Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

This article is written by Jaya Vats and further updated by Arnisha Das. In this article, the author provides a detailed study of Section 44AD of the Income Tax Act, 1961. The article provides an in-depth analysis with respect to the 2024-25 Budget, covering the objective, calculation of tax, amendments, and limitations of Section 44AD, along with its relevance.

Table of Contents

Introduction

Income is the earnings that are achieved after deducting the expenses from the gross revenue in the whole year of an individual. The government then collects the data and charges that individual evenly with the income tax regulations on the total earnings or profit of the salaried person or business person.

The taxes are then used for infrastructure development, defence, healthcare, subsidies, and other welfare reasons in the country. The methodology of taxation may often look burdensome to an individual; hence, there are methods to cut down this burden. A presumptive tax scheme lowers the tax burden even when the actual business expenses are minimal, reducing the percentage of tax on its income.

The income tax authority under the aegis of the Income Tax Act, 1961, is a legislative framework that establishes the rules and regulations that regulate taxes in India. The Income Tax Act consists of 23 chapters and 298 sections, according to the official website of the Income Tax Department. Each part of the Act deals with different areas of taxes in the country.

Thus, the levy on taxes varies for each department based on their annual turnovers. However, to maintain equilibrium and reduce the tax burden from owners or businessmen, several initiatives are taken by the government. Section 44AD, which allows small businesses to calculate their profits and gains on a presumptive basis, is one such initiative where taxpayers get a significant exemption in paying taxes without the hassle of maintaining any books of accounts or auditing expenses.

Recently, the Union Budget 2024-25 has reaffirmed the grounds of presumptive taxation declared under Budget 2023 with many modifications of Section 44AD of the Act for the purpose of computing profits and gains of a business. Small or medium taxpayers can take exemplary benefits from this provision. It offers a streamlined approach for eligible taxpayers to obtain tax benefits while maintaining compliance with applicable tax laws. This article will provide a deeper insight for the taxpayers and practitioners alike to simplify the regulations outlined in the provision and reap its benefits in the existing tax regime.

Overview of Section 44AD : presumptive taxation

The Government of India included a simple process to minimise the tax load and provide relief to taxpayers from tax compliance requirements. Section 44AD of the Income Tax Act, 1961, establishes a mechanism of presumptive taxation.

Businesses that use the presumptive taxation scheme are exempt from keeping normal books of accounts. This presumptive taxation exempts taxpayers from paying the taxes as per the regular provisions. But, in this process, the taxable income becomes greater than it is in this particular provision. In other words, the total expenses provided in normal provisions are less than they are in the presumptive provision.

Thus, the taxable income is comparatively lower. The provision entails the computation of profits and gains of small businesses on a presumptive basis. Thus, the limit of gross receipts or turnover provided for small businesses under this provision is 2 crores, which is chargeable to tax as per the provision. After budget 2023, the limit was extended to 3 crores on condition that 95% or more of the transactions are made through online mode.

The predetermined rate of tax on income remains 8% if the inflow of transactions is in cash, whereas the rate of tax remains 6% if it is made through online transactions. Overall, the tax system is based on an estimate of income rather than the actual income, allowing the taxpayers to pay taxes without maintaining extensive reporting. The deductions in this section remain for the taxpayer only in the condition that he has not already claimed any deductions under Sections 10A, 10AA, 10B, and 10BA, typically for tax incentives in certain sectors, and Sections 80HH to 80RRB under Chapter VI A for specific profit-related deductions.

Reasons for introducing the presumptive tax scheme

The main reasons for introducing Section 44AD of the Income Tax Act, 1961 are as follows:

Simplifying tax compliance for small taxpayers while eliminating the need to maintain detailed books of accounts and undergo complex tax computations.
To encourage a large number of small businesses to come under the tax base, offering a streamlined approach.
To incentivise the adoption of digital payment methods by offering a lower presumed income rate for taxpayers receiving a significant portion of their income digitally.
To streamline the tax administration process for small taxpayers, reducing the workload of tax authorities.

Eligibility criteria to opt for presumptive taxation under Section 44AD

The special provisions of the presumptive taxation scheme (PTS) are delineated specifically under Sections 44AD, 44ADA, and 44AE, respectively. The gross receipts or total turnover of a business must be 2 crores (which has become 3 crores after the amendment of sub-clause (ii) of clause (b) of Section 44AD by the Finance Act, 2023).

Now, after the new amendment, the taxable incomes are calculated with 8% on the receipts gained by cash in addition to 6% on the receipts gained from digital transactions. Thus, the total taxes would be levied, calculating both estimations as per the income tax slab rates.

As an incentive to promote digital transactions, the government offered a lower presumptive income rate for small businesses generating better revenue digitally. However, it is provided that taxpayers can simplify tax compliance without the need to claim deductions and depreciation allowances under Sections 30-38 of the Act.

To qualify for the presumptive taxation scheme under Section 44AD, a taxpayer must meet the following conditions:

To become a taxpayer under this provision, a taxpayer must be an individual or business registered in India.
The eligible assessee is a Hindu undivided family (HUF).
Any partnership firm excluding limited liability partnership firms (as under clause (n) of sub-section (1) of Section 2 of the Limited Liability Partnership Act, 2008)
Small businesses or professionals with a gross revenue of less than Rs 2 crores in the preceding fiscal year, i.e., any taxable income below 2 crores, are eligible for taxes under this section. Further, the limit is extended to 3 crores by the Finance Act, 2023, in case only 5% of the business transactions are made in cash mode. This initiative was taken to encourage the digital economy.
Any individual who claimed any deductions under Sections 10A, 10AA, 10B, 10BA, 80HH, or 80RRB of the Act during the tax year is not eligible.

The following individuals and corporations are barred from tax deductions under the provision of Section 44AD:

Any business entity carrying business except plying, hiring, or leasing goods carriages referred to in Section 44AE of the Act.
People or businesses with a turnover of more than 2 crore rupees.
Any non-resident or foreigner residing in India.
Individuals who have previously filed for tax breaks under Sections 10A, 10AA, 10B, and 10BA during the assessment year.

Computation of income and presumption rates under Section 44AD

If a person or organisation assesses tax by adopting a presumptive taxation scheme (PTS), he gets the benefits under the scheme. The tax is imposed on 8% of the income received through cash mode and 6% of the income received in digital mode without maintaining the books or accounts. In a normal scheme, the tax is levied on the total income, excluding the expenses incurred from the revenue.

For example, if Vijay, an architect, earns 1 crore as his gross annual receipt, he is eligible to file taxes under the presumptive scheme. Now if he adopts normal provisions (like Section 44AA), he has to deduct his total expenses, along with accounting services, from the receipts to get the taxable income. However, if he adopts a presumptive taxation scheme, his total taxable income will be as follows:

Let’s say, Gross Receipts = Cash Payments + Digital Payments = 60 lakhs + 40 lakhs.

Now, the total income received from cash transactions is 8% of 60 lakhs = Rs. 4,80,000.

Total income received from digital transactions is 6% of 40 lakhs = Rs. 2,40,000.

Total taxable income is = Rs. (4,80,000 + 2,40,000) = Rs. 7,20,000.

Thus, the total tax would be chargeable on Rs. 7,20,000 as per the income tax slab rate. Now, he has to fill out Form ITR-4 (SUGAM Form) to file his taxes at the prescribed rate without undergoing any compliance costs.

Features of Section 44AD of Income Tax Act, 1961

Following are the features of Section 44AD:

The ‘eligible assessee’ has the edge of filing tax on a presumptive basis upon a specified percentage rate. The assessee’s tax under Section 44AD is determined at 8% of the cash transactions and 6% of the digital transactions (if any) on the individual’s gross turnover for the fiscal year. It should be reminded that it is only provided when his or her gross sales are less than Rs 1 crore. After the alterations of Budget 2024, the ceiling has been raised to Rs 2 crores and for transactions settling at 5% of the gross receipts in cash, 3 crores per year.
The rate of 8% has been reduced to 6% in order to promote digital transactions and encourage companies to accept digital payments. As a result, assessees who take digital payments might regard their considered total revenue as 6%. This only applies if the amount of such turnover or gross revenues is received by account payee cheque or account payee bank draft, credit card, debit card, net banking, IMPS, UPI, RTGS, or NEFT.
The assessees or taxpayers would be excused from keeping any books of accounts, thus saving a significant amount of costs.
With the exception of those referred to in Section 44AE, the provisions of this section apply to any company or profession.
Income determined under this section is liable to taxes in line with the slab rates provided under the Income Tax Act.
The ITR-4 form would be filled out for tax returns by individuals, HUFs, and certain types of firms (not limited liability partnerships) in India.
Assessees who claim deductions under this provision will not be able to claim any further expenditure or depreciation, with the exception of any interest or payments given to partners.
The qualifying assessee must pay the entire amount of advance tax on or before March 15th.
If an assessee chooses the presumptive scheme and declares profits in accordance with the scheme but does not disclose earnings for five consecutive assessment years, he will be ineligible to claim the benefit of the provisions for the next five assessment years, beginning with the year in which profits were not proclaimed in accordance with the scheme.

Presumptive income tax scheme

Presumptive taxation was introduced by the government to ease tax collection and engage eligible businesses in the growing economy. Section 44ADA of the Income Tax Act was introduced as part of the presumptive taxation scheme, which took effect on April 1, 2017. It was created to assist small firms and professionals in employing a simplified taxation system with a lower compliance load.

Provisions 44AE and 44AD, which were established earlier, are the additional sections included in the presumptive taxation plan. Profits can be declared as a proportion of total turnover (sales) or gross revenues under presumptive taxation regimes. These disclosed gains are considered the assessee’s business income. A taxpayer who has chosen the program is not required to keep full records of accounts. Likewise, under Section 44ADA, small taxpayers are not required to keep books of accounts, and earnings are determined as a proportion of total sales.

According to the Income Tax Act, 1961, businessmen and professionals are required to keep regular books of accounts. In addition, they must have their finances audited and file income tax returns (ITRs). However, the presumptive taxation scheme (PTS) was created to provide assistance to small taxpayers.

