Analysis of posthumous rights of celebrity in India in light of Sushant Singh Rajput case

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October 22, 2021

Sushant-Singh-Rajput — Image Source: https://rb.gy/e0ncwx

This article is written by Anuja Saraswat, pursuing Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. The article has been edited by Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

The right of publicity is one of the developing rights in India that protects people from others against using their name and likeness for commercial gain without their consent. It guarantees the right to protect one’s identity, personality, and associated qualities and attributes. Even though there are no clear rules to safeguard publicity rights in modern India, the jurisprudence on the subject is continually developing. However, there’s a question about these publicity rights: do they exist only as long as the celebrity is alive? Is the celebrity’s right still valid after his or her death? This article analyses such posthumous availability of celebrity rights in India in light of the recent case of Krishna Kishore Singh v. Sarla A. Saraogi & Ors. Over the years, the Indian judiciary’s judgments on the issue vary due to the lack of specific statutory provisions for the same. In light of this, the author proposes that the right of publicity be separated from other overlapping rights in India. This article tries to compare Indian laws to various international jurisdictions’ laws and justify the need for an exclusive law addressing the posthumous availability of personality rights rather than any modifications or changes to the current legal system.[D2]

The concept of personality rights : the main issue

Being a famous personality provides a lot of fame, money, and status, but there are two sides to every coin and being a celebrity comes with its own set of problems. Even their name bears weight, which is determined by the monetary value associated with their persona. Laws such as the right to privacy and the right to publicity are used to safeguard people from being freely exploited for commercial gain. According to the right to privacy, no one can publish anything about an individual without his or her consent. The common law right to publicity, on the other hand, recognizes a famous person’s commercial value and protects his proprietary interests so that he can profit from his public reputation or persona. It offers the celebrity a right to safeguard his image and personality from commercial exploitation.

In the case of Titan Industries Ltd. v. M/s. Ramkumar Jewellers, the court, while discussing publicity right of a celebrity noted:

“A celebrity is defined as a famous or a well-known person. A ‘celebrity’ is merely a person who “many” people talk about or know about. When the identity of a famous personality is used in advertising without their permission, the complaint is not that no one should not commercialize their identity but that the right to control when, where, and how their identity is used should vest with the famous personality. The right to control the commercial use of human identity is the right to publicity.”

It recognizes the concept of celebrity rights. As a result, it is fair to say that ‘celebrity rights’ is essentially a collection of additional rights that a person acquires upon obtaining the position of a ‘celebrity,’ consisting of a collection of rights such as intellectual property rights, publicity, personality, and privacy rights.

While the Supreme Court of India clarified in the Puttaswamy case that privacy rights do not survive an individual’s death, the question remains whether, even though personality/publicity rights flow from the right to privacy, can publicity rights survive an individual’s death while the right to privacy does not?

The law on celebrity rights is still in its developing stage, particularly in India, and has been developing primarily through judicial precedents, in which courts have provided recognition and protection to a few such rights on being approached. The case of Krishna Kishore Singh v. Sarla A. Saraogi & Ors., in which the Delhi High Court refused to stay the release of the upcoming film Nyay: The Justice, which is based on the death of the late actor Sushant Singh Rajput, is one such event that has lately come under the spotlight.

Background

The late actor’s father Krishna Kishore Singh, claiming to be his “absolute legal heir” by falling into “the Category-I of Class-II legal heir” of Sushant Singh Rajput and under Section 16 of the Hindu Succession Act, 1956, filed a suit in the Delhi High Court seeking to protect his son’s reputation, privacy, and rights, which he claims have been violated by films such as “Nyay: The Justice,” “Shashank,” and others that are allegedly inspired by the late actor’s life.

The plaintiff claimed that the Defendants were attempting to exploit his deceased son’s personality rights to obtain media frenzy and public curiosity for their commercial gain, and therefore by way of an application under Order 39 Rule 1 & 2, sought for an ad-interim ex-parte temporary injunction restraining the use of SSR’s name, caricature, lifestyle or likeness in the forthcoming projects/films of the Defendants.

The question of posthumous availability of celebrity rights : contentions of the parties

As the late actor’s legal heir, Kishore Singh stated that publishing, producing, or depicting material relating to SSR without his consent would be an infringement of the deceased celebrity’s right to personality and privacy, which includes the right to publicity, among other things. The plaintiff relied on the case of Kirtibhai Raval & Ors v. Raghuram Jaisukhram Chandrani, in which the Gujarat High Court granted posthumous protection to the plaintiff’s legal heirs and issued an injunction against third parties seeking economic gain without the legal heir’s consent.

The defendants, on the other hand, argued that a celebrity’s right is only breached if the celebrity is identified as a component of artistic work and that no use of the late actor’s name, image, caricature, or way of delivering dialogues was made in any of the films in question. Furthermore, the film they produced is neither a biopic nor a biography of Plaintiff’s son, but rather a fictionalized dramatization of true events generally surrounding the lives of TV celebrities who have reportedly died of unnatural causes, with a disclaimer that any resemblance to a real person is disclaimed. They further claimed that because there is so much information about Plaintiff’s son’s life and death in the public domain, there can be no claim of privacy over information that is already public. They further denied plaintiffs’ claims, stating that celebrity rights do not apply in a posthumous situation, citing the decisions in Justice K.S. Puttaswamy v. Union of India and Managing Director, Makka Tholai Thodarpu Ltd. v. Mrs V. Muthulakshmi and Deepa Jayakumar v. AL Vijay.

Court’s observations

Hon’ble Justice Sanjeev Narula in the present case defined celebrity rights as “a compendium of the other rights gained by a person upon obtaining the status of a “celebrity,” consisting of a bundle of rights such as intellectual property rights, publicity, personality, and privacy rights.“

On the issue of posthumous availability of celebrity rights, the court evaluated the plaintiff’s reliance on Kirtibhai Raval & Ors v. Raghuram Jaisukhram Chandrani, in which they opined that while the Gujarat HC in the aforementioned case upheld the injunction granted by the trial court against the producers, it also took the view that the parties’ contentions required detailed consideration upon leading appropriate evidence and as a result, the court avoided delving into opposing arguments, stating that the right to privacy and publicity asserted therein was a triable issue. It was felt that the issue of whether the defendants’ on-the-record documentary evidence should be evaluated in-depth upon leading evidence, should be addressed at the appropriate time. Thus, in this case, Justice Sanjeev Narula stated that the judgment relied upon by Plaintiff says little about a celebrity’s posthumous rights and does not further the Plaintiff’s argument. Plaintiff had also sought to separate ‘celebrity rights’ from ‘right to privacy,’ but the Court noted that in the absence of statutory recognition of celebrity rights, the right to privacy derived from Article 21 would constitute the fountainhead of such rights. The ‘right to publicity’ in India is derived from the ‘right to privacy,’ and the two are not entirely separate, as the former cannot exist without the latter. As a result, the Court upon assessing the judgment of K. S. Puttaswamy v. Union of India relied upon by the defendant, noted that the right to publicity is inextricably linked to and birthed from the right to privacy and that if the right to privacy expires with the death of the human being, the only necessary corollary is that the right to publicity will also expire and will not survive after the death of the human being.

The Hon’ble Court finally decided that there is no reason to grant a restraining order against the Defendants because the Defendants’ films are neither portrayed as a biopic nor a factual narration of what happened in SSR’s life and are depicted to be completely fictional and inspired by certain events that occurred in the past and are available in the public domain. However, Krishna Kishore Singh filed an appeal to the single bench of the Delhi High Court shortly after, claiming that the single judge had erroneously ruled that celebrity rights ceased to exist after death. Since then, the film ‘Nyay: The Justice’ has been made available on a remote website known as ‘Lapalap.’ In light of this, a Delhi High Court bench of two judges finally decided that Krishna Kishore Singh might now approach a single judge of the Delhi Court to have his earlier claims examined, given that the movie and its contents are now available on the digital platform.

A global perspective on posthumous availability of personality rights

While personality rights have not yet attained proper recognition in India, the majority of international jurisdictions are enacting provisions concerning infringement of personality rights after the death of a celebrity. Even though there are no explicit federal publicity legislation made for it, the US jurisdiction grants postmortem personality rights to some extent. Although it is primarily done by statute, certain US states recognize the postmortem Right of Publicity under Common Law. There is currently no overarching Supreme Court judgment or Federal Act governing personality rights. As a result, the level of protection provided by the Right of Publicity varies on the state one is claiming.

Interestingly, the Right of Publicity is recognized in several U.S. states even after death. Indiana, Tennessee, and California, in particular, are the entertainment capitals of the United States. The states that recognize post mortem Right of Publicity protection differ from one another in terms of duration, extent, standards, limitations, and so on. For example, some states require the decedent to use his image rights during his lifetime in order for them to be preserved after his death. Nonetheless, in the United States, the prevailing norm is that rights of publicity are recognized, descendible, and extended postmortem without the need to exercise them during one’s lifetime. It turns out that most US courts that have addressed the question of post-mortem Right of Publicity have found it to be descendible, which is good news for heirs of deceased people who want to file a complaint regarding the latter’s unconsented image use in holograms. In California, for example, the right is protected by the State’s Common Law Right of Publicity and Statutory Right of Publicity, both of which are codified in California Civil Code 3344 for the living and 3344.1 for the deceased. This postmortem protection lasts for 70 years after the individual’s death, but only if the deceased’s heirs register their claim with the California Secretary of State if they want exclusive exploitation of the celebrity’s persona and compensation in the event of an infringement. According to California law, “any photograph or photographic reproduction, still or moving, or any videotape or live television transmission, of any person, such that the person is plainly identified” requires the celebrity’s or his estate’s consent.

In Europe, Personality Rights legislation is chosen by the state, resulting in a wide range of protection across the continent. Nonetheless, for members of the European Union who are bound to uphold the European Convention of Human Rights (ECHR) as well as the EU Charter of Fundamental Rights (CFREU), there is some harmonization. In Europe, as in the United States, finding the correct balance between an individual’s Freedom of Expression (as defined in Articles 10 ECHR and 11 CFREU) and Right to Privacy (as defined in Articles 8 ECHR and 7 CFREU) is a balancing act. The European Court of Human Rights does not specifically reference the Right of Publicity in its decisions, but it does protect a person’s image rights as part of the Right of Privacy. In the Marlene Dietrich Case of Germany, The actress’ image was used to promote a musical about her life, and her daughter sued for damages claiming that the illicit image use infringed on her mother’s personality rights. The German Federal Supreme Court was asked to examine whether, in addition to nonmaterial interests, Personality Rights also covered economic interests. It also had to determine if the latter interest may be transferred and inherited after the person’s death. In the end, the Court found in favour of the plaintiff, confirming that posthumous protection of personality rights was recognized and that self-determination with the ability to regulate the commercial exploitation of one’s identity should be deemed an essential protected value. This financial protection lasts for ten years after the individual’s death, during which time the heirs must consent to commercial use of his image or other features. As a result, the case confirmed that both material and nonmaterial parts of personality rights are protected under Articles 1 and 2 GG.

Conclusion

In the age of international mass media, significant economic reasons drive the cult of stardom; therefore, the legal structure controlling its commercial exploitation must likewise evolve. Celebrity publicity rights are one-of-a-kind, and they cannot be adequately addressed under any of the IPR laws. As stated previously, some European countries, such as France and Germany, have enacted special legislation to protect celebrity rights on a global scale. In addition to their courts actively recognizing this right, many states in the United States also have enacted legislation to that effect. However, Indian law has not progressed much in terms of the Right of Publicity as far as the present situation is concerned. In the aforementioned case, Justice Narula opined that determining whether celebrity rights live or expire after the death of the celebrity needed further investigation. As a result, there is still no clarity on the subject. Because there is no clear-cut entitlement to post-mortem celebrity rights in India, the court verdicts vary, which further creates confusion before the public. Following the lead of other countries, India should consider implementing legislation to protect publicity rights, lest superstars suffer. The judiciary will have to play a big role in this direction, as it has the power to legislate when laws are unclear. Furthermore, having an express statutory provision for the same is the need of the hour which will provide an appropriate and adequate protection and will further relieve the Indian courts of all their celebrity rights dilemmas.

References

CS(COMM) 187/2021
2012 (50) PTC 486 (Del)
(2017) 10 SCC 1
Appeal from Order No. 262 of 2007, dated 20th January 2010 by the Gujarat High Court
2007(6) MLJ 1152
MANU/TN/3107/2021
https://www.livelaw.in/top-stories/sushant-singh-rajput-case-are-celebrity-rights-available-posthumously-delhi-high-court-to-decide-175506
https://www.thehindu.com/news/cities/Delhi/hc-refuses-to-stay-release-of-movie-purportedly-based-on-sushant-singh-rajputs-life/article34776445.ece
Marlene Dietrich Case BGH 1 ZR 49/97

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A conceptual analysis of Human Rights Law and investment arbitration

By

Abanti Bose

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October 21, 2021

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dissertation-topics-in-human-rights-law (1) — Image Source: https://rb.gy/l0anoo

This article is written by Swathi H. Prasad, pursuing Certificate Course in International Commercial Arbitration and Mediation from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Investment arbitration is a dispute resolution mechanism to settle the dispute between the investing party who could be either a natural or legal person and the host State. It is also known as Investor-State Dispute Settlement or ISDS. The arbitration clause for an investment dispute may be incorporated in the investment treaty or the concerned laws of the host State. By resorting to this mechanism, the investor is assured of independent and impartial resolution of the dispute by an impartial third party and not by the domestic courts which may be biased or may even be controlled by the host State’s government.

Human Rights Law is that branch of international law containing the customs, rules and practices that grant all humans irrespective of their place of birth, race, sex etc., certain fundamental rights and freedoms. There is no exhaustive list of rights that are considered as human rights. Some of the prominent human rights are right to life (which has been given the broadest possible definition by States to encompass all the aspects that make life worth living), right to dignity and right to equality. They may either be contained in treaties or may be found in non-treaty-based principles or guidelines.

At the first glance, investment arbitration and human rights law appear to be disjoint from each other. However, on a closer look, one can see that they are two sides of the same coin. When an investment is made by a party in the host country, be it in the mining sector, construction of roads or ports etc., there is going to be an impact on the community living around the area or at times on the population of the host State as a whole, either directly or indirectly. In the following article, the author will try to throw some light on how investment arbitration and human rights are associated with one another.

Specific reference to human rights

It is uncommon to find a specific reference of human rights laws in an investment agreement or Bilateral Investment Treaty.

