Section 66A and other scrapped sections of the Information Technology Act, 2000

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October 6, 2021

This article is written by Harsh Gupta pursuing B.A.LL.B. from the School of law, HILSR, Jamia Hamdard. This is an exhaustive article which deals with repealed, amended and scrapped sections of the IT Act, 2000 along with Section 66A which was declared unconstitutional.

Introduction – the objective of the Information Technology Act

Due to the rapid use of popular tools like computers and the internet, new types of crimes have emerged like the publication of sexually explicit materials involving electronic form, video voyeurism, e-commerce frauds like phishing and identity theft, and offensive communications service. Therefore, penal provisions are needed to prevent such crimes in the Information Technology Act, 2000 (IT Act), the Indian Penal Code, 1860 (IPC), the Indian Evidence Act, 1872 (IEA), and the Code of Criminal Procedure, 1973 (CrPC). However, with time we have found certain provisions being misused, certain provisions were repealed by amendment because of the vagueness of terminologies or because they were against the principle of the Constitution of India or they became insufficient and useless with time.

Scrapped sections of the IT Act

Section 20

Section 20 provided for the controller to act as a repository of all the Digital Signature Certificates issued under the IT Act, 2000. It also elaborates the role of the controller that is to check for privacy and security of the digital signatures are maintained by use of procedures that are safe from encroachment and abuse and also by conforming to the standards set by the central government. It also provided under clause 3 that the Controller will have to maintain a digital database of all public keys in a way that the database and public keys can be accessed by any member of the public.

Section 20 was scrapped by way of amending the IT Act, 2000 through Information Technology (Amendment) Act, 2008 via Section 13.

Section 49

Section 49 provided for the composition of the Cyber Appellate Tribunal that will consist of a chairperson and other members appointed by the Central Government. Clause 2 of Section 49 provided that the chairperson & other members will be selected by the Central Government in consultation with the Chief Justice of India. Clause 3 of Section 49 provides for jurisdiction, power and authority of Cyber Appellate Tribunal which can be exercised by benches that can be constituted by the chairperson and other one or two members as chairperson decides. It further provided that the bench of the tribunal will sit at Delhi and other places specified by the Central Government in consultation with the chairperson at Cyber Appellate Tribunal. Under clause 4, the Chairperson has been granted the power to transfer a member of the tribunal from one bench to another. Under clause 5, the power to transfer cases from lower bench to higher bench of such tribunal has been conferred.

Section 49 was scrapped by way of amending the IT Act, 2000 by Finance Act, 2017 via Section 169.

Section 50

Section 50 of the IT Act, 2000 provided for qualifications for appointment as Chairperson and Members of the Cyber Appellate Tribunal, clause 1 mentioned the criteria for appointment for Chairperson that he should be qualified to be a judge of a High Court only then he can be appointed as a chairperson for the tribunal. Clause 2 of Section 50 provided that a member will be appointed by the Central Government who have knowledge of and professional experience in the field of information technology, telecommunication, industry, the management of consumer affairs and that person must have served the Central Government or State Government as an Additional Secretary or at another equivalent post for not less than one year or as a joint secretary or equivalent post for not less than seven years. Clause 3 of Section 50 provided for the appointment of the judicial members that those members shall be appointed by the Central Government who held the position of IAS and held the position of additional secretary for not less than a year or grade one post for not less than five years or has been qualified to be a judge of High Court.

Section 51

Section 51 of the IT Act, 2000 provided for timers of office of chairpersons and members. Clause 1 of Section 51 clarified that the terms of office will be five years from the date of joining or if he attains the age of 65 years whichever is earlier. Clause 2 provided for power to the Central Government to check on the chairperson and members and they should not have any financial interest which can have a negative influence on his services as a Chairperson or member as per clause 3.

Section 52

Section 52 of the IT Act, 2000 provided that salary, allowances and terms & conditions of Chairperson and members which includes pension, gratuity and retirement benefits will be as ordered.

Section 52A

Section 52A of the IT Act,2000 provided that the chairperson of the Cyber Appellate Tribunal will have powers of general superintendence in the conduct of affairs of Cyber Appellate Tribunal, he can also preside over the meetings of the tribunal.

Section 52B

Section 52B of the IT Act, 2000 provided that the Chairperson of the Cyber Appellate Tribunal has the power to distribute the business among the benches and the matters that are dealt with by each bench when constituted.

Section 52C

Section 52C of the IT Act, 2000 conferred power to the chairperson to transfer cases if any aggrieved party to the case files an application and after to the parties and hearing them if the chairperson feels that case need to be heard in that situation, he has the power to transfer a case pending from one bench to another bench for disposal.

Section 53

Section 53 of the IT Act, 2000 gave power to the Central Government to fill in any vacancy created in the office of Cyber Appellate Tribunal in the position of the Chairperson or members as the case may be.

Section 54

Section 54 of the IT Act, 2000 provided for the resignation of the chairperson and members of the Tribunal by way of notice in writing addressed to the Central Government. The chairperson or other members can hold his office after a three months time period of receiving the notice or until a person hasn’t been appointed as his successor in office or after the expiry of his tenure. The presiding officer can only be removed by an order of the Central Government on proved misbehaviour and incapacity after an inquiry by a supreme court judge in which the concerned person has been informed about the charges and allowed to be heard.

Section 56

Section 56 of the IT Act, 2000 provides that the Central Government has the power to appoint staff of the Tribunal, further the staff shall work as per the directions given by the chairperson of the Tribunal, salaries and allowances of staff members shall be regulated by the Central Government.

Section 91, 92, 93, 94 were omitted by the IT (Amendment) Act, 2008 through Section 48.

Section 66-A – the most controversial section of the IT Act

Section 66A provided for the provision of punishment for sending messages offensive in nature through communication services, it can be by mail, WhatsApp, Twitter with or any digital platform. It further illustrated three conditions under which a person will be held liable under this section are as follows-

If any person sends any information which is grossly offensive or has menacing character through any computer resource or a communication device, or
If any person shares information knowing it to be false but with intent to cause annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred, or ill will, or
If any person with an intent to cause annoyance, inconvenience, to deceive, or to mislead sends any electronic mail shall be punished with maximum imprisonment up to three years and a fine.

An Electronic mail for this section means any message or information transmitted including attachments in the form of text, image, audio, video and any other electronic record.

Reason for inserting section 66A

The term ‘internet’ was new for Indians even in 2000 and the IT Act was enacted in 2000. As people started using the internet by using social media like Facebook and Twitter, misuse and abuse of social media platforms was a big challenge for the privacy of private individuals and national security of the country and that is the reason for the insertion of section 66A into the IT Act, 2000.

Misuse of Section 66A : an unending saga of harassment

Section 66A was misused because of its vagueness in interpretation as few terms were very loose; terms like ‘grossly offensive’, ‘insult’ were neither defined nor interpreted clearly in the Parliament. It was very difficult to predict the boundary line regarding any statement or any electronic message being offensive as there were no parameters defined. Laws are made for the general public benefit against the injustice caused to them and safeguard them so that people get a mechanism through which they can get justice delivered as their rights can be preserved from any sort of violation.

On the other hand, common people were targeted under section 66A as many cases were registered from the Government’s side against criticism made against the policies and decisions of the government through any electronic medium. The right to free speech was undermined under this section as there was no concept of constructive criticism where a person can safeguard his right to dissent. Recently, the Supreme Court expressed its concern regarding the use of this section in filing cases through the police officials even after scrapping Section 66A after six years. This is when the Supreme Court stepped in to check the constitutional validity of the law.

Landmark judgement of the Supreme Court on Section 66A

An Appellate Bench consisting of Justices J. Chelameswar and R.F. Nariman ruled in Shreya Singhal v. Union of India, (2015) declared Section 66A unconstitutional for “being violative of Article 19(1)(a) and not saved under Article 19(2).” Under 19(1)(a), people have the right to expression, while 19(2) allows the state to restrict this right with “reasonable restrictions.”

Legal principle

It is a fundamental principle of due process that an enactment is void for vagueness if its prohibitions are not spelt out. Vague laws violate several important rights. Assuming that a person of ordinary intelligence is capable of deciding between lawful and unlawful conduct, we firmly believe laws should give that person a reasonable opportunity to learn what is prohibited. Firstly, by not providing fair warning, vague laws can trap the innocent. Secondly, laws must provide explicit standards for those who enforce them if they are to prevent arbitrary and discriminatory actions. Lastly, by allowing undefined duties to be delegated to police, judges, and juries for subjective, ad hoc decisions, vague laws can engender arbitrary, discriminatory, and capricious decisions.

Court’s ruling- Section 66A and its constitutionality

Section 66A was challenged by several petitioner’s lawyers on several grounds. According to them, Section 66A violates the fundamental right to freedom of speech and expression and is unaffected by any of the eight topics covered by Article 19(2). As such, annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred, and ill-will don’t fall under Article 19(2). Further, Section 66A suffers from the vice of vagueness, since none of the aforesaid terms is defined in Section 66 of the same Act, resulting in innocent as well as guilty persons being implicated. It is not indicated clearly on which side of the line such persons fall, and it is open to the authorities to book such persons following the said Section as arbitrarily as they please. The truth is that a large number of innocent people have been booked, and a great deal of information has been provided in the form of court documents. It would be insidious censorship to enforce the said Section, which undermines a core principle contained in Article 19(1)(a).
According to the petitioners, their rights under Articles 14 and 21 are violated, as there is no discernible difference between users of the internet and those who use other means of communication. In any case, punishing someone for utilizing a particular medium of communication would be discriminatory in itself and would violate Article 14.
The privacy of an unwilling individual cannot be invaded widely through print media, television, and films. With the internet, one can easily invade any individual’s privacy, thereby violating his constitutional right under Article 21 of the Constitution of India.
The penal law is void for vagueness if it lacks sufficient definiteness in defining the criminal offence. An ordinary person should be able to recognize what conduct is prohibited and what is allowed. Additionally, law enforcers must know the nature of the offence to avoid arbitrary and discriminatory actions. Therefore, based on the above arguments, Section 66A was held unconstitutional.

Conclusion

The majority of the sections which were scrapped from the IT Act, 2000 had become ineffective and Section 66A was against the spirit of the Constitution of India. Further, the author believes that Section 66A was unconstitutional but needed to safeguard the common people from phishing, offensive messages as with the increase in varieties of crime, provisions of IPC are not enough, the author contends that the Parliament should come up with an alternative to Section 66A with well-defined guidelines and structures so that with the scrapping of sections rights of people will not be scrapped and suffered.

References

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Kirpa Ram (Deceased) Through Legal Representatives & Ors. v. Surendra Deo Gaur & Ors.

By

Shoronya Banerjee

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October 6, 2021

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This is written by Tanvee Gupta, pursuing a Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho.com. This article has been edited by Prashant Baviskar(Associate, Lawsikho) and by Dipshi Swara (Senior Associate, Lawsikho).

Date of Order: 16^th November 2020,

Bench: 3 Judges,

Hon’ble Justices: L. Nageswara Rao, Hemant Gupta, Ajay Rastogi.

Table of Contents

Introduction

This case deals with the question of whether or not the High Courts are required to formulate any substantial questions of Law in appeals proposed before them, under Section 100 of the Code of Civil Procedure, 1908 (CPC). The Supreme Court, while holding that the High Court can dismiss the Second Appeal without even formulating the substantial question of law, remained consistent with its previous judgments while deciding this case. This article will analyse the case in detail by looking at its facts, issues raised, and the observations made by the court.