PTS income is determined on a presumptive basis, as the acronym implies. Income is estimated on a presumptive basis for a person adopting Section 44AD (businessman) at the rate of 8% of the qualified business’s turnover or gross revenues for the year. Section 44AD, however, was changed with effect from the assessment year 2017-18 to state that income shall be computed at a rate of 6% instead of 8% where turnover/gross receipt is received by an account payee cheque or an account payee bank draft, or by use of an electronic clearing system through a bank account or by any other electronic channel.

Similarly, if a professional (as defined in Section 44ADA) wishes to adopt PTS, income will be estimated on a presumptive basis, i.e., at a rate of 50% of the profession’s total gross revenues. However, both entrepreneurs and professionals can voluntarily reveal more than the necessary proportion of their company or professional income and still file their returns under PTS.

Presumptive Tax Provision	Limit	Revised Limit (95% cashless transactions)
Section 44AD	2 Crores	3 Crores
Section 44ADA	50 Lakhs	75 Lakhs

Benefits of Section 44AD of the Income Tax Act, 1961

When a person claims tax deductions under Section 44AD, he or she gets a range of benefits, which can be listed as follows:

No bookkeeping or audit in paying tax is an advantageous step, which saves a lot of time and effort.
Income is presumed at a fixed percentage on the gross receipts, which eliminates complicated computations in the actual profits.
Less paperwork and formalities simplifies the overall compliance burden on the taxpayers.
Generally, taxpayers need to pay advance tax every quarter of a year. In contrast, in the presumptive scheme, taxpayers can pay the total amount before March 15.

A tax audit report of return filing has to be submitted by the 31st of October of every assessment year. However, if one adopts a presumptive scheme, he doesn’t need to worry about the due date.

If a person runs a partnership firm, they can deduct interest and salary paid to partners up to a certain amount, as long as the individual stays within the restrictions provided as under Section 40(b).
Only residents or HUFs are eligible under this provision, and non-residents or LLPs cannot avail the benefits of the same.

Limitations of Section 44AD of Income Tax Act, 1961

There are also limitations under Section 44AD of the Income Tax Act, 1961. These are listed as below:

Under this approach, income is calculated on a presumptive basis, which means it does not take into account the actual expenses or losses incurred in a business at a definite point in time for seeking deductions.
Persons who adopt this section cannot get benefits of deductions under Sections 30–38 of the Act.
The annual gross receipts in this section should be limited to 2 crores only.
There are no disallowances mentioned in Sections 40, 40A, or 43B.
Individuals are required to pay advance tax by the 15th of March or by the end of the fiscal year.
The pay-as-you-earn model governs presumptive tax deductions, and businesses typically pay the Internal Revenue Service in instalments.
The written-down value method of asset depreciation must be used for deductions made under this programme.
Interest income, inventory value, customer advance payments, retention money, and property, plant, and equipment sales all contribute to gross receipts and are not considered.
If an assessee chooses to pay tax under this section, he must continue to get the benefits for the next five years. Otherwise, if his income exceeds the limit of 2 crores in between this period, he shall be considered for auditing or bookkeeping onwards.

Significant case laws

In the case of M/s MD Yasin Construction Pvt. Ltd. vs. Acit Circle-2, Ranchi (2024), the Income Tax Appellate Tribunal regarding Assessment Year 2015-16 addressed an appeal where the Assessment Officer (AO) estimated the profit at 10% of the total turnover without any justification rejecting the audited accounts. As the disclosed net profit was already shown to be 3.98% and aligned with the previous years, the tribunal decided to allow the appeal for statistical reevaluation and compliance before the lower authorities. The tribunal held its decision in maintaining detailed accounts in the case of Abdul Atiq, Lucknow vs. Income Tax Officer (2019) that the existence of cash deposits in banks does not automatically imply that the income escaped the assessment, especially when the taxpayer has already declared income under the presumptive tax scheme.

In the case of Kangiri Contractor vs. ITO (2011, 45 SOT 1 Jodh. URO), the facts of the case show that the assessee’s firm had a turnover of Rs. 6.21 crores and the assessee had kept good books of account, i.e., they were thoroughly audited and were devoid of any unfavourable remarks from the auditors.

The main issues before the Income Tax Appellate Tribunal in Jodhpur were that the profit rate of 8% under Section 44AD is to be applied where the assessee does not keep books of account and the turnover is less than Rs. 1 crore and that the provisions of Section 44AD were not applicable in the instant case.

The court held that the fact that the assessee destroyed the books of account, etc., after completing the scrutiny assessment and thus could not produce them before the Commissioner did not disprove the facts that those books of account were maintained and audited, were produced before the Assessing Officer, and were verified by the Assessing Officer. As a result, the commissioner’s decision to impose a net profit rate of 8% was not justified. It was also decided that if the assessee’s net profit rate of 8.15 percent covered all additions, any additional additions made by authorities below that rate must be erased.

Before getting into details of the next case, one must understand the concept of assessment of on-money. The assessment on money is proof of cash received that has been precisely recorded in diaries and records. It is frequently discovered and confiscated in situations involving builders and developers.

The proof is usually deemed very strong if it includes particular facts such as the dates of receipt, the amount received in cash and by cheque, the property for which the money was received, and the people who made the payments, among other things. In most cases, the assessee additionally makes disclosures based on the results of the search and survey. Such searches and surveys are usually hailed as huge triumphs by the investigation wing, and assessments are conducted to tax the assessee’s on-money receipts as income.

In the case of Shivani Builders vs. The Income-Tax Officer (2005), the assessee firm signed a building deal on a fixed fee with two associations. It was entitled to recover the cost of any additional work done in the completed apartment(s). During a survey activity undertaken at the assessee’s premises, one of its partners acknowledged collecting on-money outside the usual book of accounts and guaranteed that the same would be reported as clear revenue in the assessee’s books. The assessee did not include the challenged amount in its gross receipts for the relevant assessment year; instead, it returned its income based on a presumptive rate of 8% on the increased turnover as opposed to its net profit as shown in its profit and loss statement.

The main issue before the court was that the assessment officer lacked the authority to determine if returned income exceeded 8% of gross revenues. The assessee submitted an income tax return pursuant to Section 44AD, stating a net profit of 9.56 percent of the entire transaction value. On the basis of the aforementioned declaration of partnership, the assessing officer added the full ‘on money’ to the assessee’s reported income.

The Income Tax Appellate Tribunal of Ahmedabad held that because there was no material with the department to make the ‘on money’ addition and the assessee had shown income of more than 8% of the total sale consideration, no addition of ‘on money’ to the assessee’s income could be made when working under Section 44AD. The court further ruled that when the law makes a concession for its purposes, the compliance and fulfilment of the qualifying criteria are assumed, and Section 44AD would not operate to limit the extent of Section 2(24) read with Section 5. As a result, when an assessee obtains a larger income, he or she is subject to be assessed on that basis, and Section 44 AD is inapplicable.

In the case of Abhi Developers vs. ITO (2006), the assessee was a partnership firm engaged in the civil construction sector. The company built flats and stores that were sold to various parties. During the course of the survey, two diaries were discovered, one of which belonged to the assessee. The receipt of ‘on money’ was documented in this journal. The turnover was Rs. 6.21 crores, and the assessee had kept proper books of account that had been audited and were devoid of any negative remarks from the auditors.

The main issue before the court was whether, while calculating an assessee’s income under Section 44AD, the Assessing Officer does not have the authority to assess anything in excess of returned income if return income exceeds 8% of total receipt/sale consideration.

The Income Tax Appellate Tribunal of Ahmedabad held that simply because the assessee destroyed the books of account, etc., after completing the scrutiny assessment and could not be produced before the Commissioner, would not disprove the facts that those books of account were maintained and audited, were produced before the Assessing Officer, and were verified by the Assessing Officer. As a result, the Commissioner’s decision to impose a net profit rate of 8% was not justified.

Conclusion

Businesses face various compliance requirements with the eventual growth in their profits. Thus, keeping track of profit and loss statements, books of accounts, invoices, receipts, the general ledger, and tax documentation are needed to determine tax liabilities.

Usually, tax consultations, freelancers, or Chartered Accountants (CAs) aid companies to maintain their day-to-day business transactions to come to a definite amount of tax payment in the whole year. However, the implementation of presumptive taxation under Sections 44AD, 44ADA, and 44 ADE makes it suitable for the small taxpayers to overcome the tax burden. Excluding tax audits or reviewing books of payments from the regime, it empowers the taxpayers to get a simplified tax policy.

The specified rate on the business transactions without the cost of carrying the burden of estimation of profits and calculating assortments of expenses makes the process optimised for small taxpayers. It provides the flexibility of earning income at a specified rate and reimbursing the taxes without any additional hassle, improving the taxation journey. Going to the Income Tax Department’s official website, it now gives a direct way to file taxes for the small to apply for Section 44AD tax method without hiring any third party for the same. It will stand as a unique assistance to the taxpayers, eventually relieving them from the unnecessary loads of tax payment, making the process easy-going and beneficial.

Frequently Asked Questions (FAQs)

What is turnover under Section 44AD of the Income Tax Act?

Individuals, HUFs, or partnership firms to be eligible for opting for presumptive income under Section 44AD of the Income Tax Act, 1961, should not have a turnover of more than Rs 2 crore.

Is it necessary for persons to keep books of account in accordance with Section 44AA if they use the presumptive taxation system of Section 44AD?

No. If a person adopts this section for presumptive tax payment as per the guidelines of the Income Tax Act, 1961, he does not need to keep any books of accounts or auditing documents of his expenses.

What are the benefits of Section 44ADA of the Income Tax Act, 1961?

Section 44ADA is a presumptive taxation scheme in the Income Tax Act, 1961, where persons involved in certain professions can avail the deductions by estimating 50% of the gross receipts as profits.

If a professional uses the PTS, how should they calculate my taxable business income?

As a professional, if a person uses PTS, your taxable income will be 50% of your turnover or revenues. For example, if an individual receives Rs. 48 lakh in receipts or has a yearly turnover of Rs. 48 lakhs, they must disclose taxable profits equal to 50% of such turnover, i.e., Rs. 24 lakhs.

References

https://www.incometax.gov.in/iec/foportal/help/e-filing-itr4-form-sugam-faq

Satish Sitole vs. Ganga (2008)

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September 6, 2024

The article is written by Nishimita Tah. The article provides a comprehensive overview of the landmark judgement delivered by the Hon’ble Supreme Court of India in Satish Sitole vs. Ganga (2008). It exhaustively covers the facts, issues, contentions, and the court’s ruling. The article deals with Article 142 of the Indian Constitution, which talks about the dissolution of the marriage, which had broken down irretrievably. An initiative was taken to analyse the case in the writer’s own words in a precise manner.

