An overview of Section 27(f) of the Tamil Nadu Government Servants (Conditions of Service) Act, 2016

By

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October 21, 2021

This article is written by Raslin Saluja, from KIIT School of Law, Bhubaneswar. This article analyses the judgment of the Supreme Court in the matter of reservation in the Tamil Nadu Government Services in relation to the scope of Section 27(f) of the Tamil Nadu Government Servants (Conditions of Service) Act, 2016

Table of Contents

Introduction

In the case of the State Of Tamil Nadu v. K.Shobana etc. (2021), the Supreme Court reiterated that the students under the reserved category who score more marks than the cut-off marks of the general category and attain merit without availing the advantage of the benefit will get appointed and adjusted against the general category based on their merit and not by virtue of being under the reserved category.

Facts of the case

The dispute relates to the appointment for the post of Post Graduate Assistants in Chemistry departments for the year 2018-2019 in Tamil Nadu, The issues prevail in the working out of the reservation system in the limited employment opportunities that are available.
A notification dated 12.06.2019 was issued by the Teacher’s Recruitment Board (appellant no. 3) for inviting online applications from eligible candidates for direct recruitment to the post of Post Graduate Assistants and Physical Education Directors, Grade-I in school education and other departments for the year 2018-2019 in Tamil Nadu. There were issues in filling up vacancies for the post of Post Graduate Assistants in Chemistry wherein the respondents were applicants.
The notification had notified 356 posts for Chemistry with a vacancy of 117 seats for Most Backward Class (MBC) and Denotified Community (DNC) candidates. Out of the 117 vacancies, there were 74 backlog vacancies and 43 current vacancies.
The respondents in the case had applied for the post and appeared for the written examination on 28.09.2019, but their names were not mentioned in the provisional selection list which was published by appellant no. 3 on 20.11.2019.
The respondents after scrutinizing pointed out that the meritorious candidates under the MBC quota who would have got selected even without the reservation were appointed in the quota for backlog vacancies under the categories of MBC/DNC without being considered for the general vacancies. This prevented the respondents from being appointed. They argued that such meritorious candidates ought to have been appointed under the general category, leaving the backlog of vacancies to be filled up by the reserved category candidates. Thus they filed a writ petition before the High Court of Madras seeking quashing of the provisional selection list and for appointment of these respondents.

Issue involved

It revolves around the interpretation of Section 27(f) of the Tamil Nadu Government Servants (Conditions of Service) Act, 2016 (hereinafter referred to as “the Act”). The last sentence of the third proviso to Section 27(f) provides “the selection of appointment for the next direct recruitment to be made “first for backlog vacancies and then the normal rotation shall be followed”. Thus the Court deals with the interpretation of the expression “first” vis-à-vis the backlog of vacancies.

Relevant legal provisions

Section 27(f) under Reservation for Appointments, reads as:

If the eligible qualified candidates from the Backward Classes, Backward Class Muslims including the MBC and DNC are not available for selection for appointment by recruitment by transfer/ promotion in the turns allotted to them, it will lapse and the selection for the vacancy will be made by the next turn in the order of rotation.

The proviso to the clause states that:

For selections taking place from 1.04.1989 by direct recruitment, there shall be a ban on the de-reservation of vacancies reserved for the candidates belonging to any of the Scheduled Castes(SC) and Scheduled Tribes(ST), MBC and DNC to be appointed by direct recruitment. However, this ban will not be applicable to the vacancies reserved for the Backward Classes (other than MBC and DNC), Backward Class Muslims and therefore, if qualified and suitable candidates belonging to these classes are not available for appointment, then their turn will lapse and vacancy will be filed by the next turn in order of rotation.

If a sufficient number of candidates from the SC, ST, MBC and DNC are not available for selection for the reserved vacancies in the first attempt then a second attempt shall be made in the same year or as early as possible before the next direct recruitment for the same communities. If the still required number of candidates are not available then those unfilled vacancies shall remain unfilled until the next recruitment year treating them as backlog vacancies.

In the subsequent year, when direct recruitment is made for the vacancies of that year under the current vacancies, the “backlog” vacancies shall also be announced for direct recruitment, keeping the vacancies of the particular recruitment year, as two distinct groups, the current year vacancies and the “backlog” vacancies as illustrated in Schedule-IX. The backlog vacancy shall be filled first followed by a normal rotation.

Contentions by the appellant

The appellants argue that:

The clear provisions and the expression used in the section must be given effect to its natural meaning, which in turn, would imply that on the basis of merit the backlog of vacancies had to be first filled in.
After those vacancies were filled, the appointment had to be made on merit in the general turn to be recruited. Thus, the candidates who qualified on merit would be adjusted against those seats and the remaining ones would be adjusted against the reserved seats.
The vested right can only be for 69% reservation. There was no reduction in reservation below the statutory limit, and that coming in the open category did not mean that they are not entitled to benefit received to the reserved category.
They relied on Hardeep Singh v. State of Punjab & Ors. (2014) with regard to the interpretation wherein it held that it was a settled principle of law that if an interpretation leads to a conclusion that the word used by the legislature is redundant, it should be avoided because the presumption is that legislature has deliberately and consciously used the word for the purpose of the Act. The legal maxim “a verbis legis non est recedendum” which means, “from the words of the law, there must be no departure” has to be considered. There can be no assumption that a mistake has been committed by the legislature when the language of the statute was plain and ambiguous.
The counsel for intervenors too submitted their contention in addition to the appellant’s submission. It was made in the context of Article 16(4B) of the Constitution of India for the benefit of the other reserved categories. Thus, if respondents’ plea was accepted then persons less meritorious in that category would be entitled to seniority.

Contentions by the respondents

The correct methodology was that first, the list had to be drawn up on the basis of merit, and then only the issue of application of reservation would arise.
That first the meritorious candidates will take their place in the general merit list with no reservation, then reservation would apply whereby the backlog vacancies would be filled first followed by the current year vacancies.
That Section 27 of the Act has nothing to do with the selection based on merit, and only applies to the mode of reservation post that stage. For the two distinct groups, two lists are required to be made as provided for the reserved vacancies, which would be first, a backlog list and then, secondly, the current list. This has always been the consistent and current practice and disputes only arose in Chemistry that would not make any difference.
They referred to the case of Rajesh Kumar Daria v. Rajasthan Public Service Commission and Ors (2007), to support the principle of how the persons in the merit list, irrespective of their community, would not affect the reservation as they would be adjusted against the general candidates.
They also referred to a judgment specifically referring to Tamil Nadu in K.R. Shanthi v. Secretary to Government, Education Department, Chennai & Anr (20.12). Herein it was held that candidates selected on merit under open quota should not be adjusted against reserved vacancy and the inter se seniority of candidates selected and appointed in that selection should be only on merit and not on the basis of roster points. The judgment also set forth the method of selection for the vacancies in different categories.
Furthermore, they referred to the recent judgment of the Supreme Court in Saurav Yadav and Ors. vs. State of Uttar Pradesh & Ors. (2020), which set forth the steps for implementation of the list.

Analysis

The Court observed that the section reflects the idea that vacancies for reserved categories will not lapse in case there is an inadequate number of candidates. Rather, these vacancies will be carried forward for one year instead of being filled with candidates from the general category. Later, if in the subsequent year, it is still not filled then those vacancies can be passed to other categories.

The Court said that there has been a wrong reading of the provisions of Section 27 of the Act. Section 27(f) merely states that if the needed number of candidates from the communities which fall under reservation is not available, then, the vacancies which could not be filled in the current year should be treated as backlog vacancies. In the next recruitment, the backlog and the current vacancies for the different communities will be separately announced. First, the backlog vacancies will be filled by MBC/DNC category candidates through direct recruitment and then the current vacancies will be accommodated. This was also observed by the division bench in the same terms who agreed with the interpretation of Section 27 further being of the opinion that the proviso which contains the word “first” does not have any relation to the offer and placement of such reserved category candidates, including, MBC who attain their position by way of merit in the open category/General Turn vacancies.

Judgment

The Court agreed with the observation and findings of both the single and division bench of the Madras High Court. The Court said that the principle of reservation category candidates making it on their own through merit have to be adjusted against the general category has never been doubted in the precedents referred to herein. Therefore, Section 27(f) of the Act cannot be read in a manner apart from any other reason to negate this very principle.

That Section 27 only deals with the reservation and has no relation whatsoever with the general candidate’s list/ General Turn vacancies. Those reserved category students who have made it on their own have not sought the advantage of the reservation and therefore, Section 27 would not be applicable up to that point. It would be exercised later only after filling up the seats on merit when the reservation principle begins.

Thus, the word “first” would be applicable in that stage when the backlog vacancies have to be filled first and the current vacancies will be filled after. There is no question of carrying forwarding/ having current vacancies for the reserved categories when the general category seats are being filled.

The Court referred to the steps stated in the Saurav Yadav case, for filling the vacancies which were,

The general merit list to be first filled in;
The backlog vacancies of the particular reserved category to be thereafter filled in “first”; and
The remaining reserved vacancies for the current year to be filled thereafter.

However, the Court said such a situation might not arise in future as all the backlogs have been filled in. The performance and merit of the students will itself reflect in the list in question as to how many students attain an appointment on merit without availing the benefit of reservation. Hence, it was held that the increase in MBC/DNC candidates really does not impinge on the reservation of seats for other categories, nor does it violate any provision of the Constitution of India.

Conclusion

The three-judge bench comprising of Sanjay Kishan Kaul J, Dinesh Maheshwari J, and Hrishikesh Roy J. in consideration of the appeal filed by the state of Tamil Nadu against the judgment of the Madras High Court, reiterated that the qualified student from the reserved category who have scored more than the cut-off marks for general category students have to be adjusted against general category based on their merit and not on the availing the reservation. This judgement gives a chance to the students from the reserved categories who could not avail the benefits from that reservation was used by the other people.

References

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A gateway drug to western medicine

By

Abanti Bose

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October 20, 2021

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green-cannabis-plant-3536257 — Image source: https://bit.ly/2VZPGMd

This article is written by Aradhana Singh and Nippani Harshita. The article has been edited by Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

The usage of drugs has often been multi-dimensionally correlated with offences like organized crimes and human trafficking and health hazards like that of HIV. It is a bone of contention at both the international and national levels because of its effects on the life and socio-economic growth of the country. There is a huge resurgence of cannabis and opium in the past years, naming it the “drug-tourism”. The ongoing controversy on whether Marijuana should be legalized has been a hot debate for over a decade. The market analysis depicts that Marijuana has woven its fabrics in the advancement of sciences, medicines and pharmaceuticals.

Keeping in mind the economic background of India, it is termed as a highly productive crop and can also improve the employment status of the marginalized section of our society. The deemed ‘crop’ like any other commercialized crop grown has fiscal as well as health benefits.

From the technical and economic standpoint, the benefits of Marijuana have been undermined because of its interpretation from a social context making it unethical in the eyes of individuals.

Definitions

Let us look at the meanings defined under the Narcotic Drugs and Psychotropic Substances Act (hereinafter the Act).-

“Section 2(iii) of the Act defines cannabis(hemp) as –

(a) charas, that is, the separated resin, in whatever form, whether crude or purified, obtained from the cannabis plant and also includes concentrated preparation and resin known as hashish oil or liquid hashish;

(b) ganja, that is, the flowering or fruiting tops of the cannabis plant (excluding the seeds and leaves when not accompanied by the tops), by whatever name they may be known or designated; and

(c) any mixture, with or without any neutral material, of any of the above forms of cannabis or any drink, prepared therefrom;

[(viiia) “essential narcotic drug” means a narcotic drug notified by the Central Government for medical and scientific use;]

(xii) “medicinal cannabis”, that is, medicinal hemp, means any extract or tincture of cannabis (hemp);

(xiv) “narcotic drug” means coca leaf, cannabis (hemp), opium, poppy straw and includes all manufactured drugs;

(xv) “opium” means— (a) the coagulated juice of the opium poppy; and (b) any mixture, with or without any neutral material, of the coagulated juice of the opium poppy, but does not include any preparation containing not more than 0.2 per cent. of morphine;

(xxiii) “Psychotropic substance” means any substance, natural or synthetic, or any natural material or any salt or preparation of such substance or material included in the list of psychotropic substances specified in the Schedule;

[(xxviiia) “use”, in relation to narcotic drugs and psychotropic substances, means any kind of use except personal consumption;]”

Scientific usage of Marijuana has always been cited on many occasions but India is still not ready to accept it. A recent study by Vidhi Centre for Legal PolicyPunjab has found that Section 64A of the Act has been underutilized and the user’s land up in jail without being provided with the necessary treatment. According to the Punjab State Legislations, the Rules of Mental Healthcare Act 2017, mandates the usage of Opioid Substances Therapy and so does Sikkim. Looking at the urgent need in medical care, we must decriminalize substance consumption.

Prevailing legal structure

History of Legislation

The first enactment came in 1857 when the need was recognized by the British and the Law of Opium Act of 1857 was established, followed by another legislation with the same name in 1878. These laws did not equip themselves to tackle drug use comprehensively. The legislation did not even provide for the punishment which could stop the habitual offenders.