Facts of the case

An Appeal was filed against a High Court decision that rejected a second appeal challenging the Trial Court’s and First Appellate Court’s concurring conclusions.
A suit was filed by the Respondent’s for a permanent injunction before Civil Court claiming that (“the said land”) is owned and possessed by the Respondent, that is Khasra no. 238 computing 4 Bighas 3 Biswas, located at the revenue estate of Basai Darapur Village, Delhi.
A decree was passed in the favor of the Respondent declaring that they were indeed the actual owners of “the said land”.
The Respondent was obligated to file this suit perceiving a threat to the charge of their owned possession of “the said land” by the Defendant. The Defendant claimed that “the said land” was apportioned to Defendant 1 to 4 therein.
In view of, and, after taking into consideration all the issues, the Trial Court, passed a decree in favour of the Respondent holding that they were certainly the actual possessors of “the said land.”
A First Appeal was preferred by the Defendant but it was subsequently dismissed, in which the decree and the judgment of the Trial Court were attested by the First Appellate Court.
Subsequently, the Defendant preferred a second appeal which was filed before the High Court which also got dismissed as the High Court refused to dismay the conclusion and the findings of the First Appellate Court as well as the Trial Court and dismissed the Second Appeal after affirming both the judgments of the respective Courts.
Therefore, after being aggrieved by the High Court’s judgment, the Defendant preferred to file this appeal before the Supreme Court of India contending and raising a preliminary argument that the High Court cannot dismiss the Second Appeal without framing the substantial question of law which is a mandatory requirement according to the terms of Section 100 of Civil Procedure Code, 1908 (hereinafter referred to as, “CPC”).
The Supreme Court of India while concluding the Civil Appeal at present held that the High Court did not violate any law in not framing any substantial question of law and while dismissing the defendant’s filed appeal.

Issues

Is the High Court capable of rejecting the Second Appeal without raising any substantial question of law, as required by the terms of Section 100 of the Code of Civil Procedure?
Whether there is a possibility that provisions of Section 28 of Delhi Land Revenue Act, 1954 restrain the Civil Court, the jurisdiction, respecting the boundary disputes.
Whether or not the Appellant is the actual possessor of “the said land” in dispute bearing Khasra no 238 as claimed in the Appeal.
Whether or not ‘the said land’ in dispute established the part of khasra no. 238 of Basai Darapur Village, Delhi as alleged in the Appeal?
Is this suit properly evaluating the motives of court fee and jurisdiction? If not, then to what effect and conclusion?
Are the Appellants entitled to a decree for permanent injunction alleged in the Appeal?

Judgment

In view of this at first instance, the trial court framed an issue of whether it had the jurisdiction to adjudicate the suit. Ensuing due consideration of facts, the court decided that it does have the jurisdiction.

After the First Appellate Court acquiesced with the trial court, the Appellate proposed a Second Appeal before the High Court. The issue regarding whether the Appellate Court can dismiss the appeal without deciding the initial issue of jurisdiction of the civil court was raised.

Following the High Court dismissed the appeal, the Appellant proposed an appeal before the Supreme Court of India.

The initial argument raised before the Supreme Court by the Appellate was that the High Court had dismissed the appeal without framing any substantive question of Law which is obligatory in terms of Section 100 of the Code of Civil Procedure, 1908 (CPC) and consequently, the matter should be remanded back to it.

The Court also held that the issue of jurisdiction was not an issue of fact but an issue of law instead. Therefore, it can be decided by the First Appellate Court while taking up the entire appeal for hearing.

The Court referred to Section 100 of the Code of Civil Procedure, 1908 CPC to dismiss the Appellant’s allegations. Section 100 of the Code of Civil Procedure, 1908 (CPC) interprets that the sub-section (1) of Section 100 of the Code of Civil Procedure, 1908 (CPC) contemplates that an appeal shall lie to the High Court if it is convinced that the case demands a substantive question of law. Section 100(4) interprets, “Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.”

The Court noted that section 100 of the Code of Civil Procedure, 1908 (CPC) provides for an appeal to the High Court if the High Court is satisfied that the case concerns a substantive question of Law. In the memorandum of appeal, the significant question of law must be stated specifically.

If the High Court thinks that there is a substantive question of law at issue, it must formulate the question.

The Appeal must be heard on the question so formulated. The Court, on the other hand, has the authority to hear an appeal on any other substantive question of law if the requirements set out in Section 100 of the Code of Civil Procedure, 1908 (CPC) are met.

As a result, if the appellant’s substantive question of law is found to arise in the case, the High Court must formulate it for consideration.

If no such question occurs, the High Court is not required to formulate any substantial question of law. The formulation of a substantial question of Law, or its reformulation in terms of the proviso, occurs only when there are certain questions of law, not when there is no substantial question of law.

If the High Court finds no mistake in the First Appellate Court’s conclusions, it is not required to frame the substantial question of law.
The Court also held that the issue of whether provisions of Section 28 of Delhi Land Revenue Act, 1954 restrains the jurisdiction of the Civil Court in regards to the boundary disputes, the Court perceived that the act does not explicitly barbars or restrains the jurisdiction of the Civil Courts in correspondence to boundaries.

Section 28 bears for – “Settlement of boundary disputes”

All disputes concerning boundaries shall be resolved by the Deputy Commissioner, as much as possible, as attested by the existing survey maps notwithstanding if it is impossible, the boundaries shall be fixed on the basis of actual possession.
On that condition, if in the course ofon any inquiry or investigation into a dispute under this section, the Deputy Commissioner is incompetent to assure himself as to which the party is in ownership or possession, or if it is shown that possession has been obtained by wrongful dispossession of the lawful occupants of the property within a period of three months previous to the commencement of the inquiry, the Deputy Commissioner —

in the first case, shall ascertain by summary inquiry who is the person best entitled to the property, and shall put such person in possession; and
in the second case, shall put the person so dispossessed in possession and shall then fix the boundary accordingly”

The boundary disputes are between two revenue estates and do not include the demarcation of the parties’ land.

“On the day when the second appeal is listed for bearing on admission if the High Court is satisfied that no substantial question of law is involved, it shall dismiss the second appeal without even formulating the question of law;

In cases where the High Court after bearing the appeal is satisfied that the substantial question of law is involved, it shall formulate that question and then the appeal shall be beard on those substantial questions of law; after giving notice and opportunity of hearing to the respondent;

In no circumstances the High Court can reverse the judgment of the trial court and the first appellate court without formulating the substantial question of law and complying with the mandatory requirements of Section 100 CPC.”

Supporting judgments

Furthermore, the Court dismissed all the judgments reckoned upon by the appellant, except Md. Mohammed Ali V. Jagadish Kalita, saying that none of them commands or directs the High Court to frame substantial questions of law while upholding the conclusions recorded by the First Appellate Court. The Court reckoned upon the judgment in case of Ashok Rangnath Magar v. Shrikant Govindrao Sangvikar, in the course of which it had heretofore held that the second appeal can be dismissed without even formulating the substantive question of law.
The Court cited the following statements made in Ashok Rangnath Magar v. Shrikant Govindrao Sangvikar, in which it was decided that the second appeal could be dismissed without even formulating the substantial issue of law.

Analysis of the judgment

The Apex Court in its judgment while taking into account Section 100 (1) of CPC propounded on the requirements of the aforesaid Section and observed that an appeal shall lie to the High Court if it is satisfied that the case involves a substantial question of law and the substantial question of law is required to be precisely stated in the memorandum of appeal. Further, it observed that if the High Court is satisfied that such a substantial question of law is involved, then only it is required to formulate that question and the appeal has to be heard on the question so formulated. However, the Court has the power to hear the appeal on any other substantial question of law on the satisfaction of the conditions laid down in the proviso of Section 100 of CPC.

Conclusion

The Supreme Court of India, remained consistent with its previous judgments while deciding this case. Although it conceded that it had given a contradictory judgment in the case of Md. Mohammad Ali v. Jagadish Kalita (2004) by questioning the High Court to frame a substantial question of Law in terms of Section 100 of Code of Civil Procedure, 1908 (CPC), it interpreted how the reference was different from the present case. It asserted the general established rule by depending upon its judgment in Ashok Rangnath Magar v. Shrikant Govindrao Sangvikar (2015) to allow the High Court, the independence to resolve or determine if there is a matter of fact any necessity to frame any question of law prior dismissing an Appeal. Contrary to the Appellant’s perspective, it depicted Section 100 of Code of Civil Procedure, 1908 (CPC) to bear that it is the discretion of the High Court to conclude if there is a need to frame any question of law ahead of dismissing an appeal.

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Analysing the credibility of child witnesses in the Indian legal system

By

Diva Rai

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October 6, 2021

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This article is written by Vivek Maurya from ICFAI Law University, Dehradun. The author has described the admission and credibility of a child witness who has been tutored.

Table of Contents

Introduction

We all know that children are innocent in describing an incident they saw but at the same time, their testimony is very important in punishing the perpetrator. At a trial, testimony is an important part of the evidence against the accused and, unlike inanimate documents, witnesses are the main sources of testimony. Evidence given by a witness provides direct information regarding an incident before any law firm.

A witn e ss is someone who takes an oath or provides evidence in front of a judicial institution. It is the responsibility of the courts to establish their own judgement based on it. A child witness is someone who is under the age of eighteen at the time of giving testimony. In India, the age restriction for a kid to be a competent witness is not specifically recognised by law, any kid who can pass the competency exam can become a witness and there is no rule that prevents children from being witnesses.

Who may testify

Anyone who has witnessed an event is capable of testifying. The acceptable value of the evidence is subject to the fulfilment of certain conditions set forth under Section 118 of the Indian Evidence Act, 1872:

The witness must be qualified to testify,
They should be capable of understanding the questions put to them,
He or she should be able to provide a rational response.

The first facial reading of the provision shows that the court has the discretion to determine the testimony of a witness. This raises the interesting question of whether a child may be deemed to be a competent witness. As a general rule, the court must examine the child witness evidence as other witnesses.

Testimony of a child witness

Based on the facts and circumstances of each occurrence, the court has examined and ignored the testimony of child witnesses on many instances. One might inquire: Is it possible to disregard a child’s evidence due to his/her age? A kid of such a tender age cannot be regarded as a credible witness since he or she is unable to form a distinct viewpoint and is too young to comprehend the question.

In Nirmal Kumar v. State of U.P, 1992, the Supreme Court stated that a child’s evidence should be scrutinised carefully and that the court should seek some form of corroboration because corroboration is more of a norm of practical judgement than of law.

The testimony of the child witness is very likely to be taught and should be accepted only after careful consideration. Because of fear and temptations, the child may testify about things he has not seen. The court must carefully consider whether the child witness is under any teaching influence. However, the evidence should not be dismissed as he is likely to be taught because of his soft age.

Voir Dire test

The term comes from an Anglo-Norman word that means “oath to speak the truth.” In this context, the term voir (or voire) originates from French and means “that which is true”. The trial is held with the intention of determining the merits of the child witness. Usually, the judge questions the child witness to test his or her honesty and to see if the facts are constructed with the progress of the facts that accompany it.

This test is a precursor to determining a child’s maturity and ability to deal with the full potential of a witness to testify before a judge and, therefore, the judge may examine the child by asking some irrelevant questions. Some examples of questions asked in this test may be related to his name, father’s name or place of residence. This is done to assess the absolute fitness of the child witness, which may be restricted in nature.

In Rameshwar S/o Kalyan Singh v. The State of Rajasthan, (1951), the Rajasthan High Court decided that, under Section 118 of the Indian Evidence Act, every individual is competent to be a witness in a court of law unless incapable of understanding the question placed before him. Capability to understand at a young age is more likely to be dependent and to be formed at the opinion and perception of what others say and portray, due to which the testimony of a child is more likely to be modified or altered.

Hence, dealing with a child witness is of key importance. This was also addressed in the landmark case Nivrutti Pandurang Kokate Ors. v. The State of Maharashtra, (2008) in which the Supreme Court held that a child witness’ testimony must be scrutinised to ensure that it was not given under duress or undue influence and that it must also corroborate other evidence.