Introduction

According to Hindu ideology, the marital relationship is governed by the applicability of the Hindu Marriage Act, 1955, which precludes a broken marriage irretrievably as the cornerstone for judicial separation from a marriage. However, if the couple believes that there is no possibility of resuming their marital duties, they cannot legally end their marriage unless it is proved through the existence of other grounds such as cruelty, desertion, adultery, etc.

The Constitution of India grants special powers to specific courts to ensure a smooth and conflict-free society. The Supreme Court of India, being a responsible institution for the delivery of justice to the people, inherits discretionary powers granted to it by the Constitution under Article 142. Article 142 empowers the Supreme Court to pass the decree that is necessary for the fulfillment of complete justice in pending matters before it. The article also grants special leave against orders from any subordinate court in India.

The Hon’ble Supreme Court has often used Article 142 to pass orders aimed at providing complete justice to victims, ensuring that the final judgement fully addresses the issue involved in the case. The special powers under Article 142 were used by the Court to grant divorce to end all the ongoing legal disputes between the parties because their marriages were irreparably broken.

Background of the case

The case of Satish Sitole vs. Ganga (2008) reveals the need to add an irretrievable breakdown of marriage as a ground for divorce.

The background of the case entails that the respondent, Ganga, left her matrimonial home on 21-08-1994 and went back to her parents. Since the time the respondent left, she has lived separately from the appellant. The couple had lived separately for 14 years out of 16 years of married life. Thus, the Family Court granted a decree for divorce stating that the marriage had irretrievably broken down and ordered the appellant to pay alimony of Rs. 1,50,000.

In this case, harsh allegations were made against each other as grounds for divorce, including desertion, cruelty, and dowry demands, but not an irretrievable breakdown of marriage. Despite the birth of a son born out of wedlock, Chetan, on 28-02-1993, the couple could not reconcile. The Hon’ble Supreme Court used its power under the ambit of Article 142 of the Indian Constitution to dissolve the marriage, as it had broken down irretrievably.

Details of the case

Name of the Case: Satish Sitole vs. Smt. Ganga (2008)

Type of Case: Civil Appeal

Date of Judgement: 10-07-2008

Name of the Court: Supreme Court of India

Equivalent citations: Civil Appeal No. 7567 of 2004

Bench: Altamas Kabir J., Aftab Alam, J.J.

Parties to the case: Satish Sitole (Appellant) and Smt. Ganga. (Respondent)

Relevant statutes and provisions: Article 142 of the Constitution of India, Section 85 and Section 86 of the Bharatiya Nyaya Sanhita, 2023 (Section 498A of the Indian Penal Act, 1860), Section 13(B) of the Hindu Marriage Act, 1955

Facts of the case

On 22.05.1992, a marriage was solemnised between Satish Sitole (the appellant) and Ganga (the respondent) according to Hindu rites and customs. Through this marriage, a son named “Chetan” was born from the wedlock.
However, Ganga (the respondent) left her matrimonial home and went back to her parents. Due to several reasons, couples have been living separately. Thereafter, the parties took the assistance of the judiciary, and a notice was dispatched by Satish Sitole to her wife Ganga requesting her to return to her matrimonial home.
On 20.10.1995, a complaint was filed under Section 498-A of the Indian Penal Code,1860, against Satish Sitole and his in-laws, alleging demand for dowry. However, the appellant and his family members were discharged after the trial.
Satish Sitole moved to the court for the request to issue a search warrant before the Sub-divisional Magistrate Ganga appeared before the Magistrate’s court and agreed to return to her matrimonial home. However, she did not return, as she had agreed.
The appellant filed a matrimonial case before the Additional District Judge, alleging cruelty and desertion under Section 13(1)(i-a) and (i-b) of the Hindu Marriage Act, 1955, for dissolution of marriage. Thus, the respondent proved his case on grounds of cruelty and desertion. The trial court did not grant a decree of divorce, instead, the court passed a decree of judicial separation.
An appeal was filed by the respondent against the decree of judicial separation passed by the trial court, and a cross-appeal was filed by the appellant seeking a divorce. However, the High Court overturned the trial court’s decision. The trial court’s decree of judicial separation was based on the appellant’s conduct, which forced the respondent to leave her matrimonial home. However, the High Court ruled that it was not convinced that the appellant was treated with cruelty by the respondent, dismissed the appellant’s appeal for divorce, and allowed the respondent’s appeal.

Trial Court Decision

The appellant filed a matrimonial case seeking a divorce on the grounds of cruelty and desertion under the ambit of Section 13(1)(1a)(1b) of the Hindu Marriage Act. Although the respondent’s acts of cruelty and desertion were proven, the trial court did not grant the divorce but instead issued a decree for judicial separation.

High Court Decision

An appeal was filed by the respondent against the decree of judicial separation passed by the trial court, and a cross-appeal was filed by the appellant seeking a divorce. However, the High Court overturned the trial court’s decision. The trial court’s decree of judicial separation was based on the appellant’s conduct, which forced the respondent to leave her matrimonial home. However, the High Court ruled that it was not convinced that the appellant was treated with cruelty by the respondent, dismissed the appellant’s appeal for divorce, and allowed the respondent’s appeal. The trial court judgement was set aside.

Issues raised

Should the marriage between the parties that had broken down emotionally and practically be continued for namesake, or should it be dissolved?

Arguments of the parties

Appellant

It was argued that even though Satish Sitole failed to prove his allegations of cruelty and desertion, which he put forward to seek marital dissolution, the court should still grant relief due to the irretrievable breakdown of the marriage, using its power under Article 142 of the Constitution.
It was also contended that, in 16 years of married life, the parties have been living separately for 14 years, much of which was spent in contentious legal battles and making harsh allegations against each other.
It was also contended that there was no chance of reconciliation in the marriage between them and that appropriate orders should be issued in order to put an end to the pending litigation between the parties.

Respondent

The respondent contended that there was a possibility of reconciliation and that the petitioner was exaggerating the differences between us and had not made adequate efforts to re-establish the marital relationship.
The respondent refused the allegations of cruelty and contended that the petitioner had failed to provide considerable evidence to support his claims. She also argued and maintained that the disputes cited by the petitioner were usual in any marriage and did not amount to cruelty.
The respondent contended that she had been left without appropriate financial backing and that the petitioner had avoided his duty to maintain her.
The respondent also contended that divorce would leave her in a precarious financial situation.

Laws Discussed

Article 142 of the Constitution of India

The term “complete justice” follows a utilitarian perspective, which means the benefit of the masses. The purpose behind this concept is to deliver justice, which ensures citizens’ rights are not violated in any way. In the case of A. Jitendra Nath vs. Jubilee Hills Coop. House Building Society and Ors. (2006), the Supreme Court stated that Article 142 obligates the court not to pass an order that will cause injustice to others. In general, it means that the delivery of justice is in accordance with the established law, ensuring that none of the fundamental rights of individuals are overlooked.

The concept of “complete justice” under the constitutional framework refers to the power of the Supreme Court under Article 142 of the Indian Constitution. The Article grants the Supreme Court the authority to pass any decree or order that is deemed necessary for doing complete justice in the matter pending before any court. In the case of Satish Sitole vs. Ganga (2008), the Hon’ble Supreme Court utilised its power provided under Article 142 of the Indian Constitution to pass a decision to dissolve a marriage on the ground of irretrievable breakdown. The Hindu Marriage Act, 1955, does not specifically recognise irretrievable breakdown of marriage as a ground for divorce, however, the Supreme Court has power under Article 142 to grant a divorce to the parties when the marriage is beyond reconciliation.

The Indian Constitution considers that every citizen of India must achieve “complete justice.” Article 142 of the Constitution of India grants the power to the Hon’ble Supreme Court to pass a decree to achieve “complete justice.”

Article 142(1) of the Indian Constitution grants the discretionary power to the Hon’ble Supreme Court to pass any decree or order to provide complete justice in pending cases. The key points of Article 142(1) are as follows:

Article 142(1) provides the Hon’ble Supreme Court with extensive powers to ensure complete justice in any pending case before the court.
Any decree or order passed shall be enforceable across India as prescribed by the law made by the Parliament, and in the absence of such a law, as may be prescribed by an order from the President.
The Supreme Court has the discretion to pass the order if it considers it necessary.
The orders passed by the Hon’ble Supreme Court under Article 142(1) are final and binding.
Article 142(1) provides a broader scope for the court to address a wide range of legal issues and cases in a comprehensive manner.
The purpose of this article is to ensure justice by overriding procedural restrictions that prevent the court from delivering complete justice.

Article 142(2) of the Indian Constitution envisages the Supreme Court with broad powers that ensure the enforcement of its decrees and orders. The key points of Article 142(2) are as follows:

Article 142(2) of the Constitution allows the Hon’ble Supreme Court to produce an order necessary for securing the appearance of any person, the production of documents, or the investigation or punishment of any contempt of itself.
The Hon’ble Supreme Court has the power to order the conduct of investigations to ensure the proper administration of justice. The Hon’ble Supreme Court has the authority to punish for contempt of its order, which is a vital part of maintaining the dignity and authority of the judiciary.

The concept of “complete justice” was linked with the present scenario of the case.

Irretrievable Breakdown of Marriage: The Hon’ble Supreme Court recognised the marriage between the married couples had been broken down irretrievably, and there was no scope for reconciliation. Satish Sitole and Ganga had been living separately for a very long time, and the spark of the relationship was beyond repair.
Power under the scope of Article 142 of the Constitution: The power was exercised to ensure complete justice. The Hon’ble Supreme Court availed itself of the power under the scope of Article 142 to dissolve the marriage of Satish Sitole and Ganga. The power prevented them from future suffering and allowed the couple to move forward in their lives. Despite this, the statutory grounds for divorce were absent.
Precedent for future cases: The judicial decision taken in the present case sets an example for further cases where the Hon’ble Supreme Court can exercise its powers under the scope of Article 142 of the Indian Constitution to grant relief in similar cases of irretrievable breakdown of marriage. However, it fills the gap in the statutory law.