India and many other countries have endorsed and ratified the following three international conventions on drug-related matters

NDPS banned the production and sale of Marijuana but did not criminalize the use of leaves and seeds of Marijuana. As per some rules in the nation, the sale, purchase, possession and use of Marijuana, as well as bhang, is illegal in the state. Under Section 66(1)(b) of the Bombay Prohibition Act, the manufacturing, possession and consumption of bhang and bhang-containing substances have been criminalized in Maharashtra. On February 21, 2017, bhang was legalized in Gujarat from the list of “intoxicating drugs”. India’s approach toward narcotic drugs and psychotropic substances is enshrined in the Constitution of India, which directs the State to raise the level of nutrition and the standard of living and to improve public health.

Punishment for marijuana possession in India and other countries

As of 4^th August, 2020 over 25 countries in the globe have decriminalized drugs which include countries like Portugal, Netherland, Germany and Czech Republic. There is a stark decrease in death in the said countries. India, France, Turkey usually account for 83% of the total global Morphine rich opiate raw material in 2017.

While comparing the other nations we found out from different sources that over the decades the States have already recognized the medicinal benefits of Marijuana. Take for example Canada in 2001 they already made medicinal cannabis legal and in 2018 recreational cannabis was made legal but only the age of 18 and above could avail them.

Mexico, in 2017, legalized medical Marijuana, Chile in 2014 agreed to the legalization of cannabis for medical purposes and in 2015 it found its place in the medical stores. In Italy, possession of Marijuana is illegal but if it is for medical purposes you might just get away from the legal clutches.

Sri Lanka long back approved the use of cannabis for its traditional ayurvedic medicine preparation. In Africa, we see Rwanda as the sole legalized nation which provides the same but with a reference of a legalized practitioner.

Starting with the United States of America, there is no tax interruption for cannabis. The businessman involved must take the full imposition given by the states. The tax can be as high as 70% which is just like a penalty. Netherland has no action if legally referred. Russia penalizes even personal use and they refer to administrative detention and fine. South Africa decriminalized it long ago.

Argentina deals with confiscation of drugs, fine and they refer to the educational course for recourse. Chile has no punishment for personal use but penalizes for public supply and consumption.

The Czech Republic only has confiscation of drugs and imposition of fines. Germany has no sanction for possession by a legal threshold. Italy gives warnings, fines and then confiscation with referral to treatment but only if it is for the social supply of cannabis. Mexico after the third infarction refers to the voluntary treatment and if found legal no action is taken.

According to a worldwide survey vis-à-vis the punishments regarding possession and cultivation of cannabis. We are shedding light on the fact that the misconception of the health benefits of cannabis has been imposed by many countries. India became a party to the same based on the fact cannabis created a state of “insanity, criminality and death”. We shall discuss the impositions imposed by the Nations one by one. Coming back to our own country India, we just use Marijuana for our traditional preparation, mostly at the time of various festivals like Holi and Shivratri.

In India, possession of banned drugs (weed or Marijuana) is an offence under Section 20 of the Act. Indian hemp was criminalized for its production, transport, usage, consumption, import and export, manufacturing, cultivation etc., the only way to use it is for scientific purposes only and that is also vaguely defined under it.

Repeated offences under the same are treated exactly like the Terrorist and Disruptive Activities Prevention Act of 1987. It attracts Section 31A amounting to the death penalty but after 2014 this became optional. Bail is not provided unless security and surety are provided.

An elaborate discussion on the Act leads to focusing on a few points. The law states that only Low Tetrahydrocannabinol (hereinafter THC) content development drugs can be allowed. Section 20(b)(i) and (ii) the Act provides for the punishment of the contravention of such drugs with 10 years of imprisonment and Rs 1 Lakh fine or both depending upon the possession. The small quantity of the same carries 6 months jail which can extend up to 10 years with a fine. Section 27 of the Act later punishes a person with consumption of the drug either with Rs 10,000 and imprisonment of 6 months or both.

In a leading case, the Chandigarh High Court claimed that, according to the Act, usage of bhang is not “cannabis (hemp)” under the Statute, but it is a “cannabis plant.” Thus, it is not unlawful to eat cannabis leaves under the rule.

This makes us certain that the Indian system lacks to accept the difference between industrial and medical usage of hemp. India has always been using Indian hemp traditionally.

Burden on the system

The criminalization of drug use contradicts the life dignity enshrined under Article 20 of the Indian Constitution. It enroots the formation of illegal markets and illicit substance trading. Such sales lead to adulteration and compromise in quality which leads to deterioration of health. Therefore, an amalgamation of other substances leads to unprecedented addiction.

The number of arrests for consumption and possession of substance 7 as described in the Act increase per year. In 2018, 81,778 persons were arrested for the same. 59% of those were found in possession of substances for personal use. The judicial system is always under pressure of several pending cases and 99% of cases are heard for drugs and their related crimes.

The cases concerning the possession and consumption of drugs and their illegitimate usage have always been taken into consideration. Take for example- in the Mohanlal case, the court looked into the word ‘possession’. Firstly, it includes all such arrangements involving physical control or corpus, and second, it includes the element of animus, i.e., the mental intention which has reference to the exercise of the said control.

The number of arrests was more in the lower-income group for cannabis possession. The criminalization of cannabis does not take into consideration the negative bits of a criminal record. Despite the presence of other harmful substances, cannabis remains the centre of attraction.

Decriminalization and its benefits on the Indian economy

Constructive criticism

According to the medical sciences, the demerits of cannabinoids are overestimated and every country should respond to not only cannabis products but other harmful substances through progressive public health policies. In a bird’s eye view, cannabis remains the centre of the attraction despite the presence of other harmful substances such as.

One can educate the general public by implementing certain measures such as:

Initiating anti-drug abuse campaigns,
Ted-talks,
Creating awareness campaigns amongst the youth through seminars and skits,
Organizing a rehabilitation program for the victims,
Reducing the intake of active ingredients,
Imposing stricter taxes to restrict trade.

Effects on Indian economy

Elimination of illegal trade and associated crimes

The legalization of Marijuana will kill the black market across the country by setting up rules and regulations. The government will be given an upper hand to set up an efficient supply-chain management system to ensure that the crimes are out of the circuit.

Taxes on Marijuana will increase the government’s revenue

By legalizing and taxing Marijuana, the government will stand to earn huge amounts of revenue. The regulation will not only make the businessmen responsible but also reduce the amount of abuse as seen in the United States where the tax is 70% without subsidiaries allowed to them.

It will create job opportunities

The unemployment rate can be reduced by widening employment opportunities through its decriminalization.

Better state of living for the locals

The recent development project on CBD found in cannabis in Central Institute of Medicinal and Aromatic Plant in Uttar Pradesh’s Lucknow and Uttrakhand’s Pantnagar have started the research on cannabinoids and their usage with the help of the central Government. In states like Himachal Pradesh and Tamil Nadu, where cannabis plants grow, Marijuana is the only source of income for many locals. However, being a banned substance, the farmers are forced to sell it at a very cheap price to the drug dealers and they face additional pressure from the police as well, who are paid to destroy the cannabis plantations.

Supply of good quality Marijuana

Legalization will improve the quality of drugs sold to the users because the government will regulate the consumption, production and sale of the drug.

Extension in medicinal sciences and pharmaceuticals

Use of marijuana for medicinal and recreational purposes

How can we treat a world where people are suffering from debilitating health conditions, neurological diseases, cancer, other chronic disorders? CBD provides a grassroots solution and helps with contemporary treatments with scientific beliefs. Most books about ‘Marijuana and Medicine’ attempt to endorse the views of advocates and opponents. The authors are suggesting the same.

Medicinal benefits

Pain management

The cannabinoids in Marijuana may reduce pain by altering pain perception pathways in the brain. This may be helpful to treat conditions that cause chronic pain, such as:

Arthritis,
Fibromyalgia,
Endometriosis,
Migraine.

It may also minimize cancer treatment side effects, like loss of appetite. In some instances, medical Marijuana is reported to help replace the long-term use of nonsteroidal anti-inflammatory drugs (NSAIDs) like ibuprofen, which can have negative side effects.

Reduced inflammation

CBD in Marijuana is thought to help reduce inflammation. Decreasing inflammation in the body can also improve overall health.

In theory, this may benefit inflammatory conditions, such as:

Crohn’s disease,
Irritable bowel syndrome,
Rheumatoid arthritis.

Neurological and mental disorders

Due to its effects on the limbic system, doctors sometimes prescribe Marijuana to treat the following neurological and mental health conditions:

Anxiety,
Epilepsy,
Multiple sclerosis,
Parkinson’s disease,
Post-traumatic stress disorder (PTSD),
Tourette syndrome.

Sleep management

The relaxing effects of Marijuana may help improve sleep disorders, such as insomnia. And improved sleep may also occur when pain is reduced from Marijuana usage.

Cancer treatment

Clinical studies indicate that Marijuana helps treat several cancerous symptoms simultaneously.

These include:

Quelling nausea,
Suppressing vomiting,
Increase in appetite,
Relieving pain,
Soothing anxiety.

Experimental pieces of evidence suggest that Marijuana can help cure these above-stated symptoms. THC, a substance found in cannabinoids, has been used to treat cancer patients for decades. Therefore, one can reduce the content of THC and increase the CBD in the medicines prescribed.

Drug trafficking

Illegal channelization of drug trafficking comprises production, sale, consumption and possession which are subjected to drug prohibition laws. The members of the United Nations Office on Drug and Crime have been monitoring and analysing the drug market continuously to understand the sphere of dynamics.

Existing scenario

Causes of drug abuse in India

Geographical location

A major factor making India vulnerable to drug trafficking and consequent drug abuse is its geographical location. It lies close to the major opium-producing regions of South West and South East Asia is known as the ‘Golden Crescent’ and the ‘Golden Triangle’, respectively. It makes India vulnerable to transit, trafficking and consumption of Opium derivatives in various forms along the known trafficking routes.

Easy availability

Cheap and easy availability due to cross-border smuggling of drugs is a major reason for increasing drug abuse in India.

Risk factors contributing to drug abuse

Unstable home environment; poor relationship with family members behavioural problems combined with poor parenting, depression, stress, peer pressure: Use and availability of drugs from peers.

Role of media

The glorification of drug abuse in media such as in series and movies- Popular media romanticizing drug use/abuse largely influences adolescents.

Strategies to combat drug trafficking

Implementation of the following strategies can help curb the problem to a major extent ensuring the supply of medicinal Marijuana through government-approved channels:

Tie-ups with government-approved hospitals, pharma and trauma centres for usage and supply of government-approved medicinal drugs.
Setting up government-approved medicinal drugs growing grounds.
Creating an efficient SCM system to ensure that drug dealers and drug addicts are kept out of the circle (Verification and stock taking at every location).
Increasing the CBD ratio concerning THC ratio.
Production of more CBD Oil.
The sale of CBD as an addiction should not be permissible.
Identifying and shutting down illegal online pharma.
Obtain licenses for time-bound production (i.e., to supply more only after receiving a written memo from the entities we work with).
Introducing a new national seal (approved by medicinal dept of Indian govt) for prescriptions stating the use of any drugs mentioned in the NDPS Act.
Computer-generated OTP by govt at the time of delivery and immediate entries in the log for stocktaking.

Global market system

As per the report, published by Grand View Research, INC. The global legal Marijuana market size is expected to hit a mark of USD 73.6 billion by 2027. During this period, the CAGR (Compound annual growth rate) is expected to surge up to 18.1%. Based on the report published, it has been concluded that the medicinal Marijuana sector will be dominating the marketplace by holding a chief revenue share.

Figure 1: Market Integrated Share.

What makes them run in the race of evolution drivers?

It has been found that there is an increase in the application of Marijuana for a myriad of medical conditions and symptoms with a growing demand for medical marijuana legalization in several countries. There is a stark rise in the number of R&D and clinical trial activities.
A lot of countries across the globe are legalizing the use of Marijuana. It is believed that legalization could help restrain illegal substance use thereby helping people to reap its medicinal benefits. Many countries have legalized the usage of cannabis for medicinal purposes such as Australia, Canada, Chile, Colombia, Germany, Greece.

The Global Cannabis Market is an extremely fragmented market with local and regional players occupying a major share in the market. In the cannabis market, companies are very active and are constantly involved in acquiring shares and developing new products to attract a larger portion of consumers toward their products. For instance, in January 2019, Canopy Growth Expanded Beverage Portfolio with the launch of the first CBD-Infused Beverage Line Quatre.

The high-income potential of this crop is driven by its genomic and agronomic factors. The cannabis market will experience a positive curve as many countries are moving towards the path of complete or partial recognition of its convention.

Conclusion

A study of innumerable international laws and related research papers suggest that the decriminalization of Cannabis would be beneficial for India. One needs to exterminate the fear of labelling Marijuana as ‘the grass-way to harder drugs”.

It was suggested by some medical practitioners that advising of opioid-related medicines make the infant and teenager more addictive to them because the Emergency Rooms in hospitals prescribe for the smallest of the accident like that of a fracture. The medical board must look into the same before suggesting that medical Marijuana may make people addicted to it.

Readings of ancient manuscripts show that Marijuana has been a part of Indian culture for over five millennia, so why is the general public still in a state of denial? As part of their research, the authors conducted an independent survey wherein they collected data from samples and asked people their view on legalizing Marijuana.

The data revealed the following –

Figure 2: Pie Chart of the independent survey taken.

