaccine recipients. Employers should ensure that three rooms are available at the workplace for waiting, vaccination, and observation.

How can companies assist and encourage their employees to get vaccines if they are not 100 eligible and willing beneficiaries to qualify for organising the vaccination session

Any form of relief from an employer is always an ethical and appreciated action during this difficult period. Employers might pay their employee’s vaccination expenses upon submission of a vaccination certificate in order to encourage them. This would encourage employees at the bottom of the corporate ladder, who are the backbone of each company’s workforce, to be vaccinated.

What is the best way for an employer to strike a balance between its commitment to offer a safe working environment and an employee’s rights

Yes, it is quite legal for an employee to refuse to be vaccinated. Regardless, businesses should establish a strict routine for employees to follow as a safety measure, such as sanitization, social distancing, hand washing, temperature checks, and so on. The protocols in the workplace must follow the guidelines set forth by the government.

Is it possible for an employee to be fired for refusing to comply with such a vaccination policy – will this be considered as a ground for termination

No, employees cannot be fired just because they refuse to follow the company’s vaccination policy. The refusal will also not be justified. However, the industry/area of business or activity in which the person works, as well as the individual circumstances, must be considered.

Should employers provide vaccinated staff with perks or accommodations

Employers in India currently have the discretion to provide any benefits or make any accommodations for employees who choose to get vaccinated. To encourage employees to get vaccinated as soon as they are in compliance with government regulation, numerous corporations are either subsidising the cost of vaccination for their eligible employees or cooperating with health care service providers to facilitate a seamless vaccination procedure.

Do employees who have been vaccinated have the right to refuse to work in the same area as employees who have not been vaccinated

No. Because vaccination is voluntary, a vaccinated employee cannot refuse to work with non-vaccinated colleagues. Needless to say, if a coworker is found to be suffering from symptoms suggestive of COVID, or if the employer fails to implement adequate social distancing measures and safety protocols at the workplace in accordance with the Standard Operating Procedure (SOP) issued by the Ministry of Health and Family Welfare, an employee may certainly raise a concern.

Is it possible for a company to deny access to the office if employees refuse to take the vaccine

Yes, employers have the right to deny entry to physical premises to any employee(s) they see fit, as long as the denial does not prevent the employee from performing his or her formal duties and obligations.

Is it legal for an employer to ask non-vaccinated employees to sit in a designated section of the office

Yes, this is a viable option. Employers must, however, provide proper communication, and designated zones must adhere to all safety regulations and criteria.

The stance of the Indian courts

The Meghalaya High Court in the case of Registrar General v State of Meghalaya (2021) came up with the issue as to given the invasive and long-lasting nature of an inoculation operation, it’s debatable whether a person’s freedom to decline vaccination will triumph over the public good of universal vaccination.

The lawsuit was brought in response to many orders made by the Meghalaya government requiring merchants, vendors, local taxi drivers, and others to get vaccinated before returning to work. Public interest litigation was filed in response to the Meghalaya government’s directives, and it was heard by a two-judge bench of the Meghalaya High Court.

“A notification/order of the State certainly cannot put an embargo and/or fetter on the fundamental right to life of an individual by stripping off his/her right to livelihood, except according to the procedure established by law,” Chief Justice Samadder said, referring to the MoHFW FAQs on vaccination. Even that procedure must be rational, just, and equitable. Until recently, there has been no legal mandate in place that can restrict or take away a citizen’s livelihood on the basis of coercive or compelled vaccination in general, or the COVID-19 vaccination programme in particular.”

“Article 21 covers the right to health, as a basic right, within its fold,” CJ Samadder added. The right to health care, which includes vaccination, is a fundamental right in the same way. However, forcing vaccination or making it mandatory through forceful ways defeats the exact objective of the welfare associated with it. It infringes on fundamental rights in general, particularly where it undermines the right to a means of livelihood that allows a person to live.”

“Thus, by use of force or via deception, if an unwilling capable adult is made to get the flu vaccine would be regarded both a criminal and a tort or civil wrong, as was ruled in Airedale NHS Trust v Bland (1993) some 30 years ago,” CJ Samadder said. Thus, since the early stages of vaccination as a preventive tool against various diseases, the coercive element of vaccination has been not only discouraged but also regularly ruled against by the courts for more than a century.”

CJ Samadder concluded after further discussion on considerations related to forceful vaccination and rights to personal liberty under international law, “Therefore, the right to and the welfare policy for vaccination can never affect a major fundamental right; namely, the Right to Life, Personal Liberty, and Livelihood, especially when there is no reasonable nexus between vaccination and prohibition of the continuance of occupation and/or profession. A careful and purposeful reading of the law, as well as the principles of equity, a good conscience, and justice, demonstrates that forced or coercive vaccination has no legal basis, making such actions vulnerable to be found ultra vires ab initio”.

Conclusion

Many employers are likely to highly recommend vaccination without mandating it. Employers will have to cope with a portion of the workforce that is completely vaccinated and a small number of people who are not vaccinated and have no intention of doing so in the future if they want to return to the physical workplace. In such circumstances, it will be difficult for organisations and HR to maintain a smooth operation. After all, fully vaccinated employees may have a hard time getting along with those who are not vaccinated. Several progressive employers have organised workplace vaccination camps, as the company gradually reopens its offices in India over the next few months, it is in the employer’s best interest to ensure that the majority of its workforce is vaccinated.

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:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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

All you need to know about the Vice President of India

By

Sneha Mahawar

-

October 27, 2021

0

This article is written by Oishika Banerji of Amity Law School, Kolkata. The article deals with a detailed discussion concerning the Vice President of India.

Table of Contents

Introduction

The position of a Vice President in a nation is not only noteworthy but also requires a discussion as the Vice President holds the second-highest office in a country right after the President. After adopting the concept of Vice President from the Americans, the Indian Constitution framers laid down provisions for the Vice President under Article 63 which mandates the position of a Vice President of India. This esteemed position received its first holder as Dr. Sarvepalli Radhakrishnan who served for the term of ten years ( May 13, 1952- May 12, 1962) and is currently embraced by Shri M. Venkaiah Naidu who continues serving the position as the 13th Vice President of independent India (11th August 2017- present). This article will help the reader acquire relevant information concerning the Vice President of India which includes the process of election, term of office, powers, functions, and qualification.

The necessary information concerning the Vice President that one needs to know

Hereunder the reader will be able to understand the basic information surrounding the Vice President of India.

Election of the Vice President of India

Section 2(h) of the Presidential and Vice Presidential Elections Act, 1952 provides the definition of “Vice-Presidential election” which means “an election to fill the office of the Vice President of India”. Article 66 of the Constitution of India, 1950 provides the provision for the election and eligibility of the Vice President. Just like the President of India, the Vice President is also elected through the system of proportional representation by means of a single transferable vote which symbolizes an indirect election. The only difference between the Presidential election with that of the Vice President’s is the composition of the electoral college as provided hereunder;

The electoral college comprises both elected and nominated members of both Houses of the Parliament (in the President’s election, only elected members constitute the electoral college).
The electoral college does not include the members belonging to the State Legislative Assemblies (the elected State Legislative Assemblies members are inclusive in the electoral college composed for the President’s election).