One such Investment treaty is the European Union- Singapore BIT wherein, the participating States give a written affirmation that they are committed to the Charter of the United Nations signed in San Francisco on 26 June 1945 and having regard to the principles articulated in The Universal Declaration of Human Rights adopted by the General Assembly of the United Nations on 10 December 1948. If a dispute is to arise between any of the States in the EU and Singapore and a question with regard to human rights law is to arise in the same as an incidental issue, the tribunal will find it easy to assume jurisdiction without explaining itself. Since an arbitral tribunal derives its power from the terms of the concerned agreement, it becomes very easy for the tribunal to make rulings on such specific provisions in the agreement or treaty.

Implied reference to human rights

The universally recognised principle of Kompetenz-Kompetenz allows an arbitral tribunal to decide the question as to its own jurisdiction. Using this principle, the tribunal may assume jurisdiction by interpreting relevant provisions of the concerned BIT.

For instance, the investment treaty may have a clause stating that “all disputes of any nature concerning the investment made by the investor in the Host State shall be arbitrable”. Certain investment agreements have provisions that are in tune with human rights law.

The ICSID Tribunal while deciding the counterclaim filed against an application under Article X of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain (signed on October 3, 1991) in the case namely, Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa vs. The Argentine Republic; ICSID Case No. ARB/07/26 (decided on 8.12.2016), had interpreted the provisions of the Bilateral Investment Treaty entered into between Spain and Argentina. The relevant portion of the BIT i.e., Article X sub-clause 5 of the BIT roughly translates to the following:

“The arbitral tribunal will decide the dispute on the basis of the principles and rights contained in the treaty entered into between the Parties, of the domestic law of the Party in which territory the investment is made including its rules of private international law and the general principles of international law”.

It is pertinent to note here that the afore-stated Article is very similar to Article 42 of the ICSID Convention.

The Tribunal interpreted that the ‘general principles of international law’ are wide enough to include principles contained in the 1948 Universal Declaration of Human Rights as well. It assumed jurisdiction to decide the counterclaim raised by the Argentine Republic that the Claimant failed to provide the necessary investment into the Concession, thus violating its commitments and its obligations under international law based on the human right to water.

The widely found provision in an investment treaty which impliedly refers to human rights law is the provision for fair and equitable treatment. For instance, Article II (4) of the Agreement between the Government of Canada and the Republic of Argentina for The Promotion and Protection of Investment states that: “Investments or returns of investors of either Contracting Party shall at all times be accorded fair and equitable treatment in accordance with principles international law and shall enjoy full protection and security in the territory of the other Contracting Party”.

Article 5(2) of the Hong Kong, China SAR- Mexico BIT also defines ‘fair and equitable treatment’ to mean and include the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process; and ‘full protection and security’ require each Contracting Party to provide the level of police protection required under customary international law.

Another example can be Article 17(1)(a) of the BIT between the Government of Canada and the Republic of Cameroon that gives both the participating States the option to adopt or enforce a measure necessary to protect human, animal or plant life or health.

What is the relevance of human rights in investment arbitration?

The Human Rights Law is of relevance to both the investor (especially in cases in which an investor is a natural person) and the host country. In appropriate cases, the host State, investors and even affected third parties/communities (whenever agreed by the BIT or agreement) have used the Human Rights law as a sword or a shield in investment arbitration. The wording of the arbitration clause is what entitles either of the Parties or the affected communities to approach the tribunal with a dispute with regard to the human rights violation.

The Urbaser vs. Argentina is the perfect example wherein the host State has raised human rights issues (right to water) as an issue incidental to the investment dispute raised by the foreign investor.

In Biloune vs. Ghana, the Petitioner had claimed damages for expropriation, denial of justice and violation of human rights for his detention without charge and deportation to Togo. The tribunal rejected the claim as it found that it lacked jurisdiction because there was no relevant provision in the investment treaty with regard to the protection of the human rights of the investor. The investment arbitral tribunal held that it does not have the power to deal with rights of either of the Parties available to them under separate individual contracts entered into by them.

In the conjoint petitions of Border Timbers Limited and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/25 and Bernhard von Pezold and others v. Republic of Zimbabwe (ICSID Case No. ARB/10/15, the European Centre for Constitutional and Human Rights (ECCHR) had submitted a written submission as amicus curiae (‘third party’). The petition was made jointly with the Chiefs of four indigenous communities in the area of Chimaniani, Zimbabwe. The arbitration concerned timber plantations functioning in the properties which originally belonged to the indigenous groups, acquired compulsorily by the Government as part of land reforms. As amicus curiae, the right to the ancestral properties of the indigenous people under international law was raised. The same was not entertained by the tribunal as it found that the issue was beyond its jurisdiction. However, this case shows that if there was a relevant provision in the investment treaty, even an affected third party can raise their claims against the Parties to the investment treaty.

Do investor-state arbitral tribunals have jurisdiction to analyse human rights claims?

The answer to this is both yes and no.

As stated earlier, a tribunal’s jurisdiction or the power to indulge in a case is dependent on the concerned bi-lateral or multilateral arbitral treaty and the domestic laws of the host State. If consent has been given by the host State in the relevant investment treaty or domestic law, the tribunal has the power to decide on the same and vice versa.

An arbitration clause in the investment agreement/treaty may thus either limit the jurisdiction of a tribunal or may extend the spectrum to provisions of other international treaties including the principles of human rights law insofar as they are related to the investment that is in dispute.

For instance, Article X(5) of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain relied on the above-mentioned case of Urbaser vs. Argentina. The provision expands the scope and powers of an arbitral tribunal.

It is to be noted that a tribunal always has the power to adjudicate upon the human rights issues that are incidental to the claims of either of the parties. In the Urbaser vs. Argentina, the Claimants had raised contentions that they were treated unequally by the standards of BIT by the host State/Respondent. It is also to be noted here that as per the terms of the agreement, the investor may be treated at par with such other foreign investors or respective domestic investors. Even though in the instant case, the tribunal found the claim to be not valid, it deemed itself to be competent to indulge in the issue. Therefore, if either of the parties claims that there is a violation of investment treaty/agreement terms along with an incidental violation of human rights, the tribunal may assume jurisdiction to decide on it irrespective of the fact that there is no provision in the agreement/treaty with respect to human rights law per se.

How could investor-state arbitral tribunals apply human rights law in investment arbitration disputes?

Investment treaties generally have dispute resolution clauses that state that it will be resolved as per the domestic laws of the host State along with the principles of international law. Article X (4) of the Agreement between the Government of Canada and the Republic of Argentina for The Promotion and Protection of Investment and Article X (5) of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain are just two examples of such provisions. Such clauses in an investment treaty are very similarly worded to the provisions of Article 42 of the ICSID Convention. The relevant portion of the Convention is extracted as hereunder:

“42(1). The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.”

The ICSID Tribunal while deciding the Urbaser vs. Argentina case had relied on the findings of Cf. Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID/ARB/11/28 (decided on 30.12.2015) to hold that:

“1200. The Tribunal further retains that the Convention has to be interpreted in the light of the rules set out in the Vienna Convention on the Law of Treaties of May 23, 1969, and that Article 31 § 3 (c) of that Treaty indicates that account is to be taken of “any relevant rules of international law applicable in the relations between the parties.” The BIT cannot be interpreted and applied in a vacuum. The Tribunal must certainly be mindful of the BIT’s special purpose as a Treaty promoting foreign investments, but it cannot do so without taking the relevant rules of international law into account. The BIT has to be constructed in harmony with other rules of international law of which it forms part, including those relating to human rights”.

It is to be noted that the particular human right that is claimed to be violated by one of the Parties has to be one that is based on a treaty of such human rights, to which both the investor’s State and the host State are signatories to. As such human rights granted by the domestic law of the investor’s State may not be used to raise claims before the tribunal.

Conclusion

Globalization resulted in increased foreign investment across the globe. This in turn has increased the investment disputes between the foreign investor and the host State. An Investor-State Arbitration or ISDS is primarily entered into by the Parties to protect the interests of the investor from possible partiality of domestic Courts in the host State. The investor can raise any issue that is existing between the Parties including any incidental violation of its human rights. These sorts of arbitration are hardly resorted to by the host State to settle investment disputes because they generally make use of the domestic dispute adjudication system. This does not mean that the investor can get away with any breach or violation of their side of the agreement including the human rights law of the population of the host State once they initiate arbitration. Article 46 of the ICSID Convention allows the tribunal to entertain any counterclaim by the host State against the investor on any incidental issues including the violation of human rights law. The only requirement when raising such issues is that the tribunal should be granted jurisdiction to entertain such claims either explicitly or impliedly in the bilateral or multilateral treaty.

It is pertinent to state here that the United Nations have initiated a strategic policy for business namely the UN Global Compact and Corporate Social Responsibility which is a policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anticorruption. By doing so, businesses, as a primary agent driving globalization, can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere. This clearly shows that there is a correlation between the investment treaty and international human rights law.

References

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Copyright issues in webinars

By

Rachit Garg

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October 21, 2021

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This article has been written by Vinit Bagdai, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. It has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Due to COVID–19 mostly all the physical activities have moved to digital mode. The online method of learning is the new phase due to the pandemic; Since the lockdown, a phase has begun; the number of webinars taking place online are quite high. The main issue of concern is whether there is any copyright Infringement caused due to online webinars which are being conducted.

This article will analyze copyright issues in relation to webinars and discuss the rights of the speakers, organizers, and participants under the Indian Copyright law. So, how will you know whether or not you are infringing anyone’s right? Let’s discuss the basic details first and then we will talk about the exceptions as well.

Online education during COVID-19 and challenges with respect to Copyright Law

Due to the pandemic, education has witnessed massive revolutionization and the essence of reform is the way in which the delivery mechanisms function. With classes being conducted online, responsibilities on legal research now probe on the questions of the practicality of copyright laws and its application in relation to education that is provided to the students everywhere via online mode, be it via recorded lectures, study materials or any other form of education being imparted or the medium in which it is shared. With growing debate and assessment on this area; there certainly lies the ability for discourse and dissemination.

With renowned researchers in copyright law, the Centre deems that the webinar works as an extensive and discursive academic forum for the engagement of concerned students, practitioners, and other people.

Copyright Law and fair use

In India, Copyright law deals with the protection of the expression of an idea, rather than an idea itself. Therefore, tangible expressions like books and videos are protected under copyright laws. In India, protection is granted to all works in the nature of literary, dramatic, artistic, and musical work as well as cinematographic films and sound recordings as mentioned in Section 13 of Indian Copyrights Act, 1957.

Copyright restricts any other person from using the author’s original work without their authorization or permission. However, in certain circumstances, copyright law allows the use of a copyrighted work without the requirement of obtaining the approval/consent from the author. This is known as the doctrine of fair use, referred to as the doctrine of fair dealing in India (though the two concepts are not purely identical. To come under the umbrella of fair use one must always keep in mind the purpose and nature of the work for which the copyrighted work is used for, as well as, the amount of the work used by such a person.

Section 52(1) of the Copyright Act lists out the acts that do not constitute copyright infringement. Sections 52(1)(h) to 52(1)(j) enumerate the exceptions for use of copyrighted material for educational purposes. Whether the particular use of a copyrighted work falls within the scope of these provisions is determined by whether it is made for the purpose and in the manner as specified therein. As held by the Delhi High Court in the landmark DU Photocopying case, the four-factor test used in other jurisdictions such as the US to make a fair use determination does not apply under Indian law. The court clarified that the fairness of use under section 52 is to be determined only by the wordings of the provisions and the limitations specified therein.

Private use vs. public use of webinar recordings

The delivery of a speech by any person in public is regarded as a performance [see section 2(q)] and the person delivering such speech or a lecture possesses an exclusive right to make a sound/visual recording of the performance (see section 38A) for broadcasting . Any person who wants to make a sound recording or broadcast the same has to take prior authorization from the speaker(s). The necessity of prior authorization or a license can be avoided only if the producer’s intention is to use it for a private purpose and not for communicating it to the public [see section 2(ff)]. The term ‘private’ with respect to copyright, was discussed in the case of Blackwood v. A. N. Parasuraman, that the circulation of copies by the producer would not constitute private use and would amount to infringement of the copyright of the speaker(s). Therefore, it is sufficiently clear that independent copyright in a webinar recording, the producer, despite being its author, needs permission from the speaker(s) to use it for any purpose other than for ‘private use’.

Copyright in Webinar Recording

The speaker(s) of the webinar has an exclusive right to make a recording of the lecture [See Section 14(a)(iv)]. Any person other than the speaker(s) making a recording of the lecture/webinar would be committing infringement. Speakers are generally invited by several organizations or individuals to deliver a lecture as a part of a webinar. The author [See Section 2(d)(v)] of the recording of such a lecture would be the person arranging for this lecture. By virtue of Section 17 (cc) of the Act, the speaker will have exclusive ownership over the lecture, even if he is employed by some other person (who has made all the arrangements for the lecture). Therefore, an author or the producer of the recording would require the authorization of the speaker of the webinar to save one from committing the act of copyright infringement. A conflict of interest would occur if a speaker is not given the power to restrict the producer from making recordings of his lecture. However, if the producer is permitted the right to make a recording without prior authorization from the speaker, the speaker’s exclusive right to produce recordings of his own would collide with the producer’s right to communicate the recording to the public [See Section 14(e) (iii)].

Case Analysis in respect to Copyright in Webinars

The Indian courts have agreed on what constitutes fair use via judicial decisions. In Civic Chandran and Ors. v C. Ammini Amma and Ors.,[1] The Kerala High Court laid down a 3-condition test to determine whether the defense of fair use can be taken in a case. These were,

1. The quantum and value of the matter taken;
2. The purpose for which it is taken; and
3. the likelihood of competition between the two works.

However, if anyone for the purpose of criticism and review will not amount to infringement of copyright of such works as expressly stated in Section 52(1)(a) of Copyright Act. Further, Section 52(1)(i) of Copyright Act states that anything which is reproduced by a student or a teacher with an educational purpose it would not amount to infringement of copyright. Yet, there are certain limitations which have been placed because of which this doctrine cannot be used for unfair means like distribution of any copyrighted material in the name of educational purpose. Such things will just increase the likelihood of copyright infringement.

Firstly, the copyrighted work must be obtained via legal means. It would amount to infringement if the work is downloaded dishonestly and then circulated for free download of the paid material it would result in infringement of the copyrighted work. However, downloading of original work is allowed via the internet, but it should be done in a legal way.

Secondly, copyrighted work is allowed to be used for studies and educational purposes; use the exception of the educational purpose and use the copyrighted work in an improper manner. Students and teachers using the same suffer the consequences for infringing copyrighted content.

In 2012, there was an amendment in the Copyright Act which stated that it will permit the usage of scanned copies of paid books to be shared by the organizations/Institutions for the purpose of education if the institution/organizations already owns a hard copy of the book in its library other than that one cannot upload scanned copies of the paid books to be shared with the students under the umbrella of the doctrine of fair use/dealing.