This graph suggests the results of a survey the authors conducted in which people over the age of 18 were asked about their opinion on the legalization of Marijuana.

From the pie chart it is clear that the majority of the participants of the considered age (20-50 years of age) i.e., 55.2% prefer the legal use of Marijuana.

The validation of marijuana can facilitate the supervision of drug wars and other unsupervised activities using substances as enshrined in the Act by setting up government-approved channels for its circulation and usage. Regulations made in the end will make responding to the people who utilize it for their legal procedure, this would not endorse but it will reduce the threat of abuse.

In conclusion, a resolution to use Marijuana for medical purposes is greatly manifested and are well known but undermined heavily, it is clear that the many participants that see Marijuana as a strong lead in the future of medicine, thus making the author’s point clear that cannabis is the gateway to the western medicine.

References

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Cloud computing and cyber security : the interpretation of security

By

Rachit Garg

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October 20, 2021

0

This article has been written by Suchandra Mukherjee, pursuing a Diploma in Law Firm Practice: Research, Drafting, Briefing and Client Management from LawSikho. It has been edited by Zigishu Singh (Associate, LawSikho) Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

“For every lock there is someone out there, trying to pick it or break in” — David Bernstein

When we hear the term cloud computing, we wonder why it is called so.

Is it a kind of cloud-processing procedure? Or is there any connection between this operation and the clouds? Because the information being accessed is located remotely in the cloud or a virtual place, cloud computing is termed as such. Cloud service providers allow customers to store files and programs on remote servers and then access the information via the Internet. This means that the user does not need to be at a specific location to access it, allowing them to work from anywhere.

Just like a “cloud” caters to various individuals when it rains, similarly cloud computing caters to various individuals by providing services to a diverse range of people. While cloud computing definitely makes our lives easier, there also emerges a problem of cyber attacks since for any offender who hacks into a system, all the data stored is at their disposal. This can lead to several risks and issues with respect to personal information, prominent loss to a company and even damage to a country’s infrastructure. This article will highlight the need of cyber security and its relation with cloud computing.

An insight into cloud computing

Cloud computing is available in both public and private forms. Public cloud services offer their services on the internet by charging a fee. Private cloud services provide their services to a limited number of customers. These services are network systems that provide hosted services. A hybrid option is also available, which is a combination of both the public and private services.

Illustration

We have a computer in our home which is basically used for storing certain data and for playing games, but if we think of using our computer for playing high-end games or storing a large amount of data or for using software for which we have to pay a huge amount of money. then we have 3 options in our hands:

Upgrade our computer to one where all these functions will be present; or
We can buy the software for which we can get the licenses and make a new setup; or
Have high-speed internet so that we can rent a computer where all the features are present and use the power out of that computer and get our work done.

So, which one is more convenient?

Option C, right?

Cloud Computing is not just used for storage like as seen in one drive, drop box, google cloud, etc. It is much more than storage. There are several kinds of applications and softwares present in cloud computing.

For example, there’s a company where a huge numbers of employees work, so in order to store all the information, the company requires to keep a separate dedicated unit with a huge amount of in-house expense, but instead of that if the company takes all such services from a cloud service provider in exchange for a fee that is much lower as compared to the previous set up. There will be no problem when the company needs to scale up or scale down employees because in cloud computing, the amount of storage can easily be modified according to the requirement.So, all the services like online storage, database management, and the software can be easily accessed from different devices.

Important features of cloud computing

Cloud computing facilitates the supply of various services, concerning servers, databases, software, data storage, and networking over the Internet.
Cloud storage allows users to save files to a remote database and retrieve them whenever required.
Public services are available online for a price whereas private services are hosted on a network for specific clients.

Now before proceeding further into discussing cyber-crime related to cloud computing, we need to know about the various types of cloud service models.

Cloud Service Models

The 3 kinds of cloud service models are as follows: –

IaaS (Infrastructure as a service)

It is also known as ‘Hardware as a Service’. It is a computer infrastructure that is managed via the internet. The primary benefit of adopting IaaS is that it allows consumers to avoid the cost and complexity of acquiring and managing physical servers.

This provides clients with access to cloud storage, connection, and other fundamental computer tools. It simply boosts the computational capability of the consumers by enabling them to run their own devices and programmes on the cloud platform.

IaaS is used by network architects (responsible for security of networks).

The advantages of IaaS are:

Dynamic and flexible
GUI and API based access
Resources are available as a service
Automated administrative tasks
Services are highly scalable

Examples of IaaS are – Google Compute Engine (GCE), Amazon Web Services (AWS), Linode, Cisco Metacloud.

PaaS (Platform as a Service)

The PaaS cloud computing platform was designed to allow programmers to develop, test, execute, and manage applications. This grants the user access to the computer interface or operating systems of the cloud instances, as well as an underlying database, allowing them to construct or acquire software.

It provides virtual platforms and tools for developing, testing, and deploying programmes.

PaaS is used by developers (responsible for developing of software)

Advantages of a PaaS are:

It can grant access to several users while using the same development application.
Based on virtualization technology, resources can be readily scaled up or down to meet the needs of the company.
Multiple languages and frameworks are supported.
Connects to web services and databases.

Example – Google app engine, Windows Azure, Open shift

SaaS (Software as a service)

It is popularly known as ‘On demand-software’. It is basically a kind of software through which users can access the applications which are hosted by a cloud service provider by using their internet and web browser.

It offers web tools and applications to help with corporate needs.

SaaS is used by the End-users (the person who uses the product).

Advantages of SaaS are:

It is hosted by a remote server
It is managed from a central location
It is accessed using the internet
The updates are automated and users are not responsible for all the hardware and software updates.
Users can purchase the services as their usage.

For example: DropBox, Google apps, Slack, go to meetings etc.

Cloud Cyber Security

In today’s technology-operated world, it would be difficult to locate an organisation that has not implemented PaaS, IaaS or SaaS. As companies seek simpler management, utility-based payments, and lower reliance on traditional data centres and management teams, more and more IT services and applications are being used by companies.

Cloud-based cybercrime is a broad notion that includes all sorts of internet criminality committed by using the known cloud computing models including television and film piracy, and smartphone-based crime. Therefore, an efficient cloud security mechanism is required in order to secure the cloud computing systems and keep the data safe. Now the questions arise:

What are the most significant threats that we see in a cloud?
What are the technologies that an organization can deploy to ensure protection from the potential threats in the cloud?

The core threats that we see in a cloud are as follows:

Misconfiguration – When a user or team sets settings that do not guarantee proper security for their cloud data, this results in cloud misconfiguration. In the absence of effective security measures, attackers can take advantage of misconfigurations to steal cloud data. Protect yourself against cloud misconfigurations to improve your cloud protection techniques. Having the correct tools to apply security controls to cloud data, in particular, is crucial.
Unauthorized Access – According to a recent Cloud Security Spotlight Report, the biggest threat to cloud security, according to 53% of firms polled, is illegal access via the misuse of employee credentials and ineffective access restrictions. The good news, as stated in the research, is that access control can be addressed using cloud security solutions in conjunction with identity and access management regulations.
Insecure Interfaces and APIs – For developers, public cloud APIs provide up a plethora of new and useful possibilities. These interfaces add key functionalities to applications and connect them to external services. APIs that are properly integrated help all users and improve a service’s value proposition in the software market. Insecure APIs in cloud computing, on the other hand, can expose environments to malicious threats. Businesses are responsible for providing safe products, but missteps can lead to security risks.
Hijacking of accounts – Cloud account hijacking is the process by which an attacker steals or hijacks a person’s or organization’s cloud account. Cloud account hijacking is a typical strategy used in identity theft schemes in which the attacker uses stolen account information to engage in illegal or unauthorized behavior. When a cloud account is hijacked, an attacker often impersonates the account owner by using a compromised email account or other credentials.
Lack of visibility – One of the most significant cloud security concerns is a lack of visibility, which affects an organization’s ability to implement incident response plans, validate the efficacy of its security policies, and appropriately assess information about its data, services, and users. It is critical for enterprises to have a cloud usage policy in place, complete with approved means for getting approved servers up and running, deployment processes, and so on. In addition to compliance, governance, and security problems, a lack of visibility in the public cloud poses business hazards. This is necessary to determine how much visibility and control the cloud computing solution will provide.
Malicious Insiders – Malicious insiders are employees, former employees, contractors, or business associates who have lawful access to your systems and data and use that access to damage, steal, or disrupt your systems. It does not cover well-meaning employees who inadvertently jeopardize your cyber security or leak data. Recovering from a malicious insider is dependent on the extent of the harm they have caused. If they have harmed your website, introduced malware, or otherwise rendered your systems inoperable, you can implement technological solutions to those issues. However, once they’ve taken your data, there’s not much you can do to recover it. If your systems have unique logins and auditing (see information below), you or the police may be able to identify the hostile insider. However, this will not result in the recovery of the stolen data. Therefore prevention is important.
Data loss/leakage – The unlawful communication of data from within an organization to an external destination or recipient is known as data leakage. The phrase can refer to data that is transported either electronically or physically. Data leakage threats are most commonly transmitted over the web and email, but they can also be transmitted via mobile data storage devices such as optical media, USB keys, and laptops.
Data privacy/confidentiality – Data security has long been a serious concern in the field of information technology. It is particularly risky in the cloud computing environment because the data is spread across multiple locations, even the entire world. Users’ biggest concerns about cloud technology are data security and privacy protection. Data security and privacy protection are becoming increasingly important for the future growth of cloud computing technology in government, industry, and business, despite the fact that several techniques on cloud computing themes have been investigated in both academia and industry. Data security and privacy concerns apply to both hardware and software in the cloud.
Accidental exposure to credentials– Data breach assaults occur as a result of poor password management and the use of expired or third-party certificates. Methods such as one-time passwords, call authentication, and smartcard use are recommended to protect against attackers.

Remedies

MFA- Multi-Factor Authentication

Traditional username and password combinations are frequently insufficient to secure user accounts from hackers, and stolen credentials are one of the most common ways hackers get access to your online business data and apps. They can log into all of the cloud-based programs and services that you use every day to run your business once they have your user credentials. MFA may be used to secure all of your cloud users, ensuring that only authorised employees can access vital data in your on-premise or off-premise environment. MFA is one of the most basic yet effective security measures for preventing unwanted access to your cloud services.

User Access in order to improve Cloud Computing Security

Most employees do not require access to every program, piece of data, or file on your cloud infrastructure. Using an IAM (Identity and Access Management) plan to set appropriate levels of authorization guarantees that each person can only view or alter the applications or data required to execute their job.

Access control not only prevents an employee from mistakenly editing information that he or she isn’t permitted to see, but it also protects you from hackers who have stolen an employee’s credentials.

Protecting Against Departing Employees with a Comprehensive Off-boarding Process

When an employee leaves your organization, ensure that they no longer have access to your cloud storage, systems, data, client information, and intellectual property. This is an important security job that is frequently postponed for days or weeks after someone has left.

Because each employee is likely to have access to a variety of cloud apps and platforms, a systemized deprovisioning procedure is required to ensure that all access permissions for each departing employee are revoked.

Again, if you are unable to manage this internally, do not be afraid to outsource this duty to someone who is knowledgeable about how to properly set up, implement, and maintain this process.

Anti-Phishing Training for Employees

Through social engineering techniques like phishing, impersonating websites, and social media monitoring, hackers can get access to secure information by stealing employees’ login credentials.

The best approach to prevent employees from falling prey to these scams and jeopardizing your company’s critical data is to provide continual training. Phishing training is not a one-time event; it is a continuous activity that must be handled by someone within the business to be effective.

Consider Cloud-to-Cloud Back-Up Solutions

You have a very low chance of losing data due to a cloud provider’s error, but you have a very high possibility of losing data due to human error. It’s worth mentioning that most cloud providers, including Microsoft, preserve deleted data for a short time in their data centres.

However, check with your cloud provider to see what this time range is and whether there are any fees involved with data restoration. Businesses that must adhere to strict laws or are afraid about being held liable due to lost or corrupted data are increasingly turning to cloud-to-cloud backup solutions. A lot of these solutions are available on the market today that may help you safeguard your organization, so go to a trustworthy IT consultant to figure out which one is right for you.

Conclusion

We can’t stop cybercriminals from running their company using cloud services or attacking you by using cloud-hosted servers and systems (including secured servers). But to ensure that these attacks are not part of our cloud server, we can take significant efforts as mentioned above to make sure that we don’t have our IT services account when mounting these attacks.

More importantly, government training opportunities and training for law enforcement officers to improve their cloud skills and cloud knowledge (including public general education) on emerging technologies crimes, such as cloud and smart mobile phone crimes, and learning to work with the private sector or companies to reduce crime) is very essential. There is a lot of cloud security research underway to tackle your difficulties, but researchers and security engineers have failed to offer competitive solutions to the rapidly rising problems on the ground with the fast rise of this technology.

References

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

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

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Overview of the Assam Cattle Preservation Bill, 2021

By

Rachit Garg

-

October 20, 2021

0

Slaughter house — Image source - https://bit.ly/3bXqPzd

This article is written by Anubhav Anand, from Symbiosis Law School, Noida. This article talks about the Assam Cattle Preservation Bill 2021, its features, and its possible impact.