It is to be noted that Section 9 of the Presidential and Vice-Presidential Elections Act, 1952 prescribes the manner of the voting at the elections which is “votes shall be given by ballot in such manner as may be prescribed, and no votes shall be received by proxy”. Therefore, voting at the Vice President’s election has to be mandatorily carried out by a secret ballot. After the election takes place followed by result declaration, the Returning Officer shall report the same to both the Central Government and the Election Commission. The Central Government shall be publishing the same in the Official Gazette with the declaration containing the name of the person who has been elected to the President or Vice President’s office as the case may be.

One cannot ignore the aspect of election disputes which is a common sight in India. Part II of the Presidential and Vice Presidential Elections Act, 1952 concerns disputes regarding elections. Section 17 of the Act mandates that any dispute or confusion arising in connection with the Vice President’s election is to be inquired into and decided solely by the Supreme Court of India whose decision will be perceived to be final.

Qualifications that the Vice President must abide by

Article 66 (3) of the Indian Constitution provides three prerequisites for qualifying to the position of the Vice President of independent India namely;

The person shall be an Indian citizen;
The individual must have completed thirty-five years of age;
The person must be qualified for the election as a member of the Rajya Sabha, the Council of States.

Alongside these three criteria, Article 66(2) provides the limitation for the Vice President that he shall not be a member of either Parliament Houses or the State Legislature at the time when he is holding the Vice President’s office. Furthermore, a sitting President or Vice President of the Union followed by the Governor of a state or a Union Minister or State Minister who is not holding any position from where they can earn profit will qualify for being a candidate to contest for the Vice President’s position. A security deposit of Rs 15,000 is to be made in the Reserve Bank of India by the candidates contesting for the position of Vice President of India. Therefore, to summarize the two conditions for holding the office of the Vice President are provided hereunder;

An individual must not be a member of either House of Parliament or a House of the State Legislature at the time of appointment as the Vice-President.
An individual should not be holding any other office yielding profit.

Oath or affirmation

Article 69 of the Constitution of India, 1950 lays down the provision for oath or affirmation by the VicePresident. The purpose behind such swearing is to ensure and obligate the Vice President of India to deliver duties, and functions that are allotted to him efficiently. While swearing before the President, or some other person appointed by the President on his behalf, the Vice President swears the following;

To bear true faith and allegiance to the Indian Constitution; and
To discharge the duties vested on his office faithfully.

Term and vacancy of the office

The provision for the term of office of the Vice President is embedded under Article 67 of the Indian Constitution which provides a five years term for the Vice President from the date of him entering his office. Further, Article 68(1) provides that the vacancy of the Vice President’s office must be filed before the expiration of the term of the previous Vice President thereby deleting the scope for keeping the office vacant. Article 68 (2) walking in line with Article 67 states that if the office of the Vice President is vacated on grounds of death, resignation by submitting a resignation letter to the President of India, impeachment, or removal, which in many cases does not need to be in the form of impeachment as also the Constitution does not expressly talk about it, the election for the next Vice President should be completed without further delay who when elected will be holding the office again for a term of five years.

Removal of the Vice President

With a monthly salary of Rs 1,25,000 and a pension of Rs 62,500 (50% of the salary), the Vice President of India can be removed by the Council of States by means of a resolution passed by a two-thirds majority and accepted by the Lok Sabha. The first Vice President of India, Dr. Sarvepalli Radhakrishnan held the Vice President’s office for a term of ten years consecutively because of his re-election. Drawing from this, it can be said that a Vice President is eligible for being re-elected any number of times to the office.

Powers and functions of the Vice President of India

The Vice President’s function has been designed in a two-fold form namely;

Article 64 of the Constitution of India; which lays down that “The Vice President shall be ex officio Chairman of the Council of the States and shall not hold any other office of profit.”
Article 65 of the Constitution of India provides the following;

The Vice President shall be acting as the President of India if there is an occurrence of circumstances of death, removal, or resignation, or any other reasons which have led to vacating of the President’s office, for a period of six months only within which a new President has to be elected.
When the President fails to discharge his functions on grounds of absence, illness, or any other cause then it is the Vice President who shall be discharging his functions on the President’s behalf until the President resumes his/her office.

Article 70; which provides the provision for the discharge of the President’s functions in other contingencies meaning that the Vice President shall be eligible to discharge all other functions belonging to the President which are not expressly mentioned under Chapter 1 Part V of the Indian Constitution.

It is to be noted that Article 65 (3) talks about the powers of the Vice President which it can exercise while wearing the skin of the President of the nation. In doing so, the Vice President will be qualified for all such emoluments, privileges, and allowances as having been determined by the Act of the Parliament which the President is entitled to.

A list of interesting facts about the Vice President of India

After gathering information about the office of the Vice President of India, it is now necessary for the readers to learn some interesting facts concerning the Vice President of India which are provided hereunder;

Since 1952 when the first Lok Sabha was formed, India has been served by 13 Vice Presidents with Shri M. Venkaiah Naidu currently holding the office.
Among these 13 Vice Presidents, only 7 were elevated to the position of the President of India.
Among these 13 Vice Presidents, there are two Vice Presidents who have served the country twice, namely Dr. S Radhakrishnan and Hamid Ansari.
The first Vice President of India who has been well-known as a scholar, philosopher, teacher, and has been the representative from India at UNESCO is Dr. S. Radhakrishnan.
Zakir Hussain who served as the 2nd Vice President of independent India is also recognized as the co-founder and Chancellor of the national Muslim University, Jamia Milia Islamia.
The preconceived notion that the position of Vice President of India can be held only by the politicians was scrapped down when Vice Presidents K.R. Narayan and Hamid Ansari both having a background of bureaucracy, were appointed to the office. Gopal Swarup Pathak, Mohammad Hidayatullah, R Venkatraman were lawyers by profession who had acquired the Vice President’s office.
It is interesting to take into account that the only Vice President of India who got married to an individual with a foreign national was K.R. Narayan.
Shankar Dayal Sharma is the only Vice President of India who has worked as a Chief Minister, Cabinet Minister, and President of INC (Indian National Congress).
While Bhairon Singh Shekhawat has been the only Vice-President of India who belonged to Bharatiya Janata Party and fought for the President’s post with an eventual loss against Smt. Pratibha Patil, the Vice Presidents who came from the Congress background were V V Giri, B D Jatti, Shankar Dayal Sharma, R Venkatraman, and Krishan Kant.
India has received Vice Presidents who served the country with a non-political background namely Dr. S Radhakrishnan, Mohammad Hidayatullah, Gopal Swarup Pathak, and Zakir Hussain.
R Venkatraman was the only Vice President of India who was a Hon’ble member of the Constituent Assembly responsible for giving birth to the Constitution of India.

A comparison between the Indian and American Vice Presidents

As has been discussed previously, the concept of Vice President was adopted by India from the Americans, and thus a comparison between the Vice Presidents of India, and America stands necessary. The broad ground of comparison is the Succession to Presidentship in both nations. In the case of America, the Vice President is the successor of the President whenever the office of the President falls vacant for an unexpired term. On the other hand, in India, the Vice President can remain an acting President for 6 months only. This reflects on the fact that the powers vested on the Vice President of America are wider as compared to India’s Vice President thereby making it clear that the relevance of the Vice President’s position in India is minimal.