Conclusion

In this 21^st century, people can collect information from different sources and use it without infringing the rights of the original owner. However, it is important for everyone to ensure that while using such information; they don’t infringe the rights of the original owner. The doctrine of fair use also has its own limitations and hence the teachers and everyone else using such works should be always careful.

In general, public and private webinars both are protected under copyright laws and the speaker of such webinars is the owner of such works unless there is a contract to the contrary in the course of the employment.

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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Analyzing the legal journey of the National Anthem through constitutional patriotism

By

Rachit Garg

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October 21, 2021

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This article is written by Niharika Agrawal, from IFIM Law School. This article deals with the legal journey of the national anthem and emphasizes constitutional patriotism.

Introduction

The legal journey of the national anthem started long back. It started in 1987 with the case of Bijoe Emmanuel v. the State of Kerala and continued till 2018 in the case of Shyam Narayan Chouksey case v. Union of India. There has always been the question of ‘respect’ towards the national symbols such as the national flag and the national anthem. There have been many debates in the society and petitions were filed in the court as to whether and why it is important to stand whenever the national anthem is played and also if it has any effect upon constitutional patriotism. Constitutional patriotism is nothing but a feeling of love and respect towards the Constitution of the country rather than the national culture. The current position of this issue was recently decided in the case of Shyam Narayan Chouksey case v. Union of India by the Apex Court.

This article has composed a brief analysis of the entire legal journey of the national anthem and its regulating laws and the judicial and the Government approach towards it.

Laws relating to the national anthem

The Prevention of Insults to National Honour Act, 1971

This Act was enacted by the Parliament of India in 1971. It prohibits the violation or insult to any national symbols which include the national flag, the Constitution of India, the national anthem, and the map of India. This Act provides punishment for any person who disrespects the national anthem under Section 3 of the Act. According to this section, “Any person who intentionally refuses or prevents the singing of the Indian National Anthem or if causes any disturbance in the assembly engaged in such singing, would be punished with imprisonment up to the term of 3 years or with fine or with both.”

Article 51 A of the Constitution of India

Article 51A of the Indian Constitution constitutes it as a constitutional duty. It makes every citizen’s duty to abide by the Constitution and respect its ideals and institutions, the national flag, and the national anthem.

The general provision of the orders issued by the Government of India on 5th January 2015

The Ministry of Home Affairs in its order of 2015 stated that whenever the national anthem is sung or played, the audience shall stand in an attention position to pay respect to the national anthem. However, in the case of newsreels and documentaries, the audience is exempted from following the above order as that might instead of adding dignity of the anthem may interrupt the exhibition of the film and might create disorder and confusion among the individuals.

Thus, the former part of the provision tries to obligate the audience to stand whenever the national anthem is played and the latter part creates an exception.

Judicial approach

Bijoe Emmanuel Case v. State of Kerala (1986)

Facts of the case

The facts of this case relate to one school in Kerala where children who believe in Jehovah’s religion refused to sing the national anthem as it was against their faith, however, they stood up when it was being played during assembly. The Head Mistress of the school expelled the students as such an act was observed to be unpatriotic and causing disrespect to the national anthem.

Issue

Whether the act of the students who were standing but were not singing the national anthem during the assembly amounts to disrespect towards the national anthem?

Judgment

The Supreme Court, in this case, held that this act of the children has not caused any disrespect to the national anthem. They have the right not to sing the anthem and that would not amount to any disrespect. The Court also observed that there is no such provision in the law that mandates any person to sing the national anthem nor does it cause any disrespect to the national anthem when the same is not followed. It is enough if the person is standing respectfully when the national anthem is being played or sung and joining to sing is not mandatory. In this case, more stress was given to respecting the national anthem whenever sung or played.

Shyam Narayan Chouksey v. Union of India (2018)

Facts of the case

This case originated in 2003. In this case, the petitioner filed a petition in Madhya Pradesh High Court accusing director Karan Johar of insulting the national anthem in one of his movies named Kabhi Khushi Kabhi Gham. He alleged that no one except the petitioner and some other person stood when the national anthem was played. Further, he has filed a PIL with the issue of demanding due respect to the national anthem.

Court orders

Justice Dipak Mishra observed that it is impermissible to have a corrosive attitude towards the honor of national sentiments. The dramatization of the national anthem is against the constitutional philosophy. It was held that if any person shows disrespect to the national anthem in any manner, he/she would be considered to be involved in the anti-national activity. Being a citizen of the country, it is important to remember that every word, every deed, and every thought by him or her must indicate respect for the Constitution and the national anthem.

The Court ordered to remove the film from the theatres unless the scenes that were depicting the national anthem were deleted and also asked other respondents to withdraw the movie from all other cinema halls and restrained theatre owners from showing the film. However, in 2004 the famous director Karan Johar filed an appeal in the Supreme Court against the judgment pronounced by the MP High Court in 2003. It was held that whenever a national anthem is played in the course of any newsreels, documentary, or a movie, the viewers or the audience is not expected to stand as that may interrupt the exhibition of the film and might create disorder or confusion among the people instead of dignity to the national anthem. Hence, the order of the High Court of MP was set aside and the petition was allowed.

In 2016, the Court threw light on the legal journey of the national anthem in the present case. The Supreme Court made it compulsory to play the national anthem in the cinema halls. It directed all the cinema halls across the country to play the national anthem in the background before every film with the national flag on the screen. The Court also ordered the audience to stand with all respect when the national anthem is played because India is a country where people should feel that they live in a nation where respect is shown to the national flag and national anthem which are symbols of constitutional patriotism. The court also asked the cinema halls to close all the entry and exit doors of the hall when the national anthem is being played.

Interim orders

It had also set some interim orders for inculcating constitutional patriotism. They are as follows:

The national anthem should not be used for any commercial benefit or any other benefit.
There should not be a dramatization of the national anthem and neither should it be a part of any variety show.
The national anthem should not be displayed or presented in any disgraceful manner.
It is the prime duty of every individual in the country to respect the national anthem.
It should be ensured that there is no disturbance during the exhibition of the national anthem.
There should be no display of an abridged version of the national anthem.
One should have the national anthem playing in the background and the national flag on the screen and patriotism in the heart. It is because the singing of the national anthem and the concept of protocol associated with it, have their inherent roots in national identity, national integrity, and constitutional patriotism.

Final verdict in the case

The final verdict of this case was then given in the year 2018. In the judgment of this case, there have been certain modifications related to the previous judgment of 2016. In this case, the three bench judge has opined that it is mandatory for all the people to stand while the national anthem is played provided that there is an exception for the person with a disability. This includes wheelchair users, and those with autism, cerebral palsy, multiple disabilities, Parkinson’s disease, multiple sclerosis, leprosy, muscular dystrophy, or hearing and visual disabilities from its directives. However, in this case, the Court has made it optional to play the national anthem in the cinema halls and has removed the obligation. It is upon the discretion of the theatre owners during the screening of a film. The following judgment was given by a three-judge bench headed by Justice Dipak Mishra.

The Committee that is appointed by the Union Government should submit the recommendation to the concerned authority in terms of notifications for following up the actions, provided that such recommendations must not be influenced by the interim directions of the courts and also competent authority must not be constrained by any interim directions.
The orders passed in 2016 were modified to the extent that playing the national anthem before the screening of the movie in the cinema hall is not compulsory anymore but is optional and discretionary upon the owners of the cinema hall.
Every citizen is bound to respect the national anthem of India as required under executive orders and prevailing law, whenever it is played or sung on any specific occasion.

Dr. Tawseef Ahmad Bhat v. State of J&K & Anr. (2021)

Facts of the case

In this case, there was a party arranged for the celebration of a successful surgical strike. The celebration started with the singing of the national anthem. Few students in the party claimed that one of the lecturers had shown disrespect towards the national anthem by not standing when the national anthem was being played. However, the lecturer contended that he was standing along with his staff during the same. Also, the students claimed that it is a violation of Section 3 of the Prevention of Insults to National Honour Act, 1971.

Judgment

The Jammu and Kashmir High Court held that not standing for the national anthem or singing it may amount to disrespecting the national anthem and also is a failure to adhere to the fundamental duties provided in the Constitution. However, such actions do not amount to the offense under Section 3 of the Prevention of Insult to National Honour Act, 1971. The Court also observed that it is the fundamental duty of every citizen, who also claims fundamental and statutory rights from the country, to obey our Constitution, to show respect to its ideals and institutions, and to hold the national flag and national anthem with utmost high esteem. Any infringement in this regard shall be treated as a breach of fundamental duties.

Conclusion

There are no rules or regulations that mandate the playing of the national anthem, but just a practice that is followed by the theatres. It is the place for presentations of artist creation. The recent judgments given by different courts have been pronounced with utmost good faith which tries to keep the sense of not just patriotism but also constitutional patriotism that is love and respect for the constitution and nation alive. There have been various precedents with regards to the legal perspective of the national anthem for decades. The current position of this issue in which the cinema hall owners are given discretionary power to play or not to play the national anthem has made it easy for the citizens to enjoy their rights as well as to practice their constitutional duty.

Reference

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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Regulation of cryptocurrency : comparative analysis of Indian and Japanese position

By

Abanti Bose

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October 21, 2021

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This article is written by Megha Dalakoti pursuing LLM from National Law University, Odisha. The article has been edited by Smriti Katiyar (Associate, LawSikho).

Table of Contents

Introduction

Governments across the world are struggling to regulate the use and exchange of cryptocurrencies due to the anonymity involved in the holding, mining, and transactions of cryptocurrencies. Can cryptocurrencies be used as a legal tender for the development of an economy?

A cryptocurrency is a virtual or digital form of currency capable of being represented in “tokens” or “coins”. There are some cryptocurrencies that have ventured into the physical world with different projects, however, there is a large section that remains entirely intangible. Cryptocurrencies function on the blockchain technology which facilitates a record of every transaction ever conducted in the form of a ledger. Every new block generated is verified by each node and thereafter confirmed, and hence, it is impossible to forge transaction histories. Cryptocurrencies are not issued by any central authority and hence, are immune from government interference or manipulation. It is a peer-to-peer based digital currency system. They are self-regulated currencies. The value of the cryptocurrencies is volatile in nature. It does not hold an intrinsic value, but the value is determined by its use i.e., more the users, greater the value. Countries are still examining and analysing the nature of cryptocurrencies. The legality and regulation of cryptocurrencies is still a big question to be solved. Can the legalisation of the cryptocurrencies be beneficial for the economy of a country? What are the challenges associated with such legalisation?

Due to the highly volatile nature of the first successful cryptocurrency i.e., Bitcoin and increasing related financial frauds, many countries took an initiative of banning bitcoins and other cryptocurrencies, its use, and exchanges. In 2015, Ecuador was the first country to ban bitcoin and launch its own electronic currency followed by China completely banning bitcoin transactions and dealings. There are few other countries which banned dealings in bitcoin or other cryptocurrencies such as Russia, Vietnam, Bolivia, Morocco, Columbia, Pakistan, etc. In 2018, the Reserve Bank of India banned cryptocurrency dealings in India. The ban was lifted by the Supreme Court of India in April 2020. Many countries have given recognition to cryptocurrencies by regulating them and recognising them as legal tender. Japan is the hub for cryptocurrency trading in Asia. Other countries like the US, Germany, Canada, France, Malta have also recognised bitcoin transactions as legal.

We will examine the legal position of Cryptocurrency in India as well as in Japan. The aim is to compare and understand whether such currency will benefit the economy or is it too volatile to be considered a currency. On the one hand, governments like the Indian government, are against the legality of cryptocurrencies and their use, due to the risk of financial frauds associated with the transactions, and on the other hand, Governments like the Japanese government, have legalised the cryptocurrencies. Understanding the relativity in the functioning of both the countries and challenges associated with the legalisation of cryptocurrencies is the prime objective of this comparative study.

Need for the comparative analysis

There are several questions in the minds of people about the nature of cryptocurrencies. Its highly volatile nature and anonymity in the transactions open the room for various illegal financial activities such as money laundering and tax evasion. Due to the associated risk, the Indian government is not ready to outrightly legalise dealings in cryptocurrencies. There is a bill pending in the Indian Parliament for the regulation of cryptocurrencies declaring their exchange as illegal. On the contrary, Japan has recognised bitcoin and digital currencies as legal property under the Payment Services Act. Many economists suggest that cryptocurrencies/digital currencies/electronic currencies are the future of the world economy and the governments will have to recognise them in the future. The objective of the study is to compare the Indian position to the Japanese position on the cryptocurrency regulations to analyse the two opposite economic situations and their approach in regulating the cryptocurrencies in the concerned market situation.

The dominating cryptocurrencies in the global market

The first-ever cryptocurrency to be considered original was ‘Bitcoin’. It was founded in 2009, on a white paper by a mysterious man who did not disclose his identity and preferred to be called by the name, Satoshi Nakamoto. Prior to bitcoin, there were many other failed attempts to introduce digital currencies with ledger secured by encryption into the market. The new bitcoins are formed by the process of mining using open-source bitcoin software. In 2010, a miner sold his 10,000 bitcoins for 2 pizzas to trade in bitcoin for the first time. The use of bitcoin increased in 2012 and 2013. By the end of November 2013, the price of bitcoin reached $1000 thereby dropping to $760 in December 2013 and to $580 in February 2014. The price crashed to $315 at the beginning of 2015 and to $215 in October 2015. The massive price drops were due to the fraud conducted by someone who stole 8,50,000 bitcoins from the world’s largest Bitcoin exchange. The people lost their trust and confidence in the security provided by the exchange. The bitcoin rose again in 2017 breaking through $1000. In October 2017, the price reached a high of $5000, doubled to $10000 in November and reached its all-time high of $19,783 in December 2017. The price dropped again to below $3500 by November 2018. There were several countries that banned cryptocurrencies following the massive drop and frauds involved in the crypto transactions such as India, China, Pakistan, Bangladesh etc.

Bitcoin was soon followed by Ethereum (ETH), Litecoin (TCC), Dash, Ripple (XRP) and many others. Today, there are several altcoins and cryptocurrencies being traded in the global market. The countries are launching their own digital currencies to move ahead in the race.

After facing a huge drop in 2018, bitcoin revived again in 2020 registering a meteoric rise and a surprising comeback. In 2020, bitcoin surged over 200 percent along with other cryptocurrencies such as Ether, Ripple, Litecoin, etc. The trading and use of cryptocurrency have increased in the last few years as they can reduce transaction costs to a great extent. Cryptocurrencies are real and the new price records have burst the bubble-myth of numeral economists across the world. They are the future of the world economy which sooner or later, will be realised by all the nations.