The credibility of a child witness

The question of the credibility of the child witness has always been very popular in isolated cases. There are several courts that have spoken in favor of this question. In view of the case of Tehal Singh and Ors. v. The State of Punjab, 1978, the Supreme Court held that the common sense and progress of a witness at the age of 13 may be equivalent to that of a perfectly rational person. The Court argued that in an agrarian economy such as India, a 13-year-old child cannot be considered immature, at such an age that children begin working in various fields, farms and in the informal sector. In the case of Musst. Jarina Khatun v State of Assam, 1991, it was held that by considering the credibility of the juvenile witness, the trial court may by taking into account the fact that the judge may have the first and direct conversation with the child. It enables him to be the best evaluator of the child’s level of development and comprehension.

However, there are certain circumstances and events in which the judiciary must take appropriate precautions when evaluating a child’s testimony. The main concern has been the inclination of the child witness to be tutored by some other party who has an interest in the matter and which hampers the testimony. However, it is always considered in the favor of the witness and the ground on which the evidence is rejected if there is any evidence to prove such tutoring. In another instance, Mangoo & Anr. v. State of Madhya Pradesh, 1995, the Apex Court observed that while there is always an opportunity to tutored the kid, it could not be used as a sole basis for concluding that the child witness had been tutored. The Court must decide whether or not the child was tutored. If there are any indications of tutoring, it may be determined by reviewing the evidence and the contents thereof. Even if a child witness statement has been tutored, it can be relied on if the taught component can be isolated from the untutored half, and the remaining untutored part inspires trust. In such a scenario, the untutored component can be believed or at the very least considered for corroborating purposes, as in the case of a hostile witness.

Need for corroboration

As a matter of prudence, courts are afraid of placing complete reliance on the testimony of a single child witness, preferring to seek confirmation from the facts and circumstances of the case, as in the Privy Council decision in R v. Norbury, (1977) where the testimony of a 6-year-old child witness, who was herself a victim of rape, was admitted. The Court held that a child here could not understand the nature of the oath but if he could testify and understand the nature of the questions put before him and give a reasonable answer, he could accept the statement of such a child witness and the verifiable proof is not required.

The accused was found guilty of raping an 6-year-old child. The basis of this conviction is the statement given by the victim to his mother. The Court of Session on appeal stated that the evidence was sufficient to form the basis of moral faith but not legally sufficient. When the matter reached the High Court, it was undoubtedly found that the law required confirmation, but here this statement is legally admissible as affirmation. Later, the High Court, allowed the appeal and therefore the matter reached the Supreme Court, where it made the following observations:

Question of admissibility of this statement

The Assistant Sessions Judge confirmed that she did not understand the sanctity of the oath but there is nothing to show that whether the child understands his duty to speak the truth. The Supreme Court held that the error in taking the oath depends only on the credibility of the witness and not on his merit. Section 118 of the Indian Evidence Act is very clear, there is always competency unless the court ever considers it and Section 118 prevails because there is nothing to indicate incompetence.

It is always good for the judge or magistrate to record his opinion whether the child understands his duty to tell the truth or even explains why he thinks so. Otherwise, the credibility of the witness will be severely affected, not only that, in some cases it may be necessary to completely dismiss the evidence.

The Assistant Sessions Judge did not administer the oath to the kid since she did not comprehend its purpose, but he proceeded to take her testimony, indicating his aim that the girl understood her obligation to speak the truth. Furthermore, at that time, the accused had never voiced any objections to the same.

Need of corroborative evidence

Though Section 114 of the Indian Evidence Act demands that every statement of compliance must be confirmed, the great majority of instances indicate that this is not a hard and fast rule, especially in rape cases involving a kid of tender years. There is a distinction between what the rule is and what has become a rule of law. In such cases, the judge must show that he has considered this rule of caution and should proceed to explain why he believes it is unnecessary to require corroboration on the facts of the particular case before him and why he believes it is safe to convict without corroboration in that particular case.

Incompetency of a child witness

The burden of demonstrating incompetence rests on the party challenging the witness, according to State v Allen, 1967. When assessing the competence of a juvenile witness, the courts examine five elements. The child is incapable to testify if any of them are missing.

An understanding of the responsibility to testify truthfully.
When the child is called to testify, he must have the mental ability to form an accurate image of the event.
Adequate memory to recall the event independently.
The ability to express the memory of an event in words.
Ability to understand common questions about it.

The accused was found guilty of the murder of his own wife based on the testimonies of his adolescent children, but the admission of such allegations was overturned on appeal. In this case, the accused presented some proof that the child had been tutored. Thus, the evidence must be disregarded. The Supreme Court stated that it is well-established law that merely because a witness is a minor, his testimony cannot be dismissed entirely on that basis. However, the court must exercise caution to ensure that an innocent person is not penalised entirely on the basis of a child witness testimony, as youngsters are highly susceptible to tutoring.

Looking at the facts of the case, it is clear that the presence of these witnesses in the house is regular and they are seeing the occurrence that cannot be considered strange or abnormal. As a result, their evidence inspires trust and must be acted upon.

Conclusion

Even if the child is a competent witness, the evidence must be carefully examined before accepting it. The qualifications of the child witness may sometimes not be consistent and his statement may sometimes be drawn on his imagination. The testimony of the child witness is therefore required to be verified but this statement undermines the confidence of the court and if there is no decoration or correction, the court may rely on its evidence. The testimony of the child witness must be evaluated more carefully because they can be tutored. If there is evidence in the record that a child has been trained, the court must dismiss his statement to some extent or completely. However, whether the child is taught or not can be deduced from the content of his statement. The court must, therefore, determine whether the child’s witness is a separate witness and their competence and credibility, which may vary from case to case.

References

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What are the post-acquisition corporate laws to comply with

By

Shoronya Banerjee

-

October 6, 2021

0

This is written by Ishita Raghav, pursuing a Diploma in M&A, Institutional Finance, and Investment Laws (PE and VC transactions) from LawSikho.com. This article has been edited by Amitabh Ranjan (Associate, Lawsikho) and by Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

Mergers and acquisitions have now become an essential part of the growing Indian economy. Companies choose this path to explore new opportunities and achieve higher returns however, these are not the only obvious reasons to pursue such an elaborative route; the path of mergers and/or acquisitions enables companies to eliminate competition, reduce tax liabilities, and even successfully set off losses of one entity against the profit of the other company. The term “Mergers” and “Acquisitions” are often misconstrued as synonyms of each other but nothing can be further from the truth – both of these terms have different legal meanings and implications in the market.

Mergers can be considered as a collaboration between two companies created with the aim of constructing an extended company, in the form of a new company. The primary aim behind mergers is to obtain higher business growth and goodwill in the market. The company that is merging itself to the other bigger company, ceases to exist, in the process. For example, company A merges with company B, to become a part of company B and loses its existence in the transaction.

Acquisition, on the other hand, is a transaction wherein one company is sold to another company, without losing their separate entities in due process. The companies involved in the transaction continue to exist in the market with the core management and all the major decision-making power of the target company rests with the acquiring company. For example, company A purchases (acquires) company B and both the companies continue to exist and function in the market.

While there are many elaborate discussions and articles written on compliances required before mergers or acquisitions are panned out, very little is discovered about the post-completion process. It is pertinent to note that transactions of this nature are highly sensitive and in order to achieve the benefits of a successful arrangement, companies must be aware of and adhere to post transactions compliances (and the after-effects) as well. This paper shall discuss briefly introduce some of the most important post Merger and Acquisition compliances, such as –

Closing compliances with regard to stamp duty.
Compliances under taxation provisions.
General compliances under the companies act and rules.

Stamp duty

Under the Indian Constitution, stamp duty and its evaluation are a subject of state list, and many states like Maharashtra, Karnataka have introduced separate stamp duty laws, whereas states like Tamil Nadu, Assam and North East have made changes in the schedule of the Indian Stamp Act,1899 (“Main Stamp Act”). To keep this article limited and with the sole purpose of general information, the paper shall highlight stamp duty charges levied on various transactions pertaining to mergers and acquisitions in the state of Maharashtra only.

Indemnity clauses

As mergers and acquisitions deal with a high magnitude of risk and assets (or business) is shared between the parties, it would only be necessary to incorporate indemnity clauses to protect the risk bearer’s interest. The indemnity clauses provided in either the shareholders’ agreements or share subscription agreements would attract stamp duty provisions.

In the state of Maharashtra, indemnity clauses would be dealt with by Maharashtra Stamp Act 1958 (“MS Act”). Article 35, schedule 1 of the MS Act states the stamp duty for indemnity as Rs.500 (Rupees Five Hundred).

Conveyance agreements

Conveyance agreements are sale agreements wherein possession of assets is transferred between the parties. The conditions for conveyance agreement include (i) Transfer of property both movable and immovable, (ii) Transfer by sale (or purchase interchangeably), (iii) Not provided under the Main Act.

According to Article 34 of the MS Act, stamp duty levied on movable property in the state of Maharashtra would be 3 (Three) percent of the market value of the said property. If the said asset is an immovable property and is further declared as residential or agricultural, the stamp dud levied is Rs.200 (Rupees Two Hundred).

Scheme of arrangements

Though the Main Stamp Act does not specifically state levying of stamp duty on transactions like mergers, demergers, acquisitions, slump sales; it is the Companies Act, 2013 and the relevant state acts, in our example, the MS Act which makes place for the required provisions.

Now with the recent order passed by the Maharashtra Government on March 16, 2020, Article 25 of Schedule 1, of the MS Act, the maximum stamp duty payable on orders of the scheme of arrangements in the state of Maharashtra has a ceiling limit of Rs.500 million. The rule is applicable to companies, including their parent and subsidiaries, and banking companies incorporated in India.

Tax provisions, concessions and consideration

Accounting of taxation requires more attention than what is presented by companies. Mergers and all the transactions that can bring change in control or ownership, spontaneously call for relevant taxation implications.

Taxation of purchase of assets or shares

In India, the acquisition of a company occurs either on the purchase of its shares or assets (in part or in whole). Further, these assets can be purchased either in the form of “Lump Sum Sale (or also known as, Slump Sale)” where the assets are sold to the acquiring company on a continuous ongoing basis.

The other form is where “Itemized Sale (or also known as, “Asset sale”)” occurs, where only a limited and specific category of assets are purchased. Here, the acquiring company practices cherry-picking of assets that are suitable for their business. In both these transactions, the purchase price denoted by the selling company is often accepted, subject to the addition of step-up cost.

Taxation of goodwill

Calculation of goodwill is generally considered in slump sale transactions, where the total purchase value paid to the company is higher than the market value of all its assets combined. Previously, under the Indian Income Tax Act 1962(“the Act”), depreciation charges were allowed on various intangible assets such as the goodwill of companies. The value of goodwill was realized when the purchase value of the transaction was observed to be higher than the asset’s value. However, the Finance Act, 2021 with the effect from April 2020, has amended the definition of goodwill and declared that goodwill shall not be considered as intangible assets anymore.

Depreciation charges on tangible assets

The Act provides for a specific rate of depreciation on tangible assets such as buildings, furniture e.t.c. and an additional depreciation of 20% on machinery used in businesses involved in manufacturing and production. It is to be noted that depreciation charges are levied on a “block of assets” where similar assets are grouped under a single block.

Tax attributes, losses and relaxations

Under the taxation laws, tax loss can be summarized as (a) Business loss and (b) unabsorbed depreciation.

Both of these losses can be carried forward to the next financial year for the purchasing company. The business losses can be carried forward to up to 8 years and whereas unabsorbed depreciation for an indefinite timeline. However, this benefit of carrying forward can be performed under certain conditions, one of which is fulfilling the “Continuity Test” as mentioned under Section 79 of the Act. It is mandatory under the test that all the beneficial owners continue to carry 51% voting rights in the company at the end of both the financial years, the year where the said businesses losses were incurred, and the current year where these losses are aimed to be set off against the profits. However, this principle does not apply to a change in ownership of a company due to IBC affected resolutions. It is taken to be understood that this benefit is only limited to business losses, and not applicable to unabsorbed depreciation and only to unlisted companies.