Section 85 of the BNS, 2023

The scope of Section 85 under the Bhartiya Nyay Sanhita, 2023 deals with cruelty towards married women by their husbands or relatives.

Definition of Cruelty under Sections 85

According to the section, it states that “whoever, being the husband or the relative of the husband of a woman, subjects women to cruelty shall be punishable with imprisonment for a term which may be extendable to three years and shall also be liable for a fine.”

The purpose of this section is to define cruelty as:

Any willful conduct of nature that likely causes grave injury or danger to life, limb or health, including mentally or physically, to the woman.
Harassment with the intention to force her in relation to abiding by any unlawful demand over property or valuable security.

The scope of Sections 85 and 86 under the Bhartiya Nyay Sanhita, 2023 states the offence of cruelty by a husband or his relatives towards women. The Section is exercised to protect married women from being trapped under an offensive act of cruelty by their husbands , family or relatives. In the case of Satish Sitole vs. Ganga (2008), the Hon’ble Supreme Court dealt with the matter in relation to Section 13(B) of the Hindu Marriage Act (1955), which is connected to divorce by mutual consent. However, the case was related to the issues of divorce , which were interlinked with Sections 85 and 86 under the Bhartiya Nyay Sanhita, 2023, in context to the allegations of divorce that accompanied divorce proceedings.

Section 13(B) of the Hindu Marriage Act, 1955

Section 13(B) of the Hindu Marriage Act, 1955, confers divorce by mutual consent. The ingredients of the section are as follows:

Involvement of both parties in the marriage can give their presence while filing the petition for divorce by mutual consent.
The presence of both parties is mandatory before the district court.
The parties must live separately for a period of one year or more after the marriage.
The reason for separation can be due to any circumstances but reveals that the parties have not been living together as married couples.
The section also states that the couple must mutually give consent to the dissolution of the marriage. There should be no coercion, fraud, or undue influence while giving consent for separation.
In the case of a cooling-off period, the District Court orders a period of six months to consider the decision after filing the petition. Thus, the period can be extended to eighteen months from the date of filing the petition.
Once the cooling-off period ends, the couples have to mandatorily move before the court to confirm their consent for further decision.
The district court verifies the consent is genuine and also verifies whether the terms and conditions made for the cooling-off period are met by the couples or not.
If the district court is satisfied, the court grants the decree of divorce by mutual consent for the dissolution of marriage between the couples.

In the present case of Satish Sitole vs. Ganga, the Hon’ble Supreme Court decided the case in accordance with the context of Section 13(B) of the Act, which elaborates on the applicability of divorce by mutual consent. According to the facts of the case, the couples were living separately for 14 years and could not meet the grounds for reconciliation. Both the husband and wife agreed to the decision of availing themselves of divorce by mutual consent, but later, one party stepped back from the decision of divorce.

The case emphasises the importance of mutual consent for divorce under Section 13(B) of the Act. It requires both parties to agree to the divorce when filing the petition and when the final decree is issued. The case illustrates that if one party withdraws their consent before the final decree, the divorce by mutual consent can be nullified.

Cases Discussed

Romesh Chander vs. Savitri (1995)

Facts: In this Romesh Chander vs. Savitri (1995) case, Romesh Chander and Savitri were married in 1962. Romesh Chander filed a petition for divorce on the grounds of cruelty and desertion.
Issues: The issues involved were:

Whether Savitri’s (respondent) behaviour amounts to cruelty?
Whether Savitri deserted Romesh Chander without reasonable cause?
Is Romesh Chander entitled to avail of the decree of divorce?

Held: The Hon’ble Supreme Court held that Savitri’s behaviour amounted to cruelty. It was also held that the respondent had deserted Romesh Chander without reasonable cause. In conclusion, the court also held that Romesh Chander was entitled to a decree of divorce on the grounds of cruelty and desertion.

In the present case, following the decision in Romesh Chander’s case, it was concluded that the marriage is essentially over and beyond repair, and keeping it intact amounts to cruelty. In accordance with this view, the powers exercised under the ambit of Article 142 of the Constitution direct that the marriage of the appellant and respondent shall stand dissolved. The appellant’s duty is to pay the respondent a sum of Rs. 2 lakh by way of permanent alimony.

Anjana Kishore vs. Puneet Kishore (2002)

Facts: In this Anjana Kishore vs. Puneet Kishore (2002) case, the couple got married, and disputes arose between the couple, leading to various legal proceedings. Anjana Kishore filed a petition under the scope of Section 9 of the Hindu Marriage Act, 1955, seeking restitution of conjugal rights. The husband filed a petition for divorce under Section 13 of the Hindu Marriage Act, 1955, on the grounds of cruelty.
Issues: The issues were:

Whether Anjana Kishore was entitled to a decree for restitution of conjugal rights?
Whether Puneet Kishore had established sufficient grounds for divorce on the basis of cruelty?

Held: The Hon’ble Supreme Court held that the allegations made by Puneet against the wife Anjana did not amount to cruelty, which was not substantiated by evidence according to the Hindu Marriage Act, 1955. The Court also observed that the disputes between the parties were insignificant and could not be taken as grounds for divorce. However, the Hon’ble Supreme Court focused on the necessity of reconciliation and preserving the marital relationship.

Swati Verma vs. Rajan Verma (2004)

Facts: The facts of the case of Swati Verma vs. Rajan Verma (2004) state that Swati filed a petition for the dissolution of marriage on the grounds of cruelty. The allegations arose that she had been subjected to physical and mental cruelty, and Rajan had deserted her for a period of less than 2 years immediately after filing the petition.
Issues: Whether Swati had proven that her husband Rajan had treated her with cruelty?
Held: The Hon’ble Supreme Court held that Swati had established the grounds of cruelty and desertion under the scope of Section 13 of the Hindu Marriage Act, 1955. The court also observed that Rajan had treated his wife with the offence of cruelty and deserted her for a period of fewer than 2 years. However, the Hon’ble Supreme Court granted the decree for divorce in favour of Swati.

The cases of Anjana Kishore vs. Puneet Kishore(2002) and Swati Verma vs. Rajan Verma (2004) were referred to in the present case of Satish Sitole vs. Ganga (2008). The exercise of the powers of Article 142 of the Indian Constitution stated that the decrees of divorce were passed to put an end to further litigation pending between the married couples on the grounds that their marriage had broken down irretrievably.

Durga Prasanna Tripathy vs. Arundhati Tripathy (2005)

Facts: In this Durga Prasanna Tripathy vs. Arundhati Tripathy (2005) case, Durga and Arundhati were married in the year 1982, and a son was born from wedlock. The couple started living separately due to serious disputes and differences between them. Durga filed a petition for divorce on the grounds of cruelty and desertion under the ambit of Section 13 of the Hindu Marriage Act, 1955.
Issues: Whether the marriage between them breaks down irretrievably? Is the ground for cruelty and desertion for divorce established by the husband?
Held: The Hon’ble Supreme Court held that the couple had been living separately for over 18 years and there was no chance of reconciliation. The court also held that there was no possibility of the parties living together. It was also held that the marriage is dead, and continuing the formal bond serves no purpose. The court passed the decree of divorce on the grounds of an irretrievable breakdown of marriage.

In the case of Durga Prasanna Tripathy vs. Arundhati Tripathy (2005), which was referred to in the Satish Sitole vs. Ganga case stating that the marriage had broken down irretrievably without the scope of reconciliation, the Court affirmed the decree of divorce passed by the family court and directed to pay the alimony to the extent of Rs. 1, 50,000.

Judgement of the case

The Hon’ble Supreme Court held that the marriage between the parties should be dissolved due to irretrievable breakdown and directed the appellant to pay the respondent a sum of 2,00,000 as permanent alimony. Furthermore, the appellant was ordered to pay the costs of the appeal to the respondent, assessed at Rs. 25,000.

Rationale behind this judgement

The fact of the present case was that out of 16 years of marriage, the appellant and the respondent had been living separately for 14 years, and therefore, an attempt toward reconciliation would be futile. The court found that the marriage had broken down irretrievably and continuance of such marriage is an act of cruelty.

Hence, the verdict of Romesh Chander’s case was referred to in the present case, stating that when a marriage is found dead emotionally and practically and there is no chance of its being retrieved, the continuance of such a marriage would amount to cruelty. Therefore, the Supreme Court, while exercising its power under Article 142 of the Constitution of India, directed the dissolution of the marriage of Satish Sitole and Ganga, with the condition that Satish Sitole would transfer his house to Ganga.

Analysis of the case

The Hon’ble Supreme Court observed that breaking down marriage irretrievably was the valid ground for divorce, which is not explicitly mentioned under the ambit of the Hindu Marriage Act, 1955. The decision mandated legislative reforms to include the irretrievable breakdown of marriage as a ground for divorce, aligning the law with societal norms, and ensuring complete justice. The Hon’ble Supreme Court also invoked its power under the ambit of Article 142 to dissolve the marriage.

The case highlights the power of the Supreme Court under the ambit of Article 142 to dissolve the marriage, which guarantees that complete justice was served according to the facts and circumstances of the present case. In view of the author, it somehow demonstrates the court’s inclination to adapt to societal realities. It highlights the weak points of the existing legal structure, which compelled the court to use extraordinary constitutional powers. The present case has been referred to in several other Indian cases, which sets a precedent for divorce cases involving “irretrievable breakdown of marriage.”

The present case was referred to by the courts in several subsequent judgments. In the case of Anil Kumar Jain vs. Maya Jain (2009), Anil Kumar Jain filed for divorce from Maya Jain on the grounds of cruelty and desertion. The marriage between the parties was solemnised but with time, differences between them arose, leading to strained relationships. Anil Kumar Jain claimed that Maya had treated him with cruelty and had deserted without any reasonable cause. The issues raised were whether the act of Maya constituted cruelty as per the Hindu Marriage Act, 1955. The issue was raised as to whether Anil Kumar Jain was entitled to a decree of divorce on these grounds. The Delhi High Court referred to Satish Sitole vs. Ganga (2008) while granting a divorce to emphasise the importance of considering the husband’s behaviour and the wife’s testimony.