Conclusion

The Constitution of India, 1950 has not specifically facilitated the Vice President’s position with specific functions; instead, it has made it clear that the Vice President has to behave as a tail to the President of India. But, this unfamous position has significance in maintaining the political continuity of the democratic nation. Therefore, the position of the Vice President of India stands infamously famous.

References

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Here is what you need to know about a private equity investment in New Zealand

By

Oishika Banerji

-

October 27, 2021

0

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

Table of Contents

Introduction

New Zealand has a small open economy with a population of only 4.7 million people. The workforce is well educated and 75%. of the population (aged 25-64) has qualifications above secondary education. It has a parliamentary democracy and constitutional monarchy, based on a proportional representation electoral system. The traces of English common law are quite visible in legal institutions, providing a well-defined, open and transparent business environment. Also, the government has made friendly moves to cater to various business needs like double tax treaties with over 30 countries across the globe.

The estimated GDP in 2016 was approximately $248 billion diversified in various sectors like manufacture, transport, communication, construction, and the primary sector which involves agriculture, fishing, and forestry. Due to its international competitive edge in the primary production sector, it has been successful in exporting various dairy products (milk powder, butter, cheese), tourism and meat. The rise in exports is one of the outcomes of the CER (Closer Economic Relations) agreement which was signed with Australia in 1983, which exposed the previously protected manufacturing sector to the international competition from Australia and ignited the process of specialisation.

Of late, Kiwi’s creative industries, as well as information technology, have been able to garner investment attention especially in screen production and digital animation. In 2018, the top 200 technology exporting companies had seen a growth of 11%, and around $.1.1 billion in private equity and venture capital funds were invested in the overall technology sector.

Three of the top 5 trading partners are located in the Asian region and the Kiwi nation has free trade agreements with all major trading partners including Australia, China, and ASEAN. Despite an international rise in public listed companies in the 1990s, New Zealand has private companies more than public listed companies. However, due to the overall blend of economic, legal, and social environment that provides strong preconditions for private equity investment it ranks 8th in an index for the most attractive market for private equity globally (out of 125 countries), comparable to European countries such as Germany, Denmark, Switzerland, and Norway.

Recent investments (SaaS)

In September 2021, Amazon Web Services decided to invest $7.5 billion for over 15 years in Auckland to base cloud computing data centers. The tech giant has chosen the city because of its telecommunications connections and skilled workforce. The AWS team has also estimated that the investment would create at least 1000 jobs and contribute $10.8 billion to New Zealand’s GDP over the next 15 years.

In May 2020, Microsoft announced plans to build its first data center in North Island, home to the cities of Auckland and Wellington adding it to its 59 other data centers across the globe. Dairy giant Fonterra was the first major company to sign up to be a part of the multi-million dollars project. Under the said agreement, Fonterra will migrate critical parts of its operations to Microsoft’s cloud service, Azure. Microsoft Surface devices will also be provided to key Fonterra staff across Australia and New Zealand to support business across its network of 19,000 staff and 10,000 farmers. Spark NZ, a leading digital services organization and Microsoft cloud customer has also partnered with it to empower innovation and focus on building cloud and digital capability. In New Zealand, around 886 SaaS start-ups are ranging from Artificial intelligence, cloud-based, project management, job management, web security, etc.

Pandemic – a hindrance?

Well, many might assume that pandemic might have led to a downward curve in terms of investment activity in comparison to the trends till 2019 but the overall figures were quite astonishing. The year to 31 December 2020 was characterized by a record level of investment activity capping it at $2,531m, an increase of $351m from 2019 ($2,180m) driven by record levels of activity in the Mid-market category. The figures for 2020 are also significantly higher than the decade average of $1,315m. Leveraged Buy-Outs (LBOs) activity was also on a higher side driven by the EQT infrastructure acquisition of Metlifecare. The most eye-catching figures were restricted to private equity investments which saw a staggering growth of $824m to reach $2,292m from $1,034m in 2019. The international attraction for investment in software/ technology in hubs like Wellington and Auckland continues the theme seen in recent years.

Venture and early-stage capital

The early-stage investment includes the activity of fund managers, angel networks, and individuals. The stage of early-stage funds varies from large venture capital funds (greater than $50m funds under management) to small and micro venture ($2m- $10m funds under management) The investors usually appoint a fund manager or general partner who is given a position inboard to have a check on the major decisions taken by the investee company and to manage the funds invested by the investor.

The total investment value of undisclosed venture activity in New Zealand was $127.2m in 2020 as against $112m in 2019. There has also been an increase in volume which rose to 92 in 2020 from 46 in 2019. The financial year of 2017 and 2018 saw the highest venture investment in the last decade. The figures for 2020 would have been staggering high if the pandemic could have been avoided.

Mid-market investment

Although there is no concrete definition of mid-size businesses (MSBs) across the world, it is usually decided based on two factors: manpower and revenue. Keeping in mind the geography and population of Kiwi nation as compared to other highly-developed economies, the MSB in New Zealand can be defined as businesses having revenue between $5m and $30m and having employed people between 20 and 99.

MSBs in New Zealand are the powerhouse of growth, employment, and revenue, which is unfortunately overlooked while pushing the small business and celebrating the victories of larger ones. The growth in new players in the mid-size market has increased significantly in the last decade which has placed MSBs at 10,698 as compared to 2,460 large and 4,71,021 small enterprises. Amongst these MSBs, 65% are 11 years or older.

The contribution in GDP in the year 2017 was marked at $35 billion from a total GDP of $204 billion. The statistics have the potential to witness drastic upward trends but that is possible only through government initiatives and major changes by businesses themselves. The MSBs also accounts for employment generation close to 4 lakhs in 2017 which is 21% of the total employment in New Zealand. The regions having a wide presence of MSBs includes and are not limited to Auckland (34%), Canterbury (14%), and Wellington (10%).

Interestingly, the MSBs in New Zealand have an equity to asset ratio similar to those with small enterprises which indicates that MSBs behave like small businesses when it comes to procurement and utilization of finance. The tendency of entrepreneurs to opt for debt financing instead of private equity is constraining the growth prospects. There is a sense of disliking in the mid-size market when it comes to dilution of control in businesses by bringing in investors which are eventually placing the entrepreneurs in oblivion to huge capital along with expertise and network.

Case studies

EQT infrastructures and metlifecare

In December 2019, Metlifecare announced to the New Zealand Stock Exchange that they had entered into a Scheme Implementation Agreement (SIA) under which EQT, a highly respected European investment company, will acquire all of Metlifecare’s shares for $7.00 per share. The said buyout transaction was revised in the month of July 2020 after a dispute between the two parties concerning the revised share prices. The company’s largest shareholder, NZ Super, which holds about 19.9% stake, agreed to vote in favor of the deal offered by EQT offering to buy shares at $6. The intention behind the partnership is to support the Metlifecare team to embark on the journey to develop and operate high-quality retirement villages and continue to provide exceptional care to New Zealanders which Metlifecare is known for.