General compliances under the Companies Act, 2013 and the Rules

Now let us assume that two companies are getting merged into one. Let us briefly understand some of the major compliances that must be followed by these companies as per the Companies Act, 2013 and regulations (“Act”). In our example, the transaction that is occurring is – completion of the Scheme of Compromise, Arrangements, and Amalgamation under Sections 230 and 232 of the Act. The transferor company shall be called AB Ltd and the transferee company as YZ Ltd, where AB Ltd is amalgamating into YZ Ltd.

AB Ltd (transferor company)

Adopting the merger order approved by the NCLT by calling a board meeting;
Filling the merger order with the Registrar of Companies (ROC) under e- form INC 28*.
If the company is receiving foreign investments, it must file form FC-GPR with the Reserve Bank of India (RBI) within 30 (thirty) days of the date of issuance of securities**.
File form PAS-3 with the ROC within 30 days of the order***.
Income Tax compliance: Intimation of the transaction to the Chief Commissioner of Income Tax (TDS) and such other concerned officers, with the merger order and a follow up application of PAN card.

YZ (transferee company)

Adopting the merger order with the ROC by calling a board meeting;
Calling and adopting extraordinary meetings to inform the shareholders about the allotment of shares and other formalities such as change the object clause mentioned in the MOA of the YZ Ltd;
Income Tax compliance: Intimation of the transaction to the Chief Commissioner of Income Tax (TDS) and such other concerned officers, with the merger order. As mentioned before in this article, if the amalgamating company has any previous unabsorbed losses, the company here can avail the benefits of section 72 of the Income Tax Act by making required submissions.

Other miscellaneous compliances

The transferee company, YZ Ltd., should update the effective date to the ROC.
The YZ Ltd. should make and approve necessary changes in the invoices of the transferor company – AB Ltd.
AB Ltd must conduct a procedure to surrender its registration certificate with the ROC.
Both the companies must inform the banks, vendors, clients and customers about the merger and its effect on their respective businesses and dealings.

*Form INC-28: The form is filled with the ROC within 30 days of the application getting accepted by the NCLT. Both the companies, first the transferor company, AB Ltd, and then the transferee company, YZ Ltd must file this form. The form requires various key details to be filled by the filing company such as CIN of the company; authority who passed the order with the relevant date; the kind of transaction under the relevant section of the Act; date of filing the application with the tribunal; details of the transferor and transferee company; date of board resolution meetings etc.

** Form FC-GPR with RBI: This form is issued by the RBI when a company is receiving foreign investments. The conditions precedent for filing this form is that the foreign investment must comply with FDI policy and securities should be transferred to the foreign entity in the prescribed manner of foreign exchange management. The documents required for filing this form are not limited to Declaration by the authorized party that the form is as per RBI format; CS certificate, Valuation certificate (not needed for assigning rights issue shares); Memorandum of Association of the company; Board resolution; Foreign Inward Remittance Certificate and KYC details of the investors, etc.

*** Form PAS3 with the ROC: This e form is filled in accordance with sections 39 (4) and 42(9) of the Act along with rules 12 and 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The applicability of the form gets triggered every time a company having an existing share capital, makes an allotment of any securities. The details required under this form are CIN of the company; capital structure of the company; details of securities if the allotment is done via cash; details of securities of the allotment is conducted other than cash; bonus shares if any issued; list of allottees; shareholders or board resolution; valuation report issued by a registered valuer; a complete set of agreement, etc.

Conclusion

The above-explained provisions are some of the many necessary considerations that companies must keep in mind while initiating (and completing acquisition processes). From a business point of view, target companies may seem like attractive opportunities but companies should be mindful of many other aspects. The stamp duty charges are rather very expensive in real life, even worse when the two companies are in different states of the country. More often than not, acquiring companies have changed their registered office address from one state to another to avail some monetary gains. The same principle applies to taxation provisions, which need constant thorough understanding. A business deal can become a bad loss later on if it succumbs to tax penalties. That being said, when companies decide to go through the decision of undertaking merger or acquisition, they must keep an eagle eye over the pre as well as post-compliance issues and effects that the target or the acquiring company can be compelled to follow.

References

Shamika Vaidya, ‘Stamp Duty In Different States For Mergers And Acquisition In India’ (iPleaders, 2019)
‘Your One-Stop Shop For All The Information On The Maharashtra Stamp Act 2021’ (nobroker.in)
‘Implications Of Stamp Duty On Schemes Of Arrangement’ (Lawteacher.net, 2019).
(Www2.deloitte.com, 2020)
Finance Express, ‘Short-Term Capital Gains: New Goodwill Rule Seen Imposing Tax Liabilities On Firm’ (2021).
Vivek Gupta, ‘India – Taxation Of Cross-Border M&A’ (KPMG, 2021)
B Mahadevan, ‘Analysis of Section 79-Carry Forward & Set Off Of Losses In Companies’ (TaxGuru, 2019).
‘Https://Corpbiz.Io/Mergers-And-Acquisitions'<https://corpbiz.io/mergers-and-acquisitions>
Lily Bali, ‘Checklist For Post Merger Legal Compliances’ (2017)
‘Filing Form FC-GPR’ (India Fillings) <https://www.indiafilings.com/learn/filing-form-fc-gpr/>
‘Instruction Kit For E form INC-28’ (Mca.gov.in)
‘Instruction Kit For Eform PAS-3’ (Mca.gov.in)

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Pros and cons of time and materials contracts

By

Oishika Banerji

-

October 6, 2021

0

This article has been written by James Sibi pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

A time and materials contract, often known as a T&M contract, is a contract that reimburses one party for the price of supplies used to accomplish a work, as well as a specified hourly rate and additional fees connected to the services offered. When the hiring party does not know how long the job will take, how much it will cost, or how rigid the conditions will be, this form of contract is pursued. For some parties, this sort of contract may appear to be too difficult to manage. For others, it offers them the ability to easily get started by focusing their remuneration on the effort expected rather than understanding everything about the project before it begins. To know whether or not this contract is suitable for you begins with looking at some pros and cons of the materials contract and determining whether it could be used in the particular situation.

What are the pros and cons of using time and materials contracts?

Every contract comes with advantages and disadvantages that are to be analysed before making the specific contract for persons or entities. What are some pros and cons of time and material contracts? Let us unravel some of it to get a clearer picture of what one should expect while choosing time and material contracts over other options.

Advantages of T&M Contracts

Gives you the freedom you need in your contract as you’re going to have to pay a predetermined price for the materials and time taken to finish the project.
As the terms and conditions are defined quickly when drafting a T&M contract, negotiating them should be easy ( As long as you and the contractors can reach a mutual agreement and neither party tries to negotiate conditions that exclusively benefit them, everything should be OK.)
Enables you to establish a certain amount of time for a task to avoid dealing with clients that usually take as long as they want to make more money.
When pursuing this form of contract, there would be fewer repercussions if there were any setbacks or tasks were completed faster than planned. In general, Time and Material contracts give you the freedom you need when you can’t accurately predict the scope of a project when hiring a contractor.

However, there are certain disadvantages to choosing a T&M contract over a fixed-price contract, which has a specified completion date and precise terms and conditions for the cost of materials and compensation.

When to use time and material contracts?

These are the five scenarios in which a time and material contract would be preferable over a fixed price arrangement.

Unpredictable Situations

Costs are easy to predict when the needs, timelines, and exact tasks are known before the job begins. If a customer does not have a clear picture of what they want, it is impossible to predict what the result will be. Timelines can also be connected with uncertainty. If there is no defined timeframe or if those are likely to vary, time and material contracts should be considered.

When many of the project details are to be discussed when you are working out a contract, then a time and materials contract is the right way to go. Otherwise, you risk spending a lot more than you make.

When Both Parties Can Agree

Some clients dislike working with time and material contracts. Knowing the pricing fits into their budget and would be more convenient for them. These arrangements increase the owner’s risk while protecting your reward. However, when a client is unable to determine the scope of work, a time and materials contract assures the success of your firm.

Assure clients that labour and material expenses will be determined in advance. Consider operating under not-to-exceed circumstances and informing the customer when you cross certain thresholds.

When There’s Need for Flexibility

A time and material contract allows you to be flexible while working on a long-term project with frequent changes in requirements.

If timeframes are going to alter, you must be able to accommodate extended work hours and overtime. If changes are made to the project or parts of it are dropped, you must be able to account for them in the final expenses.

When You’re New to the Industry

As a new contractor, you may be ignorant of hidden fees, expenditures, and overhead that must be covered. You could be uncertain about how much to mark up supplies or were to offer a discount for long-term projects.

You can’t offer an accurate quotation if you don’t have a method for correctly evaluating costs. You also run the danger of underestimating how long it will take to finish a job.

This might result in overestimation. You’ll be quoting higher than others in the sector, and you’ll lose jobs as a result. It can also result in underestimation. You risk not being able to pay expenses and earn a profit if you underquote. People may employ you because you quoted a lower price, but you will lose money.

Using a time and material contract might assist you in developing estimation skills. You will have a better understanding of what it takes to complete a task while making a profit.

Disadvantages of T&M Contracts

T&M contracts, despite their significant attractiveness, can have a lot of drawbacks for consumers, bidders, and contractors.

If you don’t include a not-to-exceed provision and limit on costs, you could run into problems with negotiations or contractors taking advantage of the gaps.
You must deal with the time-consuming process of effectively monitoring the material used in the task and also the hourly wages, which can be tough to do, particularly if you operate your own small business. In a T&M contract, the amount of engagement required is considerably more than in a fixed-price contract.
As there is no set budget, overall expenditures might easily surpass what you expect to pay at the outset.

Contractors may not be familiar with the intricacies of accounting in the context of accounting. They may bill irregularly and carelessly without understanding the basic concepts like markup and margin.
Contractors who accept T&M contracts may be short on funds and need to get the project done as soon as possible.
Contractors who adopt T&M contracts are frequently newer or inexperienced businessmen who may not have spent a significant amount of time in the sector.
Contractors may find themselves with large expenditures towards the end of a project that cannot be recovered due to the provisions of a T&M contract.

As there are so many unknown factors in a project that leads to a T&M contract, there are several possible drawbacks. It is vital to evaluate whether or not the drawbacks exceed the danger. If so, you may want to take your time and conduct further study on your project and consider other options like a fixed price contract.

Risks involved in time and material contracts

A time and materials contract carries some risk. If you are going to use this approach, be sure you are aware of the risks and are willing to accept the consequences.

These contracts are more likely to result in a lawsuit than fixed-price contracts.
You might be charged with failing to act in good faith, which is a violation of the law. This occurs when the actual cost exceeds the projected cost.
It is fairly usual for clients to run out of money before the project is completed. This occurs when they have made several adjustments that have resulted in a rise in cost and run out of money before the work is completed.
When a client runs out of funds, you may be accused of downplaying the estimate and would be obligated to complete the project for the amount you were paid.
Clients may monitor staff productivity, including hours worked and breaks taken. They may also be unwilling to pay for required break breaks and time spent having essential talks with employees, inspectors, and other job site personnel.

Some of these elements are negotiable in a contract, while others are not. Be aware of the hazards of a time and materials contract, and make certain that you trust your customer not to take advantage of your labour.

Contracts for time and materials have certain common drawbacks. Owners or clients may attempt to negotiate not-to-exceed conditions, lower material markups or lower billing per-hour rates, decreasing the contractor’s profit. Due to their internal cost structure, clients would sometimes establish pricing that is lower than market rates, or vice versa.