In the case of Narendra vs. K. Meena (2016), the facts revolve around a matrimonial dispute between Narendra and K. Meena. Narendra filed for divorce on the grounds of cruelty, alleging that Meena had made false allegations against him and his family. K. Meena compelled him to get separated from his family. The issues raised were whether the behaviour of K. Meena amounted to cruelty against Narendra and whether compelling Narendra to get separated from his family constituted cruelty. The Hon’ble Supreme Court cited the case of Satish Sitole vs. Ganga (2008) to grant a divorce under the ambit of the Hindu Marriage Act, 1955, due to the irretrievable breakdown of the marriage.

However, in the case of Raj Talreja vs. Kavita Talreja (2017), the facts revolve around the fact that Raj Talreja filed a petition for divorce from Kavita on the grounds of cruelty. He claimed that Kavita Talreja had treated him with cruelty, which made it impossible for him to live with her. The couple had been married for several years, but their relationship had become strained due to various reasons. The issue raised was whether the conduct of Kavita Talreja amounted to cruelty as defined under the ambit of the Hindu Marriage Act. The second issue was whether Raj Talreja was entitled to a decree of divorce on the grounds of cruelty. The Bombay High Court cited the case of Satish Sitole vs. Ganga (2008) to address the grounds for divorce based on the irretrievable breakdown of the marriage.

Conclusion

The Law Commission of India and the Hon’ble Supreme Court have recommended that the irretrievable breakdown of marriage should be included as the ground of divorce. The passing of the decree of divorce on the grounds of an irretrievably broken marriage should be codified to make the implementation more clear and uniform. At present, divorce for the irretrievable breakdown of marriage can only be granted by the Supreme Court under Article 142 of the Indian Constitution.

References

Position of female as “karta” of Hindu joint family

By

Subodh Asthana

-

September 6, 2024

170426-F-AG923-0001 — Image source: https://bit.ly/2WrDJQT

This article has been written by Nishant Vimal and further updated by Diksha Shastri. The article navigates the entire journey of the position of a female as Karta of a Hindu Undivided Family. To discuss this role in detail, the author has referred to many case laws, legal principles, and amendments over time that helped females attain the role of a Karta in a Hindu Joint Family.

Table of Contents

Introduction

The roles of each family member in various societies have been defined since the primitive ages. In the hunter-gatherer societies, a man’s primary responsibility was hunting and protection, whereas the women gathered the food, cared for children, and managed domestic tasks. However, the elders acted as advisors and passed down knowledge, traditions, and values of their tribe or family.

Similarly, this setting up of defined roles continued in the ancient civilizations and made its way to various societies like an Asian, European, or even African household.

When it comes to the Hindu Joint Family, the roles are set in a way that the men are responsible for paying the bills of the household by work or a joint family business, while the women take care of the household chores and children. The most important role in a Hindu joint family is played by the Karta. In simple terms, the Karta is the head of a Hindu joint family. Since ancient times, this role was specifically meant for the eldest male member of a Hindu family.

However, in modern times, with the changing times, the definitions of these roles seem to get blurred. With the help of cultural changes, technological advancements, and social movements, there is now diversity in the roles and responsibilities of families in modern times. In this article, we will be delving deep into the concept of a Karta in the Hindu family and see whether or not a woman is a Karta of a Hindu family and, if yes, to what extent.

Concept of Karta in a Hindu joint family

Karta is the senior-most male member of the Hindu Joint Family and is the person who is the manager of all the properties of the Hindu Joint Family and takes care of all the other members. He has the maximum power in a Hindu Joint Family, and no one else has that authority.

The origin of the concept of Karta in a Hindu Joint Family is deeply rooted in ancient Hindu law. The derivation of this concept is from the ancient Hindu texts, and a long-standing tradition backs it up.

As the manager or head of the Hindu family, a Karta also has roles and responsibilities for the welfare of the family. These duties include managing family affairs, controlling finances, legal representation, and more.

Who can become a Karta

The senior-most male member is the Karta of the Hindu Joint Family, and, in his absence, the next senior-most male member becomes the Karta. If, in the case where a senior Karta lets go of his right, a junior coparcener can become the Karta after all the other members have consented to it.

In the case of Narendra Kumar J. Modi vs. Commissioner of Income Tax, Gujarat (1976), the Supreme Court decided on the issue of whether or not a minor son of the family could act as the Karta for the family in the case where the senior-most member relinquished his rights. The court held that, if the senior member relinquishes his right to be a Karta, the younger member can be a Karta after obtaining the consent of all family members.

Who are coparceners

We often come across the term “vaaris” of the family property. A coparcener is a term used to refer to the vaaris of a joint family under the Hindu succession laws. Thus, coparceners are a particular class within a Hindu Joint Family. Prior to the amendments in Hindu law, these were only the male members of the Hindu Joint Family. All the coparceners have rights over the property of the Hindu Joint Family. They are derived from 4 successive generations, and the senior-most among these become the Karta of the Hindu Joint Family. According to the Mitakshara Law, the coparcenary starts with the birth of the son in the family.

Female as a coparcener

Before the amendment of laws, only male members of the family were considered as coparceners. However, after the Hindu Succession (Amendment) Act, 2005, was passed, there were significant changes to the law that allowed daughters to be included as coparceners of the Hindu Undivided Family. Section 6 of the Act was amended to provide daughters equal rights and liabilities as the sons to be the coparceners of their Hindu Joint Family property.

Rights of coparceners

All coparceners, regardless of their gender, are entitled to the following rights with respect to their coparcenary property:

Birth-right

All coparceners get a right to the Hindu Joint Family property just by virtue of being born into that family.

Undivided Interest

Their interest in the family remains undivided, along with the rest of the coparceners.

Right to demand partition

In a Hindu Joint Family, all the coparceners have the right to demand partition of the property for their share.

Right to manage property

Apart from the Karta (head), all other coparceners also have the right to manage the family property. However, the final call remains with the Karta.

Female as a Karta

Article 236 of the Mulla Hindu Law has given the definition of “Karta” as follows:

“Manager – Property belonging to a joint family is ordinarily managed by the father or other senior members for the time being of the family. The manager of a joint family is called Karta.”

From this definition given above, it is pretty evident that Karta is either a father, a senior member, or the manager of the family affairs. In the olden days, this definition worked well with the set social roles of the male and female members of a family. However, with the passage of time, when the roles became less rigid and more practical to each individual family’s needs, the issue of whether or not a female member of the family be its Karta started rising.

To meet the changing needs of the development of the cultures in India, it was only fair that, with time, the legal principles also started shifting. This led to the beginning of a long journey for the property rights of women in their ancestral property and their role as a Karta in a HUF.

After taking a look at the meaning of a Karta and a coparcener, it is evident that only a coparcener can be eligible to become the Karta of a family. Especially considering that the most important duty of the Karta is to manage the family property, having the property rights to become a Karta is a must.

Earlier, a female was not given the chance to be a coparcener; she was not empowered to act as Karta prior to the amendment in the Hindu Succession Act. However, after the amendment of 2005 in the Hindu Succession (Amendment) Act was made, keeping in mind and respecting the position of a female member, the daughter of a coparcener shall by birth become a coparcener in the same way as the son. This was upheld in the case of Shreya Vidyarthi vs. Ashok Vidyarthi & Ors. (2015).

Section 6 of the Hindu Succession Act, 1956

Section 6 of the Act is all about the devolution of interest in coparcenary property. Thus, it provided the provision to be followed when a joint family property was passed down by survivorship. According to this section, whenever a male Hindu passed away, his interest in the Mitakshara coparcenary property would devolve to the surviving male members. However, there was also an important exception for females in the family, i.e if the deceased Hindu male left a female relative surviving, the right to property would devolve amongst members by testamentary or intestate succession and not by survivorship.

This provision led to several complex inheritance issues, considering the limited rights of daughters and the extreme focus on male lineage. As a result, the Amendment Act of 2005 was passed.

Post-amendment, this provision was altered significantly. This amendment eradicated the focus on male lineage through the rule of survivorship and gave females equal rights over property as the sons of a Hindu family. This amendment is a huge example of why the law needs to be changed with time. Over the years, these changes brought around a new bright future, opening the doors for females to lead and provide for their family while also gaining equal rights over their inheritance as their brothers and uncles. Let us take a look at the effects of the amendment below.

Hindu Succession (Amendment) Act, 2005

A major breakthrough towards eradicating gender inequality and discrimination, to prevent the gender bias that has been prevalent in families in India, and to improve the adverse condition of women in society has been ensured with the enactment of the Hindu Succession (Amendment) Act, 2005. This amendment has conferred equal property rights on daughters of a Hindu Joint Family. Now, a daughter can be a coparcener in a Hindu Joint Family in the same way as the sons.

After her marriage, she becomes a part of her husband’s Hindu Joint Family but does not cease to be a coparcener in the Hindu Joint Family of her father. She can exercise all the rights given to any coparcener before and even after marriage. She can have a right over the property of the Hindu Joint Family and also can alienate that property either by way of sale or will. The daughter will also get the property if any coparcener dies, just like the way sons get the property.

In a situation when a female coparcener dies before partition, then children of such coparcener would be eligible for claiming that property as they would have been entitled to such property in the future. A widow of a pre-deceased son is eligible for a share in the property as a legal heir of that pre-deceased son of the Hindu Joint Family. Even if she remarries, she will have this interest in that Hindu Joint Family property.

According to Section 6 of the Hindu Succession Act, 1956, daughter, mother, widow, predeceased son’s daughter and his widow, predeceased son’s widow, and daughter’s daughter are entitled to their respective shares as per the provision.

Rights of daughters in the property after the Amendment Act of 2005

The following rights were granted to daughters as a result of the 2005 amendment:

Coparcenary birth-right

Coparcenary rights in property were only given to the sons of the family before the amendment. However, now the daughters are also recognised as coparceners by birthright.

Equal property right

Since this amendment, daughters have had equal rights in ancestral property as sons. As a result, they can also control the property and its transfer and demand partition to obtain their share in the property.

Equal responsibilities

Along with the rights come responsibilities. After the 2005 amendment, the daughters of a Hindu Joint Family are also subjected to the same liabilities in the property as the sons. Thus, it may also fall upon a female as per the circumstance to become the manager or Karta of the family as and when required.

Right to dispose of property

As a result of the amendment, the daughters also gained a chance to dispose of their shares in the joint family property by way of a will.

Can a widow be a Karta

To become a Karta, the senior-most member must be a male as well as a coparcener of that particular Hindu Joint Family. Because the widow was, previously, never considered as a coparcener of the Hindu Joint Family, a widow never became a Karta. Let us take a look at the various decisions of the courts of India over the years.

