An overview of mediation and its future in insolvency proceedings

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October 9, 2021

This article is written by Aditi Aggarwal, from Symbiosis Law School, Noida. This article gives an overview of mediation as an ADR mechanism. Further, the future of mediation in insolvency proceedings has been discussed along with some pertinent case laws.

Table of Contents

Introduction

India is witnessing a new trend, where parties are resorting to Alternative Dispute Resolution methods and trying to make out-of-court settlements. This method of resolution not only saves time but is economically viable too. One of such methods is ‘Mediation’.

When it comes to Insolvency proceedings in India, the Insolvency and Bankruptcy Code of 2016 governs them. Since the Code’s inception, it has been effective in recovering money. The fundamental goal of the Code was to reorganize and rehabilitate businesses while also balancing creditors’ rights, however, it has not been accomplished in its true spirit, as the Code is still being exploited as a debt recovery tool. To solve this problem, a proposed solution can be solving such disputes through mediation.

What is mediation and which laws mention it

Mediation is a non-binding dispute resolution method (as the decision-making power remains with the parties) through which a third neutral party (known as ‘mediator’) tries to resolve the dispute between the parties and attempts to reach a mutually acceptable and amicable agreement. The mediator tries to do so through negotiation and communication with each party individually.

In India, this method has not just gained statutory place under many laws but has also been recognized in various judgments by the Indian judiciary. The laws under which it is mentioned are as follows:

The Code of Civil Procedure, 1908

With an Amendment in the year 2002, Section 89 was brought under the Code of Civil Procedure, 1908.

According to this subsection(1) of this Section, the court can formulate and give settlement terms to the parties for observation, if according to the court, there are existing elements of a settlement that may be accepted by the parties. After the parties have given their observations to the Court, the Court may then formulate the possible settlement terms again and further, refer the terms to for mediation or any other ADR method.
According to subsection 2(d), the Court has to give effect to the compromise that the parties reached by following the prescribed procedure.

The Micro, Small and Medium Enterprises (MSME) Development Act, 2006

The Micro, Small, and Medium Enterprises (MSME) Development Act (2006) came into force intending to address policy issues that affect MSMEs along with investment and coverage ceilings under the sector.

Section 18 of the Act provides an introduction to the interplay between the Arbitration and Conciliation Act, 1940 the MSMED Act.

As per section 18(1) of the MSMED Act, In the event of payment default, any party may submit the matter to the Micro and Small Enterprise Facilitation Council.
Section 18(2) of the Act establishes a conciliation process that the Council may undertake itself or refer to any institution that provides alternative dispute resolution. The Act does not allow for a distinct way of conducting conciliation, and the requirements of Sections 65 to 81 of the Arbitration Act are to apply to the dispute under this subsection.
As per subsection(3) of section 18, when a dispute cannot be resolved by conciliation, the Council shall either arbitrate the issue directly or submit it to an institution for arbitration.

Among the corporate world and especially among the SMEs (small and medium enterprises), the Insolvency and Bankruptcy Code has created a fear of prosecution even though the recovery rate of insolvency proceedings is high.

Real Estate (Regulation and Development) Act, 2016

This Act aims to promote the real estate sector and ensure the sale of an apartment, plot, or building or of a project relating to real estate transparently and efficiently by establishing a Regulatory Authority. Section 32(g) of the Act allows for the peaceful resolution of issues between promoters and allottees via the use of a dispute resolution forum established by organizations.

The Industrial Disputes Act, 1947

This Act came into force to investigate and settle industrial disputes along with some other purposes. The Act appoints conciliators to arbitrate the settlement of industrial disputes according to established procedures under Section 4. Further, Section 12 provides the duties of conciliation officers.

The Companies Act, 2013

Read with Companies (Mediation and Conciliation) Rules, 2016, the Companies Act, 2013 under Section 442 gives the authority to the Central Government for setting up an expert panel to solve the dispute of the parties through mediation.

The goal of the section is to reduce the burden of the National Company Law Tribunal and National Company Law Appellate Tribunal by providing the parties to dispute with an alternative to address their issues while their dispute is pending.

Recent Amendments

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Court (Amendment) Ordinance, 2018

Through this Amendment, a new provision relating to mediation was inserted through Section 12-A. According to this Section, a suit relating to any commercial dispute cannot be filed under the Act (unless it is any urgent interim relief) before first utilizing the remedy of pre-institution mediation, following procedure and manner prescribed by the rules of the Central Government.

Consumer Protection Act

The recent Amendment in the Consumer Protection Act 2019 provides for the initial reference of disputes to the consumer mediation cell for mediation. The State government has been given authority under Section 74 of the Act to create a consumer mediation cell to be connected to each district and state commission in that state. According to Section 37(2) of the Act, if the parties agree to settle by mediation and give their approval in writing, the District Commission will submit the issue to mediation within five days of obtaining consent, and the provisions of Chapter V, which deal with mediation, shall apply.

United Nations Convention on Mediation

India is a signatory to the Singapore Convention (United Nations Convention on Mediation), as far as international conflicts are concerned. The convention encourages the settlement of disputes through mediation under various Indian laws.

Singapore’s government proposed mediation in 2017, especially in insolvency situations. The responsible committee recommended that mediation centres be used and that the panels of these centres be enhanced to include mediators with experience in cross-border restructuring.

The SIMC COVID-19 Protocol, which offers companies an efficient option through accelerated mediation for conflict resolution, was recently established by the Singapore International Mediation Centre, keeping in mind the importance of mediation in the coming time.

In similar lines to the Singapore project, the Georgian International Arbitration Centre launched a project with the assistance of the European Union and United Nations Development Programme. The project allows the parties to either refer to their mediation or facilitation for the resolution of a dispute.

How mediation differs from other ADR methods

There are many modes of Alternative Disputes Resolution (ADR): mediation, arbitration, negotiation, etc. Mediation is different from other ADR methods in the following ways:

A mediator cannot give orders to the parties

The mediator, who is not a party to the dispute, provides his or her services to settle the dispute and participates actively in the ongoing discussions to resolve the differences and conflicts.

The purpose of the mediator, according to Article 4 of the Hague Convention for the Peaceful Settlement of Disputes of 1899, is to bring coordination to mutually opposed claims and solve the parties’ issues by pacifying the parties’ feelings of wrath and resistance.

But it is to be noted that a mediator cannot force the solution upon the parties or order them to reach a settlement. That choice is up to the parties and a mediator can only help in reaching a settlement. The moment he does so, his role ends there.

Mediation is a less formal method

This method is quite informal and flexible as it is not officially organized and recognized. No counsels are needed and the parties do not have to follow any formal rules relating to evidence or formalities like presenting witnesses.

Some laws mandate resolution through mediation before filing a suit

As discussed above, meditation has been a part of many statutory provisions, which shows that it is not a new concept. In fact, some statutes provide for mediation as a prerequisite to filing a suit in a Court of law.

Importance of mediation as an ADR mechanism, especially in view of insolvency proceedings

Mediation offers the flexibility to parties to come up with fresh solutions

Mediation encourages “party-driven solutions” by allowing the parties to reach an agreement via persuasion. The procedural and substantive norms of conflict settlement are left to the parties to decide. It can then assist the parties in reaching an arrangement that benefits both of them in some way, rather than pursuing the traditional route of dismantling assets and reorganizing business interests.

No party loses or wins

During mediation, both parties try to reduce their short-term expectations to a certain extent. Further, negotiations supervised by a mediator help the parties to reach a mutual decision without any legal foundation. Thus, it can be said that mediation increases the chances of a win-win situation, where no party wins or loses individually.

Boosts the alliance between the parties for future business models

Since the process of mediation requires only a mediator and the two concerned parties, the procedure remains a private affair. It helps in avoiding any unnecessary publicity regarding the dispute. In addition to this, it also helps in keeping commercial secrets of business secure along with other important information.

Lowering the burden of NCLT

Under normal conditions, an entire process of corporate insolvency should take not more than two hundred and 270 days in total. The difficulty is always faced in the timely completion of the CIRP (Corporate Insolvency Resolution Process) deadline. Due to the massive backlog of cases that the National Company Law Tribunal is overburdened with, the pendency in most instances surpasses a year. Determining whether to implement a resolution plan to liquidate the firm takes time as well.

In the event of insolvency, the initial attempt should always be undertaken to make recovery, especially if the insolvency occurred owing to current market circumstances. Even if the insolvency was caused by poor management, an attempt at recovery should be undertaken by making management changes.

The Supreme Court has, in many judgments, reminded businesses of the actual purpose of the Insolvency & Bankruptcy Code (IBC), which is not intended to be used only for debt recovery. The only approach to achieve the stated goal and reduce NCLT’s burden is to include ‘mediation’ in the settlement process.

Economically viable method for both the parties at dispute

During court proceedings, the professionals who are appointed under the statute must be paid more as the proceedings progress, causing the entire process to become costly.

Mediation, on the other hand, as a means of conflict resolution, has the potential to have a substantial influence on the entire economic system. In a socio-economic sense, preventing a company from going bankrupt when it is experiencing financial difficulties would allow employees to remain employed, all available resources to be efficiently utilised, and relationships, such as those with small suppliers of goods and buyers/customers of products and services, to be preserved.

In larger insolvency cases, mediation may speed up the process along with cost-effectiveness, because of which more money may be saved which can be utilised in satisfying the creditors. Thus, mediation is the best-suited option in a country like India which has a high population and where wealth is unequally distributed.

The Jaypee Infratech case (2020) led to the real estate market’s collapse in India. If it was resolved through mediation, many issues could have been settled between the homeowners and the financial creditors.

Brings Uniformity in Cross Border Disputes

Different jurisdictions may handle legal matters differently as a result of cross-border conflicts. It is feasible for parties to discuss and use a uniform settlement process through mediation.

For example, Jet Airways, one of the country’s largest airlines, ceased operations in 2019 due to a lack of further cash/loan funding. A consortium of lenders led by the State Bank of India (SBI) attempted to revive the airlines by implementing a resolution plan. None of these strategies worked, therefore the lenders, led by SBI, filed insolvency proceedings against Jet Airways by approaching the National Company Law Tribunal (NCLT).

While SBI began the proceedings in India, the Dutch Insolvency Court Administrator initiated a parallel proceeding for the sale of one of SBI’s confiscated planes. NCLT was approached by the aforementioned administrator. It committed not to sell the asset that has been seized.

It is possible that had the matter been mediated, Jet Airways would not have had to face such a situation.

Many companies, partnership firms, and corporations realize the benefits of mediation. Due to this realization, many of them have started to include ‘compulsory mediation’ clauses in case of any disagreement or dispute between parties. However, mediation is still not a popular choice.

How can mediation reconcile the interests of all the creditors in insolvency proceedings?

A very unique feature of mediation is that it requires minimal participation, which further means that not all the creditors need to be a part of the dispute resolution. Only the principal creditors and the debtor can be a part of the resolution.

When a debtor and certain creditors reach an agreement, the other creditors are unable to contest the arrangement and must abide by it. If the court does not confirm the peaceful settlement that ends the issue, it does not affect creditors who are not participants in the agreement. This situation is known as ‘cramdown’.

Case laws

V.K. Parvinder Singh v. Intec Capital Ltd. & Anr (2019)

In the case of V.K. Parvinder Singh v. Intec Capital Ltd. (2019), an authorized representative of the promoters filed an Appeal against the admission order passed by the Adjudicating Authority. Before the formation of the Committee of Creditors, they also indicated their readiness to settle the claims of the Financial Creditors.

The Appellate Tribunal chose a retired Judge to begin the mediation procedures between the parties since the parties, in this case, consented to it. Finally, the case was concluded through mediation, and the Appellate Tribunal was presented with the report. The order of the adjudicating authority was set aside by the Hon’ble Appellate Tribunal and held that the settlement terms should be treated as the Appellate Tribunal’s directions and order.

The 2008’s Lehman Brothers case

Lehman Brothers Holdings Inc., a firm dealing in financial services globally, was founded in 1847 and filed for bankruptcy in the year 2008. One of the arms of Lehman Brothers dealt in derivatives. The arm was a counterparty to at least 1.2 million derivative transactions with over 6,500 different parties.

Concerning the insolvency proceedings, an order mandating mediation for the disputes relating to the derivative contract was ordered by the court. After which, from about $9 billion outstanding claims, $333 million have been brought by 110 mediations brought for the estate of Lehman Brothers.

Thompson v. Greyhound Lines, Inc. (2013)

A company, Greyhound Lines Inc. in the USA faced insolvency in 2013. Because of this, property damage and personal injury claims were brought by thousands of claimants who suffered due to traffic accidents involving the vehicles of Greyhound. For resolution, the company set up a pre-reorganization Mediation plan and dealt with each of the creditors individually.

The process comprised of three stages, wherein the first stage was able to resolve half of the claims, The three stages are discussed as follows:

Stage 1 (the ‘offer and exchange stage’): The creditor had to fill out a claim form for lost earnings, medical costs, and other losses.
Stage 2: Negotiation of damages was done by the parties in this stage. The parties engaged in mediation for 60 days, if the parties could not reach a decision or if the participation in this stage was declined by the creditor.
Stage 3: This stage was the final stage; if the final agreement was not reached by the parties in this stage, they would have had to go for arbitration.

This case is an excellent example of how mediation could result in a win-win scenario by reducing litigation expenses and balancing the parties’ interests by resolving the dispute peacefully.