Conclusion

Many prospective customers are just not used to dealing with time and materials contracts, making it difficult to locate new business possibilities. Customers usually prefer fixed-price contracts. Time and materials contracts should be written in such a way that the contractor may bill enough money to cover fixed expenses. When billable hours are cut, fixed expenses must be cut at the same rate as billable hours.

Handling this type of deal might be risky. Fortunately, these risks can be mitigated. If you wish to utilise a time and materials contract for a project, you can lower your risks by hiring a contract lawyer. A contract lawyer who specialises in your industry can help you draft a solid T&M contract that provides beneficial terms for both you and the client and ensure that you are not missing any important clauses that could be detrimental to your business later.

References

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

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Advantages and disadvantages of fixed-price contracts

By

Oishika Banerji

-

October 6, 2021

0

This article has been written by Bhumika Saishri Panigrahi pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

A contract between a contractor and a client might take a number of different forms. A fixed-price contract is one in which the contractor commits to complete a specific task for a specific price. This indicates that both parties are aware of the amount of money that will be exchanged. The contractor knows how much he or she will be paid, and the client knows how much he or she will be required to pay. A fixed-price contract has various advantages for both parties. When you sign a fixed-price contract, you agree on the final price of a product or service upfront. This pricing is spelled out in a contract that both parties agree to follow. The project budget is set under a fixed price model. To build a product, you (the client) pay a predetermined amount of money, which is determined by two factors: the scope of the project (i.e., the number and complexity of features) and the timeframe you set. You can pay a single amount for everything, including features, materials, and problem fixes, with this form of contract. To work efficiently in the fixed model, the end product must be extremely well-defined, right down to the smallest detail. As a result, the planning step will almost certainly take significantly longer than on previous projects. The duration of the set pricing is determined by the contract’s terms. A small firm can determine whether or not to use a fixed-price contract by weighing the benefits and drawbacks. This article will specifically focus on the advantages and disadvantages of a fixed price contract.

Requirements of a fixed term contract: : When signing a fixed-price contract, the client and the contractor should agree on clear, specified task requirements as well as a reasonable cost estimate.
Furthermore, the parties should be able to agree on a delivery schedule for the task as well as a reasonable pricing.
Finally, before the final pricing agreement, the contractor should offer an estimate or bid.

Advantages of fixed price contracts

This sort of contract provides a predictable scenario for the seller and buyer, as well as stability for both sides over the contract’s duration. Buyers may be concerned that the price of a service or commodity will rise unexpectedly, disrupting their business objectives. As a result, sellers may be apprehensive about the value of their service or commodity plummeting unexpectedly, reducing their income. Buyers profit from the predictability of a fixed-price contract since any uncertainty about the project’s final expenses that exceeds the original estimates is shifted solely to the seller.

Employees of the buying firm may prefer a fixed-price contract since it provides them with a solid budget to present to their superiors for approval, as opposed to a contract with prices that can climb indefinitely over time. Buyers benefit when the market raises the worth of a service or commodity, but sellers lose potential earnings they would have made if they didn’t have a set price contract.

This sort of contract may initially cost the buyer more money; however, it is beneficial since the buyer can budget for the contract’s costs and ensure that there are sufficient finances to complete the agreement. A fixed price contract offers definite parameters for the contract’s overall worth, and as a business owner, there are numerous benefits to employing this type of agreement. The following are some of them:

1. Allowing your business to maintain control over the amount payable.

2. Maintaining control over the contract’s maximum value.

3. Managing the cost of employing outside of the company. Controlling the cost of hiring is advantageous since the contractor and firm will determine the complete agreement value before signing it, ensuring that there are no surprises. The contract’s monetary value will remain unchanged.

Cost Clarity is an advantage

A fixed-price contract provides a predictable scenario for both the buyer and the seller, as well as stability for both parties throughout the contract’s duration. A buyer may be apprehensive that the price of a good or service will rise unexpectedly, disrupting his business objectives. The seller may be anxious that the value of his product or service will drop unexpectedly, lowering his income with little or no notice. Fixing the price eliminates all of these concerns.

A buyer may also profit from the predictability of a fixed-price contract, because any degree of uncertainty about the project’s final cost surpassing earlier estimates is wholly transferred to the seller. If you’re buying supplies or resources, a fixed-price contract may be preferable to a contract where costs may climb indefinitely over time because it offers you a concrete budget to deal with.

2. Market Change

When market forces alter the value of a product or service, including any materials or supplies required in its creation, a fixed-price contract might be advantageous or disadvantageous. If market forces drive the value of the commodity or service to skyrocket, the buyer benefits, but the seller loses out on potential gains he could have made outside of the fixed-price contract. The buyer is at a disadvantage and the seller is at an advantage when the price of a good or service drops suddenly.

3. Budgeting and Financial Capacity

Even though a fixed-price contract may cost a buyer more money up front, the buyer can budget for the contract’s expenditures and ensure that it has adequate funds to meet its obligations. When the price of a commodity or service rises drastically, the buyer may no longer be able to fulfil the contract, forcing the seller to accept a loss and consider legal action. If the goods or services are required for the buyer’s business to function, the buyer’s business may suffer.

4. There is a set deadline.

The development team can better predict the project’s timeline with a final scope and specified features. They can then create a clear plan with specific deadlines based on this information.

5. A development timetable that is simple to follow.

At any point during the project, you’ll know which features will be implemented. You’ll also be able to detect if the delivery is running late.

6. The client does not need to manage anything.

You can delegate project management to the developer team now that the project details have been finalised. You don’t need to keep an eye on things all the time, so you can keep your involvement to a minimal.

Shortcoming of a fixed term contract

A fixed pricing contract gives a buyer more certainty about future service or goods costs, but it does come at a cost. Because sellers may recognise that they’re taking a risk by having a fixed price, they may charge more than they would for a variable price. The seller is at a disadvantage and the customer is at an advantage if the price of a service or good reduces suddenly.

The buyer will be unable to honour the contract if the cost of the service or items significantly increases. This means the seller must treat the transaction as a loss and determine their legal options.

Comes at a higher price

A disadvantage is that certainty comes at a higher price.

A fixed-price contract provides a buyer with more certainty regarding the future expenses of the commodity or service specified in the contract, but this certainty may come at a cost. The seller may recognise the risk he is taking by fixing a price and charge more than he would for fluid pricing, or a price he could negotiate with the seller on a regular basis, to pay for the higher risk the seller is incurring.

Planning takes a long time

This contract type is not for you if you have a tight deadline for delivering your goods. To be able to estimate accurately, the software company must first specify features in great detail, which can take weeks or months.

Process that is rigid

There is no way to change or add features after you sign the contract. Let’s imagine the market demand shifts, and a feature becomes obsolete or a new feature is required. You won’t be able to change the project’s scope without negotiating each new feature and restarting the planning process. This could cause a significant delay in the product’s delivery.

4. Not recommended for large-scale projects

The fixed price strategy works effectively for smaller projects. The fixed approach, on the other hand, will be overly stiff if your product is more sophisticated, such as an e-commerce website or a multi-platform mobile app. Complex functions, dependencies, and long implementations necessitate ongoing examination, modification, and adaptability.

5. There is a chance of miscommunication

Clear and transparent communication is required to perform efficiently in a fixed price business. If you overlook a detail or the project specifications are unclear, you can end up with something that isn’t exactly what you expected.

Conclusion

There are various methods for obtaining a fixed pricing, but they all serve the same purpose. This is done by having a risk premium that covers uncertainties and contingencies to fairly balance the risk between the customer and the consultant. It calculates the number of resources and time required to complete the job. A risk premium also guards against any unexpected surprises that may arise over the course of a project. Estimates should not be given lightly because they tend to stay in the memory of the client for a long period. In this circumstance, you should follow the guidelines. Without a project task list, it’s practically impossible to make an accurate estimate unless the project has been completed before and there are no risk factors. Estimates must be accurate since they are made by those who will deliver the project. Before the project’s estimate becomes part of the fixed price, any disagreements must be resolved. With each project, you’ll need to assess and score the risk elements so that the appropriate premium may be applied.

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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Force Majeure and its application during the pandemic

By

Sneha Mahawar

-

October 6, 2021

0

force_majeure — Image Source: https://rb.gy/69mcyy

This article is written by Shruti Yadav, currently pursuing an integrated BA-LL.B degree from Jagran Lakecity, Bhopal. This article talks about force majeure and what courts have had to say regarding it.

Table of Contents

Introduction

Force majeure refers to a clause incorporated in contracts to eliminate liability for natural and inescapable catastrophes that disrupt the expected course of events and restrict participants from meeting obligations. Until not so long ago, ‘Force Majeure’ was a scarcely used and primarily overlooked concept. The force majeure clause, if incorporated in an agreement, was skipped over mainly by lawyers hastening to read a contract. With all that has changed in a few months, no concept is more important now than the simple ‘Force Majeure’.

‘Force Majeure’ : an in-depth analysis

The phrase ‘Force Majeure’ has been defined as ‘an event or consequence that can neither be foreseen nor controlled. It is a contractual stipulation allocating the risk of loss if execution becomes improbable or impracticable, especially as a result of an incident that the parties could not have envisioned or controlled.’ While force majeure has neither been defined nor specifically dealt with in Indian enactments, some reference can be found in Section 32 of the Indian Contract Act, 1872 (the “Contract Act”). According to this Section, if a contract is contingent on the happening of an event that becomes impossible, the contract becomes void.

From the perspective of a contract, a force majeure clause can exempt one party from performing contractual obligations when there is a force majeure event. The force majeure clause applies to the conditions of the contract and the consequences of such force majeure events. Therefore, for the force majeure clause to apply, the occurrence of such an event must be beyond the control of both parties. Both parties will be required to prove that they have tried to mitigate the impact of such force majeure events. In the event of a situation falling within the scope of a force majeure and meeting the applicable conditions of this clause, the result will be that the parties would be exempted from performing their respective obligations under the contract if such force majeure events continue.

For other consequential liabilities, depending on the language of the clause, the party may need to issue a notice to formally hold the other party liable regarding the occurrence of such incidents and the invocation of the force majeure clause. Some contracts also contain a clause that allows the parties to terminate the contract if such force majeure events continue for a long time.

Case and fact specific

One takeaway from the way Courts have administered cases concerning the invocation of the concept of force majeure is that there cannot be a straightjacket, generic, one-size-fits-all applicability of the said concept. Each case where the said concept is solicited to be entreated would be judged on its unique fact situation to provide a finding as to whether the said law stood the attraction or not.

M/s. Halliburton Offshore Services Inc v. Vedanta Ltd & Anr, (2020)

In this case, Vedanta (the defendant) submitted an offer for the comprehensive development of three blocks (Mangala, Bhagyam and Aishwarya) in Rajasthan, and Halliburton Offshore Services (the applicant in this case) has successfully won the contract.

Under the contract, Halliburton provided various benefits, damages, and advance bank guarantees. The two parties agreed that Halliburton’s deadline to complete the work will be extended to March 31, 2020. Halliburton completed a significant portion of the project by March 31, 2020. However, due to the complete lockdown caused by COVID-19, Halliburton was unable to fulfil the contract because it requires foreign personnel and foreign workers to travel across the country everywhere.

Halliburton invoked the force majeure clause in the contract. However, Vedanta refused to accept Halliburton and instead reserved the right to take appropriate remedies under the contract, including termination of the contract and termination of balancing activities through alternative remedies. Halliburton would bear the risks and costs.

Therefore, Halliburton was forced to propose appropriate remedies to the Delhi High Court, including suspension of the invocation of bank guarantees; otherwise, these guarantees would normally be suspended by the Court on grounds of gross fraud under the law.

The High Court of Delhi, among other things, held that “the question as to whether COVID-19 would justify non-performance or breach of a contract has to be examined on the facts and circumstances of each case.” The judgment also avers that a force majeure clause has to be construed narrowly. If there is a breach before the advent of COVID-19, the party will not be authorised to take advantage of the force majeure clause.