TR group

TR Group is the largest heavy vehicle rental and lease company that has been facing market forces since 1992. It has a wide customer base of around 1,300 with a fleet of more than 6,500 vehicles from 15 branches throughout New Zealand and Australia. The company is headquartered in Auckland and employs around 150 dedicated staff members. In 2020, the company invited New Zealand’s largest private equity player Direct Capital, NZ Super Fund, and Kiwi investment to acquire 31% shareholding in TR Group alongside founders, Managing Director, and the Carpenter Family. The main mission for this investment was to expand TR Group’s presence in Australia which is according to them an untapped market.

Conclusion

The unprecedented disruptions caused by the covid-19 pandemic have indeed impacted some industries and sectors in 2020 but the rigid support provided by the private capital funds helped various businesses to recover and upgrade to new levels and adjust to new business practices. Although the economic recovery might take some time, the market is optimistic and the appetite of the investors (both domestic and global) for the private market is healthy. The figures across various types and stages of investment indicate a brighter picture in the coming years. The entry of new sectors like technology (SaaS) has been successful in attracting major players like Amazon and Microsoft to invest in their growing economy. Over the last decade more than $8.5 billion has been invested in Kiwi companies and interestingly in that same time over $4.6 billion has been returned to investors as earnings which are eventually reinvested in other areas. The mid-market continues to be a top performer in investment activity in New Zealand and the capital currently invested continues to accelerate the ambitions of existing companies in fund portfolios. There continues to be a huge amount of capital availability from domestic as well as international funds providing enough alternatives to companies to take a safe and better decision for sustainability and growth of the company. The Govt. of New Zealand has also been able to receive accolades at the international level for creating a vision lucrative for the entrepreneurial spirit of the country which further instigates confidence in both investors and investors.

References

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Analysis of the National Bank for Financing Infrastructure and Development Act, 2021

By

Diganth Raj Sehgal

-

October 27, 2021

0

parliament (1) — Image Source- https://rb.gy/dklopr

This article is written by Pranjali Aggarwal of the University Institute of Legal Studies, Punjab University, Chandigarh. This article discusses all the aspects of the National Bank for Financing Infrastructure and Development Act, 2021.

Table of Contents

Introduction

The formation of the National Bank for Financing Infrastructure and Development was first discussed by the Finance Minister Ms. Nirmala Sitaraman in her budget speech of the year 2021-22. She remarked it as the pre-eminent Development Finance Institution (DFI) of the country.

The Bill for the National Bank for Financing Infrastructure and Development Act, 2021 was presented in the Parliament on 22nd March 2021. It was passed in Lok Sabha on 23rd March 2021 and in Rajya Sabha on 25th March 2021. The Act, after the assent of the President, came into force on 28th March 2021. The Act led to the incorporation of the National Bank for Financing Infrastructure and Development (NBFID). With its enactment, the government is targeting the development of infrastructure financing in the country. The NBFID will play an imperative role in the construction of the infrastructure pipeline project that is worth Rs. 111 lakh crore.

Development Financial Institution (DFI)

The major function of the DFI is to help in the development of various sectors by providing them sources of financing. These are also called development banks. The concept of DFI is not naive for India. The existence of the development financial institutions in India dates back down to the year 1948. In 1948, India’s first DFI, the Industrial Financial Corporation of India was established. There were several DFIs that were incorporated nationally and internationally like the Industrial Credit and Investment Corporation of India (ICICI), World Bank, etc.

The concept of DFI saw a decline in the role during the Narasimha Rao government in the year 1991. After the reforms of 1991, the public funding was reduced for the DFIs which did not yield positive results. The trend of bank credit and external borrowing came back. The passing of the NBFID Act, 2021 has led to the resurrection of DFIs in the country through the establishment of the NBFID.

Reasons for the enactment of the NBFID Act, 2021

There are primarily two objects of the NBFID Act, 2021. They are enumerated in Sections 4(2) and 4(3) of the Act, which are as follows:

Financial object

The NBFID Act, 2021 aims to arrange investment for infrastructure projects that are situated entirely in India or partly in India. This can be done by lending or investing either directly or indirectly or to look and arrange investments from the private sector investors and institutional investors for the infrastructure projects. This will help to foster sustainable economic development in the economy.

Developmental object

The NBFID Act, 2021 focuses on the development of the bonds and derivatives market of the country. It is done by taking the key stakeholders of the process on board and building cooperation among them.
It also encourages the development of infrastructure assets in areas listed under the updated ‘Harmonized Master List of Infrastructure Sub-Sectors’ released by the Ministry of Finance.
Basically, the Act aims to assist in the development of long-term non-recourse infrastructure financing in India.

Establishment of NBFID

Section 3 of the Act provides for the establishment of the National Bank for Financing Infrastructure and Development (Institution). The NBFID will hold a perpetual existence under a common seal just like any other corporate entity.
The head office of the Institution will be based in Mumbai. Any other offices, branches, or agencies can be set up at any place (either in India or outside India) by the Institution according to the requirement.

Structure of the NBFID

The structure of the NBFID is as follows:

Authorized share capital

According to Section 5 of the Act, the authorized share capital of the institution is prescribed to be one hundred thousand crore rupees.
The total capital is divided into ten thousand crores fully paid shares (the whole amount of money is received at once and no outstanding amount is left). Each share will be priced at Rs. 10.
The Board of the Institution has the power to alter the face value of the shares and thus, divide the capital into shares (of a different value) accordingly.
The Board after consulting with the Central Government can increase or decrease the authorized capital of the Institution. The only condition is that in any situation, the shares issued should be fully paid-up shares.
The Board, after taking the approval of the Central Government, can decrease the share capital of the institution. The method adopted for this purpose is buy-back of shares which means the company repurchases its shares from the market.

Shareholders

According to Section 5 of the Act, the shares of the Institution may be held by the Central Government, multilateral institutions, sovereign wealth funds, pension funds, insurers, financial institutions, banks, and any other institution that is allowed.
The Central Government should hold at least twenty-six percent of the shares of the institution in every circumstance.

Board of Directors of the Institution and their powers

Chapter III of the Act deals with the Board of Directors and Management of the Institution.

Section 6 of the Act enumerates the composition of the Board of Directors. The Board of Directors include the following:

A Chairperson that is appointed by the Central Government according to the advice of the Reserve Bank.
A Managing Director that is appointed by the Board as per the recommendations of the Bureau (as per Section 2(c) of the Act, Bureau refers to the body notified by the central government for appointment and removal of the directors).

The appointment will be done according to the guidelines and criteria set by such agencies that are determined by the Central Government.

Three Deputy Managing Directors are appointed by following the same procedure as that of the Managing Director.
Two Directors will be nominated by the Central Government chosen from the officials of the Central Government.
At most three directors are to be elected by shareholders. The shareholders, except for the Central Government, who owns at least ten percent of the total issued equity share capital can nominate one director.
Independent directors can be appointed by the Board according to the recommendations of the Nomination and Remuneration Committee. The number of independent directors will be either three or one-third of the total number of the directors on the Board, whichever number will be higher.

At least one of the directors mentioned in clause (e) or (f) of Section 6(1) shall be a woman.
If the condition for the appointment of the shareholders as per clause (e) of Section 6(1) is not fulfilled or when there is still time to take charge by the directors, then the Board can co-opt for appointment of not more than three directors. Such appointment of the co-opt directors is to be made according to the recommendations of the Nomination and Remuneration Committee.
The Managing Directors or the Deputy Managing Directors will work as full-time Directors.