Position of other countries concerning the use of mediation in insolvency proceedings

Many countries like the USA, Netherlands, Hong Kong, Singapore, etc. have tried to inculcate dispute resolution through mediation in some bankruptcy cases. Out of these countries, one of the first countries to adopt it is the Netherlands.

USA

The USA uses mediation frequently and court-ordered mediation has proved to be very successful in cases like Lehman Brothers, Enron, etc. The concept was introduced in the country in 1986.

The country saw increased use of ADR (mediation) in cases of insolvency in the year 1998 when the Alternative Dispute Resolution Act was adopted. According to the Act, civil actions (including bankruptcy disputes) need to be authorized by all the federal district courts.

The Bankruptcy Court for the District of Delaware ruled in 2004 that parties must seek to achieve an agreement through mediation before engaging in certain adversary actions. As a result, from 2000 to 2011, ADR was utilized in 60% of reorganization cases in the country.

European Union

ADR in the European Union (EU) took time to be accepted and emerged from the legislation. Many member states of the EU have brought in methods aiming at the pre-insolvency resolution of disputes. The methods’ main aim is to rescue the debtor.

For instance:

Under the French insolvency law, two procedures, conciliation and the ad hoc mandate are provided.
The procedure provided under the German insolvency law allows creditors and the debtor to negotiate an insolvency plan.
In Italy, the insolvency system provides several options for businesses in financial distress to restructure their debt, all of which are handled outside of court (partially or entirely).

Report of the working group on individual insolvency

In August 2017, a report on individual insolvency was published by the Insolvency and Bankruptcy Board of India (IBBI) and gave certain observations and recommendations with respect to the Insolvency and Bankruptcy Code, 2016, specifically part III, some of which are discussed as follows:

India currently lacks extensive expertise in dealing with individual insolvency and bankruptcy systematically. In this regard, the RWG (Report of Working Group) anticipated challenges in implementing efficient individual insolvency resolution and observed that mediation and counselling would be appropriate additional tools to the structure of individual insolvency in the Code.
Some legal modifications are necessary to include a mediation and counselling mechanism in the Code. However, it is first necessary to research to determine all necessary amendments to the Code to operationalize mediation and counselling within the present legal framework. For a better understanding, mediation and counselling mechanisms in other developed jurisdictions such as the United Kingdom, the United States, Singapore, Hong Kong, Australia, South Korea, and the Philippines can be researched.
Recommended establishing a complete framework for individual insolvency and bankruptcy mediation and counselling, as well as making necessary amendments to the Code to assist individual insolvency and bankruptcy after proper research.

Suggestions and the way ahead

Responsibility of the Bar and Bench

For mediation to emerge as a mechanism resolution, particularly in insolvency proceedings, it is the responsibility of the Bar and Bench to create a strategy for it. Such a strategy can include following a formal insolvency process along with mediation which would help enable resolution across borders, cultures, and jurisdictions feasibly. More awareness can be brought about this form of the mechanism by talking about it in corporate judgments and opinions of the judges.

E-mediation

At a time when the whole world is facing the COVID-19 pandemic, e-mediation can be the way to resolve corporate disputes. This way would help in having a quick resolution of disputes and might save a company’s life.

Even in the post-COVID-19 pandemic scenario, this approach might be beneficial in addressing the problem of debt overhang, particularly individual financial suffering brought on by the crisis. Seeking the rapid advancement of technology and present-day problems, E-Mediation has the potential to grow rapidly in the near future.

In many courts, some type of mediation of business disputes is offered for parties to consider while they await trial, and it’s long been used by those who grew impatient. As cases have dragged on during the pandemic, it’s become a lot more popular. As the hearing of many business disputes remained pending during COVID-19 and even the IBC in India was suspended for some time, it has become a popular mechanism in itself.

Conclusion

In November 2019, while giving an interview to Economic Times, the Former CJI Hon’ble Mr Justice S. A. Bobde rightly highlighted how mediation is one of the important ADR mechanisms. He also observed that pre-litigation mediation could be mandated as far as commercial matters are concerned. Mediation can indeed become the future of resolving insolvency proceedings, provided people become more aware of it and its advantages over other dispute resolution methods like litigation or arbitration, and required frameworks are brought into place.

Of course, mediation is not the one-stop solution for resolving all the insolvency disputes, but through it, a company’s value can be preserved if both parties involved in the process try adopting a settlement-oriented approach.

References

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How can a line be drawn between free speech and contempt in a democratic world

By

Rachit Garg

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October 9, 2021

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Contempt proceeding — Image Source - https://rb.gy/45wign

This article is written by Swarnajit Das from Bengal Law College, West Bengal and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders) and Vanshika Kapoor (Senior Managing Editor, Blog iPleaders).

Table of Contents

Introduction

In the words of George Orwell, it is said “If liberty means anything at all, it means the right to tell people what they do not want to hear.” Freedom of speech is one of the most necessary things after food and shelter without which neither an individual can develop nor could any state prosper in the right direction.

Speech in its true sense is the gift of God to mankind. Thereby, it becomes necessary to utilize it in true faith in order to express oneself to the whole world. Speech is also considered to be a weapon that can both defend and kill human beings. Thus, it should be utilized wisely. Speaking quality and the skill of expression have made human beings different from animals. That is why, in every discussing platform, reasonable men always advocated for the freedom of speech and expression.

By means of speech, the human being has acquired the liberty to convey his thoughts, emotions, sentiments and feelings for others. Thus, freedom of speech and expression is a natural human right that an individual gets from birth. Therefore, according to the proclamation of the Universal Declaration of Human Rights (1948), “Everyone has the right to freedom of opinion and expression; the right includes freedom to hold opinions without interference and to seek and receive and impart information and ideas through any media and regardless of frontiers”.

The Preamble of every Constitution depicts the objective and the basic purpose of the constitution and the Indian Constitution is no exception. The Preamble of the Indian Constitution reflects the actual spirit of the Constitution which depicts the liberty of thought, expression, belief, faith and worship. This spirituality and principle is again reflected and described widely in Article – 19(1)(a) of the Indian Constitution. This article falls in Part – III of the Indian Constitution which enumerates the Fundamental Rights guaranteed to the citizen of the country.

Free Speech in context with the Indian Constitution

The Indian Constitution was drafted in a properly planned manner and every essential thing was taken care of and that is why India emerged as one of the most well-governed democratic states. Part – III of the Indian Constitution from Article 12– 35 provides the detailed structure of the Fundamental Rights which are solely guaranteed to the citizens of the country.

This right speaks about the morality and basic right of an individual in the meaning of Right to equality (Article 14–18), Right of freedom (Article 19–22), Right against exploitation (Article 23–24), Right to freedom of Religion (Article 25–28), Cultural and Educational Rights (Article 29–30), Right to Constitutional Remedies (Article- 32) and Limitations on the enforcement of Fundamental Rights (Article 33-35).

Article- 19(1)(a) of the Indian Constitution i.e. freedom of speech and expression is a very sensitive part of the Constitution and it is prone to controversy. If it is used negligently, it may lead to ‘Defamation’ and ‘Contempt of Court’. Thus, the line should be drawn very carefully and perfectly otherwise it will devastate the whole system.

Special attention should necessarily be given to Article-19(2) of the Constitution of India before exercising Article – 19(1)(a). If the necessary limitations are not maintained, on the one hand, he can be booked under the allegation of ‘Defamation’ and on the other hand, there hangs the probability of prosecution for ‘Criminal Contempt’.

Article 129 of the Indian Constitution makes the Supreme Court of India as ‘Court of Record’ and also confers power to punish criminals for contempt of court. Similar power is conferred to the High Courts of the country by the Constitution of India under Article 215 which makes the High Court ‘a court of record’. The Supreme Court and the High Courts of the Country have the power to adjudicate criminal contempt proceedings.

Statutory provision related to contempt

Section-10 of the Contempt of Courts Act, 1971 clearly empowers the High Court to punish the subordinate court in the matter of contempt, if the latter crosses its jurisdiction and judicial limitation. Similarly, Section- 15(2) of the same act clearly defines that even in the case of criminal contempt of subordinate court, proceeding of the contempt is to be initiated by the High Court on a reference made to it by the subordinate court or any motion made to it by the Advocate General (or Law officer for any Union Territory). It is also important to mention that the High Court for the purpose of Contempt of Courts Act, 1971 would also include a court of the judicial commissioner.

Contempt of Court

Section – 2 of the Contempt of Court Act, 1971 gives a clear out a glimpse of ‘Contempt of Court’ which is divided into 2 (two) parts: –

Civil Contempt; and
Criminal Contempt.

“Civil Contempt” means willful disobedience to any judgement, decree, direction, order, writ or other processes of a court or wilful breach of an undertaking given to a court.

“Criminal Contempt” means the publication (whether by words, spoken or written, or by signs, or by visible representation, or otherwise) of any matter or the doing of any other act whatsoever which –

Scandalises or tend to scandalise, or lowers or tends to lower the authority of any court; or
Prejudices, or interferes or tends to interfere with the due course of any judicial proceeding; or
Interferes or tends to interfere with, or obstruct or tends to obstruct, the administration of justice in any other manner.

Section-5 of the Contempt of Court Act, 1971 allows that fair criticism of judicial action is not contempt. This act also says that a person shall not be guilty of contempt of court for publishing any fair comment on the merit of any case which has been heard and finally decided.

The objective of the Contempt of Courts Act , 1971

In India, the crimes of contempt proceedings are dealt with Contempt of Courts Act, 1971. Contrary to the conception, the main objective of this act as mentioned in the Act as “… to define and limit the powers of certain courts in punishing contempt of courts and to regulate their procedure thereto.”

The concept and the basic theme behind this enactment can be best described by the pronouncement of Justice Wilmot in Rex v. Almon:

“And whenever men’s allegiance to the law is so fundamentally shaken, it is the most fatal and most dangerous obstruction of justice and…calls out for a more rapid and immediate redress than any obstruction whatsoever, not for the sake of the Judges as private individuals but because they are the channels by which the King’s justice is conveyed to the people …”

What is Criminal Contempt?

Section – 2(c) clearly defines criminal contempt as:

“‘Criminal Contempt’ means the publication (whether by words, spoken or written, or by signs, or by visible representations, or otherwise) of any matter or the doing of any other act whatsoever which─

(i) Scandalizes or tends to scandalize, or lowers or tends to lower the authority of any court; or

(ii) Prejudices, or interferes or tends to interfere with, the due course of any judicial proceeding; or

(iii) interferes or tends to interfere with, or obstructs or tends to obstruct, the administration of justice in any other manner;”

Scandalizing the sacred structure of the court

Scandalize or scandalizing is an attack on individual judges or the court as a whole with or without referring to certain particular cases creating unwarranted, disputed and defamatory opinions or statements on the courts or about the ability and skills of the judges which threaten the judicial pillars and democratic structure of the country. “Scandalising the Court” is the easy way to describe the crime of contempt which also includes publication by means of social media, print media, visual signs or through an oral medium. Although, it does not relate to any specific case (post or pending) or to any specific judge, it is scurrilous on the Judiciary as a whole and it cannot be entertained with soft hands.

However, the Court must make a keen notice that the judicial authority should not be confused while making the judgement in a manner like whether considering judges as a common individual. Where the contemptuous comments are made on the judge in his individual capacity and not as an officer/ authority of the court, the offence may amount to defamation but the same cannot be charged with contempt of court in that situation.

Prejudicing on the course of judicial pronouncement

Anything was done in express mode whether by speeches or writing misrepresenting and misinterpreting the proceeding of the court and other judicial pronouncement or prejudicing the public for or against a party amounts to contempt. Making a speech with an intention to influence the result of the pending trial, whether civil or criminal is a grave contempt. However, there will be no arisen of question on the intention of the contemnor whether the activity was done with calculated intention to influence the judicial order or not is of no priority.

Although, it is clearly defined in the Constitution that a fair criticism of judgement after the pronouncement of the judgement is permissible in law. However, making any statement (written or oral) or giving press interviews when the litigation is still under the jurisdiction or consideration of the court is strictly prohibited and if done by anyone, will be charged with contempt of court. Therefore, no lawyer or litigant should either give an interview, talk to the press or make any statement with regards to pending litigation before any court.

Defamation

Section – 499 of the IPC clearly defines Defamation as whoever, by words either spoken or intended to be read, or by sign or by visible representation makes or publishes imputation concerning any intending to harm or knowing or having reason to believe that imputation will harm, the reputation of such person is said to defame that person.

While exercising the full-fledged fundamental right of freedom of speech and expression, many individuals unknowingly cross the limitations mentioned in Article – 19(2) of the Indian Constitution which subsequently leads that individual to commit the crime of ‘Defamation’. The open access to the internet and social media gives every individual complete freedom to express one’s view and opinion which sometimes crosses extreme limits and if tends to lower the image of any individual or to lower the goodwill of any particular institution in a defamatory manner, the same person will be charged with defamation which is often known as ‘Cyber Defamation’.

Section – 469 of the IPC which deals with forgery for harming reputation has been amended by Information Technology Act, 2000 to include ‘electronic record forged’ which clearly says – whoever commits forgery, intending that the document or electronic record forged shall harm the reputation of any party, or knowing that it is likely to be used for that purpose, shall be punished with imprisonment of either description of a term which may extend to three years, and shall also liable to fine.

Intermediary Liability and Cyber Defamation

Section – 79 of the Information Technology Act provides safe ways and proper relief to intermediaries against any act of defamation. Section – 79 also clearly defines that an intermediary is not liable for third party information, data, links hosted on its platform. However, the safe ways and protection are limited to certain conditions i.e. an intermediary shall be liable if it initiates the transmission of the defamatory content.