Table of Contents

Introduction

The Assam Cattle Preservation Bill, 2021 was approved by the State Cabinet and tabled by Himanta Biswa Sarma, the Chief Minister of Assam in the State Assembly during its budget session. According to Himanta Biswa Sarma, The Cattle Preservation Act, 1950 lacks sufficient legal provisions to regulate slaughter, consumption, and transportation of cattle and thus it was vitally important to enact new legislation.

This article will discuss the purpose and the features of the Assam Cattle Preservation Bill. Other states with similar laws will also be discussed in this article. This article will also focus on the controversies surrounding this bill and how the misuse of the Cow Protection Bill in Uttar Pradesh holds any meaning to it.

Purpose of the Bill

The purpose of this Bill is to protect cattle from –

Unregulated slaughtering
Unregulated consumption of meat
Illegal transportation
To check cattle smuggling to Bangladesh

If this Bill is passed, it would repeal the Cattle Preservation Act, 1950 where consumption of beef was not an offense.

Salient features of the Bill

The features of this Bill are –

No person can slaughter a cattle unless he has received a certificate in writing from the registered Veterinary Officer. No certificate will be issued unless the Veterinary Officer thinks that –

The cattle is over fourteen years of age and is not a cow.
The cattle is not a cow or calf or heifer and has become incapacitated from work or breeding due to accidental injury or deformity.

If a cattle is killed by accident, then it will not be considered as slaughter under this Act.
Transport of cattle from Assam to other states where the slaughter of cattle is not regulated by law and from one state to another through Assam is banned if there is no valid permit.
No permission is required if the cattle are to be transported for grazing, agricultural, and animal husbandry purposes. No permission is required for carrying the cattle to and from the registered animal market for the purpose of purchasing and selling such cattle within the district.
Sale, exposure for sale, and purchase of beef and beef products in any form are prohibited except at places where it’s permitted to do so by the competent authority. No permission shall be granted in areas where it is predominantly inhabited by Hindu, Jain, Sikh, and other non-beef eating communities. No permission shall be granted within a radius of five kilometers of any temple, satra, or other religious institutions belonging to the Hindu religion.
Every animal market committee of recognized animal markets must issue proof of sale and purchase of animals in the prescribed format to the purchaser and maintain a proper record for inspection by the competent authority. If any animal market fails to comply with this, their license and registration will be canceled and the person responsible for such non-compliance will be barred from entering the market and fined after they are provided with an opportunity of being heard.
A police officer not below the rank of sub-inspector or a registered veterinary officer or any other person authorized on this behalf by the state government will have the power to enter and inspect any premises within the local limits of his jurisdiction if he has reason to believe that an offense under this Act has been or is likely to be committed. The owner of the premises must allow access and answer any question asked to him. Any material or carcasses or cattle or vehicle or conveyance will be seized which have been or likely to be used in the commission of the offense, from the inspected premises and the person who is suspected of committing this offense may be detained.
After the seizure, the police officer must report such seizure without unreasonable delay before the judicial magistrate 1st class. The expenditure incurred on the maintenance of the seized cattle will be recovered from such persons as prescribed in the rules. The seized cattle may be handed over to an institution established under Section 20 of this Act or a gaushala, after a value assessment by the animal husbandry and veterinary department.
If a person contravenes any of the provisions under Sections 5, 6, and 7 of this Act shall be held guilty of an offense which is punishable with imprisonment for a term which shall not be less than 3 years and may extend to 8 years and with fine, which shall not be less than 3 lakh rupees and may extend to 5 lakh rupees or with both. The trial court may, for reasons recorded in writing, impose a lesser punishment than the minimum prescribed penalty after considering facts and circumstances of a case and after hearing the public prosecutor on the question of sentence. If a person, who after conviction of an offense under this Act, is again found to be guilty of an offense under this Act, then he will receive double punishment of what is prescribed in the Bill for his second offense.
In spite of anything contained in the Code of Criminal Procedure(CrPC), 1973, all offenses under this Act will be non-bailable and cognizable.
If a person abets or attempts to commit any offense punishable under this Act, will be punished with the punishment provided in the Act for such offenses.
All veterinary officers and other people exercising power under this Act will be deemed as public servants within the meaning of Section 21 of the Indian Penal Code, 1860 (IPC).
If a person does anything in good faith or intends to do it, then no suit, prosecution or legal proceedings shall take place against that person.
This Act will not be applicable to a cattle –

Whose slaughter has been certified by the veterinary officer and is necessary for the interest of public health.
Which is going to be slaughtered because it is suffering from a disease which according to the veterinary officer is incurable or infectious or contagious and dangerous to other cattle.
Which is going to be slaughtered on religious occasions and is not a cow or calf or heifer.
Which is being operated upon for vaccine lymph, serum, or for any research or experimental purpose at an institution that is established, recognized, or conducted by the central or state government.

An institution including gaushalas may be established to take care of cattle.

Other states with similar laws

Other than Assam, states such as Karnataka, Madhya Pradesh, Andhra Pradesh, Orissa, Uttar Pradesh, Bihar, Gujarat, Haryana, Himachal Pradesh, Maharashtra, etc. also have similar laws that protect cattle.

Madhya Pradesh

According to the Madhya Pradesh Agricultural Cattle Preservation Act, 1959,

The slaughter of agricultural cattle is prohibited unless a certificate is issued by the competent authority of the area where the cattle is to be slaughtered stating that the cattle are fit to be slaughtered.
There is a prohibition on the transport of agricultural cattle for slaughter.
The sale and purchase of cattle, which are going to be or there is reason to believe that it is going to be slaughtered, is not allowed.

Uttar Pradesh

According to the Uttar Pradesh Prevention of Cow Slaughter Act, 1955,

The slaughter of cows is prohibited.
But in the case of bulls or bullocks, if a certificate has been issued, then its slaughter may be allowed.
This Act is not applicable to cows that are suffering from any contagious or infectious disease and which are under experimentation.
After the slaughter of such cows, information should be lodged in the nearest police station within 24 hours and the carcass of the cow shall be buried or disposed of in a prescribed manner.
This Act also prohibits the sale of beef and beef products in any form except for medical purposes.

Andhra Pradesh

According to the Andhra Pradesh Prohibition of Cow Slaughter and Animal Preservation Act, 1977,

This Act prohibits the slaughter of cows or calves of she-buffalo.
The competent authority can enter and inspect premises if they have reason to believe that the offense has been committed.
If a person contravenes the provisions of this Act, he may be punished with imprisonment for a term which may extend to six months or a fine which may extend to one thousand rupees.
If a person abets or attempts to commit an offense punishable under this Act, then he will be punished with the punishment provided for such offense in this Act.

Karnataka

According to the Karnataka Prevention of Slaughter and Preservation of Cattle Ordinance, 2020,

Slaughter and sale of cattle are not allowed.
Transportation of these animals within the state and outside the state is also restricted.
If the competent authority is under the belief that an offense has been committed, the cattle and the premises used or intended to be used can be inspected and seized.

Orissa

According to the Orissa Prevention of Cow Slaughter Act, 1960,

Slaughter of cows and bulls or bullocks is not allowed but in the case of bulls or bullocks, a certificate can be issued by the competent authority which certifies that it is fit for slaughter.
This Act is not applicable to cows, bulls, or bullocks that are going under experimentation or suffering from a contagious or infectious disease.
The government may charge fees for keeping uneconomic cows in institutions established by them.
A person will be liable for a punishment of imprisonment for a term of a maximum of two years or a fine of a maximum of a thousand rupees or both if he contravenes the provisions of Section 3 of the Act.

Controversies related to the Bill

Debabrata Saikia, who is the leader of the opposition, pointed out the problems in the Bill. He said that a stone can be laid anywhere and be turned into a temple which makes the 5-kilometer rule about beef very ambiguous. He also said that this may lead to communal tension.

The opposition is not happy with this Bill and plans on pushing for amendments. Aminul Islam, who is the all India united democratic front legislator, said that this Bill was not made to protect or respect cows but rather hurt the sentiments of Muslims and create differences between communities.

Meghalaya will also face difficulties because of this Bill as this Bill would ban the transportation of cattle from the other parts of the country. Even though the Bill has not been passed yet, the entry of cattle has been banned in Assam. According to Meghalaya’s Khasi Jaintia butcher association General Secretary Generous Warlarpih, beef is becoming a rare commodity in Guwahati. There are complaints of shortage of meat by those who sell beef in Guwahati and Shillong. Meghalaya imports 90 percent of its meat from other states through Assam. This Bill will affect the supplies and cause a rise in the price of beef.

Misuse of Cow Slaughter law in UP and what it means for Assam

The High Court of Allahabad has pointed out that Uttar Pradesh’s Prevention of Cow Slaughter Act is being misused against innocent people. Recovered meat is being declared as beef without even getting it examined by the forensic laboratory and in most cases, it’s not even sent for analysis. A person who has been accused may be in jail for a crime he has not even committed. Whenever it is shown that cows have been recovered, no proper memo recovery is prepared and it remains unknown where the cows have gone after recovery.

Goshalas do not accept old cows or non-milking cows and they roam around on their own. Some owners leave their cows to eat garbage and drink sewer water after milking them. The cows on the road also become a problem for the traffic as a number of deaths have been reported due to them.

According to the Assam Cattle Preservation Bill, gaushalas will be established to take care of cattle. But it is not mentioned whether old cows or non-milking cows will be accepted or not. Thus the future of such cows in Assam is uncertain which is the same in the state of Uttar Pradesh.

Also, a proper seizure report is to be presented to the Judicial Magistrate First Class without any unreasonable delay. The seized cattle will be handed over to an institution established under Section 20 of this Act or a gaushala. Thus, there will not be any uncertainty regarding the whereabouts of the cattle after their seizure.

Conclusion

This Bill focuses on protecting cattle from illegal slaughter, transportation, and consumption of beef in Assam. The provisions mentioned in the Bill are almost similar to the provisions mentioned in cow protection bills of other states and all of them share the same goal and vision.

References

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

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

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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

All you need to know about California’s health facility breach reporting requirements

By

Abanti Bose

-

October 20, 2021

0

This article is written by Shreya Patil, pursuing Diploma in International Business Law from LawSikho. The article has been edited by Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

California is one of the most transformed jurisdictions when it comes to advancement in legal tech in accordance with changing dynamics of technology, not only, in the United States of America but amongst the major economies of the world. It is one of the few jurisdictions that have taken significant steps in advancing healthcare privacy as well as implementing required regulations to match the recent advancements.

The California Department of Public health (“CDPH”), is a regulating authority looking over health care. It has issued new regulations that specify the reporting requirements which the health care facilities must adhere to. These regulations have been implemented in California’s Health and Safety Code Section 1280.15 which requires a clinic, health facility, home health agency, or hospice licensed by the Department to prevent any unlawful or unauthorized access to, or use or disclosure of, a patient’s medical information, and to report the same to the Department – as well as to the affected patient(s). This article critically scrutinises the updated regulations of the Health & Safety Code 1280.15 that have created certain exceptions for breach reporting requirements of the patient’s confidential information.

Overview of the new regulations to the Health and Safety Code

The California Department of Public Health (“CDPH”) issued a few new regulations recently that came into effect on 1^st July 2021 which certainly complements Section 1280.15 of the “Health and Safety Code”. This general statutory law, covering areas of health and safety in the state of California, prevents any unauthorised access to, or use or disclosure of, a patient’s medical information and to report any unauthorized access, use or disclosure to the Department not more than fifteen (15) business days after such breach was detected. These regulations were ordered to be effective immediately on 1 July 2021 which certainly limits the circumstances where the instances of unauthorised access to medical information have to be reported to CDPH.

The California department of public health now requires all the health care facilities which are situated in the state of California to report any breaches of medical information. This breach needs to be reported to the California Department of Public Health within (15) fifteen days of any such data breach.

The Health Insurance Portability and Accountability Act of 1996 has also ordered the data breaches to be reported to the HHS’ office for Civil Rights within 30 days of the detection of a breach. This report should be in writing and should also be signed by the representative of such a health care facility containing all the required information in explaining such data breach. The required information is expected to be detailed with certain essential elements. Such elements are as mentioned herein below:

Name/address of health care facility where such breach has taken place.
Date/time of the breach.
Date/time of discovery of such breach.
Name of patient(s) affected.
Description of medical information breached.
Nature and extent of the medical information involved (including types of individually identifiable information/likelihood of reidentification).
Description of events surrounding the breach.
Date of notification of affected patients, or expected data if notifications are not yet sent.
Name(s)/contact information of the individual(s) who performed the breach (if known), witness(es) (if any), and the details of any unauthorized person(s) to whom the disclosure was made.
Contact information of the health care facility’s representative;
Description of corrective actions taken.
Details of any previously reported events that include the affected patient’s medical information during the past 6 years.
A copy of the notification letter was sent to the affected patient(s).
Audit reports, witness statements, and other documents that the health care facility relied upon in determining a breach occurred.

The consequences of any delay in issuance of any notification or the required information concerning such breach to the California Department of Public health results in administrative penalties. Such financial penalties warrant a minimum of $15000 per violation to a maximum of $250,000 per event depending on several factors. However, the department may choose to be lenient to medical facilities that are for small and rural hospitals, primary care clinics and nursing facilities only upon a request submitted to the California Department of Public health.