Certain females are entitled to shares of family property if the partition is done. The father’s wife, mother, and grandmother are entitled to obtain a share of the joint family properties as per the provisions of the Hindu Women’s Rights to Property Act, 1987. According to Section 10, when a coparcener dies and leaves behind a widow, she will be entitled to take the property to the extent of her husband’s share.

Coming to the position of Karta, the norm in earlier times was that the Karta of the Hindu Joint Family is the senior-most male member and, hence, a female was never given the recognition. The additional qualification to become a Karta is that one must be a coparcener of the Hindu Joint Family. Therefore, females never became a Karta of a joint family because they did not satisfy both aforesaid qualifications.

Many courts have held that only a coparcener can become Karta of HUF. In the case of Commissioner of Income Tax, Madhya Pradesh, Nagpur vs. Seth Govindram Sugar Mills Ltd. (1965), the same thing was held by the court while deciding on the validity of a partnership firm between two Kartas, after the death of one Karta. In the case, when the deceased left behind widows and minor sons, one of the widows of the Hindu Joint Family had taken over as the guardian, which led to the dispute. However, in those times without the coparcenary rights, women were not considered as the Karta.

In the case of Radha Ammal vs. Commissioner of Income Tax (1949), the Madras High Court had to decide the validity of a partnership deed for its registration, entered into by a widow of the Karta of a Hindu Joint Family on behalf of minor sons and strangers. It was held that, since a widow is not considered a coparcener, she does not have any legal qualification to become a manager or Karta of a Hindu Joint Family. The court further also emphasised that the wife had obtained her right as a manager of the business of her husband only by survivorship and not by birth. This turned out to be the core justification behind her not having the right of a coparcener.

However, there were some different interpretations that were being made for the inclusion of females in the concept of coparcener, or Karta. The Income Tax Appellate Tribunal in the case of CIT vs. Seth Laxmi Narayan Raghunathdas (1948) reasoned that, since, in Dayabhaga Law, a widow may be a coparcener, she may even be the Karta of the family, particularly if she is the only member sui juris left in the family. For Mitakshara Law, where, along with a male coparcener, a female may not be a coparcener because she does not possess the right of survivorship, the court observed that this right or the status of a coparcener is not a requisite for being the manager or Karta of a joint Hindu family to which she has been admitted.

However, in times of necessity, a widow can be appointed as a Karta of the Hindu Joint Family. In the case of C.P. Berai vs. Laxmi Narayan (1948), it was held by the tribunal that a widow could be a Karta in a situation when there are no adult male members left in the family. Any Karta should act for the benefit of the Hindu Joint Family, and if a widow has the intention of doing so, she should be appointed as the Karta.

Can a married daughter be a Karta

From the information and case laws presented until now, it is pretty evident that, prior to the amendment of the Hindu Succession Act in 2005, a daughter was not considered as a coparcener, irrespective of her marital status.

However, after the amendment, the daughters have had an equal birthright to the ancestral property. Let us see what the courts have held in this respect after the amendment.

In the case of Sujata Sharma vs. Manu Gupta (2016), amongst various issues, the Delhi High Court had to decide on whether or not the plaintiff, aka Sujata Sharma, would be considered a coparcener in the HUF after considering that she was married since 1977. Another issue was, if she was the coparcener, was she also entitled to become the Karta? The position of the plaintiff as the oldest living member of the family was undisputed. With that said, the court relied on Section 6 of the Act, along with various other provisions, and allowed the petition as the majority of the issues were in favour of the plaintiff. The statutory provisions had provided her the birthright to be the coparcener and, further, be eligible to be the Karta of the HUF.

How did the question of a female being a Karta in a Hindu Joint Family arise

According to the beliefs of Sanatan dharma, women and men have always had equal rights. The roles played by them for their families varied, but that was not considered as a reason for marginalisation of the Hindu women.

Acting upon this source, in the case of Pandurang Vithoba Dahake vs. Pandurang Ramchandra Gorle (1946), it was held by the Madhya Pradesh High Court that any adult member of any family, male or female, is entitled to the right to become the manager of the property and act with bona fide intention. Besides this, the court also held that, under a legal necessity, the mother had the right to act as the manager of the property interests of her son. Relying on these facts, Justice Puranik, in the said case, decided that the mother can be the manager of a Hindu Joint Family.

Powers of a Karta

Being the natural leader or head of a Hindu undivided family, the Karta is empowered with certain powers. These powers are supposed to let the Karta carry on their functions as the manager of the family.

Power to manage the family business

Since ancient times, Hindu family businesses have been managed by the Karta of the family. Karta heads the family business and makes all the necessary decisions to ensure the growth of profits. The Karta can do anything or ask any of the family members to perform a legal activity for the growth of the family business. Moreover, it is also the basic duty of a Karta to see that the family business runs smoothly. Therefore, it’s Karta’s primary responsibility.

Power to control income and expenses

Karta receives all the income earned by the members of the Hindu joint family, and he allows the funds to all the members as per their needs and takes the decision as to when the HJF needs to spend the money. This gives them the absolute power to manage the entire finances of the family, including incomes from various other sources.

For example, if you are a part of a Hindu Undivided Family (HUF) and are interested in making an investment for the future security of your family, the last and final call of approval for the investment must come from the Karta. With this power, the Karta can effectively manage the budget of a family with ease.

Power to make decisions

In a Hindu Joint Family, a Karta is highly respected as the natural leader of the family. Hence, the major decision-making power also remains with him. Karta takes care of all family affairs and makes decisions regarding the same; hence, Karta has the most power in the Hindu Joint Family.

For example, any decision related to buying, selling, or leasing properties of the Hindu family will be valid only after obtaining the approval of the Karta.

Power of representation

The Karta is not a mere leader but also the legal representative of the Hindu Joint Family. This is an important power of the Karta because in the case of Chhotey Lal and Ors. vs. Jhandey Lal and Anr. (1972), it was held that a Hindu Joint Family cannot be a party to a suit because it does not have a separate legal existence. Thus, as the manager, Karta is responsible for legally representing the Hindu Joint Family in all suits.

Power to refer any matter to arbitration

Any conflict or dispute involving a member of the Hindu Joint Family or the family as a whole, Karta has the power to refer that matter to arbitration, and his decision is binding on all the members with respect to this.

Power to compromise

Karta has the power to settle any matter of property or any family debts, among other disputes. If it is done with bona fide intention. This also refers to the power of the Karta to conduct court settlements for internal or external disputes within the family.

For example, if the title for a piece of agricultural land of your family is in dispute with your neighbours, the Karta of your family can choose either to settle the matter by reaching a compromise or to take the neighbours to court.

Power to acknowledge contract debts

Karta has the power to take loans and pay off loans of a particular member of the Hindu Joint Family. However, if he takes a loan for the benefit of the family business, the duty to repay the loan comes to all the members of the Hindu Joint Family.

Power to enter into a contract

Karta has the power to enter into a contract in which the Hindu Joint Family is involved. He will represent the family in respect of all legal contracts they enter into on their behalf.

Power to alienate

Karta has the power to alienate any of the Hindu Joint Family property in the following cases:

If there is a legal necessity;
If he has done so for the benefit of the estate; or
If he has done so in case of an emergency.

In simpler terms, alienation means the act of disposing of a property. Thus, the Karta of a family also has the right to control the movement of family property, as long as he acts in good faith for the well-being of the family.

Powers of a female as a Karta

Earlier in certain cases like Sushila Devi Rampuria vs. Income Tax Officer (1959), the Calcutta High Court held that, where the remaining male members of the Hindu Joint Family are minors, their natural guardian is their mother. Hence, the mother can represent the Hindu Joint Family in an issue of assessment and recovery of income tax.

But, in recent cases like Sujata Sharma vs. Mannu Gupta (2016), the Hon’ble High Court of Delhi has interpreted the Amendment Act of 2005 in a way that will extend the applicability of the amendment to not just the Hindu women who will be recognised as coparceners in a the same way as the son, but also recognising the eldest woman member of the Hindu Undivided Family as the Karta of the Hindu Undivided family and its properties.

The point to remember is that the only hindrance for a female to be a Karta was the fact that they are not coparceners in a Hindu Joint Family. Under Mitakshara law, they have been given equal rights as that of a son. Son being a coparcener makes way for the instant effect that daughter can also become a coparcener. Hence, there is no firm argument as to why daughters cannot be made a Karta. When it comes to the question of a widow being a Karta, a widow is never a coparcener; hence, she will never become a Karta.

Current situation of a female as a Karta in society

A recent judgement on this issue passed by the Delhi High Court is a pertinent example. In the case of Manu Gupta vs. Sujata Sharma & Ors. (2023), the court very carefully examines how the marginalisation of women over the years has left a situation where, even after the amendment of the Hindu Succession Act in 2005, there is still a stigma around considering women as the Karta of a Hindu Joint Family. The present case was an appeal to the earlier judgement passed in 2015, as discussed hereinabove. The older order had allowed Sujata Sharma, i.e., the respondent, to claim her rights as the Karta of their HUF.

The grounds for this appeal were the fact that the respondent had already been married and was involved in the operations of the HUF of her marital home, resulting in a limitation to her involvement in the HUF of her ancestors. Further, they even claimed that the Karta was decided on the basis of Hindu laws and customs, which must not be ignored. They also claimed that the amendment did not affect the grounds on which a person can be a Karta. It was further claimed that the changes in Section 6 only allowed women rights in the coparcenary property and not the rights over Kartaship.

However, the court upheld the decision of the learned single judge in this regard and made significant progress towards the social acceptance and awareness of the position of females as a Karta in recent times.

This reaffirms the current standing that gender must not be a bar in assuming the role of a Karta.

Landmark precedents

G. Sekar vs. Geetha and Ors. (2009)

In this case, the male and female members of a family were in a dispute regarding the division of ancestral property within their HUF. The dispute arose following the deaths of the patriarch and Karta of the family, who held all the coparcenary property. The son claimed exclusive rights over the property, asserting traditional male coparcenary rights.

Based on the 2005 amendment, the female members also claimed their equal rights in the HUF property. Gradually, the dispute reached the Supreme Court of India. The issues in question were:

Whether daughters have coparcenary rights post-amendment?
Whether or not the amendment has a retrospective effect, applying to daughters born before the amendment came into force?