Can cryptocurrencies be recognised as currency?

There are several legal and regulatory challenges involved in the recognition of a cryptocurrency as a currency. Firstly, the cryptocurrency must meet the attributes of a currency to be recognised as a currency. Secondly, it is essential to regulate the cryptos and ensure stability in their value. Thirdly, it is important to analyse the possible impact of such recognition on the different sectors of the economy. Fourthly, the authorities must ensure that there is no potential misuse of the cryptocurrency for illegal activities as there are numerous malpractices that can arise due to the bad regulation of the cryptocurrencies such as money laundering, currency diversions from exchanges, frauds, etc.

It is important to ensure that a cryptocurrency meets the characteristics of a currency from the legal and economic perspective to be recognised as a currency.

A currency is:

Worthy of being used as a medium of exchange;
Accepted for having an intrinsic value;
Divisible.
Homogenous;
Durable;
Mobile;
Rare;
A fixed value; and
Controlled by a central authority.

Virtual currencies are worthy of being used as a medium of exchange for buying and selling goods. They do not hold any intrinsic value and are enforced by the government as legal tender. Cryptocurrencies are divisible and homogeneous in nature. They are durable and easy to carry from one place to another. They have a limited number of products and do not have a stable value. The value increases with the increased number of users. Cryptocurrencies are not controlled by any central authority as they are self-regulated by decentralised technology. This raises a big question on the jurisdiction aspect.

Cryptocurrencies may help in reducing heavy transaction costs in cross-border transactions. Cryptos have a limited supply and hence, cannot suffer inflation. The cryptos based on blockchain technology are reliable and secure as there is a record of every transaction on the chain.

There are several risks associated with cryptocurrency holdings. It may be hard to recover the holdings if the password or device or wallet is lost. The transactions once made are irreversible. As the process of transactions provides anonymity, it may give rise to illegal activities and there is no legal recourse available for that. There is no minimum valuation guaranteed by any authority of any cryptocurrency. As the system is based on technology, any technical glitch may result in unwarranted loss.

Cryptocurrencies hold many attributes of a currency but cannot be regarded as a currency for not having a fixed or stable value and being self-regulated. They are capable of being accepted as a legal tender as they can be accepted as a medium of exchange.

Legality and regulation of cryptocurrencies in India

Regulatory body

The economy of every country is governed by the monetary policies of its financial system. In India, the Reserve Bank of India (the central bank) plays an important role in formulating monetary policies and maintaining the stability of the financial system. The Reserve Bank of India (RBI) performs various functions such as regulating bank rates, modifying tax rates and structures, issuing banknotes, controlling credit limits, printing currency, foreign exchange, controlling monetary liquidity, imposing restrictions on imports through import duties, modifying tax rates and structures, etc. RBI derives its regulatory and administrative powers from various legislations enacted by the Parliament of India namely, the Banking Regulation Act, 1949 (Banking Act), the Reserve Bank of India Act, 1934 (RBI Act) and the Payment and Settlement Systems Act, 2007 (PSS Act), and related rules and regulations.

Regulatory attempts

Prior to 2017, cryptocurrencies were being freely traded by random people across the country. For the first time in 2013, RBI warned the virtual currency holders and traders against the risk associated with the dealings in virtual currencies via press notes. However, people did not pay much heed to the warnings of the RBI and they continued transacting in cryptocurrencies. There was a massive increase in the number of users of cryptocurrencies by 2017 and bitcoin was performing exponentially well in the market. Again in 2017, RBI issued press notes stating that the entities dealing in virtual currencies are not authorized to do so and are doing that at their own risk. Further, a circular dated 6 April 2018 issued by RBI restrained all its regulated entities from engaging in crypto transactions in all manners and were given 3 months’ time to end such affairs. The circular did not prohibit the use of cryptocurrencies but the regulated banking exchanges from dealing in their transactions.

Later, The circular dated 6 April 2018 issued by RBI was challenged before the Supreme Court in Internet and Mobile Association of India v Reserve Bank of India via a writ petition filed by the Internet and Mobile Association of India, on the grounds that RBI lacked the jurisdiction in prohibiting the crypto-exchanges from dealing in cryptocurrencies since cryptocurrencies were not ‘legal tender’ in India; RBI completely banned an activity which was not declared to be illegal; the ban being arbitrary and imposing irrational prohibitions. The Supreme Court of India vides judgement dated 4 March 2020 struck down the RBI ban observing that there was no negative impact of cryptocurrencies on the regulating agencies of RBI.

Current position

It is not illegal to trade and hold cryptocurrencies in India, presently, as there is no law to regulate cryptocurrencies in India. Cryptocurrencies are not legal tender in India, but the crypto exchanges are legal to operate. However, the Government of India is willing to regulate cryptocurrencies by imposing a ban on their use. A draft, “Banning of cryptocurrency and regulation of official Digital Currency Bill, 2019” seeking to prohibit mining, holding, selling, trade, issuance or use of cryptocurrencies in India, is pending in the Parliament of India. The Government of India is willing to actively encourage blockchain technology, its use and its application. However, it is against the use of virtual currencies. Crypto transactions are encrypted and can only be tracked by involved parties. In this way, the holdings and transactions of the investors are kept away from the prying eye of the regulators. People can evade tax by converting their money into cryptocurrency and making further currency transactions. The non-regularisation of cryptocurrencies in India is resulting in various scams and crimes. The crypto transactions are reportedly being used for terror funding and hawala transactions. There have been several cryptocurrency scams in recent years. The various investors from India have lost more than $500 million (an estimated figure) in these scams. In September 2020, Delhi-based crypto transacting platform, Pluto Exchange, duped more than $2,72,000 amount from around 43 investors and shifted the business from India to Dubai. Recently, a cryptocurrency trader based in Gujarat was being arrested and investigated by the Enforcement Director in connection with an online betting racket involving Chinese operators, which exposed a scam of cryptocurrency trading through multiple exchanges involving nearly INR 1000 crore.

There are several positive aspects of cryptocurrencies that the Indian government seems to overlook. In the economic slowdown, the cryptocurrency assets promise high rates of return becoming a magnet to many Indian investors. If regulated via good legislation, the crypto business can do exponentially well in India. India has a very large number of crypto investors trading in cryptocurrencies. Banning cryptocurrencies in the era of technological advancement cannot be a solution for competitive economies. Hence, it is essential and the need of the hour to bring clear legislation regulating cryptocurrencies in India, immediately.

Legality and regulation of cryptocurrencies in Japan

Regulatory body

Japan is home to a huge number of crypto traders and users. The crypto asset market of Japan has grown expediently after its regularisation in 2018. In Japan, the crypto asset exchange businesses are regulated by the “Payment Services Act.” Japan was the first country to use the term “crypto-asset” as the legal term for cryptocurrencies.

In Japan, all banking and investment operations are regulated by the Financial Services Agency. The FSA determines the legitimacy of the cryptocurrency and lays down the standards for the operation of a cryptocurrency exchange. The exchanges operating in the country have formed their own self-regulatory body, Japan Virtual Currency Exchange Association, to follow certain rules and best practices while operating in Japan, to make crypto operations safer and more legitimate for Japanese consumers establishing a medium between government regulators and exchange operators. The new rules formed by the Association amid Coincheck fraud set a maximum cap of 20% on user funds that can stay in hot exchange wallets and the excess will be automatically transferred to the cold storage for security purposes.

All the crypto exchanges in the country are required to register themselves with the FSA and get licensed with the FSA before starting any crypto business in the country. This helps FSA to keep track on knowing your customer data and impose anti-money laundering measures. Recently, FSA announced an outright ban on private coin trading in the country amid increasing money laundering crimes. As a result, the crypto exchanges have withdrawn many coins from their exchanges.

History of the legislation

Following the alleged hack of Mt. GOX (the world’s biggest crypto exchange based in Japan) and thereafter, its application for Insolvency with the Japanese government in 2014, the Japanese government started to develop new regulations for cryptocurrencies. The regulators did not shut down the exchanges but rather decided to regulate the exchanges. For this purpose, two groups namely, a study group and a working group were established in 2014 and 2015 in the Financial Services Agency (FSA) to submit a report on “sophistication of payment and settlement operations”. The final report submitted by the working group recommended “the introduction of a registration system for cryptocurrency exchange businesses; subjection of cryptocurrency transactions to money laundering regulations, and the introduction of a system to protect cryptocurrency users.

After the submission of the report to the Financial Council of the Financial Service Agency, a bill was submitted by the government to the Diet (Japan’s parliament) for the amendment of the Payment Services Act. As a result, the Act was amended in 2016 and the amendments took effect on April 1, 2017. The cryptocurrencies were regularised in Japan with the objective of protecting users of crypto assets and combating money laundering and terrorist financing.

In 2018, due to the hacking attack on one of the largest crypto asset exchanges of Japan, Coincheck Inc., $530 million worth of cryptocurrency was lost by the exchange. This led to the revision of policies governing cryptocurrencies to strengthen the regulatory framework. The revisions were made to the “Payment Services Act” and “Financial Instrument and Exchange Act” and came into force on May 01, 2020. The term “Virtual Currency” was revised to “Crypto Asset”; the regulations governing exchange services were made stricter, and the regulations governing crypto asset custody services were enhanced. Similarly, Electronically Recorded Transferable Rights (ERTRs) were established; new regulations governing Crypto Asset Derivative Transactions were introduced along with the regulations governing ‘unfair acts’ in Crypto Asset or Crypto Asset Derivative Transactions. Under the law, Crypto Asset is treated as a ‘property’ and not money or fiat currency. There is a possibility of using central bank digital currencies as cash equivalent in the future if it is technologically feasible.

Current legal position

Under the legislation, cryptocurrency is accepted as a method of payment and not as a fiat currency or currency. It is legal tender. To provide crypto-asset exchange services to the residents of the country, an exchange is required to register itself as a “Crypto Asset Exchange Service Provider”. All the crypto-asset exchange service providers are required to establish security systems to protect the information they possess. Cryptocurrency exchange businesses are required to keep accounting records of all the cryptocurrency transactions and submit annual reports on business to the Financial Services Agency. According to the National Tax Agency, the profits by Sale of cryptocurrencies are to be regarded as miscellaneous income and not capital gains.

There have been several financial frauds since the legalisation and regularisation of cryptocurrencies in Japan. There have been reported cases of cyberattacks on crypto wallets and money laundering. In an investigation, it was found by the National Police Agency of Japan that there had been 158 cyber-breaches for a total of $540 million lost in the first six months of 2018 alone. The largest loss was suffered in the case of Coincheck i.e., $517 million, making it one of the worst attacks ever. Another breach was at a crypto exchange called Zaif, of nearly $60 million. There is a lot to improve for the Japanese government to secure customer information and funds. Hope the new reforms will make a positive impact on the regularisation of cryptocurrencies and will provide customer security.

Comparing the Indian and Japanese position

In India, cryptocurrencies are neither regulated nor banned. The government is planning to take steps to curb its use and exchange by enacting legislations seeking to prohibit all private cryptocurrencies in India. Also, the government might introduce its own national digital currency using crypto technology. The “Cryptocurrency and Regulation of Official Digital Currency Bill” aims to provide a systematic framework for the production of the official digital currency to be regulated by the Reserve Bank of India.” The banning of cryptocurrencies cannot be a solution to the problems attached to the use of cryptocurrencies. Indeed, it is difficult to regulate cryptocurrencies by legalising them in the Country. It involves a lot of risk and loss of assets. But it wouldn’t be wrong to suggest that the crypto market attracts a huge foreign investment which is essential for the development of an economy. Japan is a technology-driven country and encourages technology and is still struggling to find a suitable solution to the problem of cyberattacks. The Indian economy has the capability to attract a large crypto investment in case it legalises these currencies. The problem rests with the control and supervision of these transactions. Japan has amended its laws recently to curb the problems of cyber attacking. If Japan’s attempts are successful, then India and other countries can take the example from the regulatory authorities of Japan for the regularisation of cryptocurrencies in their countries.

Conclusion

India should focus on bringing suitable legislation for regularising cryptocurrencies rather than focusing on banning them. The use of a nationalised digital currency can also show an effective result in boosting the economy. The legislation should ensure that effective levels of verification are processed to determine crypto transfers money laundering or terrorism financing risk. Cyber Agencies should be developed for the discernment of related transactions. Once legalised, cryptos can be used as exchange tokens in the country. The regulators of Japan have approached the crypto regulations with a hands-off approach and helped digital assets to prosper and evolve. With the new amendments in the crypto asset framework, Japan is again poised to lead the way for other countries on how to regulate crypto assets in 2021 and beyond.

References

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

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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An analysis of the National Monetisation Pipeline Scheme

By

Rachit Garg

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October 21, 2021

0

barandbench_import_2019_03_Parliament-2 — Image source - https://bit.ly/3yDZXzd

This article is written by Gyaaneshwar Joshi, from the Faculty of Law, Jamia Millia Islamia, New Delhi. This article deals with the National Monetisation Pipeline Scheme under which the government is aiming to collect Rs. 6 lakh crores revenue as a means to raise innovative and alternative financing for the infrastructure of the country.

Table of Contents

Introduction

Infrastructure is critically linked to the growth and economic performance of the country. For this purpose, the Finance Ministry introduced the Union Budget 2021-22 with an over-reliance on infrastructure investments and economic growth. The budget was introduced to create an overall institutional structure, to enhance the share of capital expenditure in central and state budgets, and most importantly for asset monetisation.

National Monetisation Pipeline (NMP) is a pioneering initiative of the Government of India to establish a medium-term pipeline along with a roadmap for ‘monetisation-ready’ assets. It is kind of a ‘fund generation exercise’ introduced in the backdrop of the unprecedented COVID-induced economic and fiscal shocks. The stagnant economy during the lockdown hugely impacted the government’s revenue, therefore the NMP was introduced to boost capital infrastructure to keep the economy on track and further on growth.

Asset monetisation : the concept

Monetisation refers to the process of making money from a non-revenue generating item. Similarly, asset monetisation is about utilising the existing asset base for creating new infrastructure. It is a process of converting unused part of the government asset (building, land, property) into economic value, and spending generated income from those assets to create infrastructure and grow the economy of the country.

Asset monetisation consists of the limited period transfer of performing or non-performing assets by the central government to a private entity and further reinvesting the selling income in other projects or investments for infrastructure growth of the country. For instance, the rights can be transferred to a private entity for a certain period of time under which the owner is independent to generate money from the purchased asset, and the money earned by the central government after selling can be used to build new infrastructure assets, and boost economic growth.