Reasons for implementing such regulations

Section 1280.15 of the Health & Safety Code which was in effect for many years, requires a clinic, health facility, home health agency, or hospice licensed by the California Department of Public Health to prevent any sort of unlawful or unauthorised access to the use and disclosure of patient’s information and reporting such unauthorised access, use or disclosure of a patient’s medical information no later than 15 days when discovered by the licensee. However, what lacked under this law was the reporting requirement for such breaches and a mechanism through which administrative penalties could be effective for such breaches in an equitable and just manner. The purpose of these regulations doesn’t restrict here. It is also intended to provide additional details on the reporting requirement which shall ultimately result in increased vigilance by the health care facilities in order to protect the information of the patients and thereby improve their experiences for the people of California. These regulations are closely aligned to the breach reporting obligations under Section 1280.15 with federal reporting requirements under HIPAA.

New exceptions to the notice requirements

Despite the statute providing internal paper records, electronic mail, or faxes inadvertently misdirected, within the same facility or health care system during the course of coordinating care or delivering services; does not constitute unauthorized access to, or use or disclosure of, a patient’s medical information, there is no exception for the misdirected communication outside of the health care system. For example, a health claim being sent to the wrong person, fax directed to the wrong physician or any other breach that pose no risk to the patient.

These exceptions have been not been retained in the new regulations and certainly have created additional exceptions for inadvertent disclosures within the same facility or health care, such as:

Inadvertently misdirected communications sent to a HIPAA-covered entity within the course of coordinating care or delivering services.
Disclosure of medical information in which a healthcare facility or business associate has a good faith belief that an unauthorized person to whom the disclosure was made would not reasonably have been able to retain the medical information.
Any access to, use, or disclosure of medical information permitted or required by state or federal law.
Encrypted electronic data containing a patient’s medical information, provided the encrypted data has not been unlawfully accessed, used or disclosed.
A disclosure for which a healthcare facility or business associate, as applicable, determines that there is a low probability that medical information has been compromised based on a risk assessment of at least the following factors:

The nature and extent of the medical information involved, including the types of identifiers and the likelihood of re-identification;
The unauthorized person who used the medical information or to whom the disclosure was made;
Whether the medical information was actually acquired or viewed; and
The extent to which the risk of access to medical information has been mitigated.

Astoundingly, these exceptions are parallel to HIPAA breach reporting regulations and in the much broader perspective since HIPAA do not contain any express exceptions for misdirected communications sent to the authorised entities of HIPAA.

Reporting requirements

The motive of these regulations was to harmonise the notification obligations of facilities with HIPAA, the reporting requirements to these regulations are an exception.

The definition of “detect” under the new regulations under 79901(f), also includes the business associates of the health care facility; these associates are required to report the breaches regardless of the knowledge of the breach within 15 business days and without any timely manner. This certainly makes the new code inconsistent with the HIPAA data breach regulations which don’t impute awareness of a breach by a business associate. This requirement to report a breach of which the facility may not be aware would be problematic.

The permission of a health facility to discharge the reporting obligations by having its business associate provide patient notices is certainly allowed by HIPAA and the same clause has been incorporated under the Section 79902(b) where such notice should be made to the department by the facility and not its business associates.

Content for notification to the patient under the Health & Safety Code Section 79902(b) must have the following:

A brief description of what happened, including the facility’s name, date of breach and date of discovery, if known;

A description of the types of the medical information involved;
Steps patients should take to protect themselves;
A brief description of the facility’s mitigation efforts;
Contact procedures for questions and additional information.

Administrative penalties

Like other regulations, not following the obligations leads to penalties. In the same way, these regulations also deal with administrative penalties which are imposed on breach of a patient’s medical information leading to violation of the Health & Safety Code 1280.15.

Any patient’s medical information that has been unlawfully accessed, used, or disclosed, can attract a penalty of up to $17,500 despite no delay in reporting. Such authority is vested with the department itself. In addition, the Department also imposes a penalty of $100 for each day the facility fails to report the breach to the Department which shall not exceed $250,000.

The Regulations have also established a base penalty amount of $15000 for any initial violation through which the department may assess an amount equal to 70% of the initial violation. The regulations under Section 7990(a) allow the base penalty to be increased or decreased on the following considerations:

The compliance of the health care facility with the Health & Safety Code Section 1280.15 and other related state and federal law for the past three calendar years;
The extent of the violation and preventive actions taken by the health care facility in order to correct it from recurring.
There are a few factors that are outside the purview and control of the health care facility such as:

No penalty if the health care facility developed and maintained disaster and emergency policies and procedures that were immediately implemented during a disaster or emergency or were the sole cause of the breach.

Any applicable factors identified by the Department depend on the specific circumstances.

The Health & Safety Code does not require health facilities to prevent all unlawful or unauthorized access to the medical records of the patients but to implement safeguards in order to prevent any unlawful and unauthorised access. The purpose of these regulations is to restrict any negligence by imposing strict liability.

Small and rural hospitals: Under Section 79905, the small and rural hospitals may be given penalty reduction upon request to the department for any financial hardships and adverse effects on the potential adverse effects within 10 business days after the issuance of such administrative penalty.

Primary Care Clinics: The regulations allow the department to show concessions on the primary care clinic in order to protect the access to quality in those facilities.

Skilled Nursing Facilities: A higher penalty may be charged under the health facility medical information breach law or under the provisions of the Health & Safety Code.

Conclusion

The updated regulations which certainly have created many exceptions will undoubtedly result in the decrease in the number of CDPH reports which hence will capitalize on the reduction in reports and broader production of documents to investigate a reported breach. The new regulations also will be helpful in order to reassess the privacy policies of the health care facilities and also strengthen the protection of the information of the patients and minimize regulatory scrutiny in any event of a breach. The Regulations and the HIPAA’s breach notification requirements, but quite identically aligned resulting in the uniformity of the laws with respect to the federal law.

References

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Role of juvenile courts in controlling juvenile delinquency

By

Rachit Garg

-

October 20, 2021

0

This article is written by Priyanshi Soni, from Symbiosis Law School, Noida. This article seeks to highlight the Juvenile Justice System in India and focuses on how juvenile courts function in controlling juvenile delinquency, majorly under the latest Juvenile Justice Act, 2015.

Table of Contents

Introduction

“A child is a person who is going to carry on what you have started. He is going to sit where you are sitting, and when you are gone, attend to those things you think are important. You may adopt all the policies you please, but how they are carried out depends on him. He is going to move in and take over your churches, schools, universities, and corporations. The fate of humanity is in his hands.” – Abraham lincoln

Juvenile delinquency is a rising issue, not only in India but also worldwide. In India, the Juvenile Justice System mainly deals with the children who are in conflict with the law or who are in need of protection and care and provides them with proper care, rehabilitation, correction homes, etc. suiting their best interests. There has always been a presumption that juveniles or children should be dealt with as leniently as possible since either they are incapable of being criminal-minded or even if they are so, it is due to some external influence. However, currently, crimes among juveniles are on the increase.

In this regard, stricter laws are being introduced – the Juvenile Justice Act of 1986 and Juvenile Justice (Care and Protection of Children) Act, 2000 and the latest being the Juvenile Justice (Care and Protection of Children) Act, 2015. We will look into its provisions in detail in the article and will also dive into the new Juvenile Justice Amendment Bill, 2021. Further, the importance and role of juvenile courts in dealing with such juvenile offenders is of great importance as they give us an outlook of how the judicial system works in this regard.

The Juvenile Justice (Care and Protection of Children) Act, 2015 : an overview

The Act was passed in 2015 to include many new provisions keeping in mind the increasing crime rate by children below the age of 18. It mandates the establishment of at least one Juvenile Justice Board and Child Welfare Committee in each district. The Act also focuses on juvenile rehabilitation and care through various correction homes and also contains adoption-related clauses in the better interest of the child.

The definition of a child and juvenile as per the 2015 Act

‘Child’ is defined under the Juvenile Justice Act, 2015 as someone who has not completed 18 years of age (a minor) and it classifies a child in two ways, namely,

Children in conflict with laws.
Children in need of care and protection.

‘Juvenile’ is also defined in the same manner as someone who is below 18 years. Thus, this Act removed the negative connotation which was attached to the word ‘Juvenile’. So, a juvenile in conflict with the law is a child who is an offender, and a juvenile in the protection of the law is the abandoned child in need of legal help. This Act includes a provision to deal with offenders between the age of 16 to 18 as adults if they commit a heinous offence. This change was included in the backdrop of the Nirbhaya Gang Rape Case of 2012 wherein one of the offenders was 17 years and few months old but since at that time, there was no such law to, he could not be tried as an adult.

In penal laws, maxim doli incapax is used which means that children are deemed incapable of forming the intent to commit a crime because of their age.

In Satya Deo v. State of Uttar Pradesh (2020), it was held that the child will not be denied his right to be treated as a juvenile at the time of the commission of an offense if he was below 18 years even if the offense took place before the enforcement of the Act of 2000. As per Section 25 of the 2015 Act, the 2000 Act would continue to be applied to cases that were pending before the passage of the 2015 Act.

Amendments proposed in 2021

It was found that 39% of the Child Care Institutions are not registered in 2020, even though the Act of 2015 mandated it. The living conditions were poor with many institutes missing basic facilities such as the presence of a toilet or clean drinking water. This all signalled the need for amendments.

The key amendments are –

Serious offenses, which are offenses under the Indian Penal Code, 1860 for which the punishment is between 3 to 7 years, will now also include offenses whose punishment is more than 7 years without any minimum period.
It changes the offenses with a punishment period of 3 to 7 years from being cognizable (arrest without warrant) to non-cognizable.

Further, the Act also amends a few provisions related to adoption and Child Welfare Committees (CWCs) .

Juvenile Courts and their importance in India

The main function of juvenile courts is to have a special and distinctive procedure to look into juvenile offenders. As opposed to what earlier criminal courts used to do, wherein there was no distinction made between juveniles and adults, the juvenile courts in present times give necessary protection to children as they are not in a position to properly defend themselves. The need was realized to make the process more reformative for juveniles rather than punitive.

Juvenile Justice Board is the Juvenile Court created under Section 4 of the Juvenile Justice Act (2015). Criminal justice administration is a state subject as per Schedule VII of the Indian Constitution.

Section 4 of the Act starts with a non-obstante clause i.e. which has an overriding effect over the Code of Criminal Procedure, 1973. This clause was being discussed in the case Chandavarkar Sita Ratna Rao v. Ashalata S. Guram (1987).

It mandates the establishment of at least one Juvenile Justice Board in each district. This board will comprise of a Principal Magistrate and 2 social workers at least one of whom should be a woman. The decision of the Principal Magistrate will be final. This principle is discussed under Section 4(2) of the Act.

In State of Himachal Pradesh v. Happy (2019), the order passed by the Board was held to be void ab initio as the composition requirements were not fulfilled and the verdict was passed by a single member.

Powers and functions of the board

The Board is empowered to deal with the cases under its jurisdiction and cases dealing with children in conflict with the law.
The power exercised by the Board can also be exercised by the High Court or the Session Court when the appeals from the Board come to them.
The Board has the power to inquire into heinous offenses as per Section 15 of the Act and such a preliminary assessment can be disposed of within 3 months of bringing the juvenile in front of the board.
The Board has to inform the parent or guardian of the child at every step of the process.
The Board shall ensure that the rights of the child are protected throughout the process of inquiry and rehabilitation and ensuring legal aid for the child.
The Board shall, whenever necessary, provide the child with a translator if there is difficulty in understanding the language, on payment of fees if required.
It is the duty of the Board, wherever deemed necessary, to transfer a child in conflict with the law to a committee stating that the child is in need of care.
It also has a provision regarding filing an First Information Report (FIR) in case of an offense against a child in conflict with the law.
Periodically conducting inspection of residential facilities for children in conflict with the law and recommending various measures for improvement in the quality of services.

Juvenile delinquency : a rise in the current scenario

Juvenile delinquency involves the involvement of a juvenile in illegal activities or behavior. Delinquency may not always be regarded as criminal activity, but this kind of behavior is harmful to the child himself and to the society.

The crime rate is on an increase in India already, and what we now see is a surge in Juvenile offenders. The biggest example anyone can give of such a heinous offence committed by a juvenile will be that of the Nirbhaya Case of 2012 where the child who committed the heinous crime of rape of the girl in a bus, with others, couldn’t be punished with death sentence or rather couldn’t be tried as an adult although he was 17 years old and even had the right capacity to think about what he was doing. This outraged the people and so the authorities deemed it fit to change the law.

Causes of juvenile delinquency

Harsh disciplinary measures by parents and even teachers are beyond normal and try to insult children and make them feel worthless without giving a proper reason for their acts. Such acts focus on punitive measures and in no way try to reform the child.
At times, bad peer company also leads to delinquency in young teenagers. Teenage is such an age where the adolescents usually fall prey to the new things which is most of the time bad and they get a lure to try out things which are meant for adults, such as drinking, smoking, etc. also if the kind of people they hangout is bad, then they might end up committing illegal acts too.
Attention Deficit Hyperactivity Disorder (ADHD) and various other mental disorders can also be one of the reasons.
Social factors such as broken homes due to death of one of the parents or divorce of parents, poverty, and beggary constitute some of the reasons for delinquency in children in India.