Most present-day contracts have force majeure clauses. However, prior to COVID-19, certain clauses were used to maintain a somewhat complicated part of the contract and were rarely the centre of attention. The existence of COVID-19 has given the whole jurisprudence of force majeure a newfound pertinence. The starting days of the virus growing in different parts of the world, and the resulting lockdowns were genuinely unprecedented and unforeseeable. Moreover, these incidents transpired in a total cessation in businesses all over the globe. Almost instantaneously, there was a scrambling of legal minds in haste to comprehend how specific force majeure clauses could be invoked, what the range of security they would yield to the concerned parties, and how the losses occurring out of COVID-19 would be bartered.

When attempting to invoke and depend on force majeure clause to seek a waiver of an enforcement obligation under the contract, what has been one of the decisive factors is the preceding performance under the contract by the party soliciting to invoke force majeure to attempt discharge of a performance obligation under the contract or suspension of the same. The question remains to determine whether the violation is caused due to a party’s force majeure situation or past non-performance. In the case of the latter, the force majeure clause will not come to the rescue of the defaulting party. The general rule that arises is that if there is a prior or continuing breach by a party, then the doctrine of force majeure cannot be clasped into service to justify the same. The outcomes of the said violation would oblige the party. On the other hand, if a party can ascertain from the record that it had been constant in its performance under the contract and it is solely because of the interceding force majeure situation that the performance of the same virtually unattainable, then arguably such a party would be anticipated to accomplish in its invocation and dependence on the force majeure clause.

Existence of a real possibility to act

In order to successfully invoke this principle, it must be determined that the force majeure event makes the performance of the contract entirely or essentially impossible.

Standard Retail Pvt. Ltd v. GS Global Corp (2020)

In this case, the petitioner was a Mumbai steel company that imported materials from a South Korean company and provided a letter of credit to Wells Fargo Bank. The contract between the two companies was based on cost and freight. According to the petitioner, due to government shutdown and protection measures, the contract between the petitioner and his supplier was frustrated under the provisions of Article 56 of the Indian Contract Act, 1872. Suppliers never arrived in Mumbai. Therefore, the petitioner refused to pay. The petitioner went to the Mumbai High Court in accordance with Section 9 of the Arbitration and Conciliation Act,(1996) to prevent Wells Fargo Bank from receiving the letter of credit. The High Court of Bombay denied giving in to the petitioner’s request of restraint in the capacity of encashment of Letters of Credit. It held, among other things, that there was not an absolute impossibility to act and that the Notifications/Advisories relied upon by the learned senior counsel does insinuate that the distribution of steel has been cited as an essential service. There are no limitations on its movement and all ports and port-related activities including the transportation of vehicles and workforce, processes of container freight stations and warehouses and offices of custom house agents have also been acknowledged as essential services.

Government’s view

In consideration of the COVID-19 pandemic and consequent closure, various ministries and departments of the Indian government and various state governments issued notices/guidelines, which were regarded as conditions of force majeure and provided certain relaxations/privileges/resignation during that time. Both parties relied on these circular guidelines/warnings to determine that force majeure conditions are widespread. However, such arguments, when brought to Court, produced mixed results.

In MEP infrastructure Developers Ltd. v. SDMC & Ors, (2020) the High Court of Delhi allowed mitigation on account of the occurrence of force majeure condition and, among other things, relying on the circulars published by the government to comply as under, the respondent Corporation itself referred to Circular issued by the Ministry of Road Transport Highways (MORTH) which notified that the COVID-19 pandemic was a force majeure occurrence. Nevertheless, in Rashmi Cements Ltd v. World Metal & Alloys (FZC) & Anr(2020) the High Court of Delhi denied dependence on government circulars to, among other things. In M/s Polytech Trade Foundation v. Union of India & Ors,(2020) the Delhi High Court, while refusing the petitioner’s dependence on announcements declared by the government, held that it was evident that the circulars were in the form of advisories and not a directory in nature. Therefore the circulars did not endorse or direct respondents to not charge ground rent, penal charges/ demurrage etc. Furthermore, the letters/guidelines/advisories also could not intrude or interfere in a private contract that respondents had with their customers, i.e. petitioner. Therefore, the Court held that Government circulars/guidelines/advisories acknowledging the COVID-19 pandemic have applications where the remedy solicited is against a government entity but cannot be pushed into service against a private entity to enforce it to give up its rights resulting from a contractual agreement.

Key takeaways of the pertaining judgements

The above-mentioned judgments have given numerous indicators regarding invoking the doctrine of force majeure and serving guide for invocation of force majeure.

In a situation of attempting to invoke Force Majeure

A connection needs to be established between violation and force majeure provisions.
There must be an attempt to authenticate that the force majeure provision has made the execution of the contract practically impossible and not solely difficult.
Punctual invocation acquiescence of any specific condition of application or content of invocation that the clause may mandate.
One must seek any admission/acceptance by the opposing party of the force majeure event/condition.

In the case of soliciting to counter invocation of Force Majeure

One must examine if it can be disputed that force majeure terms do not cover the event in the subject or that the execution was not affected by COVID-19 but a prior violation.
One needs to interpret if the request is postulated on the mere inconvenience to perform/onerousness; mere financial non-viability has been held no ground to invoke force majeure.
One must investigate if notice has been validly served following the contract.
One must respond to the force majeure notice promptly.
One must ascertain a perspective of convenience/equities in the inclination of one’s party.

Conclusion

In these unprecedented times, the applicability of force majeure cannot be interpreted as a particular case of enforcement of force majeure in all situations or contracts. Facts, circumstances, and the nature of the contract will play a key role in force majeure events and decisive factors for seeking remedies. Due to the current situation, uncertainty and anxiety have caused the parties to fire force majeure bullets desperately to evade their legal commitments. However, this misunderstanding of contract obligations and terms and attempts to use a one size fits all approach may bring significant legal risks and liabilities to the party that invokes force majeure. Since the coronavirus outbreak, the economic and logistical challenges facing the business community require all stakeholders to adopt a pragmatic approach and overcome the crisis with a certain degree of tolerance, instead of resorting to force majeure by mistake. Otherwise, although the crash may be temporary, the interruption will be permanent.

The law related to force majeure is quite mature. The law requires that when the contract itself stipulates force majeure and exemption clauses, the injured party is obliged to follow the notification procedure. While providing compensation in force majeure cases, the Court must also be within the four vertices of the contract terms. However, COVID-19 was an unprecedented event, and no one considered it when signing the contract. The suffering caused by various measures taken by the government to curb the spread of COVID-19 has affected almost every industry. However, the extent of the impact varies from industry to industry. According to the current precedents, the aforementioned abnormal situation can only occur in a series of commercial contract disputes. The Court interprets whether the contract containing the force majeure clause covers such government-imposed restrictions and blockades. However, the need now is that we need to enact written laws, rather than partial notices, to exempt affected parties from fulfilling their contractual obligations during such blockages, and such blockages should be considered force majeure. Therefore, we must enact laws related to force majeure and not merely stick to Section 32 of the Indian Contract Law or the contractual clauses.

References

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

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Major changes in the trademark system in Canada

By

Sneha Mahawar

-

October 6, 2021

0

This‌ ‌article‌ ‌is‌ ‌written‌ ‌by‌ ‌‌Yash‌ ‌Kapadia‌.‌ In this article, we explain the major developments that have taken place in recent years in Canada’s Trademark system.

Table of Contents

Introduction

In Canada, the statute relating to trademarks and unfair competition is the Trademarks Act, R.S.C. 1985 (hereinafter referred to as “Act”).

As per the Act, a trademark means:

“(a) a sign or combination of signs that is used or proposed to be used by a person for the purpose of distinguishing or so as to distinguish their goods or services from those of others, or

(b) a certification mark;”

A trademark is unique in its sense. It is crucial for a company to register a particular trademark as it denotes not only the actual goods and services that a company is selling but also that company’s reputation, goodwill and brand value.

By registering any trademark, an entity protects it under the given law from any sort of misuse by others and further also gains the exclusive rights to use it throughout Canada for a period of 10 years, a term that can be renewed thereafter.

Through this article, we shall explain the recent changes that have been implemented in the trademarks system in Canada.

Changes in Canadian trademark law

The long-awaited Trademarks Act amendments came into force on 17th June 2019. This amendment Act altogether changed almost every aspect of trademark law thereby transitioning the intellectual property rights in the Canadian landscape. The major changes are listed below.

Changes to be at par with the International trademark law standards

Under the new legislation, Canada adopted the standard procedures of the Nice Agreement that concerns the international classification of goods and services for the purpose of the registration of various marks, the Singapore Treaty on the Law of Trademarks and further implemented the Madrid Protocol that relates to International registration of marks¹.

When a country’s laws coincide or are similar to these internationally used conventions, it becomes easier to perform and run a business of protecting one’s trademarks internationally and also run a business beyond one country’s geographical boundaries. Canadians can now file only a single application and pay only one set of fees to apply for protection of a particular mark in over 100 countries. Furthermore, such an approach to have standardized international procedures also helps international companies to seek trademark protection for their businesses and marks in Canada too.

“Use” or “Intent to use” no longer required

A person can now file an application for registering a trademark for goods or services if they propose to use the trademark in Canada in association with the goods or services mentioned in the application. The new trademark law has now eliminated the need to include grounds for filing in the trademark application. It is not relevant now, whether an applicant has used the trademark or intends to use the trademark or not. Now, anyone can file a trademark application irrespective of the fact that they intend to use the trademark or not. All that is needed by an applicant is a proposed use for the mark which is a much easier requirement for any applicant to satisfy as the intent to use has been eliminated. This kind of flexibility gives an entity the freedom to decide whether they want to use a mark in Canada and even if they may not want to use it immediately, they obtain protection for the mark. As a result of the above change in the trademark law, the Canadian trademark office has seen a substantial increase in pending applications².

However, the ease to apply for a trademark in Canada also has certain drawbacks. Now it is practically possible for any person from any country across the globe to obtain a trademark registration even if they don’t intend on using the mark.

Pursuant to this change, Canada now joins China, Europe and many South American countries that operate in a similar fashion to obtain a trademark registration.

Changes in the registration process

The registration process has also been changed to be at par with the international standards which include the likes of the Nice Agreement, the Singapore Treaty and the Madrid Protocol.

Canada agreed to comply with the Nice Agreement which consists of 34 classes of goods and 11 classes of services which is an international classification of goods and services applied for registration of trademarks. Also, now all goods and services that are listed in a trademark application have to be filtered as per the Nice Classification system.

This change applies to all applications not advertised or allowed by 17th June, 2019. However, all applications advertised or allowed prior to the date mentioned above and existing registrations will be subject to the requirements to classify their goods and services as per the Nice Agreement and classification upon their renewal.

Changes in application fees to government

Furthermore, the effect of acceding to the Nice Classification system has resulted in changing relevant government applications and registration fees.

The Schedule of fees under the Trademarks Regulations outlines that under the new regime, government filing fees shall be charged on a per-class basis. The first class would cost $330 CAD and the subsequent classes for registration would require $100 CAD. The fees are submitted through the Canadian Intellectual Property Office website. If a paper copy of the application is filed, the initial fee for one class would be $430 CAD and $100 CAD for each additional class of goods or services to which the application relates as of the filing date.

Changes in the lifetime and renewal fees of a trademark

Prior to the new trademark laws, trademarks in Canada were earlier registered for a 15-year term from the date of registration. That is now cut down to 10 years. Therefore, renewal applications of trademarks will have to be filed after every 10 years to ensure that the protection is subsisting.

As per Section 46 of the Act, a renewal of the registration of a trademark costs $400 CAD in government fees for the first class of goods or services to which the renewal is related. Further, a $125 CAD government fee is charged for every additional class in which registration is needed. The renewal fees are to be paid by the owner within six months in advance of the renewal date and not before. Moreover, it is pertinent to note that every trademark registration will now only be renewed if it fully complies with the requisites of the Nice Classification system.