Generally, asset monetisation involves the creation of new sources of revenue from unutilised or underutilised public assets. These exercises are largely done at the international level, where monetising certain assets which are under Government’s control, is held to be very important for managing public resources. Many public assets are monetised to create greater financial leverage and to maintain the equity that the government has invested in them. Therefore, the Government’s main objective behind asset monetisation is to unlock the value of investment from the public assets that have not yielded appropriate or to create unexplored sources of income for the company or shareholders and allow them to contribute to a more accurate estimation of public assets. This exercise helps in the better financial management of government and public resources over that period of time.

National Infrastructure Pipeline : an approach to NMP

The Finance Minister unveiled the National Infrastructure Pipeline (NIP), which is a Rs. 102 lakh crore infrastructure project to be implemented over the next five years (2019-25). The NIP is an initiative that will provide world-class infrastructure across the country to improve the quality of life of all citizens. It includes economic and social infrastructure projects in which roads, urban, education, health railways, power, and irrigation sector comprise approximately 80% of them.

Prime Minister Narendra Modi, in the 2019 Independence day speech, announced the government’s plan to invest Rs. 100 lakh crore on infrastructure over the next five years, including social and economic infrastructure projects. To achieve this objective, a task force was constituted to draw up the National Infrastructure Pipeline (NIP) for each of the years from Financial Year 2019-20 to 2024-25 with the approval of the Finance Minister. The NIP Task-force headed by Atanu Chakraborty submitted its final report in May 2020. The important recommendations by the committee were:

A total of Rs. 111 lakh crore is needed over the next five years (2020-25) to build infrastructure projects and drive economic growth.
Around 70% of the estimated account shall come from energy, roads, railways and urban projects.
The centre (39%) and state (40%) are expected to have an almost equal share in implementing the projects, while the private sector has a 21% share.
The monetisation of infrastructure assets.

NIP will serve as a tool for inclusive growth by creating jobs, improving ease of doing business & providing equitable access to infrastructure. It would eventually contribute to the Sustainable Development Goals (SDG) 2030 agenda, to which India is a signatory. It also emphasises ease of living and improving the physical quality of life, i.e., safe drinking water, access to clean and affordable energy, healthcare for all, modern transportation, and world-class educational institutions.

National Monetisation Pipeline

The National Monetisation Pipeline (NMP) was launched by the Union Minister of Finance Nirmala Sitharaman through which the government aims to raise Rs. 6 Lakh crore ($ 81 Billion) by leasing out state-owned infrastructure assets over the next four years, from FY 2022 to FY 2025. The Government will encourage both foreign and private investment to utilise and redevelop these Government and PSUs owned assets to unlock economic value.

According to the plan laid out in NMP, the Government is aiming to raise Rs. 88,000 crores through asset monetisation in the current fiscal FY 2021-22, Rs. 1.6 lakh crore in FY 2022-23, Rs. 1.8 lakh crore in FY 2023-24, and 1.6 lakh crore FY 2024-25. With the target of Rs. 88,000 crore of asset monetisation is expected to be completed in FY 2022. As an incentive for asset monetisation by states, an additional allocation equivalent to 33% of the value of assets envisaged to be deposited in State Consolidated Funds or accounts of state public sector enterprises owning the assets. The allocation and disbursement are subject to the realised amount being necessary used for capital expenditure by states.

The Centre decided to hand over 13 identified sectors- airports, railways, highways, among other assets to private firms on a long-term lease to fulfill the objective. However, the ownership of these assets (after monetisation) shall remain with the government and the owners will have to give it back to the government after a certain time. The current objective of the central government is to identify these assets, find the most appropriate way to unlock the value, and do it in a time-bound manner.

Sector-wise Monetisation pipeline over FY 2022-25

The pipeline of assets has been phased out over four years, from FY 2022 to FY 2025. The total indicative value of NMP for core assets is estimated at Rs. 6 lakh crore over four financial years till FY 2025. The proceeds will be used to finance the Rs. 110 lakh crore national infrastructure pipeline to turn India into a $5 trillion economy by 2024-25. The NMP will constitute 14% of the Centre’s outlay of Rs. 43.39 lakh crore under National Infrastructure Plan (NIP). Some global players such as Blackstone and Macquarie are interested in participating in the monetisation process. The assets to be monetised are spread across 20+ assets, which includes national highways and power grid pipelines, etc., and more than 12 line ministries and departments. The top five sectors by value under the Government’s asset monetisation program are roads (27%), railway (25%), power (15%), oil and gas pipeline (8%) and telecom (6%).

Asset Monetisation Pipeline

Under asset monetisation, the Central Government is planning to garner a certain amount of money from the sale of different assets as mentioned below:

	Asset(FY 2022-25)	Value(in lakh crore rupee)
Roads	26,700 km of highways	1.60
Railways	400 stations, 150 trains	1.52
Power transmission lines	42,300 circuit km of transmission lines	0.67
Natural Gas Pipelines	8000 km of GAIL pipelines	0.24
Power generation	5000 MW of Hydro, Solar Wind assets	0.32
Oil pipelines	4000 km of pipelines of IOC, HPCL	0.22
Telecom	Towers of BSNL, MTNL	0.39
Mining	160 coal mining projects	0.32
Airport & Ports	21 AAI projects and 31 ports project	0.34
Stadiums	2 sport stadiums	0.11

Under NMP, the government has announced to monetise only brownfield assets, i.e., those assets which are complete but languishing, not fully monetised, or underutilised. Therefore, a central government through NMP is trying to make a strong pipeline of attractively structured, brownfield projects to increase the economy on public expenditure. The Finance Ministry clarified that by bringing private participation, the assets would be monetised better, and whatever resources obtained by monetisation can be put in for further investment into infrastructure building.

The Central Government has also encouraged the State Governments to monetise their public assets. To encourage states to pursue monetisation, the government has set aside Rs. 5,000 Crores as an incentive. In case the state government divests its stake in a public sector undertaking, the Centre will provide 100% matching value of the divestment of the state. Similarly, if a state lists a public sector undertaking in the stock markets, the Central Government will give it 50% of that amount raised through the listing. Finally, if a state monetises an asset, it will receive 33% of the amount raised from those assets. The state governments are encouraged because only states have control over their power generation assets, transmission and distribution, state highways, etc, among its key assets. Therefore, these efforts can increase visibility on funding of the state’s capital expenditure.

Asset monetisation models

Time-bound contracts are being done on brownfield models where the obligations remain with the public authority, but the day-to-day management is vested with the private sector, who will be responsible for operation and maintenance (O&M), a part or whole asset. On the other hand, brownfield PPP (Public-private Partnership) allows the private sector for end-to-end operation and maintenance (O&M).

Asset monetisation models will be categorised into two approaches:

Direct Contractual Approach (PPP Model)

Operate Maintain & Transfer (OMT): In this model, a right is transferred to the private entity to maintain and operate an asset for a definite concession period. This model is applied in India mainly for road maintenance management. The concessionaire invests an amount for operation and maintenance of road and recovers investments by various means such as through toll taxes, land value capture revenues, etc.
Toll Operate & Transfer (TOT): Under this model, the publicly funded operational projects for two years are monetised and put for bidding. After making a one-time lump-sum payment on publicly funded highways, the investors are given a right to collect an appropriation fee for 15 to 30 years.

Example: Delhi-Noida Direct Flyway is one of the most significant examples of the success of this model.

Structure Financing Models

Infrastructure Investment Trusts (InvITs): InvITs are mutual funds like institutions that enable investments into the infrastructure sector by pooling small sums of money from many individual investors for directly investing in infrastructure. InvITs growth depends on the successful acquisition of concession assets through a bidding process. As per present regulations, InvIT investments are not open for small and retail investors.
Real Estate Investment Transfers (REITs): A company owns, operates, or finances income-producing real estate. It raises funds from many investors and directly invests that sum in income-generating real estate properties. REITs are more accessible to small investors and have high liquidity due to lower unit prices. It holds land and buildings on a freehold basis or leases from a government authority.

Asset Monetisation experience : India and beyond

According to the Global Infrastructure Outlook, 2017, the total infrastructure requirement, globally, has been estimated at $94 trillion during the period 2016 to 2040. Various governments lead the initiative of meeting the massive infrastructure deficit, in which around 50% alone is required in Asia (with countries like China, India and Japan). The government’s incapacity to fund this level of infrastructure investment made them adopt the way of asset recycling to bridge this infrastructure deficit.

Many private sector investors generally avoid risks associated with the construction phase in their acquiring assets. Therefore, to exempt the construction cost in those assets, the institutional investors and funds mostly prefer to invest in mature economic infrastructures such as airports, highways, and ports in countries like Australia, Europe and North America. In India, bids for a public-private partnership (PPP) in railway stations and passenger trains show less amount of curiosity from the investors due to the risks of dis-investments. However, investors mostly prefer to invest in assets like airports, highways, telecom and power.

Australia’s Asset Recycling Initiative (ARI)

The federal government in Australia implemented the concept of asset recycling through the Asset Recycling Initiative (ARI). To facilitate ARI, the Australian Government in 2013 directed the Productivity Commission (PC) to examine infrastructure costs and financing in Australia with ways to focus on decision-making and implementing processes.

The Australian government in the 2014-15 budget announced the Infrastructure Growth Package (IGP) to initiate a ten-year vision of infrastructure investment in the country. The main components of the IGP were: Asset Recycling Initiative (ARI) and obtaining new investments. The ARI 2014 encouraged the states to recycle assets and allow private companies to fund and run those public assets and later utilise the sale proceeds for enhancing infrastructure. It was designed for five years from 2014-19, and funding was allocated on a first-come and first-serve basis.

Only three out of eight states participated in the scheme and a total of AUD 3 billion in incentive payments were paid to participating states. This scheme was a success for the government because it helped unlock over $17 billion in new infrastructure development across Australia.

Indonesia’s Limited Concession Scheme (LCS)

The government of Indonesia has introduced the Limited Concession Scheme (LCS) as an alternative to its incumbent Public-Private Partnership (PPP) Scheme. With this scheme, the government’s objective is to ensure economic growth, for which it requires a significant quantum of infrastructure financing.

Therefore, in February 2020, the Indonesian Government enacted (Presidential Regulation No. 32 of 2020) through Limited Concession Scheme (LCS) for financing public infrastructure through existing assets. The Indonesia Government is currently operating it with the support of state-owned enterprises. Under this scheme, the private sector is invited to maintain, operate and expand the existing assets, and private sectors are paying upfront to the government as a concession fee. This revenue will enable the government to complete its massive infrastructure programs and sub-financing some of its projects, such as the Trans Sumatra Highway.

LCS enables the private sector to manage and operate existing infrastructure assets such as airports, toll roads, seaports, railways, bus terminals, etc. Under the LCS, the private sectors are required to pay a premium to compensate the government or the state enterprise for a grant of the concession through which that state enterprise or government will fund that amount for the development of new infrastructure assets.

Challenges

The government under a pipeline scheme is ready to attract private concessionaires to invest in the natural assets according to their funds, but the main problem is the low revenue-generating assets. Some assets may not have the revenue streams ready or having execution and operational challenges. Therefore, the private party is ready to invest in lucrative assets except for those assets that might not generate the resources that the party is going to put in. For example, the recent PPP biddings of railway stations did not attract much attention from the private parties.

However, the initial success has been achieved in roads and power transmission assets. The government stated that the monetisation plans succeeded in roads assets with over 1400 km of road was monetised under the TOT model. Also, the power grid asset successfully carried out an invade for FY 22 for Rs. 7700 crores.

Conclusion

The accumulation of Rs. 6 lakh crore is currently a normative value released by the government. However, the real value will emerge from the bidding process until FY 2025. The government needs to receive a decent amount for the first few projects in each sector to set the ball rolling in the right direction. Therefore, smooth implementation of the first Rs. 10,000 crores will determine the fate of the targeted Rs. 6 lakh crore.

According to the experts, if the government achieves to collect the targeted money, then NMP will be marked among the biggest and boldest reforms initiated in the infrastructure sector of all times.

References

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All you need to know about love jihad laws

By

Diva Rai

-

October 21, 2021

0

love-jihad — Image source - https://bit.ly/3vxnpNx

This article is written by Ronika Tater from the University of Petroleum and Energy Studies, School of Law. In this article, she explains the origin of love jihad and recent laws on the conversion of marriage. It also discusses whether the present state’s law aligns with the constitutional provisions or not with the support of case laws and relevant provisions.

Table of Contents

Introduction

India is a multi-linguistic country with the origin of diverse religions of the world. In 1950, the Indian Constitution through 42nd Amendment Act, 1976 declared India as a secular state which means that everyone in the country has a right to practice his or her religion peacefully. Part III of the Indian Constitution guarantees various fundamental rights. Under which Article 25 to Article 28 provides for the freedom of religion. The Indian Constitution states that it is the choice of the adult couple to freely convert themselves into another religion but the laws established by several states are against the principle of the Constitution.

Marriage and religion under the Constitution

Indian jurisprudence on religion has evolved what constitutes an essential religious practice. The two relevant constitutional provisions which provide the provision of the right to freedom of religion are below-mentioned:

Article 25 states that every person is equally entitled to freedom of conscience and the right to freely profess, practise, and propagate religion. However, restricted to public order, morality, and health. Nevertheless, it shall not affect the operation of any existing law or prevent the State from making any laws based on regulating or restricting any economic, financial, political, or any other secular activity with regard to religious practices.
Article 26 states that every religious denomination or any section of it to establish and maintain institutions for charitable and religious purposes, to manage its affairs, to own and acquire moveable and immovable property, and to administer such property as per the law. Subject to restrictions to public order, morality and health.

For several years there has been a conflict between freedom of religion and one’s right to equality under Article 14 of the Constitution. Both of these rights are guaranteed to every citizen of the country. The fact that women need to choose between one or the other is an unfair choice and against the principles of their constitutional right. Moreover, the secular laws such as the Special Marriage Act, 1954 (hereinafter ‘SMA’) which provides codified and religion-neutral laws for those who want a secular marriage, also suffers from lacunae and does not guarantee justice. According to a 2018 Law Commission of India paper, interfaith couples are often left with no choice but to convert in order to avoid delay and procedural problems. The SMA requires the interfaith couple or couples intending to marry to provide a 30-days notice before which is then publicly posted. This provides an orderly delay in marriage and is violative of human rights.

Further, Article 16 of the Universal Declaration of Human Rights, to which India is a signatory, provides men and women of majority the right to marry without any limitation to race, nationality or religion. It recognizes inter-faith marriages as a part of human rights.