Powers of the board

They are entitled to supervise and govern all the activities of the Institution. They can use all those powers and perform activities that can be performed by the Institution.
They can also act in accordance with business principles but they should not be contrary to the provisions of the NBFID Act, 2021.
According to Section 8 of the Act, the Board can delegate its powers or functions to the Directors or committees formed under this Act by adhering to the conditions and limitations as prescribed by the Act. This can be done either by passing general order or special order.

Disqualification and removal of the directors from the office

Section 10 of the Act lays down provisions regarding the disqualification and removal of the directors from the office.
This power is vested with the Central government and can be exercised in the following situations:

If any director has been declared insolvent; or
If he has become either physically or mentally incapable to act as the director; or
If he has been convicted of such an offence that is moral turpitude (degradation) according to the Central Government; or
If he has gained any sort of financial interest that will lead to biasness while exercising the powers and functions as the director.
If he has abused his position, and the Central government opines that if he continues his office, it will be against the interest of the public.
If he has been removed due to any reason from the service of:-

(i) The Government; or

(ii) Any bank including the Reserve Bank of India and the State Bank of India; or

(iii) Any public financial institution or state financial institution; or

(iv) Any other corporation owned or controlled by the government

If the removal is to take place as per clauses (d) or (e), then he shall be given a sufficient opportunity to put forward his view.
If any director has been elected as the Member of Parliament or any State Legislature, then he will cease to be a director of the Institution from the date he is elected or nominated at any such office.
Section 11 of the Act envisages other situations in which the Chairperson or directors can be removed. The situations are as follows:

The Central Government may remove the Chairperson and substitute him by appointing another person. This Central Government should exercise this power after consulting the Reserve Bank of India.
Any director that is appointed as per the clauses (b), (c), or (f) of sub-section (1) of Section 6 can be removed by the Board of Directors after consulting the Bureau.

Committees of the Board

Section 15 of the Act envisages the provision for the formation of the committees of the Board. The formation of committees is the total discretion of the Board. The committees should perform their functions and follow procedures as may be specified by regulations.

Nomination and Remuneration Committee, a Risk Management Committee, and an Audit Committee shall be formed by the Board. Each committee will comprise a minimum of three independent directors.
An Executive Committee may be formed by the Board. It may consist of such a number of directors as the Board may deem fit.
The Chairperson of the Institution shall not be a member of the Executive Committee. He cannot become a member of the Audit Committee and the Nomination and Remuneration Committee also after the first year.

Disclosure of the interest by members of Board or of Committees

Section 16 of the Act deals with the disclosure by the members of the Board and Committee regarding their interest in body corporate if any. In this Section, the ‘body corporate’ will have the same meaning as enumerated under Section 2(11) of the Companies Act, 2013 which includes:

A company, a firm, a financial institution, or a scheduled bank or
A public sector enterprise established or constituted by or under any Central Act or State Act; or
Any other incorporated association of persons or body of individuals.

The provisions of the Section are as follows:

The Director holding any interest in body corporate in the manner as referred to in this Section shall disclose it in the first meeting of the Board in which he participates as a Director; or
In the cases where he has acquired interest subsequently after previous disclosures then he can disclose the same in the next meeting of the Board after such change.
When any agreement, proposed contract, or arrangement has been entered into or is to be entered by the Institution with:-

The body corporate in which director or directors in the association are holders of more than two percent of shares; or
Director is the promoter, manager, chief executive officer or trustee of that body corporate; or
A firm or other entity in which such director is a partner, owner, or member, as the case may be,

Then such directors either holding interest, directly or indirectly, are not entitled to participate in the meeting of the Board or of its Committee in the following cases:

When such contract or arrangement will be deliberated upon;
Or when such instruments are to be discussed in any way.

The person holding such interest should disclose the same at the time of such meeting also.
On the later discovery of the fact that the Institution entered into such contract or arrangement in which the director is interested and he did not disclose his interest according to Section 16(2), then such contracts are voidable at the option of the Institution.
The employees who are part of the senior management of the Institution are also bound to disclose their personal interests relating to any financial, material, commercial transactions that can potentially act in conflict of the interest of the Institution.
If any director acts in violation of the provisions laid down in Sections 16(1) or 16(2) or any employee that violates Section 16(4), then such individual is liable to pay a sum of Rs. 1 lakh as the penalty.
Without prejudice to anything contained in sub-section (5) of Section 16, the Institution has the power to recover losses from the director or employee, if the Institution faced loss because they did not abide by the disclosure procedure.

Powers and functions of the Institution

Section 17 of the Act deals with the powers and functions of the Institution that are as follows:

Can establish subsidiaries or joint ventures or branches either in India or outside India. Such establishment can be made for the following purposes:

To delegate functions of the Board;
Or an arrangement can be made to finance them;
Or to guarantee any of their liabilities;
Or any other arrangement that the Board may deem fit.

Maintain coordination between the activities of the Institution and other units that are indulged in the field of infrastructure finance.
The expert staff needed to study problems relating to infrastructure finance should be maintained by the Institution.
They should provide consultation services to the Central Government, the Reserve Bank, and other institutions that are indulged in the field of infrastructure finance.
They should establish trusts according to the Indian Trust Act, 1882. The primary function of the establishment of trusts is to create such funds that will help in the financing of infrastructure projects. Such infrastructure projects can be situated either wholly in India or partly in India and partly outside India.
Facilitate in the development of a deep and liquid market for bonds, loans and derivatives for infrastructure financing including facilitating electronic and negotiated markets infrastructure, investor protection, adjudication infrastructure, etc.
Lend and invest in the infrastructure projects situated in India, or partly in India and partly outside India. This can be done through following ways:-

By underwriting credit, securitization of its receivables or,
By way of any pass-through certificate or direct assignment, transfer or novation or,
Through the usage of innovative financial tools including transactions secured by receivables from the project.

To provide financial aid to any company, statutory corporation, trust or any financial institutions that are engaged in any infrastructure project either in India or partly in India or partly outside India. Financial aid can be provided by sanctioning loans or advances.
To look after all the aspects regarding loans like refinancing, settling them, etc.
To purchase, underwrite, acquire, hold or sell any type of securities (shares, debentures, bonds, etc) that are issued or guaranteed by any private firm or trust or government institution that are engaged in funding infrastructure projects situated in India or partly in India and partly outside India.
They can borrow money from the Central Government, scheduled banks, financial institutions, mutual funds, any class of persons, and from any other institution or authority, or organization that is notified by the Central Government. The loan can be borrowed when there is a mismatch between assets and liabilities. It cannot be used to employ funds in business activities.
To engage in buying, selling or any other dealing in foreign exchange, that is needed to discharge functions of the Institution.
The Institution can opt for technical or professional services of the companies that are indulged in the field of infrastructure during the completion of the projects.
In case of transactions or services concerning debt securities issued by infrastructure companies and financial institutions for the purpose of infrastructure projects, the Institution can play the role of intermediary. They can also provide credit enhancement facilities to such institutions.
They can participate in the negotiations and discussions in the cases relating to infrastructure financing with the government authorities and stakeholders in order to ensure effective dispute resolution.
They will apply, receive and manage all the grants, aids, donations, etc from all the national and international sources.
They will work to encourage foreign participation in the projects of infrastructure development.
They can enter into any other business or activity that is permitted by the Central Government after consulting with the Reserve Bank of India.