How is Defamation differentiated from Free Speech

Article – 19(1)(a) of the Indian Constitution gives the essence of Free speech or Freedom of speech and expression to all the citizens of the country. However, these guaranteed fundamental rights are not always absolute and sometimes these rights are subjected to restriction on reasonable grounds. The constitution provides reasonable restrictions in order to create the protection of the reputation of another person which otherwise may fall within the ambit of the definition of defamation. It is also made clear that ant comment or remark which hampers the reputation of another person (unless the statement is true) would invite liability under the law of defamation.

Role of Judiciary on Defamation or Cyber Defamation

The Indian Judiciary plays a crucial role in the prevention of defamation or also keeps a keen eye on the cyber platform in order to combat cyber defamation. Judicial examination, scrutiny and critical analysis are the deep reasons for the unity and integrity of India. In the world of criticism, where people take just a minute to keep a caption to criticize someone or something on some issue through a vibrant platform like social media. Therefore, the Judiciary and IT departments are bearing huge responsibilities on their shoulders to keep a keen notice of every activity done on the digital platform by the citizens. They also need to keep a fair look that a fair and legitimate criticism with true facts is no defamation and criticism should not cross the decent limitation.

The Few of the case law and judicial pronouncements related to cyber defamation are as follows:

The first-ever case on cyber defamation is SMC Pneumatics (India) Pvt Ltd v. Jogesh Kwatra (See Here) – In this case, a dissatisfied employee sent disparaging, defamatory, offensive and abusive emails to the company’s fellow employers and to its subsidiaries spread all over the world with an intention to lower the image and diminish the reputation of the company along with its managing director. The Delhi High Court granted ex- parte ad interim injunction restraining the defendant from defaming the plaintiff in both physical and on the cyber platform.
M/S Spentex Industries Ltd. &Anr. Vs Pulak Choudhury (See Here) – In this case, the petitioner had filed for a compulsory and prohibitory injunction along with the recovery of ₹50,000/- as damages for the loss of reputation and business cycle due to defamatory emails sent by the defendants to the International Finance Corporation, World Bank, President of Republic of Uzbekistan and UZEREPORT (a news website portal and publisher of monthly news reports).

Kalandi Charan Lenka v. State of Odisha (See Here) – In this case, the petitioner was stalked online and a fake account was created in her name. Moreover, obscene and indecent messages were sent to her friends from that account by the culprit. The main intention of the defendant was to diminish the reputation and defame the image of the plaintiff. The Odisha High Court held that the said act was done by the defendant and the offence falls within the ambit of the Cyber Defamation. Ant thereby, the accused became liable for the offence of defamation through the manner of obscene images and texts.

Recent controversy related to free speech and contempt of court

In today’s world, the controversy became a regular schedule for a few of the people and such amongst them were Shri Adv Prashant Bhushan, he is a lawyer by profession and a social activist and politician by passion. One of the recent and most controversial case related to ‘Contempt of Court’ in India was Adv Prashant Bhushan’s contempt case. The controversy draws the attention of the whole world and also occupied the headline of almost all the newspapers of the country. Thereby, the Supreme Court of India initiated suo moto contempt proceedings against Mr Bhushan (See Here) for his controversial tweet made against the then Chief Justice of India, Justice Sharad Arvind Bobde. In his 2009, interview with Tehelka Magazine wherein Mr Bhushan questioned the integrity of a past few Chief Justices of India. The 2009 Tehelka Magazine case was filed by Senior advocate Harish Salve in which the accused (Adv Prashant Bhushan) made allegations of corruption in the judiciary. Apart from Prashant Bhushan, the then ‘Tehelka Magazine’ editor, Mr Tarun Tejpal was also charged with Contempt of Court.

In 2010, the three-judge bench headed by Justice Altamas Kabir issued notice to Bhushan and Tejpal, but the case only came up for a hearing when the Supreme Court recently initiated a fresh contempt case against Bhushan.

In the year 2020, again Mr Bhushan rose with a controversy where one of his tweets made on 27^th June, 2020 in which Mr Bhushan has written about the “role of the Supreme Court” in the “destruction” of the democracy during the last six(6) years and had also mentioned the “role of the last four (4) CJI’s” in it.

Another tweet again came out on 29^th June, 2020, where Bhushan had commented on Bobde astride a Harley Davidson bike. He had questioned the then CJI for riding a bike without helmet and face mask while “he keeps the Supreme Court in lockdown mode.” Later, a constitutional bench found him guilty of the offence of committing Contempt of Court and he was fined ₹1/- for breaking the rule of law.

What are the defences available in Contempt Cases

There are many defences available against the allegation of ‘Contempt of Court’ and such are as follows:-

Innocent publication (Section – 3) – This section shows that immunity attaches to certain statements or certain matters which may interfere or tend to interfere or obstruct or tend to obstruct the course of justice in connection with any civil or criminal proceedings pending at the time of the publication. However, if the person so publishing had at the time of its publication no reasonable grounds for believing that the proceeding was pending, the publication is described by this section as “innocent”.
Fair criticism (section – 5) – This section clearly says that fair criticism does not come under the ambit of Contempt of Court. Thus, every citizen of India has got fundamental right to express oneself to the whole world. Free speech and expression also include criticism but that should be fair in nature. Moreover, no person is allowed to keep an opinion or criticize any case which is still sub- judice or pending in the court. Otherwise, it will lead to contempt proceedings.
Truth as defence (Section – 13) – Section 13 of the Act enables the Court to permit justification by truth as a valid defence in any contempt proceedings if it satisfied that such a defence is in the public interest and the request for invoking the defence is bona fide in nature. Truth should ordinarily be allowed as a defence unless the Court finds that it is only a conspiracy to escape the consequences of the deliberate attempt of scandalising the Court.

Conclusion

“With great power comes great responsibility,” the phrase comes true in every instance of our life. At the same time, we can notice that technology has given many opportunities and convenience to human life. In actuality, technology provides a cushion to our life. However, there are many instances whereby the mistake or due to some technical glitch, we commit the wrong. The very best example can be Social Media without which human life will become standstill.

It gives a vibrant platform without reasonable restriction whereby, it gives the user complete liberty to say and express anything which unknowingly sometimes leads to the commission of ‘Defamation’ and ‘Contempt of Court’. In every democratic world, this is very necessary that there should be no bar on free speech and expression and at the same time, there should also be an imposition of reasonable restriction in order to prevent the structure of democracy and also to secure sovereignty and integrity of the country. So, it is very necessary from my point of view that a line should be drawn between free speech and contempt in a democratic world for smooth governance of the country.

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Creation of IP division by the High Court of Delhi

By

Shoronya Banerjee

-

October 9, 2021

0

delhi-high-court — Image source - https://bit.ly/3dSDHZK

This article is written by Anshuman Dash, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

Introduction

Due to the growing research and developments in India, several intellectual properties came up in the 21^st century, and with the boost in innovation, came disputes regarding intellectual properties. Now, it was amazing for a developing economy to have a more intangible property to be exploited to generate revenue but the increase in disputes heavily burdened the courts which were already overburdened. There arose a need for a special appellate board only to deal with issues related to intellectual properties which gave rise to IPAB (Intellectual Property Appellate Board) which was set up in September 2003. The aim of this appellate board was to establish a smooth venue for disposing of intellectual property cases on a rapid basis as compared to the high court’s as the issue mostly were the appeals against the Registrar. In this article, we shall focus on the order of the Delhi High Court and the application of the Tribunals Reforms (Rationalization and Conditions of Service) Ordinance, 2021

Why was the IP division created?.

On 4th April the Government of India by using Tribunals Reforms (Rationalization and Conditions of Service) Ordinance, 2021 scrapped the appellate board citing inefficiency. The main reason for the creation of this appellate board was faster delivery of justice and reduction of dependence on High Courts but the board failed as there were several cases pending in the Appellate Board and it was facing issues regarding shortage of staff. Following this ordinance, all the pending cases of the IPAB were subsequently transferred to the high courts. Due to this, the Delhi High Court recommended the creation of a new intellectual property division.

Objectives and aim of the recent IP division in Delhi High Court

Adjudicating all the matters related to Intellectual Property Rights would be under The Intellectual Property Division of the Hon’ble Delhi High Court. This will include the following:

Intellectual property disputes
Appeals from the registrar of Trademarks, Controller of Patents, Copyright Registrar;
Revocation and cancellation of applications
Writ petitions
Original proceedings and Appellate proceedings;
Fresh intellectual property rights filing
Regular First Appeals (RFA);
First Appeal from Order (FAO);
All other proceedings that were maintainable before the erstwhile IPAB under the trademarks, copyrights, patents and Designs Act.

The main aim is to create a division within the high court of Delhi for expedite clearance of disputes relating to intellectual property rights.
The Delhi High Court has been formulating rules and regulations for the newly created body intellectual property appellate board.

Tribunal reforms (Amendment act of 2021) that lead to the scrapping of IPAB

A tribunal is a quasi-judicial body with the presence of the executive wing of the government vested with certain specific judicial rights which are formed as per Articles 136 and 227 of the Indian Constitution. The original idea of the tribunal system was to free certain specific issues out of the clutches of the judiciary so that it could reduce its burden and could provide specific experts to deal with specific disputes with the tribunal having the final call on the fate of the cases. Which meant that those tribunals would be the first and last courts for any appeal but experienced litigators denied this idea and this merely remained on paper.

Litigators preferred courts more than these quasi-judicial bodies as even with scarcity of judges, courts never stop to function unlike in the case of tribunals. So the Tribunal Reforms Act, 2021 takes the litigation back to the courts and finishes off this extra layer of litigation. The case of IPAB (Intellectual Property Appellate Board) mostly remained non-functional in most of its lifetime. This decision was made by the government to end tribunals and start independent bodies under the courts for rapid delivery of justice.

The order of the High Court which established the said division

Serial number	Section under which it is filed	Respective Acts	Nature of proceedings	High court nomenclature	Jurisdiction as per the ordinance	Jurisdiction (under high court)	Court fees
1	Section 47	Trade Marks Act	Original (As per Sec. 47(i) can be filed before Registrar of Trademarks as well as High Court having concurrent jurisdiction)	C.O. (Comm. IPD-TM)	Registrar of TradeMarks” or the “High Court”	IP Division (Original Side)	Five hundred twenty-five rupees(525 rupees )
2	Section 57	trademark	Original (As per Sec. 57(2) can be filed before Registrar as well as High Court having concurrent jurisdiction)	C.O. (Comm. IPD-TM)	Registrar of TradeMarks” or the “High Court”	IP Division	Five hundred twenty-five rupees(525 rupees
3	Section 91: An appeal was made to the Appellate Board which is now the High Court.	trademark	Appellate (against the order passed by the Registrar and since u/s 47 & 57 Registrar and HC have concurrent jurisdiction	C.A. (Comm. IPD-TM)	High court	IP Division	Five hundred twenty-five rupees(525 rupees
4	Section 125 Application to the Appellate Board for questioning the validity of the registration was with IPAB but now under High Court)	trademark	Original (Sec. 125 specifically provides for presentation before the IPAB (now HC) and bars it before the Registrar and since u/s 47 & 57 Registrar and HC have concurrent jurisdiction)	C.O. (Comm. IPD-TM)	High court	IP Division	Five hundred twenty-five rupees(525 rupees
5	Ss19A, 23,31,31A,31B, 31C,31D, 32 and 33 .	copyright	Original (proceedings are originally filed before the IPAB (Now HQ and not before the Registrar as per Section 31-D(3)	C.O. (Comm. IPD-CR)	Commercial Court” (As per Sec. 2(fa) Commercial Court means a Commercial Court or the Commercial Division of a High Court.	IP Division for time being till further orders	Five hundred twenty-five rupees(525 rupees
6	Section 50 Rectification of Register by IPAB which is now under the high court)	copyright	Original (The application as originally filed by the Registrar or any aggrieved person before the IPAB (Now HQ and not before the Registrar as per Section 31- D(3)	C.O. (Comm. IPD-CR)	High Court	IP Division	Five hundred twenty-five rupees(525 rupees
7	Section 72.	copyrights	Appellate	CA (Comm. IPD-CR)	High court	IP Division	Five hundred twenty-five rupees(525 rupees
8	64. Revocation of Patents by the Appellate board which is now under the high court	patents	Original (The application is originally filed before the IPAB (Now HQ and not before the Controller)	C.O.(Comm. IPD-PAT)	High Court	IP Division	Five hundred twenty-five rupees(525 rupees
9	Section 71.	patents	Original	C.O.(Comm. IPD-PAT)	High Court	IP Division	Five hundred twenty-five rupees(525 rupees
10	Section 117-A.	patents	Appellate	C.A.(Comm. IPD-PAT)	High Court	IP Division	Five hundred twenty-five rupees (525 rupees

How would this impact the IP cases in India?