Decision of the case

The Supreme Court very fairly recognised the rights of the daughters in coparcenary property. More importantly, the court even clarified the effect of the amendment and emphasised that this right was applicable to all daughters, whether born before or after the amendment. This judgement was one of the initial steps in upholding gender equality in inheritance.

Prakash vs. Phulavati (2015)

This case is another important precedent that made it easier for daughters to claim their rights over the Hindu Joint Family property. The main issue involved was whether the amendment to the Hindu Succession Act, 1956, gave daughters equal rights as sons and was the effect applicable retrospectively. In this case, it was held by the Supreme Court that the law applied prospectively and the daughters could only claim rights in the property if the father had passed away after the amendment was enacted. You can read more about this case here.

Danamma @ Suman Surpur vs. Amar (2018)

The facts of this case are such that one Gurulingappa Savadi, the Karta of a Hindu Joint Family, had two sons and two daughters. He passed away in 2001. After his death, his grandson filed a suit for possession of the property. He further argued that the daughters were not coparceners as they were born before the Succession Act was passed in 1956. Contesting this suit, the daughters claimed a right to share in the ancestral property. The Trial Court had ordered in favour of the sons, denying the rights of the daughters on the grounds that they were born before the Act.

Further, the High Court even upheld the decision of the Trial Court and dismissed the appeal. As a result, the present review petition was filed. The main question before the Supreme Court was whether or not the daughters born before the Hindu Succession Act were entitled to coparcenary rights post-2005 amendment.

Decision of the court

The Supreme Court held that the daughters have the same coparcenary rights in ancestral property as the sons, regardless of whether the father was alive or not when the amendment was made applicable. This decision is another significant progress towards bringing gender equality into inheritance matters.

It was also held that the daughter was a coparcener by birth, the same as the son. Hence, the date of death of the father did not matter to prove the daughter’s right to ancestral property. This case is a great example of precedent for future cases.

Vineeta Sharma vs. Rakesh Sharma (2020)

Another landmark judgement decided by the Supreme Court of India interprets the amendments to the Hindu Succession Act. In this case, Vineeta Sharma was seeking her rights in the coparcenary property post-amendment. This was contested by her brother, Rakesh Sharma.

The main issue before the Supreme Court was whether the daughter, i.e., Vineeta Sharma, had coparcenary property rights despite her father having passed away before the 2005 amendment came into effect. Thus, the case revolved around the retrospective effect of the amendment. Another important issue was whether the amendment had any effects on the partition suits that were filed before the enactment of the 2005 Act.

Decision of the court

This decision was also important considering the fact that it would resolve the conflicting views found in the various precedents set before and after the amendment. The Supreme Court, after interpreting Section 6, held that daughters have coparcenary rights in property since birth, just like the sons of a Hindu Joint Family. With this progressive interpretation of the statute, the court has upheld gender equality against women in property rights.

Conclusion

God created everyone equal, then as civilizations grew, everyone started following set roles; as discussed, the women were mostly seen as domesticated. With the passage of time, equality started becoming a distant dream as the unfair treatment and marginalisation of the assumed weaker gender began increasing. Beyond the violence against women, for several years, they have not even been given any rights in their own household, including inheritance and property rights.

The rigid laws in India have always resulted in women being marginalised. The role of Karta stands secondary; until 2005, Hindu daughters were not even considered entitled to the joint family or ancestral property. Even the role of Karta was only available to the senior male members. Women were never given consideration until recent times. Now, the legislation and judiciary in India have exercised their powers and authority in such a way that gender equality is ensured.

In the olden days, the reasoning was given by the courts that women could not become a Karta because one of the coparceners is only appointed as a Karta and women could not become a coparcener. But the amendment to Section 6 of the Hindu Succession Act, 1956, gives equal rights to daughters in the Hindu Mitakshara coparcenary property as the sons have.

The amendment of 2005 has cleared the pathway for women to be coparceners in a Hindu Joint Family and has given them consideration for being the Karta. In a lot of cases, we have seen that justice is denied because of a lack of knowledge about one’s rights or awareness of the law. Therefore, this law and amendment should result in greater convenience for women, and it may be easier for them to know about their rights. Measures should be taken to implement their rights.

Frequently Asked Questions (FAQs)

Can a female create HUF?

A female can be the Karta of an existing HUF. However, for a Hindu Undivided Family, only a single member is not enough. So, a single member, whether male or female, cannot create a HUF.

Is there a gender for Karta?

No, there is no set gender for a Karta. Post-2005 Amendment of the Hindu Succession Act, females too have equal rights in ancestral property, paving the way for them to take over the position of a Karta as and when applicable. Thus, male or female, either member can be a Karta of HUF.

What is the role of a female as Karta?

As the Karta, a female has the right to represent the HUF in all matters, control the family and HUF business matters, and take any action in the good faith of the HUF.

What is the difference between a coparcener and a Karta?

All members with the right to ancestral property by birth can be the coparcener. However, only the eldest surviving member can assume the role of the Karta of the property. While all coparceners have the right to a share in ancestral property, the Karta is the one that takes control over all the matters and represents the family.

Which laws allow females to be Karta in India?

No law explicitly states that a female can be Karta. However, the Hon’ble Supreme Court of India has in many judgments held that females can take up the position of managers and the role of Karta in a Hindu family. The most important judgement was the case of Sujata Sharma vs. Manu Gupta.

References

Legitimate interest as a lawful basis under GDPR

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September 5, 2024

This article has been written by Karthika R pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho and edited by Koushik Chittella.

Table of Contents

Introduction

The GDPR (General Data Protection Regulation) enacted by the European Union in the year 2018 can be regarded as the Grund Norm for global data privacy legislation. The enforcement of GDPR marked the inception of a whole new system of compliances that are to be followed by organisations for the protection of the personal data of EU residents. Under the GDPR, businesses worldwide are mandated to take proactive measures, both technical and organisational, for the protection of personal data, which they have collected from EU residents, to deliver any sorts of goods or services to them. In this article, we are going to explore the scope and viability of using legitimate interest as the lawful basis for processing personal data under the GDPR.

Compliance and violation

Any violation of the rules of GDPR would invite hefty fines to business owners, amounting to up to 20 million euros or 4% of the global annual turnover, whichever is higher. Therefore, it is essential for businesses to remain compliant with GDPR.

The compliances that are to be followed by an organisation depend on whether the organisation identifies as a data controller who uses the personal data of individuals to offer goods or services to EU residents or as a data processor who processes the personal data of EU residents on behalf of the controller. GDPR permits the lawful processing of personal data of the data subjects by the data controllers and data processors. Article 6 of the GDPR considers only 6 methods as lawful basis for the processing of personal data, and they are consent, contractual, legal obligation, vital interests, public task, and legitimate interest.

Legitimate interest

Legitimate interest, as a lawful basis, can effectively manage the interests of the data controller without compromising on the rights of the data subject. As per Article 6(1)(f) of the GDPR, any processing done by a data controller or a third party for the purpose of pursuing their legitimate interest is considered lawful. However, the processing of personal data by considering legitimate interest as a lawful basis is subject to the exception that such processing shall not violate the fundamental rights and freedoms of data subjects concerning the protection of their personal data.

Public authorities can also use legitimate interest as a legal basis for processing the personal data of individuals if the legitimate interest they are pursuing is anything other than the performance of their duty as a public agent.

When data controllers are involved in any processing of data that falls outside the protection of the first five legal bases provided under Article 6, such processing can be justified using the scope of legitimate interests. The legitimate interest pursued can be either the data controller’s own interest or that of a third party and may include commercial interests, individual interests, or any wider societal benefits. Before the enforcement of GDPR, legitimate interests of data controllers for the processing of personal data were gauged as per Article 7(f) of Directive 95/46/EC.

When compared to the other 5 legal bases for the processing of personal data, legitimate interest is the most flexible one. There are two major situations in which data controllers can rely on legitimate interest as the legal basis for processing data, and they are:

No other legal basis can be relied upon due to the specific nature and circumstances of the data processing.
More than one legal basis can be relied upon, but legitimate interest seemed to be the most appropriate one.

Legitimate interest and potential areas for application

Recitals 47 to 50 of the GDPR specify some potential areas of data processing where the data controller can apply legitimate interest as a legal basis after conducting a LIA.

General corporate operations and due diligence: for day-to-day business operations and strategic growth

Product development and enhancement.
Direct marketing and communications
To run background checks by HR departments
Fraud detection and prevention: by financial institutions like banks, credit card companies, insurance companies, or any organisation involved in customer service
Network and information systems security
Social Media Platforms: Profiling for implementing targeted advertising
Personalisation for enhancing customer experience.
Artificial Intelligence: To train Large Language Models (LLMs)
Automated decision-making based on customer history
Location-based services
Data set/information received through M&A transactions.

Legitimate Interest Assessment

A legitimate interest assessment (LIA) is a crucial process undertaken by data controllers to establish the legal basis for processing personal data. When relying on legitimate interest, organisations must demonstrate that their interest in processing the data is valid, necessary, and balanced against the rights of data subjects. Essentially, LIA ensures that data controllers strike the right equilibrium between their objectives and individual privacy rights, thereby complying with data protection regulations.

While performing the LIA, the data controller has to conduct the 3-part test. The 3-part test is derived from the scope of legitimate interest for processing personal data as provided under Article 6(1)(f).

The three-part test includes the following:

The purpose test
The necessity test
The balancing test

Purpose Test

By conducting the purpose test, the data controller can establish the legitimate interest that it has with regard to the processing of data. During this test, the data controller has to delineate the need for processing the data and the benefit that the data controller would receive pursuant to such processing. The data controller shall also assess how important the benefit is and what the likely effect of not processing the data is. Additionally, the data controller has to reveal any benefits received by third parties from the processing of data, including wider societal benefits.

Necessity Test

The necessity test helps the data controller establish how the processing of data is necessary for pursuing the legitimate interest. In this test, the data controller has to prove that the processing of data done by it is in proportion to the intended purpose (legitimate interest) that is sought to be achieved. During this test, the data controller has to find out whether the processing can be done using less data or through less intrusive methods.