Functions that can either be performed by Institution itself or can be delegated to the subsidiaries or joint ventures

These functions are elucidated in Section 17(2) of the Act that are as follows:

To encourage the participation of the Central Government, public sector, private sector, and institutional investors from India or overseas in infrastructure development projects located in India, or partly in India and partly outside India.
To assist any person engaged in the infrastructure development projects regarding technical, legal, marketing, and administrative aspects.
To provide consultancy services in the projects situated in or outside India, in matters like the development of infrastructure, structuring of project and capital, etc.
To arrange for the facilities for training, dissemination of information, and promoting research activities. This can be done by issuing loans or grants.
They can act as trustees in the case of securities and even undertake and execute any other trusts.
They can also exert powers of executor, administrator, receiver, treasurer, custodian, and trust corporation.
They prepare proposals and negotiate the final agreements with the investors and proponents of infrastructure projects regarding the infrastructure projects in India or partly in India and partly outside India.
They can undertake acts or activities including sale or transfer of its assets that incidentally fall under their ambit while exercising the powers or abiding by the duties that are laid down by the Act or any other law for the time being in force.

Prohibited activities

Some businesses are expressly barred by the Act to be undertaken by the Institution. They are envisaged in Section 18 of the Act and are as follows:

The Institution cannot provide loans or advances by keeping its own bonds and debentures as securities.
The Institution is not entitled to issue loans or advances to any individual, or firms in which one or more directors hold power or are having substantial interest (the definition of ‘substantial interest’ given in Section 2(77) of the Companies Act, 2013 applies here). This provision does not apply to a borrower if any director of the Institution is nominated by the Institution or the Central Government as director on the Board of such borrower or is elected on the Board of such borrower by virtue of shares held in the borrower by the Institution.

Transactions with related party

There are some transactions elucidated in Section 19 of the Act with related parties that cannot be undertaken without the approval of the Board and fulfilling other requisites as prescribed by the Act. Such transactions are as follows:

Sale, purchase, or supply of any goods or materials;
Selling or otherwise disposing of, or buying, property of any kind;
Leasing of property of any kind;
Availing or rendering of any services;
Appointment of any agent for purchase or sale of goods, materials, services, or property;
Such related party’s appointment to any office or place of profit in the Institution, its subsidiaries or joint ventures or associate companies;
Underwriting the subscription of any securities, or derivatives thereof, of the Institution.

The conditions that the above-mentioned activities are subject to, are as follows:

The prior approval of the Board is needed to enter into any arrangement or transaction that involves a sum more than what is permitted by the regulation.
Shareholders who are the related parties in the transaction are not allowed to cast a vote for its approval in the general meeting.
If the Institution enters into any of the transactions referred above [Section 19(1)], then the Board should present a report stating the justification for entering into such a transaction to the shareholders.

Consequences of non-compliance with the provisions of Section 19

If any transaction is entered into by any employee or director without adhering to the procedure of the consent from the authorized authority, then such transaction is voidable at the option of the Institution or shareholders. The Institution can recover the losses from the director if the transaction entered into by the Institution is with any related party of the director.
Any director or employee acting in violation of Section 19 is liable to pay a penalty of a sum of upto twenty-five lakhs rupees.

Government grants, guarantees, and other contributions

Chapter V of the Act deals with government grants, guarantees, and other contributions, the provisions are as follows:

According to Section 21 of the Act, the government can support the Institute by providing grants or contributions. These can be in the form of cash or marketable government securities.
The Government must grant or contribute a sum of five thousand crore rupees after the end of the first financial year after the establishment of the Institute. This grant should not lead to any prejudice to the generality of the foregoing.
According to Section 22 of the Act, the government should fix the concessional rate at not more than 0.1%, at which the borrowings can be taken from multilateral institutions, sovereign wealth funds, and any other foreign institutions that are prescribed by the government.
According to Section 23 of the Act, the Central Government may reimburse the amount that the Institution is unable to pay relating to borrowings of foreign currency. This is done by the government to protect the Institution from the fluctuation of the rate of exchange.

Accounts, audit, and report

Chapter VI of the Act deals with the accounts, audits, and reports of the Institution.

Reserve fund

Section 24 enunciates the provision regarding reserve funds for the Institution. The provision is as follows:-

The reserve fund shall be created by the Institution. The Board will transfer such sums that the Board deems fit from the accrued profits of the Institution into the reserve fund. The sum transferred should not be less than twenty percent of the accrued annual profits of the Institution.
The Board has to firstly ascertain and create provision for the following:

Bad and doubtful debts,
Depreciation of assets and
For all other matters for which provision is necessary or expedient or which is usually provided for by bankers and
Transfer such sum as deemed fit to reserve funds.

After providing for all the above matters, the Board can calculate net profit and subsequently distribute the same as dividend to the shareholders.

Preparation of balance sheets and accounts of the Institution

Section 25 deals with the guidelines of preparing balance sheets and accounts of the Institution which are as follows:

The balance sheet and other accounts are to be prepared as per the form and manner prescribed. No such rules have been prescribed yet.
The closing date for the accounts and books of the Institution is the 31st day of March of every year or any other date decided by the Board.

Audit

Section 26 deals with provisions regarding audit of the Institution, that are as follows:

The auditors who are qualified as per the provisions of Section 141 of the Companies Act, 2013 are only eligible to audit the accounts of the firm.
They are appointed in the Annual General Meeting of the shareholders from the panel of the auditors that are prepared by the Reserve Bank of India. They are to be paid remuneration as fixed by the Reserve Bank.
They will be provided with a copy of the balance sheet of the Institution. They need to study balance sheets, other books, and vouchers together.
The auditor will also get the list of all the other books kept by the Institution. They are entitled to access all the books, accounts, vouchers, and other documents of the Institution at all reasonable times.
The auditors have the power to examine any director or employee with respect to accounts of the Institution. They are entitled to receive such information or explanation from the Board or officers or other employees that are significant for the completion of the task of auditing.
The auditors have to submit the report to the Institution regarding the audit of the accounts and balance sheet. The report should be lucid regarding their opinion on the following aspects:

Whether the balance sheet of the Institution is fair and contains all the required particulars?
Whether it is prepared properly and presents a true picture of the state of affairs of the Institution?
In case the auditors received the information or explanation from the directors or employees of the Institution, they must mention the fact that whether he gave such information and whether it was acceptable.

The Institution has to submit the following to the Central Government and the Reserve Bank of India:

Copy of balance sheet and accounts;
Copy of the report of the auditor;
Report concerning the working of the Institution during the relevant year.

The above-mentioned documents need to be submitted within four months of the date from which the accounts of the Institution were closed and balanced.
The Central Government has to present all these documents before the Parliament.
Thus, the NBFID is not under the vigilance of the Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC), and Central Bureau of Investigation (CBI).

Establishment of other development financial institutions

Section 29 of the Act lays down the procedure regarding the establishment of other development financial institutions other than the NBFID. The procedure is as follows:

The person who wants to establish other development financial institutions has to submit an application to the Reserve Bank of India.
The license can be issued by the Reserve Bank of India after consulting with the Central Government provided all the terms and conditions are adhered to, that are laid down by the guidelines issued by the Reserve Bank of India.
The institution that got a license as per Section 29(2) is to be governed according to the provisions of the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949.
Only that provisions of the Reserve Bank can be made applicable to the institutions established under this Section that are not contradictory to the provisions of this Act.