Case laws

The Indian Courts in various judicial precedents have held that the right to choose a partner of a person’s choice is a fundamental right thereby, stating that this right shall not be affected by the difference in faith and religion. In the case of Ratilal Panachand Gandhi v. the State of Bombay, (1954), the Court held that every person has a fundamental right under Article 25 of the Constitution of India to follow such religious belief as per their conscience or judgment and also to exhibit his belief, ideas and thoughts in such overt acts as sanctioned by his religion and to impart his religious views for the betterment of others in society. Similarly in the case of Rev. Stanislature v. the State of M.P, & Ors., (1977), the right to propagate religion under Article 25 does not include the right to convert by fraud, deceit, or allurement and thereby upholding the constitutional validity of the earliest anti-conversion statutes enacted by Madhya Pradesh Dharma Swatantraya Adhiniyam, 1968 (now amended) and Orissa Freedom of Religion Act, 1967 (now amended) prohibiting conversion by force, fraud, deceit, or allurement. Neither of these Supreme Court deaths with the question of freedom of choice in the relation of religion and marriage.

In Lata Singh v. State of U.P & Anr. (2006), the Supreme Court held that there is a need for protecting the parties to bitter-caste and inter-religious marriages. It also stated that in a democratic country, once a person attains major he or she can marry whoever they like. In Asha Ranjan v. the State of Bihar & Ors, (2017), the Supreme Court held that the right to choose a life partner is a legitimate constitutional right. It is recognized under Article 19 of the Constitution which is not a reasonable restriction to the concept of class honour or group thinking. In the instant case, it was also held that class honour has no legitimacy even if it is practised by a group of people with some kind of a notion. Consequently, in the case of Shakti Vahini v. Union of India, (2018), the Supreme Court held that a person’s right to marry without the limitation of religion is part and parcel of their fundamental rights recognized under Article 21 of the Constitution.

In the recent case of Shafin Jahan v. Ashokan KM, (2018), (also known as the ‘Hadiya case’) the Supreme Court after observing the facts and circumstances of the case stated that the claim raised by the father of Hadiya is baseless. Hadiya is an adult and the Constitution provides her with the freedom to convert to another religion and marry the person of her choice freely. The Constitution grants an individual absolute autonomy over the choice to marry. The Court mentioned that the conversion for marriage was not under any influence, coercion or fraud. Since the marriage was valid as per the Muslim law and to exercise the jurisdiction to declare the marriage null and void is ultra vires of the judicial power.

Origin of love jihad

‘Love Jihad’ is a theory propagated by right-wing groups under which they say that Muslim men ‘forcibly convert’ women to other religions under the appearance of love, it is also known as forceful conversion. The origin of love jihad traces back to the 1920s, during the era of shuddhi which was a purification movement to reclaim Hindus who had converted to other religions. This movement was launched by Arya Samaj. The objective of this movement was to build a campaign against the conversion of Hindu women by Muslim men. The issue of love jihad is not a new phenomenon. But the current war on love jihad was originated in 2009 when the BJP-led Karnataka government initiated an investigation into Muslim men on the basis of claims that the Muslim men were wooing Hindu and Christian girls for conversion. After the investigation, it was found out that the allegations put forward by the BJP-led Karnataka were based on substantial data to prove the case of love jihad.

What are love jihad ordinances?

The Preamble of the Constitution of India provides that the citizens of India are secured from the following:

Justice includes social, economic and political justice.
Liberty of thought, ideas, expression, belief, faith and worship.
Equality before the law and of opportunity among all.
Fraternity states secure the dignity of the individual and the unity and integrity of the nation are protected.

This last promise, that is, of “fraternity”, means brother or brotherhood which is necessary for a harmonic coexistence of people of all kinds. In recent times, it has been noticed that several ordinances, laws and rules passed across the state legislature are against the idea of fraternity, secularism and fail to recognise the intrinsic value of the individual to freely choose their religion and adopt another religion.

For instance, the Uttar Pradesh Prohibition of Unlawful Conversion of Religion Ordinance, 2020 was the establishment by the state legislature to combat the threat of “love jihad” by some of the political leadership to describe interfaith relationships and marriages. The ordinance provides for the prohibition of unlawful conversion from one religion to another by coercion, misrepresentation, fraud, undue influence, force and allurement for marriage thereby making it a criminal offence. The provisions for punishment are the most problematic. The punishment for imprisonment may extend to a term of five years, and if the victim is a minor, woman or a member of a Scheduled Caste or Tribe, the punishment for imprisonment extends to ten years. Section 2(a) of the ordinances provides that if conversion is for an allurement or an inducement then the conversion is not valid. Thus UP ‘love-jihad’ law provides threat and harassment of Muslimes thereby, violative of Article 14 (right to equality), Article 15 (non-discrimination), Article 19, Article 21, Article 25, Article 26 and equality of status to minorities.

The objective of anti-conversion laws

The primary objective of anti-conversion laws introduced by various state legislatures in the guise of freedom of religion is the prevention of forceful conversion. However, there is no central legislation stressing the issue of conversion for marriage, the only restriction is on the grounds of public order, health, morality, and public peace. It also violates the right to life and liberty guaranteed under Article 21 as it thrives on and apprehended certain people that such ordinances, laws, and policies will invite criminal sanctions. For instance, Section 6 of the Uttarakhand Freedom of Religion Act, 2018, Section 5 of the Himachal Pradesh Freedom of Religion Act, 2019, Gujarat Freedom of Religion (Amendment) Act, 2021, and the Madhya Pradesh Freedom to Religion Ordinance, 2020, states an anti-conversion law that outlawed religious conversion based on marriage and declares it to be null and void. Moreover, these stringent laws make the conversion for marriage unlawful for the sole purpose of adopting a new religion.

Further, on the issue of whether love jihad laws are constitutional or not, the Gujarat Chapter of the Jamiat Ulema-e-Hindi filed a petition before the Division Bench of Gujarat High Court stating that some of the amended provisions under the Gujarat Freedom of Religion (Amendment) Act, 2021 are unconstitutional. The Gujarat High Court passed an interim order staying at Section 3, 4, 4A to 4C, 5, 6 and 6A of the Gujarat Freedom of Religion (Amendment) Act. The Court stated that the marriage performed by a person of one religion to another religion without force, allurement, fraudulent ways does not come under the ambit of marriages for the purpose of unlawful conversion. Thus these anti-conversion laws go against the democratic value of the Constitution. It is capable of great public mischief and acts as a hurdle for interreligious marriages and relationships.

Misuse of the anti-conversion laws

In Lily Thomas, Etc. v. Union of India, (2000), the Supreme Court held that conversion for marriage for the sole purpose to get rid of the first wife. In the instant case, an already married Hindu man converted to Islam solely for entering into bigamous marriage was in question before the Court. The Court stated that on such an occasion the previous marriage will automatically dissolve and the second marriage would be void.

In the case of Shahan Sha A. & Another v. State of Kerala, (2009), the High Court of Kerala while dismissing a bail application under Section 438 of the Code of Criminal Procedure (Cr.P.C) focused on the importance of Article 25 of the Constitution. The High Court also stated that our law does not prohibit inter-religious or inter-caste marriages. Inter-religious marriages arising out of love affairs are promoted and recognized in today’s time. While solemnizing such marriages, one party doesn’t need to convert into another party’s religion. But, in the case where one party believes that a marital union cannot be performed without the other party converting to his or her religion i.e., his or her faith. However, in such cases, love is not prominent but religion is paramount. Forcible, misappropriate, compulsive or deceitful conversions take place in such cases. It destroys the sanctity and divine love. The Government is bound to protect the fundamental rights of the citizen under Article 25 but it does not promote indulging in activities for compulsive religious conversion. It is rightfully said that the freedom of one should not entitle him to hold the freedom of another.

The present reality about love jihad

All the allegations stating love jihad that Muslim men are waging jihad through such marriages have been proven wrong and there is no evidence, for instance in Hadiya’s case. According to the reported 2011 census data, 79.80% of the population of India is Hindu, 14.23% Muslim, 2.30% Christian, 1.72 % Sikh, 0.70% Buddhist, and 0.37% Jain. Thus, practically the recent anti-conversion laws are aimed at the smallest percentage. These anti-conversion laws run contrary to the spirit of interfaith and inter-caste harmony which is one of the basic principles in the Constitution. Thus, only the judiciary can take note of this matter.

In a recent case, Priyanshi @ Km. Shamren & Ors. v. State of U.P. & Anr, (2020), the division bench of the Allahabad High Court overruled an earlier decision by a single judge of the Allahabad court which declared that conversion to Islam was valid only when it was based on a change of heart. However, in the instance case, the Court stated that marriage is a matter of choice, and every adult woman has the fundamental right to choose her partner. The case also emphasises that in the matter of marriage and choice of religion, the state can not intervene. The conspiracy theories such as ‘love jihad’ are based on fake news and propagate hatred and suspicion among the religious communities. Such anti-conversion laws only instil fear among Muslims and contribute to deepening communal fault thereby making it tougher for interfaith couples to exercise their right. Every individual has the right to choice in friendship, love, marriage, and the right to practice a religion of one’s faith is an inalienable right.

Indian courts have repeatedly reaffirmed the constitutional right to choose a life partner regardless of religion is a fundamental right of conserving adults and it is intrinsic to the Right to Life, Privacy and Personal Liberty. Recently, the Supreme Court on 01.06.2021 went ahead to examine the constitutional validity of anti-conversion laws established by Uttar Pradesh and Uttarakhand. After receiving various arguments based on the provision of the laws being oppressive. It also stated that the requirement to obtain prior consent before marrying someone from a different faith was to create division in society. It also raises questions on the grant of ultra vires to the police. In Divyaben W/O Sameer Abdulbhai Queshi D/O Vijaybhai Jethabhai Rohit v. State of Gujarat, (2021), a division bench of the Gujarat High Court passed an interim order to protect the parties of inter-faith marriage from being unnecessarily harassed. In the instant case, the petitioner approached the High Court to quash an FIR which was brought forward by the police relating to certain religiopolitical groups thereby, highlighting the issue of the love-jihad angle.

Conclusion

Jacob F. Roecker said that “the greatest threat to our Constitution is our ignorance of it”. The anti-conversion laws established in several states highlight specific aspects of the acts that violate the secular principles of this nation. It is hard to believe that such ordinances/laws could be passed by the state government in a country that is governed by rule of law and the Constitution. Although the judiciary has no power to interfere in the legislative function such as in matters of conversion of marriage unless the question of the constitutional validity of law is raised. The recent Allahabad High Court’s and Gujarat High Court’s decisions are encouraged by the various segments of society and encourage women and men to choose their partner and marry outside their religion freely. But there is still a need to look into the constitutional validity of recent ordinances and state laws as they violate the right to religion which tries to end all interfaith marriages. Hence, the judiciary must uphold the democratic values and morals of the Constitution.

References

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Provisions of the RERA Act providing solutions to the problems of allottees

By

Rachit Garg

-

October 21, 2021

0

This article is written by Shreya Singh, from Gitarattan International Business School, IPU. In this article, she discusses the approach of provisions of the RERA Act in settling the problems of the allottees in the real estate sector.

Introduction

The Real Estate (Regulation and Development) Act (RERA) came into being in 2016 for the regulation and development of industries or companies necessitating large upfront capital investments, having a basic focus on capital intensive markets, and functioning to keep the system of checks and balances among different councils and tribunals thus providing for adjudication. The Act de jure some obligations and tries to harbor the interest of the promoters, the estate agents, and the allottees. It’s a central law passed by the parliament concerning the problems affecting the real estate sector and to do away with issues of unprofessionalism, non-standardization of law, inadequate consumers protection, no transparency in delivering the property and money collected from purchasers, and no fast-track dispute resolution mechanism, concerning the same. The nucleus of legislation is pivoted on the concept of “justice” and bustling in providing a set of remedies for persons aggrieved under it.

Solutions as per RERA

Registration

The Act put a precept for prior registration of real estate projects with real estate regulatory authority. As per the Act, the ‘Promoter’ shall file the application for the registration of real estate project in a prescribed manner and disclose all necessary documents inter alia to the real estate project, the failure of which shall forbid promoter to advertise, sell or offer for a sale, or invite persons to conduct purchase in any manner. The following group of people is entitled to obtain RERA registration:

Builders;
Developer;
Development Authority/public body;
State cooperative society or primitive cooperative housing society;
The person holding power of attorney.

On the non-compliance of the registration, the aggrieved allottee may file a complaint under Section 4 of the Act. Section 59 of the Act ensures delivery of accurate project details whereby if the builder is found at fault, then, they will have to pay 10% of the project’s expenses or face imprisonment up to three years. Putting the validity of RERA registration in question, we can say that it may be extended under circumstances like force majeure that affect the usual development of a real estate project.

The specified persons are exempted from registering under RERA 2016:

1. The area of land proposed for development is less than 500 square meters or the number of apartments designed does not exceed 8 apartments, including all phases;

2. The promoter has received the completion certificate for the real estate project before the commencement of RERA;

3. The real estate project requested for re-modelling, replacement, or development of projects is those projects which do not require marketing, advertising, selling, or new allotment of apartments.

Association of allottee

Allottee Association is a welfare association and is mentioned under the RERA. The allottee association is formed as soon as the majority of flats or plots in real estate are booked by the developer or promoter of such a real estate project. This has been formed to ensure the welfare of all the allottees of such a project, for example, they can check if there is any delay happening in the project by filing an application before the RERA, or if there is a situation where the deregistration of the project is called for, then the allottee association is given a right to complete the project. Moreover, registration of allottee associations is mandatory.

Promoter’s Duties

The promoter has been obliged under Section 11 to carry off some fidelities, which being:

Lease certificate

Section 11(4)(c) constrains that the promoter shall be responsible to obtain the lease certificate, where the real state project is developed on the leasehold land. Moreover, the promoter shall be responsible for providing and maintaining the essential services on reasonable charges.

Conveyance Deed

It’s been contemplated under Section 11(4)(f) RERA that the promoter shall execute a conveyance deed whereby he hands over the legal right and authority of land in favour of the allottee. It must also elucidate as to the proportionate title in the common areas of the apartment or plot or as the case may be.

The deed must be executed following the local laws of the area. In a situation where local laws are silent, the period of three months from the date of occupancy certificate must be taken for its execution.

Payment

It shall be the promoter’s duty under Section 11(4)(g) to pay for all the outgoings until he transfers the physical possession of the real estate project to the allottee or the association of the allottees, as the case may be, which he has collected from the allottees for the payment of outgoings like land cost, ground rent, etc. If the promoter fails to do so he will continue to be liable even after such transfer and penal charges may apply for the same.

Advance amount

In the real estate sector, home buyers used to pay a substantial amount of money on an allotment letter or just an application form without a general agreement being shown to the client or the buyers or being entered into. The Act to curb that misrepresentation or undue/unfair trade practices has brought in Section 13 which says that no promoter can collect more than 10% of the amount money without agreeing to sell and that agreement to sell will be a very exhaustive agreement which is going to contain all the specifications of the project, the price of the unit and also the date of delivery.