Evolution of laws related to juvenile delinquency in India

The Apprentices Act of 1850 was the first legislation dealing with juvenile delinquents and according to this, juveniles under the age of 15 who have committed any petty offenses will be bound as apprentices. Then came the Reformatory Schools Act of 1897 which aimed at sending the children to reformatory school. In 1987, the first Juvenile Justice Act came up after independence. The aim was the protection, rehabilitation, and reformation of juvenile delinquents. As per this Act, juveniles were defined as boys under 16 and girls under 18 years of age. But, after the Juvenile Justice Act of 2000, the age for both boys and girls was set to be 18 to be called juveniles. Then came the Juvenile Justice Act of 2015.

International concerns for juveniles

The Convention on the Rights of the Child which was adopted by the UNGA in 1989 focuses on the best interest of the children. The following rights of a child are focused on under this Convention:

Right of survival, which includes proper standard of living to the children with healthy nutrition and other necessities.
Right to protection from inhuman practices, trafficking, armed conflicts, etc.,
Right to participation includes freedom of speech, expression, religion, and opinion and thus ensuring proper participation by them.
Right to development which includes all kinds of educational, physical, mental, and cultural, and recreational development.

Article 34 of the said Convention protects children from any kind of sexual exploitation or abuse, exploitation through prostitution, and exploitation by using them in pornography.

Article 37 states that imprisonment of a child should be used as a last resort and that too shall be for the shortest possible period. This way it protects the liberty of the children and focuses more on their reformation and development.

Juvenile Justice System in the United Kingdom

The law in the U.K. believes that children should not be prosecuted in criminal courts and for them, delinquency can vanish when they grow up if they are properly reformed in remand homes and for this, only juvenile courts should look into such cases. The Acts such as the Children and Young Offenders Act of 1933 and the Criminal Justice Act of 1948 further implement all these requirements. The 1908 Children Act provides a provision for the creation of a separate judicial board in juvenile courts.

Juvenile Justice System in the United States

The system in the U.S. is more simple. Firstly, the police officer will either keep the child in custody or release him immediately. Then, he will have to inform and hand him over to the juvenile court. After the trial, the children are sent to correction homes and they are tried as adults only in cases where their age is closer to adulthood or when they commit crimes repeatedly which can make them a danger for the whole society.

The International Juvenile Justice Observatory (IJJO)

It is an international organization that aims at promoting the making of policies, rules, legislation for the development and protection of juveniles and these are applicable all over the world. It also provides information regarding the juveniles in the world who are in conflict with the law and are in need of attention.

Recommendations

The Juvenile Justice Act of 2015 brought many good changes in the justice delivery of juveniles, such as proper distinction between the 2 categories of juveniles, formation of a proper Justice Board and added a provision for heinous crimes by juveniles between 16 to 28 years of age which was a great step with the changing needs of the society. But, it has few problems too:

Age from 16 to 18 is a vulnerable age due to many hormonal and mental imbalances taking place in the body. These usually change when one grows up into an adult. So, if such children are tried as adults, then it can lead to a major impact on their mind and can affect them permanently.
Also, many have pointed out that this provision of the trial of 16 to 18 years juveniles like an adult is in contravention to Article 14 of the Indian Constitution which ensures equality before the law and the UN Convention on Child Rights.

As we all know, prevention is better than cure. Proper education development and counseling from time to time by parents and at schools can help children in many ways. More focus should be on rehabilitation so that the future of such kids does not get affected by their present deeds and they come out as better beings.

Therefore, for the proper development of a child into a good being, rather than a delinquent, the following things need to be ensured by the government:

Giving children a basic minimum standard of living with proper focus on education of all and recreation of all.
As discussed, special training programs should be conducted for children by way of counselling and discussing child psychology with them.
Proper assistance of a social worker and a lady officer in the child cell should be made compulsory even during investigations who understand child psychology well.
Police should be more careful about the handling of the juvenile.
Even the staff of the shelter homes of juveniles should be well trained in dealing with children of such age and such minds.

Apart from this, there should be more public awareness at the end of the general public that such children do exist and that handling them with an open mind is the need of the hour.

Conclusion

Children are undeniably the future of this world. There is a great need for more reformed legislation that aims at deterrence of such juveniles so that their as well as society’s future is secured. This will help make the world a better place and also can reduce the chance of future crimes. Small delinquent acts by children can also have a huge impact on their future, and so, this needs to be tackled at an early stage itself. Above mentioned reforms and counsellings at an early age are very important especially for those who come from a harsh or disturbing background. NGOs need to work equally towards the betterment of children in need.

References

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Forfeiture and non-forfeiture clause under Insurance Law : everything you need to know

By

Diva Rai

-

October 20, 2021

0

How-to-make-the-right-choice-in-life-insurance-58b596945f9b58604673ef5f — Image source - https://bit.ly/3AVO5ZG

This article is written by Anushka Singhal, a student of Symbiosis Law School, Noida. In this article, she discusses the forfeiture and non-forfeiture clauses in insurance law.

Table of Contents

Introduction

Life is very precious. With each life, we have three to four other lives connected. Therefore to ensure that with the death of one, the lives of the other three are not affected, we have the concept of ‘life insurance.’ Insurance can be defined as, ‘a plan by which a large number of people associate themselves and transfer to the shoulders of all, the risks that attach to an individual.’ Other things like motor vehicles, goods and property are bought after a lot of investment. Thus, to ensure that the money invested in them is not wasted due to an unforeseen situation, we have introduced the concept of insuring these assets too. Insurance has certain important clauses and an insurance buyer should be aware of them.

History of insurance in India

India has a long history of insurance. The classic texts of Manu, Rishi Yagnavalkalya and others mention insurance. The word, ‘Yogaksdhama’ is found in Rigveda which suggested that some kind of community insurance existed in India. The modern history of insurance started when the Oriental Life Insurance Company came up in Calcutta in 1818. Then the insurance business gained a good start and then a plethora of insurance companies showed up. In 1823, the Bombay Life Assurance company came into being, then we had the Bombay Mutual Life Insurance Society in the year 1870.

The nationalisation of insurance and the legislative Acts regarding the same came up in 1912 when the Indian Life Assurance Companies Act came up. Then we had the Indian Insurance Companies Act and the Insurance Act in 1928 and 1938 respectively. After independence, the Life Insurance Corporation Act, 1956 penned down a new chapter in the insurance history of India. When the insurance sector started growing, there arose a need for a regulating authority and then the Insurance Regulatory and Development Authority (IRDA) was set up. Today we have about 57 insurance companies in our country.

Forfeiture clauses

These clauses lay down that under certain conditions i.e. when a person has withheld some information, have given untrue information regarding his documents or have given false information under his proposal, such policy is subject to the provision of Section 45 of the Insurance Act 1938, wherever applicable, the policy shall be declared void and all claims to any benefits in virtue thereof shall cease. According to Section 45 of the Act, an insurer cannot question any life insurance policy on any grounds after three years from-

The date of issuance of policy
The date of risk commencement
Date of the revival of policy in case of lapsation
The date of rider to the policy

Reviving the policy

Nowadays, the insurance companies provide an option to the insured to revive their lapsed policy. It is similar to purchasing a new policy and new terms and conditions may be imposed on the insured. Most companies have their own revival policy and one can check it while entering into an insurance contract with the company. Before going for a revival one must pay all his due premiums under the policy along with the penalty that the insurance company may levy. The company may change the terms and conditions of the policy after revival and thus one should check the documents carefully.

Validity of forfeiture clauses

It was contended in the below-given cases that the forfeiture clauses under the insurance law went against Section 28 of the Indian Contract Act, 1872, it lays down that agreements in restraint of legal proceedings are void. An agreement is said to be in restraint of legal proceedings when it may restrict a party from approaching the court under any contract or which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability arising under or in respect of a contract. The Court has discussed this point in a number of cases.

National Insurance Co. Ltd. v. Sujir Ganesh Nayak and Co.,1997

Facts

In this case, the Respondent firm had obtained two fire policies from the appellant’s insurance company for twelve months. There was a clause 19 in the contract which said that no claim can be entertained after 12 months of the loss caused. The Respondent suffered a loss and claimed insurance but his request was hit by clause 19 of the contract. The Respondent reached the contract pleading that clause 19 of the contract was in contravention of Section 28 of the Indian Contract Act, 1872.

Judgment

The Court observed, “It is precisely to avoid delays and to discourage such belated claims that such insurance policies contain a clause like a clause 19. That is for the reason that if the claims are preferred with promptitude they can be easily verified and settled but if it is the other way round, we do not think it would be possible for the insurer to verify the same since evidence may not be fully and completely available and memories may have faded.” Thus it held that the clause was valid and was not against Section 28 of the ICA.

Girdharilal Honuman Bax v. Eagle Star and British Dominions,1923

Facts

In this case, the Plaintiff purchased insurance from the defendant company. It had a clause that if a claim has been made and then rejected, an action or suit shall be filed within three months of such rejection and if no suit is filed within this period, then all the rights of the Plaintiff under the policy would be forfeited. The plaintiff contended that such a clause in the contract was void and in contravention of Section 23 and Section 28 of the Indian Contract Act, 1872.

Judgment

The Hon’ble Court held that the clause was valid and was not against Sections 23 and 28 of the Indian Contract Act. Thus, such forfeiture clauses in a policy that restrict the time in which a suit regarding insurance can be filed are completely valid and the courts do not interfere with them.

LIC v. Debasis Mishra, 2005

In this case, the Complainant had a money-back policy. He paid certain premiums but later was not able to pay the premiums due to some reason. He, therefore, wanted to end his policy and thus demanded his submitted premiums back. The insurance company said that since he failed to pay the premiums, the policy lapsed. As the policy lapsed, according to the clauses of the contract, he was not able to get his already submitted premiums back. His money was forfeited. The Court held that the clause was justified and thus it did not allow the Complainant to claim the already paid premiums.

Advantages and disadvantages of a forfeiture clause

They serve as a shield for the insurer. In case, a person enters into an insurance contract with a malicious intention, like if he is suffering from a disease and hides it from the insured, the insurer would not have to bear the brunt of such fraud. He can terminate the policy. Insurance fraud is a prevalent wrong in society and such forfeiture clauses assist in putting a full stop to such instances. Forfeiture clauses can be of a great disadvantage to the insured. Insurers can use it adversely. Forfeiture of insurance is a massive and disproportionate penalty in relation to the policyholder’s relatively harmless non-compliance with a condition in the insurance policy.

Non-forfeiture clauses

It is a clause under a policy that enables you to choose how you receive the policy benefits in case of a lapsation due to non-payment of premiums. These clauses are included in life insurance policies. When a whole life insurance policyholder surrenders the policy, the non-forfeiture provision may become available. The clause may involve returning some portion of the total premiums paid, the cash surrender value of the policy, or a reduced benefit based upon premiums paid before the policy lapsed. It lays down that if the policy has run for at least 3 full years and subsequent premiums have not been paid the policy shall not be void but the sum assured will be reduced to a sum that will bear the same ratio as to the number of premiums paid to the total number of premiums payable.

Payout options under non-forfeiture clauses

When a policy is terminated or surrendered, the policy owner does not forfeit the previous payments and is entitled to receive the policy’s cash value. Following are the payment options under a non-forfeiture clause-

Cash surrender value

Under this, the insurer has to pay the amount of the insured within six months of the surrender of the policy. The longer the duration of the policy, the better is the cash value.

Extended-term option

It allows the policy owner to buy an extended-term policy using the cash values from the previous policy. Sometimes the insurers provide an automatic extended-term option after the policy has lapsed.

Reduced-paid up insurance

In this option, the policy owner receives a lower amount of payments made as premiums for the original whole life insurance. In this way, the insurer is able to retain the policy benefits.

LIC v. Raj Kumar Rajgarhia,1999

In this case, a loan was advanced to the Petitioner (deceased at the time of the case) under the terms and conditions entered into by the parties read with the terms of the loan bond. There was no mention of repayment time in the contract. There were certain important clauses in the loan bond pointing towards the time period of repayment. Then came the time of repayment of the loan, the Defendants did not rely on any of the clauses of the loan bond but instead, they solely relied on the automatic non-forfeiture clause which said that ‘all amounts due can be forfeited’. The Court said that while interpreting the words in a contract more weightage has to be given to the intention of the parties and one should not opt for the liberal interpretation. The Court interpreted the word ‘all amounts due’ to mean such amounts which have not only become due but payable under the contract. Therefore the defendant was not entitled to deduct the amount.

Rights of beneficiaries under non-forfeiture clauses

Non-forfeiture clauses have become quite common in life insurance policies. Standard Life Insurance provides the insured with various options to choose from in case of default of a premium. There is a time period of three years given in most of the policies. If the insurer rejects an insured’s claim for money for some misrepresentation or fraud on his part, then the insured cannot do anything. But if the claim is rejected after the lapse of three years, the insured can still get the benefit and the insurer cannot do anything. Thus these non-forfeiture clauses help the policyholder to a great extent. This whole principle has been enshrined under Section 45 of the Insurance Act, 1938. There is an option of the revival of a policy after it lapses. A revival can be an ordinary revival i.e. effected within the first six months from the due of the first unpaid premium, it can be a revival on a medical basis or a revival on a non-medical basis.