Changes in eligibility of a trademark

The new amendments brought about changes that have led to giving a better meaning to what is considered to be eligible for trademark registration purposes. Non-traditional signs such as colours, holograms, animated images, and scents are now eligible for protection in the Canadian market. Non-traditional trademarks are examined for their distinctiveness at the time of use to qualify for their registration of marks which differ from the evidence of prior use. The uniqueness of the proposed trademark is determined based on its distinctiveness rather than consumer recognition and goodwill. The benefits of this change in the law shall help business owners who make use of non-traditional marketing methods to gain consumers and also protect their interests in their unusual trademarks.

Changes in examination procedure of the trademark

As per the new trademarks laws in force, new and pending applications that have not yet been approved shall now be examined for distinctiveness. The Registrar of Trademarks is equipped with the power to ask for evidence of distinctiveness from any applicant as of the filing date for an application filed by them containing a mark that the Registrar may feel or maybe of the opinion that it is not a distinct mark. Since the amended legislation came into force, the Canadian Intellectual Property Office (CIPO) published various sets of examples of marks that would be objected to by reason of not being inherently distinctive. Some of these marks are as follows:

Primary geographic locations like London, Paris
Includes designs common to the trade like a generic sketch of grapes or apples and vine leaves for wine
Is the word for a particular colour where the goods are also of that same colour like white with a paper
Are one or two letters or numbers
Are laudatory words and phrases like Ultimate, Best in the world, etc.

Considering this procedure is quite new, raw and unexplored, the trademark examiners and practitioners are in the learning phase and CIPO is welcoming comments from practitioners who have dealt with and are currently dealing with such objections. Initially, evidence was required to be proved to clear the not being distinctive objection. However, now the language has been altered to accept comments or evidence or both.

Post this amendment, a number of objections have been given to marks that would otherwise be registered on the ground that their component parts are not inherently distinctive. These objections, therefore, appear to be at odds with a guiding principle of trademark prosecution: that a mark should be considered as a whole.

Therefore, in order to avoid any objections that lead to expensive prosecutions of an application, applicants registering trademarks must seek advice from lawyers or trademark experts before filing an application before the Registrar of Trademarks.

Changes in editing or amending an application in any manner

The new legislation put forth provides better flexibility for correcting the errors made by applicants while submitting trademark applications. For example, allowing a change to the trademark if the desired mark is substantially the same as the applied-for mark. It further increases the department’s ability to divide applications, amend and merge several trademark registrations.

The allowance to divide an application to advance the registration of a trademark where an objection has been raised in connection with only a particular section/ part of the goods and services in the application is a valuable option. By dividing applications, applicants can obtain the registration of their mark for even some part/ section of the goods and services in the preliminary application while they continue to communicate with the concerned examiner in order to comply and make good the remaining objections.

Other minor changes

On 4th December 2018, the Federal Government of Canada gave its royal assent to a massive budget Bill (Bill C-86) that includes even further changes to the Canadian trademark law. This Bill draws our attention to address the grievances about trademark practice in Canada for years and to improve them by creating necessary changes and amendments similar to the ones that came into force in June.

The amendments of 2019 also brought about changes in priority claims. As per the amended legislation, any applicant can claim priority to any application filed in the preceding 6 months, however, not only those applications filed in the applicant’s country of origin.

Conclusion

There has been a major transition in the trademark laws and the entire paradigm has changed considering that Canada is now at par with China, European countries in terms of its trademark laws. These amendments have opened the gateways of international countries to register trademarks in Canada that would lead to more and more foreign investment after the pandemic but it may also be anticipated that the local business would be at loggerheads with their upcoming international competition. The said amendments have their good and bad points to consider but more light shall be thrown on the positive aspects of the changes being implemented by the Canadian legislative system.

All in all, courts have also been busy with respect to these new amendments coming into force as to what happens to cases that were filed before the amendment, the applications pending in the registry before the amendment came into force. The transition is happening in a fastrack process wherein the Courts have made notable decisions and some landmark judgments can be accessed here.

In drawing things to a close, the amendments are a bold move taken by Canada and only time will tell if the change implemented in the trademark system would be beneficial to the future of the Canadian economy.

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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An analysis of three case laws on clickwrap agreements

By

Oishika Banerji

-

October 6, 2021

0

This article has been written by Shivam Sharma pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

With our increased dependency on online platforms, we ought to understand some legal aspects that remain associated with most of the websites. Online agreements are one such aspect that we end up signing without even realising what they entail. Legal effects of such online agreements have always been a matter of discussion. Clickwrap agreements come under the category of online agreements, wherein a message appears on the system of the user with a button labeled ‘I agree.’ When faced with the question of enforceability of such an agreement, the courts still end up applying the traditional rules of contract. In this article, we will understand the legal aspects of the clickwrap agreements in the light of a few important case laws.

Click Wrap agreements

Clickwrap agreements are those agreements which we come across while using software, website, or any other electronic media. They are also referred to as clickthrough agreements and clickwrap licenses. What sets these agreements apart is the way they present the ‘terms and conditions’ of using the services and such terms and conditions are followed by the words ‘I agree’ or ‘I accept’. In order to facilitate the complete use of these services, the user needs to click on such ‘I agree’ or ‘I accept’.

A user will encounter such agreements in the following instances:

(i) Downloading and installing antivirus on the computer;

(ii) Purchasing a ticket for a movie screening from a website;

(iii) Registering and using any social media account;

(iv) Ordering any item online to be delivered at home.

These are in no way an exhaustive list of events but are a mere small representation of the whole picture of clickwrap agreements. This article dwells on three important cases that have shaped the legal outlook of clickwrap agreements internationally. The article has extended its scope to international cases because the judicial outlook on clickwrap agreements is still in its infancy in India. However, there have been some small developments in the Indian landscape as well and the same will be explored in a later part of this article.

Case one: Feldman v Google

Facts and issues

The case involved a law firm by the name of Lawrence E. Feldman & Associates (Feldman) availing the services of advertisement via Google’s AdWords. The contention of the Plaintiff in the case was that Feldman was a victim of ‘click fraud’. Click Frauds are frauds that occur when persons and entities who have negligible interest in the services which are being advertised, click repeatedly on the ads for such services. The contention of Feldman was that since Google required it to pay for every click on its ads, Google should not take into account those clicks which are fraudulent. Another important point of contention was the forum selection clause in the agreement between the parties. This clause governed how a dispute resolution would be conducted between the parties.

Analysis

In the present case, the selection clause reads as follows. “The Agreement must be construed as if both parties jointly wrote it, governed by California law except for its conflicts of laws principles and adjudicated in Santa Clara County, California.” Feldman contended that this clause shall not be applicable as it was neither seen nor signed and negotiated by anyone in the firm.

To this, Google replied that Feldman had entered into a contract before it placed its ads on AdWords. The webpage displaying the AdWords contract begins with a notice which asks the user to “Carefully read the terms and conditions. If you agree with these terms, indicate your assent below.”

This was followed by the actual terms and conditions. The very beginning of the contract stated that once the user agrees to these terms, he or she will enter into a binding and legal agreement with Google. At the bottom of the page, which one could see without any scrolling, were displayed the words, “Yes, I agree to the above terms and conditions.” It is imperative for the user to click on this box in order to avail of the services of AdWords.

Final Decision: The court concluded that Feldman had good and reasonable notice of the terms and conditions of the agreement and it was the prorogation of Feldman to have read them before agreeing to them. The court held that Feldman was indeed bound by the terms of agreement it had entered into with Google.

Case two: Specht v Netscape Comms. Corp

Facts and issues

The case took place between numerous plaintiffs (which included Mr. Specht) and Netscape Communications Corporation (Netscape). Netscape provided a software named ‘SmartDownload’. The users were expected to install the software SmartDownload on their computers to browse the internet. However, it was later found out by the users that the SmartDownload software was transmitting their personal information to Netscape whenever they browsed the internet. Plaintiff brought a lawsuit against Netscape for the breach of privacy rights. Netscape on its part argued that the users of the software had agreed to the terms of use and hence any dispute would be subjected to the Arbitration Clause of the agreement between Netscape and users.

Analysis

The webpage which provided the download link for the SmartDownload software had the terms and conditions for downloading and using the software. However, these terms were not readily visible and the user needed to scroll down to the bottom of the page to view them. On clicking on the link of terms, the user would be directed to the actual license agreement which indeed contained the Arbitration Clause.

However, these terms and statements were not displayed anywhere near the ‘Download’ button itself. The user had to be extra vigilant in order to find the terms of use.

Final decision

The court held that a mere click on the Download button for SmartDownload software by itself does not signify assent to the terms of use as crafted by Netscape. The agreement itself was too inconspicuous. Thus, the court made out that Plaintiff was not bound by the terms of the agreement as the Download button was not sufficiently linked to the terms of the agreement.

Case three: Bragg v Linden Research, Inc.

Facts and issues

The present case took place between Linden Research, Inc (Linden) and Mr. Bragg. Linden was the creator and developer of an online game called Second Life. Mr. Bragg was one of the many players of this game. Second Life involves an online virtual reality where a player can build things, buy things, explore places and interact with other people/players. An additional feature of the game is that the player can also purchase land within the game with real-life money.

Linden recognized the intellectual property rights of its players in the context of what they created inside the game and also facilitated a mechanism for the sale of land at profits by the players. Mr. Bragg had purchased and owned many parcels of land in the game and one such parcel was called ‘Taesot’ which he had purchased for $300.

At a later point after the purchase, Linden nulled the said purchase by Mr. Bragg and froze his account. This was done because Linden found the purchase was done via an ‘exploit’ within the system and was thus fraudulent. This was challenged by Mr. Bragg in a suit against Linden. However, Linden contended that the terms of use require all the disputes to handle via arbitration.

Analysis

Every user/player of Second Life must accept the terms and conditions before they can play the game. Mr. Bragg too had accepted these terms by clicking on the accept button. Yet he argued that the arbitration provision was procedurally and substantively unconscionable. A term in an agreement is substantially unconscionable if it delivers a ‘shock to the conscience’. On the other hand, a term is procedurally unconscionable if it is a contract of adhesion.

This case is especially interesting because the services provided by Linden have no alternative. A user of Second Life cannot simply substitute it with another game as no such substitute is in existence. Hence Mr. Bragg had no other choice but to accept the terms for what they were. This made the present agreement into a contract of adhesion.

Final decision

The Court held that in the present case, the weaker party (Mr. Braggs) was given the terms with a ‘take it or leave it’ stance. There was no room for negotiation and hence there was indeed some procedural unconscionability. Keeping this in mind, the court held that the terms of the Clickwrap agreement were not applicable. It must be noted that the present decision was solely driven by the consideration that there was no substitute for the services of Linden. Had there been some substitute available, the Court would have ruled in favour of Linden.

The above mentioned case laws have contributed towards setting some strong principles with respect to the significance and enforceability of clickwrap agreements. After understanding the international outlook, let us have a quick overview of the position of clickwrap agreement in India.

A few important developments in Indian jurisprudence for clickwrap agreement

Up until this point, this article focused itself on the international decisions and legal position with respect to Clickwrap Agreement. The jurisprudence for Clickwrap Agreements has only begun to develop in India. In the case of Central Inland Water Corp v Brojo Nath, it was held that a gross inequality in the bargaining power over contracts will render its terms unconscionable. Going by such standards would however, render most clickwrap agreements as invalid. This, of course, would be counter intuitive.

But again in L.I.C. of India and Anr v. Consumer Education and Research Centre and Ors, the Supreme Court once again stuck down a contract citing that the parties did not have equal bargaining powers.