Power to make rules and regulations related to the Act

Powers of the Central Government to make rules

Section 30 deals with the powers of the Central Government to make rules to carry out the provisions of the Act. The rules can be framed by passing a notification.

The Central Government has the power to make rules for the following cases provided these do not go against the general powers issued by the Act:

Institutions holding the shares of the NBFID under sub-section (3) of Section 5.
The manner of election of directors by shareholders under clause (e) of sub-section (1) of Section 6;
The terms and conditions regarding induction of independent directors to the Board as per sub-section (5) of Section 6;
The fees and reimbursements in respect of independent directors under sub-section (3), and the term of office and other terms and conditions of service of the Chairperson, Managing Director, Deputy Managing Directors and other directors of Board under sub-section (5), of Section 9;
The manner in which the members of Board and committees will disclose their interest under sub-section (1) of Section 16;
The threshold for determination of beneficial interest by directors of the Institution or any relative of such director under the Explanation to sub-section (3) of Section 18;
Conditions that need to be adhered to by the Institution while entering into a contract or an arrangement under sub-section (1) of Section 19;
The parameters that will act as the basis for the external agency to review the performance of the Institution under sub-section (2) of Section 20;
The rate of fees for Government under Section 22;
The form and manner according to which the balance sheet and accounts of the Institution can be prepared under sub-section (1) of Section 25;
And any other rule that needs to be prescribed.

Power of the Board to frame regulations

The power of the Board to make regulations is elucidated in Section 32 of the Act. The Board can exercise this power after prior sanction of the Central Government is given after consulting the Reserve Bank of India. The Board can make regulations only in the cases when such regulation is necessary to carry out the provision. Such regulation should not go against the basic powers of the Act.

The power to the Board has been given in the following cases:

The salaries and allowances that are to be paid to the Managing Director and Deputy Managing Directors under sub-section (4) of Section 9;
The time, place, and rules of procedure related to the transaction of business of the Board under sub-section (1) of Section 13;
The time, place, and rules of procedure in regard to the transaction of business of the committees and their functions under sub-section (5) of Section 15;
The amount for transactions under the proviso to sub-section (1) of Section 19;
The terms and other conditions of service of the officers and employees of the Institution under sub-section (2) and the terms and conditions of deputation under sub-section (4) of Section 30;
The mechanism under sub-section (1) of Section 39 to determine the penalties specified under sub-section (5) of Section 16 and sub-section (5) of Section 19.

Rules and regulations to be laid before the Parliament

Every rule or regulation that is made as per this Act is to be presented before both the Houses of the Parliament.
Such rule or regulation is to be tabled for thirty days before the Parliament. The period can either be completed during one session or two successive sessions.
The rules and regulations will come into force depending on the decision of both the Houses. If both the Houses agree, then it can be enacted and the provision can be modified accordingly and if both the Houses disagree regarding the rule, then such rule is discarded.
The only condition adhered to by the Houses is that the decision regarding acceptance or rejection should not be against the validity of any rule or regulation that was made in the past.

Indemnity of the directors

Section 40 deals with provisions regarding indemnity of the directors that are as follows:

Every director is indemnified against the losses incurred if the duties are performed as per the Act. The benefit will not be given if such loss is the outcome of the default of the director only.
The director is also indemnified in the following cases:

When loss or expense is incurred by the Institution because of the fault of other directors or employees of the Institution; or
When loss is incurred due to insufficiency or deficiency of the value of, or title to any property or security that was taken on the behalf of the Institution; or
When the loss is the result of the wrongful act of any debtor or any other person that owed duty towards the Institution; or
When the director acted in good faith while discharging his duties as prescribed by the Act.

Oversight mechanism

Performance review of the Institution

Section 20 of the Act enumerates the provision regarding the performance review of the Institution. The provision is as follows:

The performance of the Institution shall be reviewed by the external agency that will be appointed by the Central Government.
The review will be done once every five years.
The review will be done with respect to the purpose and objectives of the Institution as laid down in Section 4 and also take other parameters under consideration that may be prescribed.
The external agency has to submit its report regarding review to the Board of Directors.
The Board has to submit a copy of the and of the action (if any taken based on the report) to the Central Government. The period prescribed for this purpose is three months from the date of receipt of the report.

Questioning the validity of advance or loan

According to Section 37 of the Act, the validity of advance or loan cannot be questioned in the following cases:

If all the provisions of this Act are met while granting a loan or advance, then the validity of such loan cannot be challenged for non-complying the provisions of the other law that is in force for time-being or any other resolution or instrument that were contrary to the provisions of this Act.
However, this Section does not empower any company to obtain a loan or advance that is not allowed as per its charter documents.

Miscellaneous provisions

According to Section 35 of the Act, if any action against any employee is to be taken then the prior sanction of the Central Government is necessary.
According to Section 45, the NBFID Act, 2021 will have an overriding effect. When other laws in force at that time have contradicting provisions still, the provisions of the NBFID Act will prevail.
The provisions of the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 will be amended as per the manner prescribed in the Second Schedule and Third Schedule of the Act respectively.
According to Section 43 of the Act, the Institution will liquidate as per the directions and order of the Central Government. The laws governing the companies in case of winding up will not apply to the Institution.

Conclusion

The infrastructure sector plays a crucial role in the development of a country. Infrastructure paves the way for new opportunities and growth prospects for the country. In India, various aspects of the infrastructure sector are untapped and they need to be put into use to ensure development of the country and the NBFID will aid in attracting investments and help in financing the infrastructure projects. The infrastructure projects will also help in creating employment opportunities for the people in the country. The Act will not only establish the NBFID but also has provisions to set up similar institutions working for the same goal. Thus, the NBFID Act will prove to be the catalyst for the ecosystem of infrastructure funding and helping in the sustained growth of India in the coming future.

References

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Carbon tax and its impact on India

By

Abanti Bose

-

October 27, 2021

0

This article is written by Krithajnya Raghunathan, pursuing Certificate Course in Advanced Corporate Taxation from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

Climate change is a cause for global concern and could have devastating effects on the planet if serious mitigation efforts are not undertaken. Forecasts have determined that if the planet becomes warmer by a mere 2°C, there could be unprecedented heat waves, intense storms and widespread food shortages. To avoid reaching this threshold, it is essential that there are zero net carbon emissions by the end of the century; carbon taxes are one of the mechanisms for achieving this target.

In simple words, a carbon tax is a tax on carbon emission. The purpose of a carbon tax is to reduce carbon emissions by sending a price signal to emitters to incentivize them to eschew carbon-intensive production and consumption. The revenue collected by governments as carbon tax can then be used to further reduce emissions by channelising such funds to invest in green technology, renewable energy sources, research on emission reduction, etc.

An important feature of carbon taxes is that they place the external costs of carbon emissions—such as loss of land due to rising sea levels, the damage to crops caused by changing rainfall patterns and the healthcare costs associated with heatwaves and droughts—on the polluter and not on the public. Carbon taxes hence serve to capture the costs associated with negative externalities of carbon emissions within their ambit. Carbon taxes need not necessarily be levied only on carbon emissions; they could also take the form of taxes on the use of fossil fuels such as petroleum and coal. This article aims to examine the impacts of carbon taxes on India.