This new intellectual property dispute settlement would result in a more efficient and consistent IP redressal and other high courts would eventually follow the same mechanism. This is because maximum cases of the IPAB were appealed to the Delhi high court so they carry the necessary experience to deal with intellectual property disputes and with the adoption of similar mechanisms by other high courts specialized bodies will sprout within the courts that will have expertise in intellectual properties issues as they would even make something similar to “High Court of Delhi rules governing patent suits, 2020” which would advise them as it would do in the case of Delhi High Court.
There will be a focused approach made by the judges who have technical expertise (as it is required in case of dealing patent cases e. g. the PHOSITA) and have faced intellectual property issues in the past. This shall result in streamlined, consistent and predictable decisions. For e. g. in the past, there were certain cases in which two judges discussing the same facts and laws applied different thought processes or reasoning and reached different conclusions on the same case which has caused high levels of unpredictability. This new system would eliminate these confusions and would provide several exposures to intellectual property disputes.
High courts inherently carry higher worth than any other tribunal, so converting the intellectual property appellate board to an extension inside the Delhi High Court would significantly increase the importance of intellectual properties in India. The decisions provided by the extension wing of a high court shall definitely have an upper hand and higher importance as precedents in future and due to the technical expertise of judges reliability on those decisions would increase exponentially
The problems of the IPAB was the shortage of staff and non appointment of the chairperson which would hardly be an issue in any high court
This would make an upsurge in patent agents who are qualified under the high court.
There might be applicants or patent holders who would have to wait more or in other words, waste their right of exploitation (in case of patents on a majority basis a term- period is as less as 20 years with two or three years wasted already on achieving registration) being reduced as they have to wait and lose more years for the intellectual property division to function on its fullest extent.
Since the intellectual property division is an extension of the High court there would be higher litigation expenditure by the applicants.

Measures to be taken by the Intellectual Property Board

Due to the huge pendency of cases, there are chances that applicants might have totally lost interest in their matters. So fixed timelines should be made for completing the pleadings made before the court. This has to be done specially for cases that were pending in the IPAB for more than one year or twelve months. There should be a discouragement for any adjournments in the IP division and only on some exceptional conditions, adjournments should be considered.
The tenure of judges must be extended and kept for longer periods so that they could build up the required technical expertise in any intellectual property subject matter.
Increase the number of judges in the intellectual property division for speedy justice.

Conclusion

There is a lot of buzz among the lawyers and IP enthusiasts about this issue but instead of totally cutting off the quasi-judicial body it would have been better to transfer those cases smoothly after making a proper mechanism and approaching all those applicants concerned. This would have led to less procedural compliances as now the applicants whose cases have been pending since 2017 or 2018 would have to wait a few more months or years for the compliances to be finished.

Constant delays were a major reason for scrapping the IPAB but now, when it is added to the High Court (which is already overburdened with cases), it may lead to further long delays which might defeat the purpose of this recent high court order. IP holders would have to bear with problems as due to this, there might be a shortage of time period of exploitation of their IP rights. There might be some additional costs for litigation in the High courts as well.

References

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Child sexual abuse in India : where does the law lack

By

Diva Rai

-

October 9, 2021

0

child-sex-abuse-in-India — Image source - https://bit.ly/3Bqc6Jq

This article is written by Dnyaneshwari Patil from RTMNU Babasaheb Ambedkar College of Law, Nagpur. In this article, she discusses the child sexual abuse prevailing in India, legislation regarding the protection of children from sexual abuse, and the Act’s loopholes.

Table of Contents

Introduction

The father of the nation, Mohandas Karamchand Gandhi, once said: “India will be free when the women feel safe to walk in the streets of India at midnight”. However, this continues to remain a dream yet to be achieved and far away from reality. In India, people worship little girls. However, at the same time, there has been an increase in the cases of paedophilia in India. From 2009 to 2014, the number of registered child rape cases rose to 151%. Children with disabilities face more risk as they are the easiest targets, and those from the economically weaker sections do not have the adequate means to protest and complain against the violence. The meagre of data by the proper authorities on the matters regarding sexual abuse of disabling child also aggregate the condition. According to the National Crime Records Bureau, increasing cases are due to the rise in reporting of cases and the development of new criminal law. The decrease in the stigma attached to child abuse and rape cases, awareness regarding the issue on various social media platforms and the introduction of the Protection of Children from Sexual Offence (POSCO) in 2012 and the Criminal Law (Amendment) Act in 2013 was instrumental in higher reporting of rape cases against children.

Child sexual abuse in India

Child sexual abuse (CSA) is an old age problem in India that the public has only been recently acknowledged. Before rape was the primary offence acknowledged by the public, other CSA acts were largely ignored by public discourse and the criminal justice system. In the 2007 survey sponsored by the government of India, in which 12,500 children from 13 different states were interviewed, and the gravity of widespread sexual abuse was brought to the forefront. Most of the time, children are not aware that they are being sexually abused or are scared to inform their parents about the incident. According to the 2007 survey, only 25 % of the children have told anyone about the abuse, and only 3% have informed the police. This was due to the deeply rooted cultural stigmas attached to the term ‘sex’ and CSA and unawareness about the same. The children found it difficult to raise objections against the older adults who were in an authoritative position.

The lack of specific legislation for recognising the range of offensive behaviour regarding CSA such as harassment, fondling, exhibitionism, voyeurism and exploitation for pornography was never legally sanctioned. Until 2012, the only sexual offences, not specific to children, which were covered under three Sections of the Indian Penal Code are rape (Section 375), outraging the modesty of a woman (Section 354), and unnatural acts defined as “carnal intercourse against the order of nature with any man, woman or animal” (Section 377). Thus, offences like non-penetrative sexual assault, harassment and exploitation were not explicitly recognised as a crime. Various Non-Governmental Organisations (NGOs) and the Central government’s Ministry of Women and Child Development strived hard to make the issue gain momentum between the public discourse and politics through the reports “Breaking the silence”. After adequate momentum was created due to the increase in activism by the media and the Ministry of Women and Child Development, it led to the enactment of new legislation called the Protection of Children from Sexual Offences (POCSO) 2012. It is gender-neutral and also recognises boys as the victim of sexual violence. It criminalises sexual assault, sexual harassment and pornography involving children and also mandates the establishment of special courts to expedite trials.

Addressing paedophilia in India

Paedophilia is a mental defect where an individual seeks sexual gratification from children. According to the American Psychological Association (APA) Dictionary of Psychology, paedophilia is “a paraphilia in which sexual acts or fantasies involving prepubertal children are persistently preferred or exclusive method of achieving sexual excitement.” A recent order was passed by the Allahabad High Court denying a man bail who was booked for raping a 13 years old girl. The Court also pointed out its effect on the child and instructed the judiciary to stop such crimes strictly.

The World Health Organisation terms paedophilia as a mental disorder where patients suffer from a persistent sexual interest in children. The condition cannot be cured easily; however, the behaviour can be controlled through coping mechanisms. In India, not many psychologists treat paedophilia. People suffering from the disorder hesitate to take treatment due to the stigmas attached to the issue. However, Paedophiles are different from those who abuse children. Not every paedophile abused minors. India lacks awareness regarding the disorder. Therefore talks regarding the disorder are necessary so that those suffering from it can be provided with proper treatment resulting in a decrease in further misfortunate events.

Distinctive features of POCSO

The POCSO Act was enacted in 2012. It defines a child as someone under the age of 18. The Indian Penal Code does not recognise boys as victims of sexual assault; however, the POCSO Act is a gender-neutral Act and recognises that boys can also be victims of sexual violence. Under the Act, the principle “guilty until proven innocent” has been set rather than the general principle of “innocent until proven guilty” (Section 29). The presumption of guilt under Section 29 would come into play even during the pre-trial stage as ruled by the High Court of Jammu and Kashmir.

Under the POCSO Act, penetrative sex is not only confined to penile penetration, but its definition is broad enough to include oral sex, as well as insertion of any object into the anus, mouth or vagina. (Section 3). In the State vs Pankaj Chaudhary (2011), the Delhi High Court refused to prosecute the accused of rape because digital penetration of the anus, vagina of a 5 or 6-year-old girl was not recognised as an offence under IPC. Thus, due to the POCSO Act and the 2013 Amendment, the increase in the scope of the definition of rape has increased the cover of protection of the children.

The POCSO Act also defines a wide range of sexual assault without any penetrative act with imprisonment ranging from three to five years (Section 7,8). A recent judgement by the Bombay High Court held that groping a child’s breasts without ‘skin-to-skin contact’ would not amount to ‘sexual assault’ under the POCSO Act, which is a graver offence, rather it would amount to molestation under the IPC, which is a minor offence. Before the problem regarding section 8 was the mandatory minimum sentence of three years. Due to this the percentage of acquittal became high because the Judges thought that the mandatory minimum punishment prescribed is more compared to the seriousness of the crime. Aggravated forms of penetrative and non-penetrative sexual assaults, committed by a specific section of the perpetrator in a wide range of situations and conditions or/and have a severe impact on the victim (Section 5,9).

Sexual harassment with a broader definition includes continuous following or watching, or contacting the child directly or virtually or through any other means with sexual intent. (Section 11). It also punishes the abetment of or attempts for committing any of the offences listed in the preceding Sections (Section 16). The law also contains punishment for false complaints or information given with malicious intent to prevent its misuse. Reporting and recording of the case are mandatory under the Act. The police officer must register the First Information Report (FIR) in all cases of CSA. (Section 21, 22).

Critical analysis of POCSO

Even if the POCSO Act has been seen as progressive and acknowledged countrywide, there are still many loopholes in the Act. Thus, we will discuss the problems and ambiguities in the POCSO Act, which might cause unintended negative consequences individually or in combination.

Age of consent

Under the POCSO Act, any person below the age of 18 is considered a child. Any sexual act described under POCSO would be an offence if the victim is below the age of 18 as the consent given by the minor is not considered to be valid consent under the eyes of the law. Thus, the biggest critique of the POCSO Act is that it nullifies the consent of an adolescent girl and holds the adult criminally liable. However progressive the Act may be, consensual sex between minors has been a grey area under the law as it does not provide sexual autonomy to the children. According to a study by the Centre for Child and the Law, National Law School of India University, it was observed that out of the total complaints of sexual assault under POCSO, 26 per cent were related to individuals between the ages group of 16-18 years and nearly 90 per cent of these 26 per cent complaints resulted in acquittal because the adolescent girl refused to testify against the sexual partner as they were in a consensual relationship with the accused. The determination of sexual offence involving a minor would greatly depend on the individual interpretation of the situation or circumstances, which might even lead to abuse of the law. It is either too restrictive of children’s autonomy in such matters or too permissive of CSA.

The Bombay High Court recognised this problem and granted bail to the 19-year boy booked under the POCSO Act for raping her minor cousin. Whereas the girl during the investigation disclosed that it was a consensual act.

The Supreme Court had issued a notice on a special leave petition against the order of the Madras High Court in Maruthupandi v. State (2019). It was held that even if a minor girl falls in love with the partner and has a consensual sexual relationship, the Sections of POCSO will still be attracted against the latter. Further, it was observed that if a minor girl registered a complaint about an offence under the POCSO Act, then it became an offence against the state, and the subsequent compromise won’t take away the offence. Therefore, the petition filed in the SC raises the issue of whether an adolescent boy who enters into a relationship with a minor girl can be convicted for the offence under the POCSO Act.

The Madras High Court also suggested that the consensual sexual relationship with a girl aged above 16- years should be excluded from the ambit of the POCSO Act. It was further said that the Act should be amended such that the age of the offender should not be more than five years older than that of the victim of 16 years or more so that the impressionable age of the victim should not be taken advantage of by the older offender who has crossed the age of presumably infatuation or innocence.

Thus, it is seen that a large array of cases brought under the POCSO Act are by the families of the adolescent and teenagers who are involved in a romantic relationship. Therefore, the courts need to demarcate the nature of the act that should and should not fall under the Act’s ambit because if acted hastily and irresponsibly, it would lead to irreparable damage to the youth, who acted only innocently, due to the severity of the punishment. It should not become a tool for certain sections of society to abuse the law.

Determination of the age

Another problem associated with the POCSO Act is the determination of the age of the minor. What documents should be used to determine the minor victim’s age is not mentioned under the said Act. In Jarnail Singh v. State of Haryana (2013), the Court noted that the age of the victim should be determined by Rule 12 of the Juvenile Justice Rules, and under the said rule, preference should be given to the school documents in determining the age of the victim. If other documents are produced, then the children have to undergo a bone ossification test, which only provides a rough estimate of the child’s age at best. Thus, the forensic means used to establish age might be inexact and complicated. In Babloo Pasi vs the State Of Jharkhand and Anr (2008), it was noticed that determining age is difficult in the case of the absence of a birth certificate or other official documents, and the opinions of the medical experts might help in establishing age; however, it cannot be the only and conclusive factor to do so. It further observed that hyper-technical methods should not be used, and the court should give the benefit of the doubt to the child while ensuring that the law is not being misused. Thus, determining the age is vital under the POCSO Act as it influences the outcome at the charging and trial stages. Therefore, the provisions of the POCSO Act need to be clear regarding the determination of the age and whether the benefit of the doubt be given in cases where the medical or forensic test does not provide an accurate assessment.

Mandatory reporting

One of the problems regarding the said Act is the obligation for the medical professionals in general and mental health professionals, in particular, to report to the police of anticipated or actual offences. Failure to report the CSA would lead to the punishment of a fine, or imprisonment for up to 6 months, or both. The mandatory reporting clause overrides the confidentiality of physician-client interactions. Children who are engaged in sexual intercourse become pregnant are also considered as a victim of sexual assault, and thus it mandates healthcare professionals to inform the police of such pregnancies. However, this contravenes the provision of the Medical Termination of Pregnancy (MTP) Act, 2003, in which it is mandatory for healthcare professionals to keep all information on those seeking abortions confidential.