Structural change

Section 14 puts a mandatory obligation on promoters to adhere to the sanctioned plans and project specifications as approved by the competent authority which may be developing authority, municipal corporation, town and country planning department, etc., depending upon the land on which the building is to be constructed. Furthermore, it says that no alteration, construction, additions will be allowed in the building except if they fulfil certain criteria. This Section does not define what are minor alterations but it does define what are not minor alterations. So, increase in super area or the carpet area, addition of columns or floors, addition of the covered area of the building, etc. are not minor alterations. So any addition in building or any part cannot be made without prior intimation to the allottee. This all has been done to protect the interest of actual allottees of the land or otherwise it will lead to encroachment of someone else’s property right if consent has not been taken. It moreover provides for rights of the buyer or allottee and post-possession obligation upon the builder.

It provides 3 rights to buyers:

1. No deviation from approved plans;

2. No additional construction of 2/3rd owners;

3. Promoter to repair defects in workmanship for 5 years post possession.

In case of a structural defect or any other defect in workmanship, it shall be the duty of the promoter to rectify the same within thirty days and in the event of failure to do so, the aggrieved allottees shall be entitled to compensation.

Completion certificate and occupancy certificate

As per National Building Code (NBC), a builder is required to submit a building completion certificate to the sanctioning authorities. When any builder plans to construct a building, whether commercial, residential, institutional or any other type of buildings of property complex, it must follow the building bylaws, master plan, development code of the city and any other regulations related to fire and safety rules, environmental regulation, etc. which are in force in the state of the jurisdiction. The builder has to follow all these regulations only then he can get the completion certificate without which the property will be considered as an unauthorised construction. On the other hand, the occupancy certificate is given to the owner by the sanctioning authority in which the permission for habitation in the building is granted. These have to be handed over to the allottee at the time of transfer of possession for the failure of which one can file a complaint under Section 14 of the Act.

Obtaining insurance and other documents

Under the RERA, a promoter has been obligated to use Section 16 to get insurance for the project. Two insurances need to be bought by the promoter, the first being against the land title and the second being against the construction. The insurance of land title means that in any unforeseen circumstances the burden for damages shall lie with the insurance company so that no further burden arises or falls upon the allottees. Withal, the promoter shall, at the time of the construction is made, acquire insurance in respect of the real estate project so that the construction can be done from an insurance claim in a locus of unforeseen circumstances, such being of a disaster (natural or man-made) due to which there is damage to the construction or demolition of the construction. Forbye the insurance has to be carried at all times during the construction stage as well after that. Every allottee has the right under Section 19(1) of the Act to inquire about this and seek the insurance premium or insurance documents from the promoter.

Defective title of the land

Section 18(2) of the Act explicitly discusses the defective title of the land. The Section obliges the promoter to compensate the allottee for any loss caused, by a reason of defective title in the land. For example, a builder constructed some property and you paid for that land as well as for construction, however before it could reach even a substantial height, it was found that the land was allotted to the builder fraudulently and the actual owner has come into the picture and has got right overland through court orders. So in that scenario, this Section comes to rescue the allottee and every payment done by you will be paid back by the builder.

For any violation

It is Section 18 of the Act which gives an unqualified and mandatory right to an allottee if in case the builder has defaulted on terms and conditions of the sale agreement. Moreover, if there is any contravention under the given Act or there is any violation of the given agreement or the terms and conditions of that sale agreement, then one can seek compensation for all other violations under the substantive provision of the Act or under any rules and regulations made under the main Act, i.e., RERA.

Maintenance

Promoters are responsible for providing and maintaining essential services on reasonable charges till the taking over of the maintenance of the project by the association of allottees.

Solutions as per the agreement for sale

There were so many anomalies before RERA came in, it established the model form of agreement i.e., an agreement for sale usually between a developer and a purchaser. It came up with very specific covenants wherein various disputed areas between buyer and seller were addressed.

An agreement for sale is always a document where a buyer and seller are having some obligation remaining to be fulfilled on some future date. For any agreement to be entered under RERA, it must be following the Annexure whereby any application letter or any other document must not affect the agreement for sale. Anything mentioned which is by the statute and mandatory according to the provision of the Act shall be retained in every agreement executed between the promoter and the allottee. Any clause in this agreement found contrary to or inconsistent with any provision of the Act’s rules and regulations thereof shall be void ab initio and will not suffice. Furthermore, breach of agreement may occur under the following circumstances as per the Act:

Wrongful cancellation

Section 11(5) canvasses an idea for cancellation of the agreement to sell unilaterally by the promoter. Provided that in case, if the allottee is aggrieved by such cancellation because of it, not being by terms of the agreement to sell, unilateral and without any virtuous cause, the allottee may approach the specific authorities for relief by filing a complaint under this Section.

Pending obligations before transfer

It often happens that the promoters create a third party interest or sell off a certain portion of the project to a third builder, meaning thereby, a new builder is being brought into the picture to complete the project, so that the project may be delivered.

So as per Section 15 of the RERA, a promoter cannot create any third party interest for any portion in that project, without first obtaining express and free consent from the 2/3 allottees, which will not include the unsold flats or the purchased flats of the promoter itself. So steps to create third party interest in the project needs to:

1. Seek consent from 2/3 allottees;

2. Apply to the competent authority for approval.

The consent of allottees will be required not only under Section 15 but also under Section 14(2) of the RERA. Whenever a requirement of consent arises, that has to be free consent under the prevailing facts and circumstances, not in previous facts and circumstances. In a situation where promoters are relying on the previous consent given by the buyers in the agreement to sell, in that scenario also the allottee can file their objections. The next promoter who will take the project will also overtake all the duties and responsibilities of the existing promoter.

Delivery of possession

The most important right is the right to claim a refund and exit from the project, in case where the project has not been delivered as per the terms and conditions of the agreement to sale and the unit is not delivered by the date as mentioned in the sale agreement.

In such circumstances, the allottee is invested with the right to claim the refund along with the interest rate tied upon the state in which you are residing. The violation of which the allottee may file a complaint under Section 19(5) of the Act.

Information for plans and schedules

Section 19(1) provides for the right to obtain information concerning the real estate project one will be investing in. This right has been conferred upon every allottee irrespective of whether he is going to invest or not, to ensure transparency to land title, approval of sanctioned maps, etc.

Moreover, the allottee under Section 19(2) & (3) is entitled to know schedule-wise completion of the project and claim the possession of plots or any other kind of real estate property, as the case may be.

Any other violation

If there is any contravention under the given Act or there is any violation of the given agreement or its terms and conditions, then an allottee can seek compensation under Section 18(3) for all other violations under the substantive provision of the act or any other rules and regulations made under the act the main act.

With respect to authority

Compliance of order of an authority

Any order passed by the competent authority under Section 63 of the Act whereby if the promoter or the developer of the real estate project fails to comply with the orders and direction of the authority concerned, then the penalty can be levied upon the promoter following each day of default.

Generally in circumstances like these, the penalty for non-compliance of order goes up to 5% of the total cost of the projects. In case the developer fails to pay such an amount, the recovery letter is issued against them through the respective District Magistrate.

Compliance of order of the appellate tribunal

In a situation where disregard has been made of the orders of the appellate tribunal by the promoter (Section 64), they shall be liable for penalty along with imprisonment for a term which may extend up to three years and fine on a daily basis of default.

Here, the penalty for non-compliance of order cumulatively extends up to 10% of the estimated cost of a real estate project.

Execution

Most stakeholders fail to notice that RERA also provides for execution proceedings. It’s an Act that provides exhaustive remedies. The act deals with the execution proceedings under Section 40 according to which if a promoter and an allottee or a real estate agent, as the case may be, fails to pay interest, compensation or penalty that has been imposed upon him, then the same shall be recoverable from such defaulter.

The amount that has to be recovered can be recovered as areas of land revenue according to the concerned state land revenue laws. In the proceedings, the concerned state RERA verifies the order first and the evidence that has been brought before it and thereafter issues a Recovery Certificate (RC) which is then sent to the jurisdictional district collector, revenue collector or the magistrate and is thereafter forwarded to the Jurisdictional Tehsildar or the related officer as the case may be.

Others

Once the order is obtained from either the authorities or the educating officer, the aggrieved can also knock on the doors of the National Company Law Tribunal (NCLT). There are generally threshold criteria of 10% for the allottees to move to the NCLT, however, persons are not hit by this threshold criteria and can pursue the matter individually.

Moreover, one can approach the High Court through the writ of mandamus in which the district magistrate or any related officer can be made a party. Now as far as consumer forums are concerned, they are strictly limited to consumers and the builder or investors cannot approach them. Moreover, the execution proceedings in such forums are much lengthier and messier.

Pre-EMI scheme

It’s the monthly interest that the buyer needs to pay on the amount received from the bank. It’s a kind of subvention scheme for the payment of home loans whereby all the Pre-EMI and interest are borne by the builder till the possession or for a definite period, as the case may be. It is formed based on the Tripartite Agreement that is the legal document among three stakeholders, i.e., the buyer, builder and the housing bank which is further attached to your sale deed. Few observations hereby can be noted under the Pre-EMI scheme:

1. It’s not concerned with the principal portion and rather include the interest accordingly;

2. Pre- EMI keeps increasing since the interest payable on the principal drawn, increases accordingly;

3. It’s possible only in the cases of under construction purchases.

Are there any extra charges for the subvention scheme?

As there are no freebies and builders work for profit only, so if they are paying Pre-EMI on your behalf then definitely they have to be reimbursed with an extra premium charge which is usually based upon a percentage of the flat cost.

Buy Back Scheme

It’s a scheme whereby the developer or the builder assures the allottee that they will buy back the property within a stipulated time frame at a higher amount price if the allottee would not take possession after that guaranteed time. This puts faith in the investor that his investment is safe and value will likely increase in future. Under this, the allottee is invested with the right to determine whether he will retain the property or sell it to the builder at the predetermined price.

Assured Return Scheme

It’s a de rigueur topic in the market when it comes to commercial real estate projects to attract prospective buyers. The builder further demands an upfront payment by way of consideration and promises for return for the said payment made by the investor until the delivery of possession.

However “Assured returns schemes seem risky” as there may be a risk of losing both your principal and interest. However, buyers who are stuck in such schemes can either approach NCLT or go to the Civil Courts and file a recovery suit.

Miscellaneous Provision

Section 79 canvasses the bar of jurisdiction, which says that no civil court shall have jurisdiction to entertain any suit or proceeding under this Act.

For the trial of cognizance, there has to be a complaint either by the authority or any officer of authority duly authorised for it. Punishment of imprisonment under this act is to be awarded by the magistrate and for that purpose, any court inferior to that of metropolitan magistrate or judicial magistrate of the first class shall try any offence punishable under this Act.

Alternatives for appeal?

In a situation of homebuyers where they have grievances, there are 3 options available for them to appeal, i.e Insolvency & Bankruptcy Code 2016, Consumer Protection Act 2019 and the Real Estate (Regulation and Development) Act, 2016. It’s said that for each cause of action one can pursue it only under one code as bestowed under the ‘doctrine of election’, where the litigant elects one option from multiple options and can’t indulge in any kind of mischief.

However, the RERA in Section 88 articulates that added laws can be applied to RERA like Contract Act, Transfer of Property Act, etc., but not the one which is inconsistent and in derogation. The RERA also says in Section 79 about courts. Just like other laws which are not allowed in RERA, other courts are also barred to entertain any matter which the authority or tribunal under RERA is authorised to perpetrate. Only the RERA court or the RERA authority can summon as under the provisions of the Act, other courts are not allowed to interfere in RERA related matters, famously called Ouster of the jurisdiction of civil courts.

Conclusion

As an overall conclusion, I would say that RERA undoubtedly has turned out to be successful in achieving milestone changes in the real estate sector in India such as increasing joint ventures or timely delivery of projects, etc. Its introduction is expected to bring greater accountability towards consumers and transparency to the sector and protect the parties from any kind of mischief. The act has been designed majorly for protecting the interest of the allottees and gliding by the promoter’s rights, which in turn may jeopardize the real estate sector. Moreover, the provisions of the act will Ex facie be intra vires and will have a retroactive effect rather than retrospective operation.

References

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Statutes that impact your payroll process

By

Shoronya Banerjee

-

October 21, 2021

0

This article is written by Rahul Sharma, pursuing a Certificate Course in Labour, Employment and Industrial Laws for HR Managers from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

When it comes to building a superior employee experience, effective Human Resource (HR) operations are the key to delivering this mandate, and payroll services are something that has become a hygiene factor for the top organizations. In this article, we would first briefly touch upon a state-of-the-art payroll process to understand what a good process looks like. Next, we would break down a typical salary structure to evaluate the impact of various statutes on different pay components.

Payroll process

The starting point of the payroll process is anchored in the HR organisation, usually, a payroll specialist, who maintains the master data of employees (new, active, and exit). As a part of the onboarding process, the bank account details of the new employee are collected, and a salary break-up is shared along with the employment contract. Every payroll cycle has a cut-off date for accepting the additions and deductions for a given employee. Additions could be for shift allowances, incentives, joining bonus, travel settlement pay, reimbursements, etc., and deductions can be made for fines, insurance, salary advance, travel settlement recovery, leave without pay, contributions, etc. The payroll specialist validates these inputs and prepares the salary master file which is shared with the payroll vendor. This salary master sheet has four basic elements to it, namely employee master (employee name, date of joining, email, Provident Fund (PF) option, Permanent Account Number (PAN), Bank account details), a financial master (contains the cost of company structure and details of the components), resigned and salary hold (contains the list of people in notice period and their last working date), one-time payment/deduction (contains the earnings and deductions).

The payroll vendor starts the next set of activities when they receive inputs from the payroll specialist. A professional vendor would have a system for actual payroll processing when the received data is fed into it. The system calculates the payable amount (in-hand salary) based on the tax declarations/actual submitted to the vendor. The output file is the result of this activity, and there are two files that are shared with payroll specialists to review and approve – salary register, active and left, and bank transfer files. The finance team uses the bank transfer file to make the payments to the employees.

Once the salaries are disbursed, the payroll vendor shares the statutory reports. All statutory deductions like Employees Provident Fund (EPF), Tax Deduction at Source (TDS), Professional Tax (PT) are deducted at the time of processing payroll and the reports will be shared with the finance team. The finance team then remits the amount to the respective government agencies. The frequency can vary depending on the type of the dues. In most cases, payment of dues is made via challans. After all, dues are paid, a return/report is filed. e.g. for filing PF return, ECR(Electronic Challan cum Return) is generated and filed.

Individual records of various statutory deductions are maintained which will later be used to issue form-16 for employees for filing tax returns. In the below table, you can find the current rates for these contributions and tax deductions.