In another decision, this time from the Income tax tribunal in the matter of Ddit (It) 3(1), Mumbai vs Gujarat Pipavav Port Ltd, the Tribunal expressed its concerns and doubts with respect to the applicability of clickwrap agreements in the Indian context. This case related to copyright infringement but it required dwelling into the concept of clickwrap agreement. The Tribunal also highlighted the aspects of unconscionable and unreasonable bargain.

This is not to say that all contracts over the internet will be invalid. In the case of Trimex International FZE vs. Vedanta Aluminium Limited, India, the Apex Court has indeed upheld the validity of unregistered and unsigned contracts which were reached via the mode of emails.

Conclusion

The above analysis is a cautionary tale for those who intend to provide their services via an electronic medium. A developer must always ensure that the user of its services provides explicit consent to the terms he has set out and that is done via an ‘I agree’ button. In every case, the nature of the contract must be obvious and efforts must be undertaken to ensure that the agreement itself is not inconspicuous. The user needs to have reasonable notice and a fair opportunity to review the terms of the agreement.

The terms themselves must be drafted in a fair and reasonable manner, especially where the service is one of its kind and there is no readily available substitute for the same. Clickwraps are one of the strongest ways to obtain legal consent for an agreement online. They are definitely way better at it than their counterparts Browsewrap Agreements. Yet there are numerous pitfalls that one must be aware of while drafting a Clickwrap Agreement.

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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Different aspects of Right to Privacy under Article 21

By

Vanshika Kapoor

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October 6, 2021

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This article is written by Anusha Misra from NALSAR University of Law. This article looks into the different aspects of the right to privacy under Article 21 and its related conflicts.

Table of Contents

Introduction

Privacy is a fundamental human right enshrined in many international treaties. It is important for the protection of human dignity and is one of the important pillars of a democratic country. It supports the rights of self and others.

Privacy is a right that all human beings enjoy by virtue of their existence. It also extends to physical integrity, individual autonomy, free speech, and freedom to move, or think. This means that privacy is not only about the body, but extends to integrity, personal autonomy, data, speech, consent, objections, movements, thoughts, and reputation. Therefore, it is a neutral relationship between an individual, group, and an individual who is not subject to interference or unwanted invasion or invasion of personal freedom. All modern societies recognize that privacy is essential and recognize it not only for humanitarian reasons but also from a legal point of view.

The terms of privacy and the right to privacy cannot be easily conceptualized. Privacy uses the theory of natural rights and often corresponds to new information and communication technologies. Privacy is our right to maintain the territory around us, including everything that belongs to us, including our bodies, homes, possessions, thoughts, feelings, secrets, identities, etc. Your privacy allows you to choose what parts of this area can be accessed by others and to control the scope, method, and duration of the parts you choose to disclose.

A recent development in the Indian jurisprudence is the widening of the scope of Article 21 particularly post the case of Maneka Gandhi vs. UOI (1978). The Supreme Court has time and again laid down that Article 21 is the basic foundation of fundamental rights. Article 21 has proven to be multi-faceted. The scope of Article 21 has been widened by reinterpreting what constitutes life and liberty in specific circumstances. These terms, that is life and liberty, are not one size fits for all terms.

In order to understand the Right to Privacy, it becomes necessary to look into what constitutes privacy. According to Black’s Law Dictionary, “right to be let alone; the right of a person to be free from any unwarranted publicity; the right to live without any unwarranted interference by the public in matters with which the public is not necessarily concerned”. In order to widen the scope of Article 21, the Supreme Court has decided to interpret it along with the Universal Declaration of Human Rights.

The right to privacy is not formally advocated as a fundamental right in the Constitution. The right to privacy came into light in Kharak Singh v the State of U.P (1962) where the main issue was pertaining to surveillance of suspects.

Right to Privacy in India

The right to life within Article 21 is freely interpreted and therefore, it includes all aspects of a life that makes a person’s life more meaningful and the right to privacy is one of these rights. This issue was first raised in Kharak Singh vs. the state of UP (1962), the Supreme Court held that Regulation 236 of the UP Police Regulations violated the Constitution because it violated Article 21 of the Constitution. The Court held that the right to privacy is part of the right to protect life and personal freedom. In this case, the Court equated privacy with personal freedom.

Maneka Gandhi vs. UOI (1978) laid down the triple test for any law interfering with personal liberty:

(1) It must prescribe a procedure;

(2) the procedure must withstand the test of one or more of the fundamental rights conferred under Article 19 which may be applicable in a given situation and

(3) It must withstand the test of Article 14.

The law and procedure authorizing interference with personal liberty and right of privacy must also be right, just and fair and not arbitrary, or oppressive. It is now established that the right to life and liberty under Article 21 consists of the right to privacy as well.

The conflict between Right to Information and Right to Privacy

In the case of R. Rajagopal v. the State of T.N (1994), the Supreme Court held that the right to privacy is a ‘right to be let alone’.

In Mr. X v. Hospital Z (1998), it was laid down that if there is a conflict between two fundamental rights including the right to privacy then the right that furthers public morality or public interest would be enforced.

Ratan Tata approached the Supreme Court against the publication of the intercepts of his conversation with Neera Radia. Tata alleged that as Radia’s phone was tapped by government agencies for the purpose of investigating a possible offence then, the recorded conversation must have been used for that purpose alone. Tata thereby pleaded for the protection of his right to privacy.

By the use of the word “or” the legislation suggests that unwarranted invasion of individual privacy may trigger the exemption, even if the information has a relationship to public activity or interest. But the added caveat says that the larger public interest could justify the release of even purely private information. In addition, what constitutes “personal” information has not been defined in the legislation.

The Privacy Bill, 2011

The Bill protects the citizens from identity theft, including criminal identity theft and financial identity theft. The Bill bars intercepting communication lines without the permission of a Secretary-level officer. In addition to that, it is requisite that the material collected is destroyed within 2 months of discontinuance of interception. It ensures the constitution of a Central Communication Interception Review Committee to examine and review the interception orders passed. In addition to this, it is encompassed with the duty to uphold an interception that is in conflict with Section 5 of the Telegraphs Act is destroyed forthwith. It also prevents surveillance except in certain cases mandated by the procedure.

On the basis of the bill, no person whose place of business and data equipment is within India, shall leak any data relating to any person without their consent. The Privacy bill lays down the constitution of a Data Protection Authority of India. The Data Protection Authority of India is to monitor development in computer technology and data processing. This is done in order to evaluate the law and examine its effect on data protection. In addition to this, the authority is to receive recommendations and give representation to the public on any matter pertaining to data protection.

The authority also has the power to investigate any data breach and issue orders to ensure security interests. The bill establishes that an interception not adhering to the guidelines thereof may lead to imprisonment or a fine. Further, it says any person who obtains any record of information concerning an individual from any officer of the government or agency under false pretext shall be punishable with a fine of up to Rs. 5 Lacs.

Later developments in Right to Privacy

Right to Press vs. Right to Privacy

With the advancement of social networking sites and technology, the right to privacy being given the status of a fundamental right becomes extremely difficult. However, on the other side, the right to privacy of a person includes their right to seclude information that is of personal nature.

Now, every person can be a press, this can be ascertained from the rise in social networking sites and blog spots. The right to privacy often comes in conflict with the right to press. The right to press is a right derived from Article 19 (1) (a). The right to expression of a person might come in conflict with another person’s right to privacy. Thus, to decide in such situations the concept of public morality and interest are brought in. Each case is distinct and each right is special.

Test of public morality

Any right that has been derived from Article 19 can be derived from Article 21 as well. This is possible due to the wide interpretation of the term ‘personal liberty’. While the Court applies the test of public morality or public interest generally in case of conflict between two rights that are derived, a different interpretation is also possible. A right derived from Article 21 holds more superiority vis-à-vis a right derived from Article 19. This is because the state enacting law in contravention of such right can be saved under the reasonable restrictions under Article 19(2) to (5). This position was not followed in the pre- Maneka era as Article 21 was not interpreted to be a substantive right.

Right to privacy and police investigation

The right to privacy may also come in conflict with several aspects of the police investigation. Narco–analysis, brain mapping tests and polygraph tests lead to unjustified intrusion into one person’s right to privacy. The Supreme Court has acknowledged the right to privacy by branding these tests to be unconstitutional and inhumane.

Right to privacy and thermal imaging

The Supreme Court in the Directorate of Revenue and Anr v. Mohammed Nisar Holia (2007) laid down that “thermal imaging”, an advanced technology that can enhance the feeling when being locked out of a person’s house. It can detect whether the prisoner has stored drugs. The internal substance violates the rights and privacy of the person. The court discourages unnecessary infringement of a person’s right to privacy and believes that no unlimited power shall be granted to infringe a person’s right to privacy. The court revoked the conviction and seizure that violated the statutory registration requirements. Although the statutory power of separate search and seizure may not infringe on the right to privacy, in a case of this nature, the court can at least ensure that the right will not be unnecessarily infringed.

The Supreme Court’s Aadhaar judgement and the Right to Privacy

The Aadhaar Act grants residents the right to receive an Aadhaar number by submitting biometric and demographic information as part of the enrolment procedure.

The Supreme Court was tasked with determining whether the Aadhaar Act’s provisions were infringing on the right to privacy, which was declared a fundamental right by the Supreme Court in 2017. In this regard, it’s worth noting that a number of services supplied by both private businesses and the government required an individual to link their Aadhaar number for authentication, effectively making obtaining an Aadhaar number necessary for the vast majority of people. As a result, the question was not so much whether this constituted an infringement of the right to privacy, but rather whether it was a legitimate exemption. Certain sections of the Aadhaar Act were overturned or read down by the Supreme Court because they failed to meet the aforesaid proportionality standard. Apart from these provisions, however, the Supreme Court found that the Aadhaar Act, as a whole, serves a legitimate state goal and is proportionate, making it a justifiable exception to the right to privacy.

The Right to Privacy in the age of Facebook

In its case, the Facebook-owned company claims that requiring intermediaries to identify the originating source of information on its platforms might put journalists and activists in India at risk of retaliation, as well as infringe on people’s fundamental right to free speech and expression.

Government steps to protect privacy

Personal Data Protection Bill 2019: To provide for the protection of individuals’ privacy in relation to their personal data, and to establish a Data Protection Authority of India for these purposes and matters relating to an individual’s personal data. Based on the B N Srikrishna Committee’s recommendations (2018).

Information Technology Act, 2000: Provides protection against some data breaches involving computer systems. It includes safeguards to prevent unwanted access to computers, computer systems, and data stored on them.

Way Forward

Parliament and the Supreme Court should conduct a thorough examination of the Right to be free (RTBF) and devise a method for balancing the competing rights to privacy and freedom of expression. Data is a precious resource in the digital era that should not be left unregulated. In this scenario, India’s time for a strong data protection regime has arrived.

Conclusion

Privacy rights are essential elements of life and personal freedom rights under Article 21. Privacy rights are not absolute rights. They are subject to rational limitations for the protection of crimes, disadvantaged, or morality, or the protection of other human rights. If there is a contradiction between the two derived rights. If one looks at the later judgments of the Apex Court one can observe the desirability of the court to treat the basic rights as water-tight compartments. This was felt foremost within the case of A.K Gopalan v. the State of Madras (1950) and also the relaxation of this stringent stand may well be felt within the decision of Maneka Gandhi v. Union of India (1978). The right to life was considered to not be the embodiment of mere animal existence, but the guarantee of a full and meaningful life.

Being a part of society often overrides the very fact that we are individuals first. Each individual needs their private space for whichever activity (assuming here that it shall be legal). The state accordingly gives each person the right to enjoy those private moments. Clinton Rossiter has said that privacy could be special reasonable independence that may be understood as a trial to secure autonomy in a minimum of some personal and spiritual concerns. This autonomy is the most special thing that the person can enjoy. They’re truly free humans there. This is often not a right against the state, but against the planet.

References

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