Thus, professional’s interaction with young people will be compromised due to violation of privacy if they are obligated to reveal their private information. Thus, the Act also states that no person shall incur civil or criminal liability for providing information in good faith. Another problem regarding mandatory reporting is that it raises the issue of who should be responsible for enforcing the legal obligation where the police already scarcely possess the capacity to do so. One failing to report the cases will hardly meet with the penal and financial sanctions due to poor mechanism for its enforcement and lack of accountability.

Implementation of the POCSO

With the increase in POCSO related cases, there has also been an increased backlog of the same. This has become a cause of concern as it is making the law ineffective. Speedy justice is being denied to the victims. The conviction rate is low due to frequent adjournment and the failure of police officers to file investigation reports. Cases under POCSO are disposed of by the police because of insufficient evidence and lack of clues. The public hesitates to file complaints regarding CSA consequently due to the delay direct evidence gets lost. Similarly, the medical examination is unable to tract minor injuries sustained during the unfortunate event and lead to loss of important biological trace evidence.

According to Section 28 of the POCSO Act, the state governments, in consultation with the Chief Justice of the High Court, should designate a Sessions Court as a special court to try offences of CSA. however many provisions are not being complied with by the government. In addition to this, the judges appointed are not experts in the particular subject and lack additional training. Therefore the Supreme Court in a PIL filed by Alakh Alok Srivastava in the court passed certain directions in respect of the Act. The directions included instruction for the fast track courts for avoiding unnecessary adjournment and the constitution of a committee for monitoring the progress of trial under the Act. Constitution of Special task force by the Director-General of Police of the states to assist in the investigation and the production of witnesses before the trial courts on the due date. Creating a child-friendly environment in the court so as to prevent children from becoming hostile during the trial due to fear and various reasons associated with the event.

Conclusion

The legislation for the protection of children against sexual abuse was a much-needed one. It made a significant contribution in tackling the issue. Due to the increasing sensitisation of the problem, reporting of the CSA cases has increased. Provisions of the POCSO Act also contributed toward the recognition of unacceptable sexual behaviours that pose a threat to children. An act of sexual assault or sexual harassment has a long term impact on the mental psyche of the child who is vulnerable and at a developing stage. This trauma they experience may dictate their thoughts for years to come and may hinder their normal social growth leading to various psychological problems. The failure of Fast Track Court might affect the victim adversely. Thus the loopholes of the Act create potential problems for implementation in the Indian context. For the Fast Track Courts to be more effective, judges, prosecutors, and staff of the Fast Track Courts should be trained and sensitised towards child rights. Thus, Rooting out the problems of CSA should be the paramount interest and need the collective efforts of the public, administrator and the judiciary.

References

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Shariah law and cyber-sectarian conflict : how is Islamic criminal law responding to cybercrime

By

Shoronya Banerjee

-

October 9, 2021

0

This article has been written by Surupa Hossain Bhuiyan, pursuing the Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho. This article has been edited by Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

Our new way of life is built around computers and communication, thanks to the explosive rise of the high-technology industry. The rise of Islamic websites on the Internet such as islamqa.info/en,. muslimheritage.com, peacetv.tv, islamicmarkets.com, www.isdb.org, etc some of which are dedicated to Islamic education and propagation while others are of a more commercial or entertainment nature, demonstrates the enthusiasm of certain Muslims to embrace such technology.

On one hand, the use of information technology has indeed transformed the way people communicate and receive information around the world. On the other hand, this has led to a proliferation of computer-related crimes such as theft, fraud, forgery, and general malfeasance as well as classic criminal activities that were previously restricted to organised crime.

In general, computer crime can be defined as a criminal activity carried out with the aid of computer technology. The legal system has lagged behind technological advancements, failing to grasp and adapt as quickly as it should have. The key concern here is how Islamic law, which was founded in the seventh century, can deal with crimes stemming from the use or misuse of new technology and offer proper regulations for the protection of its computer users.

Cyber-sectarian conflict

The growth of new forms of crimes and criminals is certainly aided by the internet. The term “cybercrime” refers to a wide range of virtual illicit activities that take place in cyberspace, such as hacking and communications network sabotage. Unfortunately, an increase in so-called “cyber-sectarian conflict” has emerged from the rising Muslim presence in cyberspace. In September 2008, Sunni hackers targeted more than 300 Shia websites, including Grand Ayatollah Ali al-main Sistani’s website (http://news.bbc.co.uk/hi/arabic/news).

In the Islamic world, the issue of hacktivism (derived from combining the words ‘hack’ and ‘activism’ ) has rarely influenced religious consciences. Religious officials did not condemn hacktivism, giving the impression that it was done to protect Islam. As a result, the internet has become a hotbed of Islamist extremism, fanaticism, and bloodshed.

‘Cyber-Islamist Advocacy’ and ‘Islamist Hacktivism’ are two sorts of cyber-sectarian warfare. The first type includes religious reading, debates, email awareness, lectures, and movies. Cyber-attacks against religious and non-religious websites are referred to as the latter. Cybercrime includes hacking, the distribution of viruses, Trojans, and worms, cyber-vandalism, password thefts, and denial of service assaults (DoS). Academics have paid the most attention to the first category. The cyber-Islamist environment, cyber-terrorism, cyber-Jihad, and a number of other cyber-Islamic issues, for example, have all been extensively researched.

Muslim hackers regard Shariah as the supreme legal system and are therefore critical to cybercrime. Muslims believe that Allah is the only one who can pass laws and that anyone who refuses to accept his law, is a non-believer. Hence, Shariah’s participation in cybercrime is crucial though cybercrime is a relatively new phenomenon.

The basis of the Islamic law or Shariah law

In Islam, the basis of law is the Quraan (Islam Holy Book) and Hadith (Prophet sayings). Shariah law is the name given to Islamic law, and Shariah means “way to follow God’s Law.” It is a set of laws, concepts, teachings, and disciplines developed from Islam’s two principal sources, the Qur’an and the Sunnah. Islamic common law dates back to the arrival of Prophet Mohammad (Peace be upon him) in the seventh century when Islam officially began. Shariah law has an all-encompassing or eclectic approach to guiding people in their daily lives. All public and private conduct is governed by Shariah law. Islam’s Shariah law has a worldly punishment as well as an afterlife.

The Islamic law’s basic premise is to safeguard Islam’s five essential necessities: religion, life, intellect, offspring, and property. Aside from protecting these five necessities, Islam focuses on awakening human awareness through moral education, which also helps to establish religious consciousness in the human soul. Second, Islamic criminal law is based on the idea that punishing a criminal serves as a deterrent to other criminals in the future.

Crimes in Shariah/Islamic law

In contrast to English common law, judges in Shariah are not bound by precedents, regulations, or previous rulings. The most serious crimes and punishments in Shariah require a very high level of proof. If the proof fails to meet the requirements, the crime must be classified as a lesser offence. Crimes in Islam are divided as follows:

In Islam, crimes/ offences are classified as follows:

Hadd offences: Murder, apostasy, declaring war on Allah and His messengers, theft, adultery, defamation, a false charge of adultery or fornication, robbery, and intoxication are the most heinous crimes in Shar’iah law. These are considered acts of blasphemy against Allah.
Tazir offences: It includes acts that are punishable because the perpetrator disobeys Allah’s commandments and laws and it is crime against society.
Qesas offence: It is the crime of retaliation. The victim has the right to seek retribution and reprisal if you commit a Qesas crime. The first statutory “Code of Hammurabi” and the law of Moses in the form of “an eye for an eye” both contain the concept of retribution. “However, it is preferable to forgive,”in Islam.

The assumptions of vengeance are still present in today’s common law. Similarly, Qesa’s crime is straightforward retribution: if a person commits a crime, he is aware of the consequences. In the same way that “civil law” is used in many countries around the world, Qesas law mixes criminal and civil hearings into one. In both common and civil law, Qesas offences are compensated through restitution. Payment (Diya) is required for every offence under the Qesas law. Diya may be traced back to the time of the Prophet Mohammad when there were various local families, tribes, and clans. The culprit/offender will compensate Diya if the victim is still alive. If the victim is no longer alive, the money is given to their family, clan, or tribe. According to the assumption, victims will be reimbursed for their losses.

Islam in cyberspace

With the advancement of technology, the mindset of Muslims is now changing, as well. There are numerous Islamic websites that might be found all over the internet. Muslims in cyberspace have a common platform for interaction and, more significantly, for the dissemination of their own opinions. Despite the fact that certain Muslim clerics issued a Fatwa (religious ruling) forbidding Muslim internet users from accessing chat rooms, this is still the case. On the other hand, for Muslims, cyberspace has become a common location to interact, socialise, and, most importantly, spread their views. It is simple to identify Islamic websites that are specifically developed and optimised to defend Islam against its adversaries. Through online, new features of crimes and criminals are being developed.

Although Shariah does not specifically criminalise any form of cybercrime, it does contain general criminalisation guidelines. The second source of Shariah law (the Prophet Tradition), according to traditionalists, gives strong support for the criminalization of online crime. Scholars have used a number of Hadiths to criminalise developing offences, such as the Prophet’s statement that “no damage shall be inflicted [on anyone] nor retaliated [against anybody].” Because cybercrime causes harm to computer systems or indirectly to an individual’s property – one of the fundamental five values – the Hadith provides a legal foundation for criminalising it.

Muslims believe that the Quran and Hadiths should be the foundation of most, if not all, laws. This is because it is believed that Muslims feel safer in this way and are aware of the law’s boundaries. Such law will otherwise be driven by a group of individuals, such as parliament, which may have flaws.

Saudi Arabia follows traditional Shariah law, a highly strict interpretation of Shariah known as Wahhabism. Though Saudi Arabia is controlled by Islamic law, the Anti-Cybercrime Act was passed by the Council of Ministers. This new act was enacted to address a modern situation, yet it is primarily founded on the fundamental principles of Islamic law. The Anti-Cybercrime Act does not define Internet fraud precisely.

Muslims resist secularisation in their countries because they think Islam is more than just a religion; it is a way of life, and Muslims’ daily activities are governed by Shariah. Because Islamic law is not a Muslim-made law, it can be followed in any country, even if the government does not declare it or believes that what they have done is in violation of Islamic law. Because Shariah contains numerous advantages, objectives, and goals, anything that is unjust or harmful is not Shariah. It changes according to the rewards, situations, times, locations, and ambitions of the individual. Nonetheless, the majority of scholars felt that Shariah has benefits and may be applied to any scenario, such as when it comes to cybercrime. Islamic law provides general norms for responding to cybercrime and constructing efficient countermeasures.

According to Muslim scholars, the internet has provided humanity with a new dilemma by facilitating crimes that know no bounds and leave no trace. Muslim academics claim that Islamic cybercrime legislation should exist because Muslims relate to and follow Islamic teachings that inculcate fear of God.

Conclusion

Computer crime research is not separate from computer ethics research. From cyber stalking to child exploitation, there are various types of computer crimes. Computer crime legislation is thought to be more of a preventative measure than a cure for many people in society as a whole, rather than a deterrent for a single individual. Lawmakers and theologians debate whether Islamic cybercrime should be referred to as a computer crime law or a computer crime ethics law because the goal is to work with human beings to prevent them from committing the crime rather than punishing them. Shariah law is rich with general principles as well as its objective urge to its followers to develop an efficient response to cybercrime, but the extreme groups: Muslim scholars, traditional and reformists face the toughest question of all that what can be done to bring the muslim law in alignment with the modern contemporary criminalisation? While traditionalists always defend the capability of Shariah law to address contemporary issues, they appear not prepared or even clueless at times so as to make a way forward and how to find responses to these comprehensive legal issues. On the other hand, reformists have tirelessly worked in making a paradigm shift and have brought sharia law in harmony with the contemporary legal issues to some extent, but none of the groups have any significant contribution in the space of cyber crime. This situation will give Muslim hackers and cyber-terrorists justification to attack cyberspace which should be prevented.

References

Hasanah U.(2018,November 02). The Effectiveness of Islamic Law Implementation to Address Cyber Crime: Studies In Arab, Brunei Darussalam, and China. Al-Ahkam. Semanticscholar.https://pdfs.semanticscholar.org/26c8/ed6b7919011350d5041c7176a02dd81add3c.pdf
Maghaireh A.(2009). Shariah Law and cyber-sectarian conflict: how can Islamic Criminal Law respond to cyber crime?. University of Wollongong.https://ro.uow.edu.au/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1674&context=lawpapers
Al-A’ali M. (2007,September 20).Cybercrime and the Law: An Islamic View. Webology. https://www.webology.org/data-cms/articles/20200515043342pma46.pdf

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All you need to know about the Atal Bimit Vyakti Kalyan Yojana

By

Oishika Banerji

-

October 9, 2021

0

Islamic-Law-Law-of-the-Muslim-World-eJournal.-June-14

This article has been written by Aditi Sahu pursuing the Diploma in Business Laws for In-House Counsels from LawSikho. This article has been edited by Aatima Bhatia (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).

Table of Contents

Introduction

ABVKY (Atal Beemit Vyakti Kalyan Yojana) scheme is a welfare measure for employees, it was introduced on July 1, 2018. Unemployment benefits are paid to employees insured by the Employees’ State Insurance (ESI) scheme under it. This welfare measure for employees is covered by Section 2(9) of the ESI Act, 1948, in the form of a once-in-a-lifetime relief payment of up to 90 days and can be claimed after three months (90 days) of unemployment in one or more periods.