Present rates of contributions – PF

By	Contribution Accounts
EPF	EPS	EDLI
Employee	12/ 10%	0	0
Employer	Difference of Employee Share (EE) share and Pension Contribution	8.33%	0.50%

Diagram, Teams

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Regulation of salary, wages, and bonus

The labour legislation governing the payment of salaries and remuneration are:

The Minimum Wages Act, 1948.
The Payment of Wages Act, 1936.
The Payment of Bonus Act, 1965.

Definition of wages

Earlier the HR community had confusions about the definition of the wages between different acts as above. The definition of wage as per Section 2(y) of the new Wage Code states that:

The new definition of ‘wages’ –

a. Includes basic pay, dearness allowance and retaining allowance, and

b. Excludes certain pay components such as house rent allowance, bonus excluded from the terms of employment, any retrenchment compensation or other retirement benefit, or ex-gratia payment made by an employer.

Critical new elements in the definition

a. The pay components that are excluded from the definition of wages will be ‘deemed’ to form part of wages where these pay components exceed 50% of all the remuneration paid to an employee, and

b. For remuneration paid in kind, up to 15% of such remuneration in kind will be deemed to form part of the wages.

The new deadline to clear full and final settlements

Deadline to pay full and final settlements: According to Section 17(2) of the new Wage Code, the full and final settlement of wages to employees who are removed, dismissed, retrenched, or resign from service must be paid within two working days of their ceasing employment with employer i.e., last working day.

Time

As per the Payment of Wages Act, the time for payment of wages is before the expiry of the 7^th day after the last day of the wage period, where there are less than 1000 workers employed and in other cases on the 10^th day after the last day of the wage period. For people whose employment is terminated, within two days after termination.

Fines

The total amount of fine which may be imposed in any one wage period on any employed person shall not exceed an amount equal to 3% of the wages payable to him in respect of that wage period.

Maintenance of registers and records

Each applicable establishment must maintain the register of wages, deductions, etc. for all employees. The key point to note on applicability: Payment of Wages Act applies to industrial or other establishments; it does not include offices or other places where services are rendered. Similarly, the industrial disputes act applies to ‘workmen’ in an ‘industry’, and those who work in a shop or office may not qualify as ‘workmen’, and such setups may not qualify as ‘industry’. However, the Shops and Establishments Act in different states have ensured to mirror certain provisions of the above acts to ensure uniform compliance. For example, Telangana Shops and Establishment Act, has listed the provisions related to wages and terminal benefits in chapter VIII.

Salary components and applicable Acts

A typical salary structure has different components and:

Salary Component	Brief	Act
Basic Salary	Basic salary, also called base salary, is the amount of money a salaried employee regularly earns before any additions or deductions are applied to their earnings.	Section 17 of The Minimum Wages Act 1948
House Rent Allowance	House rent allowance is part of the salary provided by the employer for the expenses incurred towards rented accommodation.	Section 10(13A) of the Income Tax Act (IT Act)
Sodexo Meal Voucher	A prepaid instrument was issued to purchase food and non-alcoholic beverages.	Section 17 (2)(viii) Rule 3 (7) (iii) of IT Act
Children Education Allowance	Allowance towards children’s education.	Section 10(14) of the IT Act
Hostel Expenditure Allowance	This allowance is granted to an employee to meet the hostel expenditure on his child.	Section 10(14) of IT Act
Telephone & Mobile Allowance	Landline including broadband and mobile phone	Rule 3(7)(ix) of the IT Act
Professional Pursuit Allowance	Any amount spent & reimbursement claimed by employees for academic research or other professional pursuits including training, short-term/online course, etc.	Section 10(14) of the IT Act
Provident Fund (Company Contribution)	A provident fund is a government-managed, mandatory retirement savings scheme	Section 17(2)(vii) of the IT Act
Car Running and maintenance expense	Running and maintenance charges” of motor cars and other vehicles. Includes expenses incurred on petrol/diesel.	17(2)(viii) Rule 3(2) of IT Act
Driver Allowance	Driver salary perquisite	17(2)(viii) Rule 3(2) of IT Act
Special Allowance	Special allowance is a fixed amount that is given over and above the basic salary
Incentive	Performance-based incentive refers to compensation paid out to employees that have performed above and beyond their job requirements
Gratuity	Gratuity is the amount that an employee receives as appreciation for the cumulative service offered to him/her upon leaving the job	Paid as per Gratuity Act 1972
Professional Tax	Profession tax is the tax levied and collected by the state governments in India. It is a direct tax.	Section 16 (iii) of IT Act
Leave travel Allowance	LTA is the sum paid by the organization to compensate for domestic travel expenses of employees	Section 10(5) of IT Act
NPS	National Pension Scheme (NPS) India is a voluntary and long-term investment plan for retirement	Section 80C and Section 80CCD of the IT Act

Conclusion

In conclusion, your payroll must be well described with clear segregation of duties to be able to deliver an experience that is uniform, compliant and predictive. There are key legislations that are enacted to regulate salaries and remuneration but also the new wage code bill aims to consolidate and simplify this area by giving a concise definition of wages. However, there are still some open questions on how to work with this new definition of wage.

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Overview of BOT (Build-Operate-Transfer) contracts

By

Shoronya Banerjee

-

October 21, 2021

0

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

Introduction

Ever thought about how the public infrastructures and service models are constructed or what is the process used to build them? These projects require huge financial planning and resources. We can look into the construction of the Mumbai Metro project. Mumbai Metro project was brought into effect through a contractual relation between the Mumbai Metropolitan Region Development Authority (MMRDA), Reliance Energy Limited, and Veolia Transport. This is a contract between government authority (MMRDA) and private entities (Reliance Energy Limited and Veolia Transport). These types of contracts go by the name of concession contracts wherein the government or any local government body authority grants the private entities certain rights to design, build, operate or own for a limited period of time and transfer the ownership right at the end of the contract period.

The aim of this article is to provide an overview of concession agreements, public-private partnerships, and BOT contracts; How this contract works, the risk factors involved, and the advantages and the disadvantages.

What is a concession agreement?

A concession agreement is a contract between government authorities and private entities wherein the government grants a concession (which is a license) to private parties providing exclusive rights to execute and implement the projects or services which are particularly held by the government under the law. In return for such rights, the government allocates the risk to the concessionaire. The concession is for a limited period with setting forth terms and conditions. The government authority will be responsible during this period to monitor the project and the concessionaire’s performance.

Such concession agreements are commonly entered to execute and develop public infrastructure projects or services under the public-private partnership (PPP) model.

What is a public-private partnership?

Public-Private Partnership refers to a long-term contract for a period of 20-30 years between the government or government-owned entity and private entities for the purpose of building projects, assets, or services for public benefit. Under these contracts, the capabilities of the public and private sectors are combined to get optimal results. Here, the private sector undertakes the responsibilities of financing, designing, building, and operating projects like public transportation networks, parks, museums, etc., and the public entity shares the risk involved in the project with the private entity. To understand PPP in nutshell, PPP is an alternative method to undertake capital-intensive infrastructural projects that are financed by the private sector. This can be an upgrade, renewal of existing infrastructure, or designing and building entirely new infrastructure. There are various types of PPP contracts depending upon what kind of project it is, involvement of risk factors, the requirement of finance, and desired result. These are –

BOT (Build-Operate-Transfer)

These contracts are developed to serve a particular purpose as they are formed to construct a particular asset rather than an entire network (you could say toll road). Herein, the private sector is given the freedom to construct and the public sector will bear the equity risk.

BOOT (Build-Own-Operate-Transfer)

Under this model, the private entity after building the project does not transfer it to the government, instead, they build and own the facility for a certain period of duration mentioned in the contract with the sole purpose of recovering the investment cost involved in construction during the operational phase. The project or facility at the end of the contract is handed back to the government. This model is usually undertaken to build schools, hospitals, ports, etc. wherein the financial requirement is huge.

BOO (Build-Own-Operate)

This model is very similar to the above BOT model with the exception that the project or a facility built and owned is not subsequently transferred to the government. These types of models are eligible for tax exemption and are usually used to build a water treatment facility or power plant projects.

DB (Design-Build)

Under this model, the contract is provided to a particular private entity instead of a consortium for performance specification which in turn shall save time, money and provide a performance guarantee at a better rate.

DBF (Design-Build-Finance)

Under this model, as the name suggests, the private entity will construct a facility and finance the capital cost involved for the construction period only. Of all these models, BOT contracts are most commonly used while developing infrastructural facilities or services involving huge capital investment and equivalent risk factors as well.

What is a BOT contract?

BOT contract is a model used to finance projects that require large financial investment, typically infrastructure projects. Under the BOT scheme or contract, one or more private entities are brought together which would later form a consortium (this consortium consists of financers, architects, developers, and engineers). These private entities receive concessions (it is a license provided by the government authorities with a purpose of execution, implementation, and construction of public utility infrastructures or services which are exclusively under the law under the government domain) from mostly government authority or any local government body to undertake, finance, design, build and operate a facility for a period stated under the concession contract. Herein, a public administration delegates a license to a private entity to design and construct the facility as well as operate and maintain the facility for a period of contract.

How do BOT contracts work?

Under such contracts, a government entity grants a concession to design, build and operate the facility for an agreed time period (25-30 years) with the aim of recouping the investment amount and then transferring the said facility to the government to control, on the expiration of the contract period.

BOT contracts are usually the projects with large-scale financial requirements, greenfield infrastructure projects (new projects), or brownfield infrastructure projects (existing projects) that are otherwise financed by the government. Private entities have the responsibility to raise and bring in the finance required for the facility or project and to operate and maintain the facility as well as retain the revenues generated during the operational phase. The facility will be transferred to the government at the end of the concession agreement. The government pays the private entities a fee which can be a fixed sum or milestone payments or a combination of both which shall be recovered by the entities.

In a BOT contract, the project company or operator generally obtains its revenues through a fee charged to the utility/government rather than tariffs charged to consumers. In this case, ownership of the facility rests with the government.

These types of contracts are formed for a special purpose particularly for a given project and the government usually dives in for such contracts for two main reasons; first, the risk factor involved in the project is shared with the concessionaire and second, finances are raised by the private entities. The presence of these elements makes the BOT scheme preferable by government bodies.

Who are the parties involved in BOT contracts?

Government agency

The government is the initiator of the infrastructure project and decides if the BOT model is appropriate to meet its needs taking into account other economic and political factors as well.

Private entities/concessionaire

They come together to form a special purpose entity and contribute towards the financial requirement of the project.

Banks

The bank will finance the project on a ‘non-recourse’ basis which means it has recourse to the special purpose entity and all its assets for the repayment of the debt.

Other parties to the contract

The special purpose entity will subcontract to perform its obligation under the contract such as the supply of raw materials and other resources necessary to a third party.

Benefits and pitfalls of BOT contract

Benefits

It reduces public sector borrowings and direct spending since the project is financed by the private sector to provide capital requirement.
By engaging private entities who are experts in their respective fields, the government gets the benefit to use best management skills in the construction, operation and maintenance of the project.
It saves a considerable amount of time and accelerates the development of the project.
Participation of private entities ensures efficiency and quality standards by using the best resources and equipment.
It allocates the project risk and burden that would otherwise would have to be borne by the government to the private entities.
These projects are conducted through bidding criteria and thus completed at lowest cost possible.

Pitfalls

Transaction costs involved in the project are high around 5 to 10 percent of total project cost.
These kinds of contracts are not suitable for smaller projects.
Risk factor involved under the project is high and the success of the project is relative to raising of required finance.
BOT contracts involve multiple entities to finance it and the legal and institutional framework applied is complicated.
The passing procedure of BOT contracts may take time to ensure complete benefits are realized.

Essential clauses under BOT contract

Definition clause

This clause incorporates the definition of certain specific terms used under the agreement

sample clause;

For the purpose of this agreement, the following words and expressions shall, unless repugnant to the context and meaning thereof, have the meaning hereinafter respectively assigned to them:

‘Competent Authority” includes any court of competent jurisdiction and any local, national or supranational agency, inspectorate, minister, ministry, the official or public or statutory person (whether autonomous or not) in or of, or of the government of, [country];

“Concession” means the rights and obligations acquired and assumed by the Concessionaire under this agreement;

Scope of the project

This clause contains all the necessary, required and ancillary work to be done by the contractor under the agreement. Scope of work contains designing, building, financing, operating, and maintaining the facility and other set forth obligations under the agreement.

Sample clause

The concessionaire shall have the right and obligation at its cost, with due care and diligence and in accordance with good engineering and operating practices, to design, build, own, operate, finance, and maintain the project subject to and in accordance with the provisions of this agreement.

Grant of concession

This clause contains the power of the government authority to grant concessions to the contractor to finance, design, build and operate the facility during the concession period.

Sample clause

The concerned government authority hereby grants the contractor the concession with an exclusive right to design, implement, finance, build and operate the facility during the concession period and the contractor hereby accepts the rights granted through concession subject to and in accordance with terms and conditions set forth under the agreement.

Arrangement with third parties

This clause states the arrangements entered into by the contractor with the third parties such as workers, suppliers, and other small contractors and local bodies for effective implementation of the project under the agreement.

Sample clause

The contractor shall be entitled to enter into agreements with the third parties relating to the supply of materials and other resources, manpower required to build the project, and other resources necessary for the implementation of the project provided the arrangement is not in violation of any statutory requirements and is not in breach of any provisions and obligations mentioned under the agreement.

Statutory requirements and consents

This clause contains all the necessary and mandatory permissions, approvals and consents to be obtained from the concerned authority and other condition precedents that are required to be adhered to by the contractor subject to terms and conditions of the agreement.

Sample clause

Without prejudice and subject to the provisions mentioned under this agreement, the contractor shall pay for its own costs and expenses and carry out all and any necessary obligations under this agreement so as to comply at all times with all statutory requirements and required consents (including those introduced after the date of this agreement).

Time for completion

This clause mentions the time period by which the project undertaken by the contractor shall be completed subject to terms and conditions of the agreement.

Sample clause

The contractor shall execute the project that it shall be complete in accordance with the concession specification and shall pass the performance tests within the time for completion.

Conclusion

As we have seen, BOT contracts are contracts licensed by the government authorities to private entities to build and operate infrastructure projects and infrastructure projects have a vital role to play in the economic development and upliftment of the country. These projects have high capital requirements which alone cannot be supported by the government budget. Therefore, the government introduces private entities into these projects who can bring in and raise the required finance. The Government of India is accepting the private sector participation in domestic public infrastructure development projects where the BOT scheme is preferred by both public and private sectors. The Government of India has amended several bills and rules to increase private participation, BOT projects still lack a defined legal framework.

References

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