A brief analysis of carbon tax in the world

Several countries around the globe have implemented various types of carbon pricing mechanisms (carbon pricing mechanisms are mechanisms that place a price on carbon emission). According to the United Nations, 23 of these countries have implemented carbon taxes, primarily at the national level. Countries began adopting carbon taxes in the early 1990s—Finland introduced a carbon tax in 1990; Norway and Sweden in 1991; and Denmark in 1992. Over the decades, carbon taxes were introduced not just in developed economies, but also in emerging economies (for example, Chile and South Africa have introduced carbon taxes). Carbon taxes vary in their mechanism and rates in every country and are increasingly being adopted by countries not only in pursuance of mitigating the effects of climate change but also as a means to avoid being penalised by the international community.

The carbon tax regime in India

According to the Global Climate Risk Index 2021, India is among the 10 countries most affected by extreme weather caused by climate change. As a developing country, it is of paramount importance that carbon emissions are brought to the lowest level possible. While India is one of the few countries on track to achieve its targets for emission reduction under the Paris Agreement, it is essential that further efforts are taken to bolster it against climate change.

Currently, India does not have a uniform system of carbon taxation across the country; however, state governments have imposed their own taxes to capture the costs of negative externalities—such as the Green Cess implemented in Goa and the Eco Tax on vehicles entering Mussoorie. Further, while the Government of India (GOI) has not implemented an explicit carbon tax, it has in the past introduced measures to capture the costs of negative externalities.

One measure introduced by the GOI in 2010 was the Clean Energy Cess which aimed to incentivize the use of clean fuels by increasing the cost of consuming coal and using a portion of the revenue collected to fund research and clean energy projects. However, with the introduction of Goods and Services Tax (GST) in 2017, the Clean Energy Cess was abolished; in its place, a Compensation Cess on coal production at Rs.400 per tonne was introduced.

The Compensation Cess introduced is to have force until 2022. However, it taxes only the usage of coal and not the quantum of carbon emission from the usage of coal. This creates a two-fold problem:

1. It does not serve to reduce the amount of coal used and therefore the amount of carbon emitted, and

2. It penalizes taxpayers even if they choose to use cleaner variants of coal.

The system of carbon taxation in India is currently rudimentary at best. Further, it is not a progressive system of taxation. Not only does this have an impact on the economy of the country in terms of the external costs of carbon not being adequately captured, but it has the potential to affect India’s international trade.

The European Union (EU) announced that it plans to introduce a “Carbon Border Adjusted Mechanism” (CBAM) which would tax carbon-emitting goods which enter the EU at the borders. At present, it is cheaper to import certain goods from outside the EU than use domestically manufactured goods; the CBAM hence aims to resolve this issue by bridging the gap between the prices of imported and domestic goods. As a part of the rollout strategy for the CBAM, a reporting system is to apply from 2023 and importers would need to start paying financial adjustments by 2026. The CBAM would be detrimental to India’s interests and India has been vocal about its displeasure.

From an international trade perspective, India would not have enough bargaining power to combat policies such as the CBAM which would be injurious to its interests as it does not have a domestic carbon pricing mechanism in place. With the dangers of climate change looming over the planet, it can be expected that many more countries would implement such mechanisms. Mechanisms such as adopting a carbon tax would not only portray to the international community that India is serious about its emission reduction targets but also gradually help reduce carbon emissions and thereby reduce the impact of measures such as the CBAM on its exports.

Utility of carbon taxes

Carbon taxes have several utilities as laid down below:

Carbon taxes discourage the consumption of highly emissive materials/sources of energy and incentivize the use of renewable sources of energy. By making highly emissive inputs more expensive, such taxes would provide an impetus to firms to search for greener inputs.
Carbon taxes place the external costs of carbon emission on the polluter and not on the public. This forces polluters to use means of production which are less emissive and more environmentally friendly. Further, they also enable the government to collect revenue which can then be used to mitigate any potential disasters caused by climate change.
If a maximum limit of emissions is set, beyond which such emissions would be taxable, carbon taxes could be a progressive system of taxation. Further, by taxing emissions and not the use of fossil fuels which are essential to economically disadvantaged persons, a carbon tax system would benefit the country without harming the very individuals it seeks to protect.
From an international trade perspective, India would protect itself from being ostracised or penalised for not imposing a carbon tax. Further, India would be able to bolster itself from any adverse impacts on its exports.

Disadvantages of carbon taxes

While carbon taxes have many utilities, they also have several disadvantages:

Carbon tax systems could have an adverse impact on the economy if they are not tailor-made for it. If the system is not suited to the needs of the economy, it could result in harsh burdens upon economically disadvantaged persons. A strategy for implementing such a mechanism hence needs to be carefully considered and meticulously implemented.
The production of many essential commodities results in carbon emissions. If a carbon tax is imposed on emissions, it could make such essential commodities more expensive and thereby ultimately burden consumers. This is extremely problematic for a country like India where large sections of the population cannot afford to pay an increased price for such commodities.
To avoid paying carbon taxes, firms could hide their true levels of carbon emissions which would mask the extent of the issue. If governments were not to rely on voluntary disclosure and were to instead inspect the emissions of firms, it would require manpower and infrastructure which could be time-consuming and expensive to establish.

Conclusion

Carbon taxes are a useful mechanism for reducing carbon emissions and fighting against climate change. It is becoming increasingly important from an international perspective for countries to introduce carbon pricing mechanisms. Carbon taxes not only capture the costs of negative externalities but would also incentivise and encourage firms to switch to cleaner and greener means of production which would be beneficial to both the environment and the economy. Hence, it would be advantageous if such a tax were introduced in India. However, it must be kept in mind that such a system must be established after considering the specific needs of the Indian economy.

References

Eckstein, D., Kunzel, V., & Schafer, L. (2021). Global Climate Risk Index: Who Suffers Most From Extreme Weather? GERMANWATCH. Retrieved October 11, 2021, from https://germanwatch.org/sites/default/files/Global%20Climate%20Risk%20Index%202021_2.pdf
Ojha, V. P., & Pohit, S. (2020, September 4). Controlling emissions: Explicit carbon taxation is needed, indirect taxation doesn’t help. Financial Express. Retrieved October 16, 2021, from https://www.financialexpress.com/opinion/controlling-emissions-explicit-carbon-taxation-needed-indirect-taxation-doesnt-help/2074347/
Sawhney, A. (2021, July 15). Carbon Tax – An Indian Perspective. Vidhi Centre for Legal Policy. Retrieved July 18, 2021, from https://vidhilegalpolicy.in/blog/carbon-tax-an-indian-perspective/
The World Bank. (n.d.). Pricing Carbon. Retrieved October 19, 2021, from https://www.worldbank.org/en/programs/pricing-carbon#WhyCarbonPricing
United Nations Climate Change. (n.d.). About Carbon Pricing. Retrieved October 10, 2021, from https://unfccc.int/about-us/regional-collaboration-centres/the-ci-aca-initiative/about-carbon-pricing#eq-7

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