The Scheme was implemented on a trial basis beginning on July 1, 2018, for two years. From July 1, 2020, until June 30, 2021, the program has been extended for another year. It has also been decided to increase the rate of unemployment relief under the scheme from 25% to 50% of wages, as well as relax eligibility requirements, provided that the Insured Person has been in insurable employment for at least two years immediately preceding her/his unemployment and has contributed for at least 78 days in the contrived period.

What is ESI Act,1948?

Under the Employees’ State Insurance Act, 1948 those workers and employees include those who work in factories, business facilities, and organizations like hotels, road transportation, theatres, newspapers, educational or medical institutions, and stores, where 10 or more people are engaged and working.

In the event of an unpleasant event at work, the ESI system provides benefits to both workers and their dependents. Employees or workers in the above-mentioned groups who earn up to Rs. 21,000 per month and a person who is capped with a disability earning not more than Rs. 25,000 are eligible for this social security scheme under the ESI Act. During times of crisis, the ESI Act aims to defend people’s dignity by shielding them from destitution and deprivation.

There are two contribution periods of six months each in a fiscal year. Also, the ESI Act contribution rate was reduced from 6.5 percent to 4 percent in July 2019 (employer contribution from 4.75 percent to 3.25 percent and employee contribution from 1.75 percent to 0.75 percent).

The employee who exempt under ESI Act, 1948:

The ESIC system does not cover workers or employees earning more than Rs.21,000 per month, and the maximum monthly income for people with disabilities is Rs.25,000.
In Maharashtra and Chandigarh, the current coverage criterion is still 20 employees, rather than 10 in other states or UTs.
Employees with a daily average wage of up to Rs.137 are exempt from contributing.

Eligibility for ESIC Atal Bimit Vyakti Kalyan Yojana

To get eligible under ESIC Atal Bimit Vyakti Kalyan Yojana,

The employees must be covered under Section 2(9) of the ESI Act of 1948;
During the period of the claim for relief, the Insured Person (IP) must be unemployed;
The insured person must have worked in insurable employment for at least two years.
The Insured Person’s contribution should not be less than 78 days during each of the four contribution periods.
Unemployment should not be caused by punishment for misconduct, superannuation, or voluntary retirement.
The Insured Person’s Aadhar and Bank Account must be linked.

Disentitlement for relief under ESIC Atal Bimit Vyakti Kalyan Yojana

ABVKY relief is not admissible in the following circumstances:

During the lockout.
Employees went on strike, which was declared illegal by the appropriate authorities.
Voluntary job termination/voluntary retirement/premature retirement
Contributory service of fewer than two years.
When you reach the age of superannuation.
Convicted (punished for making a false statement) under Section 84 of the ESI Act and Rule 62 of the ESI (Central) Rule
If he or she is re-employed elsewhere during the period in which he or she is receiving ABVKY relief.
Dismissal/termination as a result of disciplinary action.
On the death of IP (insured person).

Benefits under the Scheme of ABVKY

The scheme provides relief to the extent of 50% of the average daily earnings during the previous four contribution periods (total earnings during the four contribution periods/730) to be paid up to a maximum of 90 days of unemployment once in the Insured Person’s lifetime.
After a minimum of two years of Insurable Employment and subject to the contributory conditions, an IP (insured person) will be eligible to draw the Relief under the Atal Beemit Vyakti Kalyan Yojana (ABVKY) for a maximum of 90 days once in a lifetime. After three months of clear unemployment, the claim for relief under the Atal Beemit Kalyaan Yojana will be payable. The compensation will be paid for each month of unemployment. There will be no allowance for prospective claims.
If the beneficiary finds gainful employment between the three months of unemployment for which he was eligible for ABVKY relief, the relief will be paid for the clear month of unemployment between the date of unemployment and the date of re-employment. In this case, the beneficiary may claim the remaining 90 days of relief in the same manner as described above, based on the initial contributory conditions, if he becomes unemployed from Insurable employment again within one year of his initial unemployment.

Online procedure for applying under the Scheme of ESIC Atal Bimit Vyakti Kalyan Yojana

The following steps should be followed to claim the ABVKY scheme. These steps are:

Step 1: Visit the ESIC Official Website.
Step 2: It directs the applicant to the website’s Home Page.
Step 3: Click on the Atal Bimit Vyakthi Kalyan Yojana ( ABVKY) link i.e. [email protected] on the home page.
Step 4: When you click on the link, the Application Form in PDF format opens.
Step 5: The form can be downloaded into the system, and applicants can begin filling it out.
Step 6: Begin by filling out the ESIC ABVKY Form with your basic information such as name, insurance number, Aadhar number, and bank information such as bank name, account number, branch IFSC code.
Step 7: Enter the insured person (I.P.) Insurance Number, Name of the Insured Person, Father’s/Name, Husband’s and the Applicants’ Complete Permanent Address in the Registration Form.
Step 8: Enter the employer’s name, code number, and address.
Step 9: Date of Appointment and Date of Unemployment should be entered.
Step 10: Enter the Contribution Period, Number of Days, Wage Amounts, RC/CCP/ESIC 71 Register SI Number, and Employer Code Number.
Step 11: To answer the question, select Yes or No. Is there a copy of the Employer’s forwarding?
Step 12: To answer the question, select Yes or No. Is the I.P. receiving any other type of equivalent benefit?
Step 13: Select Yes or No for the question “Are you eligible for ABVKY?”
Step 14: In Rupees, enter the Relief amount under ABVKY.
Step 15: Applicants must submit the completed form, along with the appropriate documentation, to the selected branch office.
Step 16: The Bank’s staff will examine the forms that have been submitted.
Step 17: After that, the system will calculate the claimant’s amount and determine the amount to be paid to the Insured Person.
Finally, the sum is credited to the insured person’s bank account ( I.P).

Role of Atal Bimit Vyakti Kalyan Yojana in in granting unemployment allowance to workers amid pandemic

Many people got retrenched from their jobs as a result of the Covid pandemic. Thus, to evacuate the workers from this situation, the government’s Atal Bimit Vyakti Kalyan Yojana was made available for those who work in the organized sector and their employer deducts PF / ESI from their salary every month. Then,

The central government will provide the funds for the next 24 months under the scheme of ABVKY.
The government has also decided to increase the rate of unemployment relief under the scheme to 50% of wages from 25% previously, as well as relax eligibility criteria until December 31, 2020. The “Atal Beemit Vyakti Kalyan Yojana” has been extended by ESI Corporation (ESIC) for another year, until June 30, 2021, after December 31, 2020.
Those who lost their jobs due to a pandemic can receive unemployment benefits of up to 50% of their wages for up to three months, even if they have resumed work, under the Atal Bimit Vyakti Kalyan Yojana.
Previously, financial assistance was provided within 90 days of job loss, but that time frame has now been reduced to 30 days due to a covid outbreak.
Instead of having the claim forwarded by the last employer, the Insured Person can submit, duly completed online or directly the claim to the ESIC Branch Office, and payment will be made directly into the IP’s bank account.
ESIC has ordered where an employer has indicated “Zero” contribution with respect to an employee for some time before withdrawing him from the system, the relief under ABVKY for that period of “Zero” contribution will be allowed. Only those beneficiaries who have been removed from the employer’s payroll will be eligible for payment of relief under ABVKY if they meet all other eligibility requirements.

Conclusion

The Employees’ State Insurance Corporation (ESIC) launched the Atal Beemit Vyakti Kalyan Yojana on a pilot basis for two years, beginning on July 1, 2018, to provide help to unemployed insured persons (IPs). Since its commencement, a total of 43299 people have benefited from the scheme, with a total of Rs.57.18 crore disbursed.

The immense contribution made by the Government of India during the Covid 19 outbreak was to give attention to the difficulties that beneficiaries have faced. To resolve this issue the Government of India has been decided that claimants who have submitted their claims under the Atal Beemit Vyakti Kalyan Yojana online and uploaded scanned copies of the required documents, such as copies of Aadhar and bank details, do not need to submit a physical claim. If the documents are not uploaded when the claim is filed online, the claimant will submit a printout of the claim, duly signed, along with the required documents. The requirement to submit the claim in Affidavit Form has been waived.

References

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https://www.india.gov.in/spotlight/atal-beemit-vyakti-kalyan-yojana

How can a CA earn additional income

By

Sneha Mahawar

-

October 9, 2021

0

This article is penned down by Pranjali Aggarwal of the University Institute of Legal Studies, Panjab University, Chandigarh. It elucidates different opportunities that can help a CAS to earn additional income.

Introduction

Chartered Accountant (CA) is one of the flagship qualifications that enjoy a statutory monopoly in the audit of financial statements under the Companies Act of 2013, Income Tax Act, 1961, etc in India. The CA course was introduced in India in 1949 after the enactment of the Chartered Accountants Act,1949. The Institute of Chartered Accountants of India (ICAI) is the regulating body for the profession of CA in India. The CA course basically comprises education in the field of business, taxation, accounting, and auditing. The financial statements audited by a CA are presumed to meet the general principles of accounting standards.

Conventional job opportunities for a CA

After completion of the CA course, there are primarily the following opportunities that one might opt for according to one’s interests and suitability:

Self-practice

CA can start their own practice and become a practising Chartered Accountant, it refers to the person who is a member of the ICAI and is holding a certificate of practice (COP) granted under the provisions of the Chartered Accountants Act, 1949 and includes any concern engaged in rendering services in the field of chartered accountancy. The COP authorizes CA to undertake audits on his own account.

Join CA firms

Some CAs join existing CA firms rather than opting for self-practice. This will help the fresher CA to have clients at the initial stage of the career and build his goodwill in the market.

Work in the corporate sector

CA can work in the corporate sector as well. They generally work at tip-notch positions of the accounting & finance department of the firm. There can be different roles for which they can be employed like accounting, auditing, planning of financial strategies, etc.

Various opportunities for a CA to earn additional income

Apart from working in conventional jobs, a CA can extend the following services to earn an additional income:

Tutor

One can impart services as a tutor after completion of CA. In these modern times, one can conduct classes from the comfort of their homes without obstructing their main jobs or practice. One can work as a tutor for online platforms that provide coaching for CA or even start their own academy to provide coaching for CA aspirants. They can even curate extensive courses for the students in specific subjects and sell them either themselves or in collaboration with any online platform. Thus, one can earn when any learner buys the courses. This can be a part-time opportunity to earn additional income for CAs.

CS with CA

CA and CS (Company Secretary) have many overlapping subjects and thus, makes it easier to pursue CS along with CA. After completion of CS, CAs have better knowledge and grasp of corporate law which is an asset for their job. The person can either apply for the CA plus CS position in the company or either impart the service as CS on an assignment basis.

Advantages of CS with CA

Job prospects – Companies prefer to appoint one person with holistic knowledge rather than two individuals.
Hike in salary – As one person is fulfilling the role of two, the companies grant a higher salary package because they need not pay two individuals. This is a win-win situation for both the company and the professional because for the former, it is cost-effective while the latter gets a lucrative package.
Polishing skills – CS provides a CA with the new perspective of law and acquaints the person with the nitty-gritty of law. Thus, helping a CA to polish his practical skills which will yield benefits in the long run.

Average salary

The average salary after completing CA plus CS is around 25 lakhs.

CA and CFA

The person owning qualifications of both CA and CFA ( Chartered Financial Analyst) will be the expert in the finance sector with impeccable analytical skills and thus can be employed in managerial positions in the company. According to Mr. Yogesh Sakunia, an equity research analyst, “a CA might get you the job, but a CFA will keep you there.” CFA is like icing on the cake that increases one’s worth and they are remarked as ‘demigods’.

Average salary

The person after completing CA plus CFA and having experience of 3-6 years is entitled to get the salary of around Rs 1.2 lakhs to Rs 2 lakhs per month.

Book author

CAs who have an interest in writing can write books either for CA aspirants or for the general public. This is a great source for additional income as once a book is written, one can either earn through sales of books or can sell books to the publishing house earning a lump sum amount.

Average earnings

The author on average is entitled to 7.5% of the price of each book sold.

Help a start-up

CA can play a huge role in the incorporation of a start-up. Following are some functions played by CA:-

Help in the registration process of the start-up by preparing documents like Memorandum of Understanding, partnership deed.
They even help in raising funding for the start-ups.
They help in managing shareholdings, projections, and cash inflows of the start-ups.

Thus, one can earn a handsome income by providing such services with a full-time job.

Make videos on Youtube

Youtube is one of the leading social media platforms and is proving to be the golden opportunity to prove it big. Youtube can generate promising amounts. CAs can make educational videos or portray their passion through videos which can be an excellent source of income.

Average income

Youtube pays the Youtuber through the income generated from ads based on the views on the videos. For eg – if the video has 1000 views, one can earn Rs 200 to Rs 500 and if it has around 100 k views, one can earn Rs 2000 to Rs 5000.

Investment in the stock market

Investment in the stock market can help in earning through the thriving economy. A CA can study the financial status of the company and even know the factors that will help in its growth or downfall, thus, can recognize companies that will yield profits. One can invest in any company accordingly and thus earn additional income.

Become a partner in the business

CAs are well-acquainted with the working of the business and can help any business achieve heights. Thus, one can opt to become a partner in the business and can enjoy profits. The partners can divide their work according to the expertise and thus, can divide the shares in the business accordingly.

Work as fraud investigators

CAs after pursuing a course on forensic accounting and fraud detection can work as fraud investigators for the company. Many companies and governments appoint CAs to look into the books of the companies to investigate the fraud. In every sector, there is a possibility of occurrence of fraud and thus there is a huge market for fraud investigators. One can function either as a full-time fraud investigator or take up assignments.