Conclusion

The forfeiture and non-forfeiture clauses play an important part in an insurance contract. While the forfeiture clauses protect the insurer from any fraud, the non-forfeiture clauses save the insured in a situation wherein he forgets to pay the premium. Before entering into a contract, the insured should carefully read the terms of the contract and should know about the revival policy in case a policy lapses.

References

http://www.manupatra.com/roundup/338/Articles/HISTORY%20OF%20INSURANCE%20LEGISLATION.pdf
https://economictimes.indiatimes.com/wealth/insure/how-the-3-year-clause-impacts-life-insurance-claims/articleshow/66653173.cms?from=mdr
https://www.jstor.org/stable/1334829
https://ujcontent.uj.ac.za/vital/%20access/manager/Repository/uj:30370?view=null&sort=null
Sumeet Malik, many restrictsLaw of Insurance, Volume 1, EBC Publication
Avtar Singh, Law of Insurance, EBC Publication
https://corporatefinanceinstitute.com/resources/knowledge/other/nonforfeiture-clause/

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Impact of Brexit on net neutrality in the UK

By

Rachit Garg

-

October 20, 2021

0

This article is written by Meera Shah, from NMIMS School of Law, Navi Mumbai. The major focus of this article is the status of net neutrality in the United Kingdom post-Brexit and laws and regulations governing it.

Table of Contents

Introduction

The internet is built and functions on the idea of openness and easy exchange of viewpoints. Net neutrality is governed based on certain rules and principles which provides for the internet service providers to treat all the data fairly without blocking or slowing down the functioning of particular websites or data streams. The concept of net neutrality can be analogized to the working of telephones. While calling someone through a telephone line, we can call any number and be connected to the respective line within a few seconds and each connection would approximately take the same duration to connect as any other contact number. Hence the access to the numbers is neither blocked nor deliberately delayed unless it is forced by law. Also, telecom operators are bound by a set of rules and laws that compel them to provide unrestricted phone services. However, with the advent of the internet, this similar principle in the case of the internet came to be termed as “ net neutrality”.

Why is net neutrality favorable

Net neutrality is essential in allowing users to easily access the websites in an unhindered manner. In the absence of net neutrality, internet service providers would shape the traffic and derive commercial benefits out of it.The amount charged from websites such as Netflix and Youtube would be more as compared to other not so frequently accessed website.This is due to the fact that there is difference in bandwidth occupied by them as compared to the rest.

It is essential to give equal opportunity to all to display their content without discriminating on the cost that they would have to pay to display their content.

Net neutrality is essential to keep the competition fair across the major e-commerce players, startups, and many other organizations that carry out significant business tasks over online platforms. The basic aim of net neutrality is that all the traffic should be fairly treated and not penalizing or prioritizing any of the websites based on the domain name, publisher, or service provider. It is also essential to give voice to the diverse people across the world which they otherwise might be deprived of expressing in society.

When net neutrality is ceased, the rising prices imposed by the internet service providers make it difficult for small businesses and startups to sustain themselves in the competitive markets.

Net neutrality rules seek to ensure that the internet ecosystem can continue to flourish as a platform for innovation as well as upholding freedom of free speech and expression.

The pandemic has made consumers and companies increasingly reliant on their broadband connections resulting in the growth of internet users.UK has one of the highest internet penetration rates.It has almost 62.87 monthly users as per 2021 data and covers a significant part of UK.Innovations like cloud computing and IoT devices have become more common and the 5G deployment could have an even greater impact on internet demand. Hence net neutrality rules have become mandatory.

Impact of Brexit

Brexit, as we know, was a term given to the departure of the United Kingdom from the European Union. It is formed as a combination of the words “Britain+Exit”. The referendum that was held on 23rd June 2016 to decide on its membership with the European Union found that 51.89% of the voters supported the decision of leaving the European Union. As a result of this, the UK left the European Union on 31st January 2020.

As far as net neutrality is concerned, it is in place for most parts of Europe. The UK had been one of the the most stringent enforcers of neutrality among the European Union. However, there were questions regarding the impact of net neutrality in the UK post- Brexit.

EU and UK net neutrality rules may differ. The Open Internet Access ( Amendment) ( EU Exit ) Regulations 2018 as per EU Withdrawal Act,2018 had strictly provided that during the transition period of Britain’s Exit, the net neutrality requirements should be fulfilled.

Laws related to net neutrality in EU

Net neutrality in Europe is guaranteed by the European Open Internet Regulations 2015.

BEREC has been deeply involved in regulating net neutrality in the EU. BEREC is the European body that brings together all the National Regulatory Authorities and brings in rules with relation to net neutrality and provides an implementation framework for the NRAs and ensures uniform application of the laws across all EU Countries. This is obligated to the BEREC as per Article 5 (3) of the Regulation EU 2015/ 2120.

Some of the essential guidelines as per the European Open Internet Regulations, 2015 are as follows :

Article 3 deals with safeguarding open internet access and to that end impose obligations and direct permitted practices to be mandated to the internet service providers.
Article 4 provides guidelines for the transparency measures that need to be adopted to comply with open internet access.
Article 5 provides guidelines for supervision and enforcement. To that end, National Regulatory Authorities shall closely monitor and ensure compliance with Article 3 and Article 4.
Article 6 deals with penalties that might be imposed on breach of the guidelines. The penalties can be imposed at the discretion of the member states for infringement of laws listed under Articles 3,4 and 5. Also, the penalties imposed must be effective and proportionate.

Net Neutrality post- Brexit and BEREC Rules

The UK Regulations(The Open Internet Access)(EU Regulation)Regulations 2016 (SI 2016/607) to implement certain provisions of the EU Regulation by the formulation of a UK National Regulatory Authority. The authority aims to implement the provisions about net neutrality in the UK which comply with the EU Regulations and enact provisions that seek its enforcement and penalize its non-implementation. The UK Regulations are also expected to include all the applicable guidelines as has been issued by the Body of European Regulators for Electronic Communications( BEREC). It is pertinent to note that these regulations are made as per Section 8 of the European Union ( Withdrawal) Act 2018 (c.16) which aims at addressing the deficiencies that might arise as a result of the exit of the United Kingdom from the EU.

Some of the essential net neutrality guidelines as per BEREC are stated below.

Internet service providers are prohibited from restricting or slowing down the pace of any particular website except wherever it is necessary. The exceptions include traffic management to comply with some legal orders, to ensure network integrity and security,. However, such exceptions can be utilized for periods only as long as necessary management of congestion wherein equivalent categories of traffic are treated equally.
Article 3(3) has set in traffic management practices which include blocking, slowing down, alteration, restriction, interference of any kind, degradation, discrimination. This would be prohibited for any kind of content, application, or service. These regulations apply to all end users. The end users’ legal definition given by the regulatory framework by the EU includes individual consumers as well as the business which uses internet access services. As per the Regulations, the internet service providers are required to provide information which includes speed, data cap, traffic management measures implemented by them, and implementation of the specialized services. This information should also be provided in the contracts and be published in marketing and other websites. Further, this information must also be easily accessible, accurate, meaningful, and capable of offering a comparison with others. Besides, the guidelines explicitly state that the National Regulatory Authorities must take utmost account of the provision mentioned under BEREC and monitor the application of its regulations and hence assure the stakeholders.
As far as the UK is concerned Ofcom is the National Regulatory Agency that regulates the Open Internet Regulations in the UK. As per the national regulations in the UK, Ofcom has been conferred with certain powers to keep up with the net neutrality regulations. They include :
To impose a penalty of up to 10% of the net business turnover in case of breach of net neutrality regulations.
The company or organization that breaches the regulations has to also take measures to compensate for the consequences of their breach and further comply with their obligations.
Ofcom is also expected to publish annual reports which will include all their monitoring, findings, and compliance which would have to be submitted as mentioned under UK laws.

Highlights of the essential net neutrality rules as devised by Ofcom

Article 1 of the Open Internet Regulation states that the goal of the provisions is to create norms to ensure fair and impartial treatment while managing internet traffic and safeguarding the rights of the end-users.Regardless of the end user’s provider’s location, or the location, origin, or destination of the information, content, application, or service, they can access and distribute information and content, utilize and supply applications and services, and use terminal equipment of their choice. Besides, enforcement regulations give Ofcom the authority to demand information from internet service providers and enforce the responsibilities imposed on them by Articles 3–5 of the Open Internet Regulation.
The regulations also mandate adherence to the Consumer Contracts Regulations as well as Consumer Protection from Unfair Trading Regulations,2008. As a result, the service providers will be compelled to be transparent about their services and offers and redress their grievances adequately.
Further, Ofcom is also expected to take utmost account of the guidelines published by the Body of European Regulators for Electronic Communication (BEREC). This is particularly true for zero ratings ( zero-rating is a practice of providing internet access without imposing any financial cost ) and traffic management practices. Further, they are also expected to publish an annual report based on their findings and submit it to BEREC.
On the 6th of December 2017, Ofcom launched an enforcement program to check with the ISP traffic management methods and other potential violations. The goal was to gather data to see if any ISP traffic management measures raised any concerns or breach of the Open Internet Regulations which govern the functioning of the internet

Conclusion

After gaining an understanding of the traffic control tactics used by ISPs and taking enforcement action where necessary, Ofcom has decided that it is now appropriate to close its formal enforcement program investigating ISP traffic management practices. They will, however, continue to monitor providers’ adherence to the open internet and related policies. They have promised to look at the enforcement rules and they would run into complaints that might arise relating to open internet regulations and address it at the earliest. Meanwhile, Ofcom has urged ISPs and CAPs to conduct proactive self-assessment compliance with the net neutrality rules and to speak with Ofcom about any concerns they may have. The current laws and regulations relating to the enforcement of net neutrality are sufficient and in the future can be modified based on the traffic management strategies and aid given to the internet service providers for evaluation of open internet access rules. Ofcom has recently announced that it plans at reviewing the net neutrality rules which would incorporate regulations with greater flexibility for mobile and broadband operators. They haven’t released their revised rules but have assured safeguard the rights of the consumers and at the same time support innovations and startups.

References

https://timesofindia.indiatimes.com/tech-news/What-is-net-neutrality-and-why-it-is-important/articleshow/29083935.cms
https://www.aljazeera.com/news/2017/12/15/what-is-net-neutrality-and-why-it-matters/
https://www.itpro.co.uk/strategy/28115/the-pros-and-cons-of-net-neutrality
What is Brexit? | Government.nl
https://assets.publishing.service.gov.uk/media/5bd1ef0340f0b604d37fa7fd/Explanatory_Memorandum_-_OIA_EM.pdf
Monitoring compliance with the net neutrality rules – Ofcom
Ofcom launches review into UK’s net neutrality rules post-Brexit | IT PRO
6160-BEREC-guidelines-on-the-implementation-b_0 (1).pdf
Internet usage in the United Kingdom (UK) – statistics & facts | Statista

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Role of judiciary in alternate dispute resolution

By

Shoronya Banerjee

-

October 20, 2021

0

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This article has been written by Adv Priscilla Rodrigues, pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho), and Ruchika Mohapatra (Associate, Lawsikho).

Table of Contents

Introduction

Alternative conflict resolution techniques have grown in popularity in recent years, owing to their numerous benefits over the traditional way of litigation. In a report presented to Parliament in September 2014, the Ministry of Law and Justice showed that India is short of nearly 6,000 judges.

It’s worth noting that between 2006 and 2018, India saw an 8.6% increase in the number of cases pending in all courts, lengthening the time it takes for a judge to determine a dispute. These considerations make it possible to prevent litigation in India, particularly in contractual issues that can be resolved by alternative methods such as arbitration, which is regulated by the Arbitration and Conciliation Act, 1996.

Alternative dispute resolution is a procedure for parties who do not agree or have certain disputes with one another. This resolution gives them more possibilities for reaching a compromise. Conciliation, mediation, arbitration, and Lok Adalat are some of the examples of these methods. These procedures are far superior to the traditional court procedures. They are both faster than traditional court procedures. They are also casual, requiring fewer protocols and formality on the part of the families.

Different methods to solve disputes

As we all know there are a few methods available for two parties to resolve disputes. The first and most common approach is to resolve disputes through courts when a dispute occurs between two individuals belonging to the same government, there is the same sense for the dispute to be resolved by the parties through the courts set up by that country’s law. Our conventional judicial system has become outdated and there has also been a need for another structure to sustain our judicial system as a replacement or alternative for settling disputes between peoples.

Our judicial system has some drawbacks, such as an overburdened court, time-consuming, requiring a costly technical process with a low population ratio of judges, and unfilled vacancies with long procedural and pendency of cases.

Alternative dispute resolution mechanism in the Indian judiciary system

Justice is the foundation and the focus of every civilized society. The quest for justice was an ideal that the human race aspired to down the line for decades. Dispute resolution is one of the Indian judiciary’s major functions and is essential to a stable society. The Government of India operates through various organs and the judiciary is directly responsible for the administration of justice.

The judiciary in India is the real point of the provision of justice. Resolving conflicts is one of the key factors for society’s peaceful existence. Arbitration, the ADR style, is accepted as an instrument of dispute settlement by the Indian judiciary. Originally, arbitration was regulated by the Indian Arbitration Act, 1940.