International opportunities

Indian CAs are eligible to practice in various countries as the ICAI qualification board is recognized by countries like the UK, Dubai, Australia, etc. Thus, one can extend services internationally and earn additional income. Like in the year 2017, Indian CA helped UAE in the implementation of VAT. The earnings in these cases depend on the task as well as the experience of the person.

Portfolio management

Portfolio management helps in the investment allocation of the business by prioritizing the objectives of the business and studying the risks involved. CAs can offer the services of portfolio management after getting a professional license from the Financial Industry Regulatory Authority (FINRA).

Average salary

The average salary of the portfolio manager is around Rs 8 to 10 lakhs. Some take 1% of the total amount managed as their fees.

Information system audit

Information system audit refers to the examination and evaluation of the information technology infrastructure, policies, and operations of any organization. These are conducted to check whether the data integrity is maintained and the data of the clients is safe or not. One can function as an IS auditor after completing a Diploma in the Information System Audit offered by ICAI. Thus, CA can generate additional income by taking up Information system audits.

Tax return preparer

An Income tax return preparer is a professional who assists people in filing their tax returns and is approved by the Income-tax department. As per the Tax Return Preparer Scheme, 2006, CA can also act as a tax return preparer. CA in job can also extend services of tax return preparer.

GSP or GST Suvidha Provider

GSP refers to the exclusive entity that helps businesses, taxpayers, and firms in accessing GST portal services. GSP helps the people to comply with all the rules and regulations of the GST law. A CA can act as a GSP and assist people in using the GST web portal easily.

Online services

CAs can extend their services online and thus can earn more from the comfort of their home. The person can have access to international clients also. This will not only raise one’s earnings but will also help in increasing market value. The income usually depends on the fees taken by a CA per task.

Conclusion

CA to business is like a doctor to human beings. CA is one of the professional courses that have a guaranteed handsome income after its completion. The average salary for a fresher CA is around 6 to 10 lakhs and will increase over time with experience and skill. There are myriad other opportunities that can help a CA to earn additional income and not affect the present income. The only thing that should be constant is hard work which will surely lead to success.

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References

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All you need to know about the CPA exam and how to prepare for it

By

Sneha Mahawar

-

October 9, 2021

0

Certified Public Accountant — Image Source: https://rb.gy/cu7cue

This article is written by Vanya Verma from O.P. Jindal Global University. This article discusses the CPA exam in detail and how to prepare for it.

Introduction

Certified Public Accountant (CPA) requires the highest level of skill in the subject of accounting. The American Institute of Certified Public Accountants (AICPA), the world’s biggest accounting group, administers the test. A CPA course is the finest option for anyone who is thinking about a career in accounting and wants to make a name for themselves. CPAs are regarded as the best accountants in the world, and they are employed in a wide range of businesses.

Who is a CPA

A CPA is an accounting professional who has completed the educational requirements, gained experience, and passed the CPA Exam to receive the CPA license.

What does a CPA do

A CPA is a professional designation, not a career path or job title, that can give accounting professionals more flexibility and mobility in their careers. CPAs are typically only licenced in one state, however, based on reciprocity laws they can obtain licences in other states.

CPAs are sought after across industries for their industry knowledge, reliability as well as credentials. The AICPA lists the following five common industries in which CPAs work:

Business and industry;
Public accounting;
Non-profit;
Education;
Government.

This isn’t a complete list. Obtaining a CPA designation can open doors in almost every business.

Five popular areas of specialisation available to persons who achieve the CPA designation, according to the AICPA, are:

Tax preparation and consulting;
Financial planning;
Auditing and review;
Consulting services;
Litigation consulting.

It takes time, effort, and planning to become a CPA. Even after getting your CPA designation, being a CPA necessitates a commitment to continued education. Depending on state board standards, it is often expected by a CPA to complete forty hours of continuing professional education each year.

Many in the finance and accounting sector consider the CPA licence to be one of the most prominent CPA/accounting credentials a professional can achieve due to the difficulty of passing the CPA Exam and the commitment to continuous education.

Steps needed to become a CPA

Depending on where you live, the path to become a Certified Public Accountant (CPA) differs. The 4 E’s can be followed at a basic level:

Education

To become a licenced CPA, all states require some level of accounting education. This usually entails 150 credit hours of college-level accounting coursework in most states. Some CPA accounting candidates fulfil this qualification as undergraduate students. While a master’s degree is not required to fulfil the educational requirement, some of the 150-hour programmes do lead to a graduate degree.

Experience

Candidates must meet certain experience criteria in some states, such as a year of work experience under the supervision of a certified CPA.

Exam

For some individuals, passing the CPA Exam is the most challenging criterion. It is a single level exam involving four subjects.

Ethics

Ethics exams or ethics courses may be required by some states to complete a CPA licence.

Eligibility for the CPA

A candidate must have a bachelor’s degree or equivalent to enrol in the CPA certification programme.
The candidate must finish 150 hours of CPA course semester to get the CPA licence.
Many states demand that candidates have 1-2 years of experience working under the supervision of a CPA.

It must be noted that the CPA eligibility criteria for US citizens and candidates differ from those for the rest of the world. International candidates have a different consent agreement, international testing expense, and additional identification requirements than US candidates.

Eligibility criteria for Indians to sit for the CPA exam

Candidates must possess any of the following qualifications to sit for the Certified Public Accountant Examination.

Member of the Institute of Chartered Accountants of India
Member of the Institute of Cost and Works Accountants in India.
Member of the Company Secretaries in India.
Master of Commerce.
MBAs

Several states in the United States recognise Indian CAs with a B.Com. The exact criterion, however, will differ from state to state.

The CPA exam

The exam is a four-part, 16-hour evaluation that assesses the abilities and knowledge required of a CPA. The computer-based test is administered at recognised test centres throughout the world and is the same for all candidates. The test is conducted in English. MCQs, simulations, and written ability are all included in the questions. On a scale of 0-99, passing marks are 75.

Subjects in the CPA exam

The CPA certification exam consists of questions from the following four subjects.

Auditing and Attestation (AUD)
Business Environment and Concepts (BEC)
Financial Accounting and Reporting (FAR)
Regulation (REG)

CPA exam pattern

CPA exams consist of the following four parts that take a total of 14 hours to be completed.

CPA exam type	Time	Types of questions
Auditing and Attestation	4 hrs	72 MCQs and 8 task-based simulations
Business Environment and Concepts	4 hrs	62 MCQs, 4 task-based simulations and 3 written communications tasks
Financial Accounting and Reporting	4 hrs	66 MCQs and 8 task-based simulations
Regulation	4 hrs	76 MCQs and 8 task-based simulations

The CPA exam is scored on an independent basis for each candidate. The candidate is graded using this scoring pattern based on their knowledge levels, talents, and analytical approach.

Skill levels to be assessed on each section of the CPA exam

CPA exam type	Application	Remembering and Understanding	Analysis	Evaluation
Auditing and Attestation	30–40%	25–35%	20–30%	5–15%
Business Environment and Concepts	50–60%*	15–25%	20–30%	—
Financial Accounting and Reporting	50–60%	10–20%	25–35%	—
Regulation	35–45%	25–35%	25–35%	—

Syllabus of Auditing and Attestation

Auditing and Attestation Content	Allocation of marks (%)
Area I	Ethics, Professional Responsibilities, and General Principles	15-25
Area II	Assessing Risk and Developing a Planned Response	25-35
Area III	Performing Further Procedures and Obtaining Evidence	30-40
Area IV	Forming Conclusions and Reporting	10-20

Syllabus of Business Environment and Concepts

Business Environment and Concepts Content	Allocation of marks (%)
Area I	Enterprise Risk Management, Internal Controls, and Business Processes	20-30
Area II	Economics	15-25
Area III	Financial Management	10-20
Area IV	Information Technology	15-25
Area V	Operations Management	15-25

Syllabus of Financial Accounting and Reporting

Financial Accounting and Reporting Content	Allocation of marks (%)
Area I	Conceptual Framework, Standard-Setting, and Financial Reporting	25-35
Area II	Select Financial Statement Accounts	30-40
Area III	Select Transactions	20-30
Area IV	State and Local Governments	5-15

Syllabus of Regulation

Regulation Content	Allocation (%)
Area I	Ethics, Professional Responsibilities, and Federal Tax Procedures	10-20
Area II	Business Law	10-20
Area III	Federal Taxation of Property Transactions	12-22
Area IV	Federal Taxation of Individuals	15-25
Area V	Federal Taxation of Entities	28-38

Application and fees for the CPA Exam

The method of applying for the CPA exam differs from that of applying for a CPA licence. You can begin the application procedure for a CPA licence once you have passed the Uniform CPA exam with a minimum passing score of 75.

You must pay the CPA application and examination fees after you have reviewed the minimal eligibility criteria for the jurisdiction you desire to apply for. The application and other relevant documentation should be accompanied by the CPA application fees.

CPA fee structure for applicants not belonging to the US

CPA exam type	Fees
Auditing and Attestation	$356.55
Business Environment and Concepts (BEC)	$356.55
Financial Accounting and Reporting (FAR)	$356.55
Regulation (REG)	$356.55

How to prepare for CPA

Schedule your exam

Decide when you’ll take the exam.
Schedule your exam with Prometric using your NTS information.
You can take the exam at any Prometric test centre that offers the exam.
There is an extra charge for international locations.

Prepare for your exam

To prepare for the exam, review the Exam Blueprints and make use of all accessible exam resources and study aids. For each exam section, you’ll find the following information in the Blueprints:
- Content is grouped by area, group, and topic, with a score weighting system in place.
- Task statements examples that depict what you might be required to complete during testing.
- Tasks are graded according to skill levels.
- Reference materials that support sample task statements.
- You must accomplish a certain number of different item types (multiple-choice questions, task-based simulations and written communication tasks).
- The weighting of each item type in the final score.
Practice with the sample exams and access the lesson topics located by selecting the “Help” button in each sample test to learn about the exam’s format and operation.
Review the test structure of each exam section.
Use your NTS to get six months of free access to the Professional Literature package of the National Association of State Boards of Accountancy (NASBA).

Take the exam

Within 18 months, pass all four portions of the exam (score a minimum of 75 on each section)
In most situations, the 18-month complete “clock” starts when you pass the first Exam segment, but check with your specific Board of Accountancy for more information.
You can take multiple exam sections per test window, but you cannot retake the same section in the same exam window.
Pass the Ethics test (only if required by your Board of Accountancy)

Apply for your license

In general, you’ll need 150 credit hours of education with an accounting concentration. This consists of 30 semester hours in accounting and 24 semester hours in business administration.
A minimum of 15 semester hours in accounting must be taken at the graduate or upper-division level.
A minimum of one year of experience (roughly 2,000 hours) is verified by a licensed CPA.
The experience must be in the fields of accounting, attest, auditing, or tax.
For licensure specific requirement information, visit the NASBA website or contact your Board of Accountancy.

Benefits of pursuing CPA as a career

The CPA exam is regarded as the pinnacle of accounting education, with limitless opportunities to demonstrate your abilities. According to the NASBA, there are five benefits after becoming a CPA, the benefits are as follows:

Reputation and esteem

You will join a selected group of accountants once you have finished the difficult road to pass the CPA Exam and meet all other prerequisites.

Advancement of your career

Certified Public Accountants have the opportunity to advance their careers both inside and outside of the CPA/accounting profession. Candidates who pass the CPA test have the option of working in investment banks, accounting and auditing firms, hedge funds, merger and acquisition firms, research firms, mutual funds, private equity firms, commercial banks, and other areas.

Career security

As CPAs continue to be in high demand, and as retiring CPAs exit the market, the number of employment openings for freshly licensed CPAs is increasing. The average CPA accounting pay may be higher than that of other accounting professionals in the field, depending on their individual skills.

Job satisfaction

You’re more likely to be qualified to conduct highly specialised duties that are more important or fascinating after receiving the CPA designation.

Money and Benefits

Being a CPA is more than simply a job, it’s a series of jobs and stepping stones that will lead to an incredible career. The latest stats on CPA earnings and employment are as follows:

If you have a CPA licence, you will earn 10-15% extra.
Accountants and auditors are expected to expand faster than the average for all jobs through 2024, according to the Department of Labor and Statistics.

CPA jobs and recruiters

A CPA’s job entails financial management, which involves assessing and analysing the client’s financial situation, reviewing financial documents, generating capital, tax, and audit reports, providing bookkeeping advice, and informing the client about changes in government regulations. The following are the key responsibilities of a CPA:

Prepare and evaluate financial statements and records.
Maintain records of all financial transactions, as well as assets, liabilities, and taxes.
Prepare client financial reports.
Ensure compliance with government regulations.

Individuals, corporations, industry, government, private, and non-profit organisations hire CPA licenced experts.

Conclusion

Considering the benefits and recognition that a CPA can get it’s indeed one of the most prominent fields one can think of depending upon the interest. Though it’s quite tough it’s worth it.

Join us for an exclusive 3-day boot camp on – International Opportunities for Chartered Accountants / Company Secretaries in US Corporate Law from 9th to 11th October, 6-9PM.
Click here to register.

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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How to draft a Series LLC Operating Agreement : an overview

By

Oishika Banerji

-

October 9, 2021

0

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

Table of Contents

Introduction

Limited Liability Company or LLC is a familiar term for many people, but very few know about another version of traditional Limited Liability Company which is called a Series Limited Liability Company. The Series Limited Liability Company is a complex entity that may be difficult to understand for most people and that is why it is not as familiar as an LLC. Series LLC comes with several risks and unresolved queries due to which this version of Limited Liability Company is not much in use and is only in use to a very limited extent such as in some sophisticated enterprises like investment companies and special purpose commercial entities. However, despite all the difficulties, Series LLC laws are being adopted by the governments in several states. And, with the evolution of Series LLC laws, the business community is expected to become more comfortable with the concept of Series Limited Liability Companies. Soon the practice of Series Limited Liability Companies may become the more popular option for business owners and lawyers. It is generally assumed that the Series Limited Liability Company has the potential to protect the organizations and their assets from liability and in several cases can do so without demanding much expenditure and ensures more flexibility than other business structures which comes with the liability risk like the holding company or parent-subsidiary structures. The author in this article seeks to explore the concept of Series LLC along with discussing key pointers on how to draft a Series LLC agreement.

What is a Series LLC?

The concept of Series LLC has been derived from Delaware’s statutory trust law, which found popularity, particularly with Mutual Funds. Under the statutory trust law, one investment company can be founded in the form of a trust with a separate series and each of these series could carry its own portfolio with different investor profiles, strategies and other aspects.

A series LLC consists of the Parent/Umbrella Company with one or more than one series that is constituted under the parent LLC. Each series carries some characteristics that are absolutely different from other series. Also, the assets, members, objectives and investment strategies of each series differ from others and this way each series works as a separate entity with the Series LLC. A Series LLC is subject to all the LLC law provisions as a traditional LLC but those laws are exceptions that specifically apply to the Series LLC only.

What is required to constitute a Series LLC?

Like every commercial unit, the series limited liability company also requires some factors or necessary things to be formed. These include:

There should be a separate bank account for each series or cell which should not be merged or shared with the other cells. The cell should also be given a separate asset name, tax ID number, etc.
If a subsidiary LLC makes a purchase in real-estate, the related deed is required to be in the name of that individual series/cell.
The previous rule applies to any contract, notes, and loans to avoid confusion.
Any transaction between different cells of a series LLC should be considered as they are taking place with the outside companies or entities.
Any transaction involving loans between units of series LLC requires interest-bearing and well-organized documentation.
Assets and operations of each series or cell are to be separate from others in the series.
Particular assets can be owned by only one series.
Each series must have a sufficient capital base to support its individual business operations.

What is a Series LLC Operating Agreement?

The Series LLC Operating Agreement is known as an innovative concept that unites a series of cells within one LLC. There may be several benefits that the Series LLC Operating Agreement can serve. As the law states a series limited liability company may be created using an individual series of membership interests. When this type of company is established it is called Delaware Series LLC. The several benefits of Series limited Liability Company include:

Retention of its own assets;
Conducts its own operations;
Has its own members; and
Pursuit of business objectives different from the other ‘cells’ or units.

The Series LLC is already popular in some parts of the world in the form of “segregated portfolio companies”. While constituting a Series LLC, only one-time filing fee is required to be paid, doesn’t matter how many series/cells it contains. Series LLCs are considered to be single businesses and that is why there is a requirement for only one registered agent and one annual franchise tax fee instead of paying separate fees and taxes for every unit. Constituting a Series LLC protects personal assets from debts and obligations incurred by the business.

Here we want to share some crucial information about a Series Limited Liability Company Operating Agreement. Some important characteristics are usually there in such an agreement. The aforementioned characteristics are:

An operating agreement gets prepared that outlines the norms and rules for regulation or for governing the operation of the series LLC.
The job of drafting the agreement is recommended to be assigned to an attorney. Also, an account is suggested to be appointed to explain the tax laws associated with a series LLC.
Publically filing the Series LLC Operating Agreement is not a requirement.
For adding or removing a cell or a series, the operating agreement is required to be amended and this can be done whenever it is needed. Also, there is no fixed number of the series which can be made a part of it.
In general terms, only one registered agent is needed for a series LLC and the series is required to file a single annual report.
It is also suggested that each Sub-LLC/cell should apply for a “doing-business-as” (also referred to as DBA) title that is an assumed or fictitious name of the company.
The owners of the series must be listed in the records for the DBA, in order to avoid confusion as to which series LLC is to be held responsible for any issue or debt.

What are the requirements of drafting a Series LLC Operating Agreement?

Rights and Responsibilities of the Members: The distribution of both labour and authority should specifically be divided and mentioned in the Series LLC Operating Agreement. What rights are different members entitled to and what are the obligations of each member in the series should specifically be mentioned and discussed in the agreement. This is necessary for making every member understand their role within the company and to know about the skills they bring to the table.
Joining and Leaving the Series LLC: The unexpected should be expected by every unit in the Series with regards to its members. The operating agreement should be consisting or touching the protocol for the detailed procedure to adhere to in case a member decides to join or leave the series. Outline details for process changes in the agreement on the decision for both joining and leaving by a member must be given in the agreement.
Norms of Dissolution: A Series LLC Operating Agreement should be carrying detailed terms and processes with regards to dissolving a series LLC or cell. The following should be involved in the agreement:
- Rules for division of remaining assets among the members after paying off all the debts.
- Whether a former member is allowed to form or run a company like the one which has just been dissolved.
Severability Provision: The Operating Agreement should not miss out on a Severability provision which is considered to be a standard legal boilerplate clause. It states that if any provision or arrangement of the operating agreement proves to be contradicting any state or federal law, that only provision would be removed or stated out of the effect and all the aspects which are not contrary to the state or federal laws would still be remaining the effect. It actually ensures that any small oversight must not invalidate the entire agreement.
The procedure of Amendment: Do not forget to include the scope of editing in the operating agreement in the future whenever needed. It’s a good idea to include a provision covering the way to bring forth modifications into the document otherwise you may end up dealing with outdated rules or may have to depend upon the default rules for amendment set by the state.

Conclusion

The Series LLC operating agreement is an innovative concept that unites a series within one LLC. This is a powerful advantage because each series is treated separately for liability purposes, just as if it were its own LLC. The aforementioned factors are to be considered while drafting a Series LLC Operating Agreement. It is also recommended that the agreement should be reviewed by all the members one more time in order to be sure that there is no error or inaccurate information inculcated in the document. After this, the agreement document for the Series LLC can be finalized.

References

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

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

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Responsibilities and duties of a Company Secretary

By

Diganth Raj Sehgal

-

October 9, 2021

0

This article is written by Arya Mittal from Hidayatullah National Law University. The article lays down the responsibilities and duties of the company secretaries.

Introduction

Company Secretary (CS) is among the most esteemed professions which also assures a lucrative income after some years of experience. As the term itself suggests, these professionals are responsible for the proper functioning of the company by ensuring compliance with all the laws applicable to the company. Company Secretaries can be employed in a company or they can offer their services to the company through their practice. This article seeks to discuss the responsibilities and duties of company secretaries in general as well as specifically for company secretaries in practice and company secretaries in employment.

Duties of a CS under different laws

Duties under the Companies Act, 2013

Section 205 of the Companies Act, 2013 read with Rule 10 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 deals with the functions of a CS. Some of the major duties and functions of a CS can be inferred as follows:

To ensure compliance with laws prevalent and applicable on the company and report to the Board of Directors (BoD) about the same.
To facilitate approval and conduct of Board meetings and general meetings of shareholders.
To ensure compliance with the applicable secretarial standards.
To represent the company before various authorities.
To ensure that the company engages in good corporate governance practices.
Any other function that the Central Government may prescribe.

Duties under the Companies Secretaries Act, 1980

CS are governed by the Institute of Company Secretaries of India (ICSI) which is the regulatory authority set up under the Companies Secretaries Act, 1980. The Act governs the conduct of CS professionals in India. It provides for a whole chapter i.e. Chapter V which deals with misconduct. It is the legal as well as the moral responsibility of company secretaries to ensure that they do not indulge in any form of misconduct as provided in the Act, failing which, they have to face severe consequences. Schedule I and Schedule II also enlist some of the criteria which may be considered as misconduct. Therefore, it is the duty of every CS to abide by the law and ensure that no misconduct occurs on their part.

Responsibilities of a CS

Corporate laws advisory

The exhaustive curriculum of the CS course makes a CS a competent corporate law advisor. Company secretaries have knowledge of different corporate and commercial laws ranging from company laws, securities laws, labour laws and a lot more. Therefore, they are usually engaged in providing advisory services to companies on complex legal issues relating to the company. Companies can consult CS for different laws which include but are not limited to the Companies Act, the Securities Contracts (Regulation) Act, the Depositories Act, the Foreign Exchange Management Act and the Competition Act.

Drafting agreements and other documents

No wonder why the students of CS Final have a whole module on drafting and pleadings! It is indeed one of the most important functions that a CS needs to perform. The most important documents of a company i.e. the Memorandum of Association and Articles of Association are usually drafted by a CS. Not only these charter documents but there are many other documents that a CS needs to prepare. Some of these are mentioned below:

Pre-incorporation contracts;
Shareholders agreement, sale agreement, collaboration agreement etc;
Minutes of the meeting;
BoD report;
Legal opinion and advisory notes;
Legal notices, applications and petitions;
Prospectus/offer for sale/letter of offer/other documents related to issue of securities.

Representation services

CS professionals are allowed to represent their clients/companies before various State authorities, some of which are as follows:

Registrar of Companies (ROC);
Regional Directors (RD);
National Company Law Tribunal (NCLT);
National Company Law Appellate Tribunal (NCLAT);
Reserve Bank of India (RBI);
Securities and Exchange Board of India (SEBI);
Insurance Regulatory Authority of India (IRDA);
Competition Commission of India (CCI);
Real Estate Regulatory Authority of India (RERA);
Stock Exchanges (SE).

Responsibilities of a CS in practice

Certification services

One of the most basic responsibilities of a CS includes certification services. Many statutory compliances and documents require certification by a CS. Companies have to file different forms throughout the year as a part of compliance. These forms are mostly certified by a CS in practice. Further, many other documents in the pre-incorporation phase are certified by a CS before they are filed with the concerned authorities. Additionally, they are also responsible for signing and certifying the annual returns of the company.

Secretarial auditor

Certain companies have been prescribed under Section 204 of the Companies Act, 2013 read with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. These companies include:

Every listed company
Every public company having-
1. paid-up share capital of fifty crore rupees or more or;
2. turnover of two hundred fifty crore rupees or more or;
3. outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.

Such companies are required to comply with secretarial audits which shall be conducted by a CS in practice. The report of such an audit is attached with the report of BoD.

Services related to finance and accounting

The comprehensive curriculum also makes company secretaries competent for providing various accounting and finance-related services. They often engage in making project reports for companies and conduct feasibility studies for their future projects. They also advise on tax planning, tax management and various compliance relating to direct as well as indirect taxes. They also provide consultancy on matters such as budgetary controls and choice of appropriate capital structure.

Other miscellaneous responsibilities

In recent times, company secretaries have also started taking on new roles and responsibilities. They are eligible to be appointed as insolvency professionals after clearing the exams and training stipulated by the Insolvency and Bankruptcy Board of India. They are also eligible and can choose to work as GST professionals and registered valuers which differ from their traditional role.

Responsibilities of a CS in employment

Part of KMP

Section 203 of Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides that every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have the following whole-time Key Managerial Personnel which also includes a CS. Further, according to Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every private company which has a paid-up share capital of 10 crore rupees or more is also mandated to have a whole-time company secretary. Therefore, CS is an integral part of KMP and thereby has a responsibility to advise the BoD at all times in relation to the day-to-day functioning of the company.

Compliance officer

It cannot be disputed that CS is indeed the compliance officer of the company. Owing to its characteristics, a company is supposed to make a large number of compliances under various laws. Compliance with these laws is ensured by a CS. From the filing of different forms to ensuring good corporate governance practices, a CS does it all.

Conscience seeker of a company

A CS is popularly referred to as the ‘conscience seeker’ of a company. This is because it is considered that the CS will try at all times that the company is following good corporate governance practices. Ensuring due diligence and compliance is one such practice. Another example could be the timely conduct of board meetings and general meetings where different categories of directors and shareholders actively participate in their respective meetings. The Companies Act of 2013 aims at ensuring good corporate governance practices and this belief is strengthened by the presence of CS in companies.

Custodian of statutory books

Companies are required to maintain many registers, books and documents as a mandate of law. These include Register of Members, Register of Company, Register of Directors and Key Managerial Personnel, Register of Charges, Register of Renewed and Duplicate Share Certificates, Register of Employee Stock Options, Register of Shares/Other Securities Bought Back, Minutes book, secretarial records etc. A CS acts as a custodian of these documents and is therefore responsible for the same.

Convenor of meetings of the company

It is usually the CS who is responsible for convening the general meetings and board meetings, though other persons authorised by BoD are also eligible. However, in common practice, the CS usually convenes a general meeting or a meeting of BoD. Moreover, the CS is also responsible for preparing the minutes of the meeting and such minutes book is preserved by CS only as specified above.

Conclusion

Company Secretaries have an important role in the functioning of a company. They have several statutory as well as moral duties towards the company. They take up different roles and responsibilities such as compliances, representation and drafting. To conclude, with the increase of companies, it is hopeful that the scope of this profession is only going to increase in the near future and thus, a person can take up this esteemed profession to build a successful career.

Join us for an exclusive 3-day boot camp on – International Opportunities for Chartered Accountants / Company Secretaries in US Corporate Law from 9th to 11th October, 6-9PM.
Click here to register.

References

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

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