The courts were mainly concerned about the control of the arbitral tribunals, and they were very keen to see if the arbitrator had exceeded his authority in determining the matter referred to him for arbitration.

The judicial process in India is not only expensive for an ordinary person but also it takes years and years to deliver justice. To address the much-criticized delay in the delivery of justice, the implementation of Alternative Dispute Resolution (ADR) mechanisms such as Lok Adalats, arbitration, mediation, and conciliation were considered and followed with praiseworthy results afterward.

The judiciary has figured prominently in developing and transforming India into an arbitration-friendly country, and the day is not far away when India will be a significant contender in hosting international arbitrations. When a party challenges an arbitration ruling, the Supreme Court of India and different High Courts have taken a hands-off attitude.

In recent years, Indian courts have repeatedly embraced an arbitration-friendly attitude. There have been numerous cases where courts have sustained arbitration agreements despite small flaws, thereby recognising the parties’ decision to have their problems resolved through arbitration. Despite adopting a pro-arbitration stance, the Supreme Court approved an arbitration agreement despite an error, concluding that because the parties’ purpose to arbitrate was obvious, the Court can make the arbitration agreement viable even if it contains certain faults.

Whenever litigants have attempted to circumvent the Arbitration Act’s requirements, the courts have typically refused to interfere with the awards made under the Act. Anti-arbitration injunctions have also been granted with caution by the courts. The High Court has ruled that if a party has recourse under the Arbitration Act, it cannot obtain an anti-arbitration order from the court by ignoring the Act’s provisions. In that particular ruling, one of the arbitrators was chosen in conjunction with another party and without implementing the consented process, prompting the party to seek an injunction from the Court prohibiting the arbitral tribunal from proceeding with the arbitration.

Measures to be taken to make ADR more effective

There are certain measures that can be taken so that the arbitration process in India will no longer be allowed to drag on needlessly:-

The transition from ad hoc to institutional arbitration should be pursued.
Courts should impose steep fines on bogus requests to overturn arbitral rulings.
Expert arbitrators should be appointed based on the circumstances of the case.
Laws pertaining to arbitration, mediation, and conciliation lack a clear distinction and should be defined clearly.
Each financial year, the state must specify a reasonable proportion of new issues that must be resolved using one of the ADR methods. It would encourage organisations to begin training and developing skills to advocates in the area of ADR, as well as building a profitable ADR practise.

Findings of the Law Commission of India

While the alternative methods have provided speedy justice to the people, some legal luminaries have raised a few relevant questions through these exercises. The Law Commission of India maintained that the reason for the judicial delay was not the lack of clear procedural rules, but rather the inadequate implementation or even absolute non-observance thereof. In its 14th Report, the Law Commission of India categorically stated that the delay did not result from the law-making process, but from the non-observance of many of its important factors. Given the huge number of cases pending, governance and administrative oversight of the judiciary by manual processes have become extremely difficult.

If we study the reports from the Law Commission of India it sheds light on the factors that contribute to delays and a huge backlog of cases before the courts. The main contributing factors are regular adjournments to clients and attorneys, trial boycotts by lawyers, a scarcity of presiding tribunals and tribunals, lack of adherence to basic procedures and standards of case management and disposal.

The Supreme Court in Brij Mohan Lal v. Union of India & Others made it clear that this state of affairs must be addressed: “An autonomous and effective judiciary is one of the basic structures of our Constitution … It is our constitutional obligation to ensure that the backlog of cases decreases and that efforts are made to increase the disposal of cases^.”

In the case of Avitel Post Studioz Limited v. HSBC PI Holdings Limited, the Supreme Court recently addressed the subject of whether or not claims of fraud can be handled in arbitration rather than in court. The Apex Court decided that “serious charges of fraud,” leading to non-arbitrability, could emerge solely if any of the following two requirements were met, but not otherwise:

In cases in which the Court decides that the arbitration agreement itself is irrevocably tainted by fraud;

or when claims of arbitrary, fraudulent, or mala fide conduct are made against the State or its instrumentalities, giving credence to due process concerns rather than commercial questions.

Thus, it implies that all other cases containing “serious allegations of fraud,” that is, situations that do not fit the Supreme Court’s two criteria, would be arbitrable.

Alternative dispute settlement was once viewed as a voluntary act on the part of the parties seeking legislative recognition under the Civil Procedure Reform Act, 1999, the Arbitration and Conciliation Act, 1996, the Legal Services Authorities Act, 1997, and the Legal Services Authorities (Amendment) Act, 2002. What is required now is the implementation of the Parliamentary object.

Conclusion

ADR and the judiciary should work in tandem as they both are reliant on one another; the Courts must urge the parties to resolve their conflicts constructively using ADR processes. The Courts’ engagement in the ADR process should be limited, and they should only act if needed; more freedom must be given to the ADR procedure in business disputes. The arbitrator, who is attempting to be an unbiased judge, ought to be rigorous and liable for any liability they may incur. Arbitrators should be given training and such advocacy programmes should be organised by the judiciary to give them and train them the proper method to conduct themselves in the ADR process.

It is strongly recommended that in a country like India, where the ADR process is rapidly expanding with more cases being filed, the judiciary should commence arbitration advocacy under the Arbitration Act, allowing it to resolve more litigation and conflict cases in India.

Although the court system has attempted to extract obstacles during and after the arbitral proceedings by generally refraining from meddling with arbitral tribunal decisions or having to pass other arbitration-friendly judgments, this may not be enough to entice foreign entities to use India as a venue for arbitration.

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

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Is goodwill a depreciating asset under the Income Tax Act

By

Diva Rai

-

October 20, 2021

0

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This article is written by Anushka Singhal, a student of Symbiosis Law School, NOIDA. In this article, she discusses whether goodwill is a depreciating asset or not.

Table of Contents

Introduction

Goodwill is the reputation of the business or the company that basically plays a very important role when one acquires a company. The goodwill of a company is not just the personal value of the company but it represents the commercial value of the same. It consists of the assets, contacts and the good name of the company. Goodwill was previously considered as a depreciating asset i.e. a property that provides an economic benefit for more than one reporting period. Normally, the Income Tax Act,1961 (hereinafter referred to as the IT Act) explains two types of assets – tangible and intangible assets and goodwill was not included in either of them. Goodwill is not explicitly mentioned as a depreciating asset under the IT Act. It was the judiciary that held that goodwill is a depreciating asset. But goodwill was able to find a place as a depreciating asset for a very short period after which the government through the 2021 Budget explicitly mentioned that goodwill is not a depreciating asset.

Goodwill as a depreciating asset

Goodwill is said to be a thing that is easy to describe but difficult to define. It holds an established business apart from a new business. An excess consideration over and above the net value of an asset taken over in slump sales, mergers and acquisitions is called goodwill. Depreciation of goodwill is not allowed now but it continues to be applicable on other intangible assets like trademark, copyright etc. Depreciation is considered a decrease in an asset’s value. It can occur due to a number of reasons. Section 32 of the Income tax provisions provides rules regarding depreciation. We know that the value of machinery, land etc. can decrease over time and this decrease is known as depreciation. Goodwill was considered as a depreciable asset because it was believed that it falls in the category of intangible assets and depreciates over time similar to other assets. But the Memorandum to the Finance Bill, 2021 states that goodwill is not a depreciable asset as it can be appreciated instead of being depreciated. This phenomenon of depreciation assisted a taxpayer in paying tax but now with the new legislation, a pandora of new judgments will definitely open.

Provisions of the IT Act dealing with depreciation

The IT Act lays down the concept and procedure for depreciation through Section 32. Firstly, it categorizes the assets into two types- buildings, machinery, plant or furniture as tangible assets and technical know-how, franchise, licence etc. as intangible assets. It lays down that in the case of tangible objects like machinery, plants or furniture, depreciation can be carried out through a reduction in the value of the assets if it exceeds a particular value. It lays down that deduction cannot be carried out for a car which is used for tourist purposes and also the one which is used outside India. It also lays down that depreciation cannot be allowed for new machinery where there is a certain reduction in price in accordance with the Central Government. The Act explains what new machinery is and the definition of the same is laid down in Section 32-A. Further, it also lists some categories of machinery or plants in which no deduction can be carried out. They are-

Any machinery which was previously used outside India.
Any machinery which is installed on residential premises.
Any machinery used in an office or road transport vehicles.
Any machinery or plant, for which the actual cost has been realised.

Depreciation of an asset helps a company to recover the cost of an asset when it was purchased i.e if a machine has been used for 10 years and then after somebody acquires the company and uses that machinery, he has the right to cut the cost for the use of those 10 years. Moreover, Section 50 of the IT Act also lays down the provisions for the computation of capital gains in case of depreciable assets. This section has now been amended and the procedure to be followed in cases of goodwill already deducted has been laid down.

Whether it is a depreciating asset under the IT Act

Goodwill was first declared as a depreciating asset in the case of Commissioner of Income Tax Kolkata v. Smifs securities Ltd.(2010) wherein the Hon’ble Supreme Court held that goodwill falls under the category of intangible assets and thus can be considered as a depreciating asset. Since then, the companies were using goodwill as a depreciating asset and the courts were also dealing with the cases in the same way. The IT Act lays down provisions for amalgamation and acquiring of a company and therein goodwill was being used as a depreciating asset. The inclusion of goodwill as a depreciating asset led to the companies going for a business purchase instead of a share purchase. But after the Finance Bill 2021, it is no longer considered as a depreciating interest and a proviso has been added to Section 32 which explicitly mentions that goodwill is not a depreciating asset. The decision of the government has started a plethora of debates.

Many of the experts say that such exclusion of goodwill was not needed as it deprived the buyer of getting adequate benefits. The depreciation of goodwill was not leading to any tax evasion and thus it was not needed. The reasons for discontinuing the use of goodwill in the depreciating assets were given by the government in the memorandum. It says that there is no concrete proof that the goodwill would depreciate over time, it can appreciate or it can even remain neutral and thus it would not be a logical decision to keep it under the header of intangible assets that can be depreciated. The amendment has not made a distinction between the provisions to be followed in a case of slump sale as well as in the case of amalgamation. This distinction was needed as in both these cases goodwill is calculated differently.

An analysis of the recent amendments in the IT Act regarding goodwill

The decision of removing goodwill from depreciating assets has received a mixed reaction from the people of the tax industry. Here are some of the apprehensions (or we can say the negative side) of the amendment-

It will increase the tax costs. All the recent deals would have to be reconsidered because the taxes would be altered now as depreciation is not allowed anymore.
The memorandum to the Finance Bill says that goodwill cannot be depreciated but it is not true. The goodwill can be depreciated in case a merger or acquisition goes wrong. There are certainly other instances too wherein the goodwill can depreciate.
This proposal does not differentiate between depreciation in a lump sale vis-a-vis depreciation in a merger and acquisition deal as goodwill has a different definition in both cases.
The proposal will lead to double taxation wherein neither the buyer would benefit nor the seller.
Depreciation on goodwill is always an essential element in calculating the post-tax return of an acquisition proposal and would severely impact pay-back calculations of every M&A deal and the corresponding negotiations in the bid or offer price for an asset.

Case laws

CIT v. Smifs Securities Ltd.

Here an amalgamation occurred between YSN shares and Smifs Securities Ltd. where a bad debt was incurred by the company. The other company was asking for the depreciation of assets and thus a deduction of Rs. 54,85,430 due to the depreciation of goodwill. The other company was denied depreciation on such bad debt. It approached the Court seeking depreciation. The Hon’ble Court allowed the petitioner to deduct the value. The Court held that goodwill is an intangible asset and thus can be depreciated. It applied the principle of ‘ejusdem generis i.e. of the same kind and took goodwill to be the same as any other business or commercial right of similar nature.

Triune Energy services P. Ltd. v. DCIT

Here the assessing officer denied the deduction in goodwill. The assessee said that since the opposite party had goodwill, thus it should be deducted. In this case, the Delhi High Court observed that goodwill is an intangible asset providing a competitive advantage to an entity and provides a company with innumerable benefits that are acquired when a person acquires a business.

Bremko Brake India v. DCIT

In this case, the income tax tribunal held that as the buyer acquired the machinery and other things on acquiring the business, similarly he acquired the list of customers, know-how and thus, in short, has acquired the intangible assets, goodwill being one of them.

United breweries v. ACIT

This case was different in the sense that it did not directly allow for considering goodwill as a depreciating asset unlike the decision in the above cases. It was held that an amalgamating company would not be entitled to the depreciation of goodwill if the amalgamating company is not claiming the same.

Pitney Bowes India (P) Ltd. v. DCIT

Herein the company was denied the deduction of goodwill costs as it had not pleaded the same before the High Court and Supreme Court previously. The Court held that an alternative plea of allocating the value of Government Authorisations/Approvals (GAs) towards goodwill also cannot be accepted as the taxpayer is bound to accept the value assigned to the Government Authorisations/Approvals (GAs) by an independent valuer.

Conclusion

The goodwill that was erstwhile a depreciating asset is no more the same. This new decision by the government may lead to several cases being filed in court. The decision has not been received happily by many and the chances are high that it would be challenged. Goodwill, if considered as a depreciable asset, would have a positive effect on the transactions and it is wrong to exclude it from the depreciable assets. It would be interesting to see what will be the next step of the major players of the industry.

References

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