Balancing Test

The balancing test is the final and most important part of a LIA. It also represents the pivotal stage of an LIA. For data controllers to rely on legitimate interest as their legal basis for processing personal data, they must demonstrate that individual rights and freedoms do not outweigh the legitimate interest they seek to pursue. In essence, the controller must prove that data processing does not unduly impact data subjects’ rights, ensuring a delicate equilibrium between organisational objectives and privacy considerations.

For the purpose of conducting this test, the data controller has to ascertain the specific nature of data, such as a special category of data or data related to children, etc. Additionally, the data controller has to delineate that the processing of the concerned data falls below the reasonable expectation that the data subject has against the controller concerning the goods and services delivered. Finally, the data controller has to evaluate the impact of the data processing on the data subjects and the safety measures adopted by it to mitigate any potential risks posed by the processing.

Thereafter, the data controller shall make an intelligible decision as to whether to continue with the data processing on the basis of legitimate interest or not. After completing the LIA, the data controller has to record the outcome for justifying compliance.

Result of the balancing test

Generally, if the balancing test turns out to be negative, the data controller cannot rely on their legitimate interest for processing the data. To continue pursuing the legitimate interest, the data controller can attempt to redefine the scope and nature of the processing or incorporate more efficient safety measures, both technical and organisational, to mitigate the impact created through the processing. Following this, the data controller can rerun a balancing test. If the result turns out to be negative once again, the data controller should stop relying on such data processing or rely upon any other legal basis for it.

Effect of legitimate interest on GDPR principles and data subject rights

While processing personal data based on legitimate interest, the data controller or third party has to comply with the principles of data processing prescribed under Article 5 of GDPR, like transparency, purpose limitation, data minimisation, etc.

As far as the transparency principle is concerned, similar to the case of data processing based on consent, while using legitimate interest, detailed privacy notices as prescribed under Article 13 and Article 14 shall be issued to the data subjects. These privacy notices shall inform the data subjects that the processing of personal data is being done based on legitimate interest as the legal basis.

Conducting a proper LIA would help organisations to comply with principles like purpose limitation and data minimization. Nonetheless, if the result of legitimate interest assessment is not in favour of the data controller and the third party, the organisation will fail to comply with the accountability principle under GDPR. When personal data processing relies on legitimate interest, most data subject rights remain fully applicable. These include the right to access, rectify, erase, restrict, and object to processing. However, there’s one exception: the right to data portability. Additionally, data subjects are protected from decisions based solely on automated processing. In essence, legitimate interest strikes a balance between organisational needs and individual rights.

Having said that, it is important to note that some of these rights cannot be exercised unconditionally. For instance, the right to erasure does not come off as a natural corollary to the processing of data based on legitimate interest. This right comes into existence only in instances where the data subject has raised an objection against the processing of data and the controller could not establish a legitimate interest with respect to such processing in a justifiable manner.

Similarly, if the processing of data is done in association with fraud prevention or network and information systems security, the objection raised by the data subject may not be considered sufficient enough to outweigh the legitimate interest of the controller. Nevertheless, data subjects can exercise the right to object, absolutely against processing of data associated with direct marketing.

Relevant case laws

Rynes Case

This is a famous case law in which the CJEU upheld the legitimate interest possessed by a house owner when he installed a surveillance camera outside his home, which monitored the entrance to his home, a small portion of the public way, and the entrance to the house opposite to him. The dispute arose when one of the two suspects, who had broken a window of Mr. Rynne’s home, challenged the legality of the video submitted as evidence during the criminal trial, which was recorded by Mr. Rynne’s surveillance camera. The suspect had challenged the recording on the ground that it was unlawful processing of his data since he did not consent to it and he was also not notified about the existence of a camera.

CJEU made some notable observations in the case when they held that video surveillance will not fall under the exemption provided to processing of data in relation to a household activity if it “covers even partially a public space and is accordingly directed outwards from the private setting of the person processing the data in that manner.” However, the CJEU held that in the instant case it is necessary for Mr. Rynes, as the data controller, to engage in the processing of personal data based on the legitimate interest of a house owner to protect the property, health, and life of his family members and himself.

Google Spain Case

In this landmark case, a Spanish citizen named Costeja Gonzalez requested a newspaper to remove an article about his bankruptcy from its online website, and a similar request was made to Google Spain to take down all the links that appeared when his name was entered into the search engine. Both the newspaper and the newspaper refused the same. This led the applicant to file a case against the Spanish Data Protection Authority. The data protection authority decided that the newspaper is not under any obligations to remove the content owing to journalistic exceptions, but Google is under the duty to remove it. Google challenged the decision of the Spanish Data Protection Authority before the European Court of Justice, citing lack of jurisdiction since Google is a company based in California, US, the legitimate interest held by Google based on which they processed the personal data of the applicant, and the legitimate interest held by internet users in accessing information.

The ECJ, after applying the balancing test to the right to privacy and data protection of the data subject against the legitimate interest of the search engine operator and the general public in accessing information, held that the fundamental rights of the data subject generally overrule the economic interest of the controller and the interest of the third parties to have access to information and therefore to let the applicant exercise his right to erasure.

Italian SA’s order against Open AI.

In March 2023, the Italian Data Protection Supervisory Authority (SA) took a critical step against OpenAI and its large language models (LLMs). The Authority ordered an immediate restriction on processing data of Italian citizens’ due to concerns about how personal data was being used to train algorithms behind ChatGPT. The Supervisory Authority questioned the legal basis for collecting and processing this data.

Following the order, OpenAI adjusted its privacy policy in April 2023. They clarified that their legitimate interest now serves as the legal basis for training their algorithms.

Challenges

It could be used as a legal basis only when the organisation has a persuasive reason for the processing.
Although legitimate interest is the most flexible legal basis for processing personal data, it could be used only in cases where the processing of personal data is done in ways that the individuals reasonably expect and that affect the privacy of individuals in the least possible manner.

One of the major challenges associated with using legitimate interest as a legal basis is that, if the processing is not done by complying with all the necessary measures associated with Article 6(1)(f), the processing of data will not have a legal basis, making it unlawful, which will eventually invite hefty fines against the organisation.
More often than not, the right to object and erase data subjects overrides the legitimate interests possessed by the data controllers, with only some exceptions like fraud prevention and network and information system security. This may lead to organisations suffering from potential losses.

Overcoming challenges in using legitimate interest as a legal basis.

Before investing in the processing of personal data based on legitimate interest, make sure that it involves a compelling justification.
Conduct LIAs in an unbiased manner by complying with provisions associated with legitimate interest under the GDPR and documenting it properly.
Stick to the GDPR principles associated with data processing.
Keep the data subjects informed about the processing of personal data and the legitimate interest associated with it.
Implement both technical and organisational measures to mitigate the impact of the processing on the data subjects.
LIAs should be reviewed and updated if the processing activity changes or develops over the course of time.

Conclusion

If used properly, legitimate interest as a legal basis offers great flexibility to businesses for pursuing various organisational needs and attaining strategic growth through the processing of personal data. If the data controller is not sure whether the data subject’s rights outweigh the legitimate interest they are trying to pursue, it’s better to find another lawful for processing of the personal data. Legitimate interest may not be the most suitable basis if the processing of data involves high risk or if it falls outside the reasonable expectation of the data subjects. Unwarranted use of legitimate interest as a legal basis for the processing of data violates the rights of the data subjects. Processing personal data unlawfully invites huge fines, and it is detrimental to both the reputation and financial status of the organisation.

References

Stock market investment strategies for long-term success

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September 5, 2024

This article has been written by Tisha Bhagwandas Agarwal pursuing a Remote freelancing and profile building program from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Introduction

The stock market is the place where shares of listed companies are traded. The stock exchange is a secondary market and not a primary market. Whenever any company wants to be listed in the stock market, it first has to get approval from SEBI (Securities Exchange Board of India). Whenever any company is listed for the first time, it is called an IPO (initial public offer). An IPO means that a private company sells shares of its own company to the public to raise equity capital. When a private company successfully gets listed on the stock exchange and its shares start being traded, it is declared a public company instead of a private company. There are two parties in the stock market: one buyer and the other seller. The buyer is an individual who buys shares at a low price and the seller is an individual who sells previously purchased shares at a high price. Whenever any individual investor invests in any company and sees future growth, that individual investor buys a percentage (%) of shares of that company and gets that much ownership. Brokers also play a role in the stock market because whenever a new person wants to invest in shares, the first thing he should do is open a demat account and choose the right broker. Brokers are those who act as intermediaries between buyers and sellers. Examples of brokers are: Zerodha, Angel One, Upstocks, Motilal Oswal, etc. Different brokers have different charges; hence, it is important to choose the right broker after doing full research. SEBI’s objectives are to protect the interests of investors, promote fair practices and the development of the stock exchange, prohibit illegal or unfair trade practices, regulate stock market activities. Another important thing is that not all countries have the same stock exchange. Many people do not know this, but for the person who wants to make his career in the stock market or who has interest in going deeper into the stock market, it is very important for him to know that different countries have different stock exchanges. For example, there is a ‘National Stock Exchange’ in India, ‘London Stock Exchange’ in the United Kingdom, ‘New York Stock Exchange’ in the United States, ‘Japan Stock Exchange’ in Japan, ‘Shanghai Stock Exchange’ in China, etc. Also, everyone has different timing.

Understanding long-term investment

Let’s understand what a long-term investment is. A long-term investment is one where the risk level is low and the investment remains safe. But sometimes people also make losses because they did not do proper research before investing. The person who has a high level of patience can earn profits from long-term investments. This is because sometimes a person invests for the long term, but when the price drops, they get worried, thinking, “My investment is long-term, but if the price goes down further in the future, my capital will also be lost. It’s better to sell now at a loss.” And after 3 years, when the price goes up, they regret it, thinking, “If I had been patient, I would have been in profit today.” Therefore, it is very important to have patience if you are a long-term investor. But yes, sometimes it happens that, due to patience, even the capital gets exhausted. That is why doing proper research is very important before investing. There are many ways to make long-term investments, like PPF (Public Provident Fund), mutual funds, stocks, bonds, gold, equity funds, real estate, etc. A long-term investment is one that you hold for more than 3 years and it is good for those who do not want to take much risk. For example, someone who is new to the stock market, who is employed, and who wants to invest a small portion of his salary in future returns. If someone is thinking about making a long-term investment in a company, they should check the company’s fundamentals before investing. If the company’s business is likely to grow in the future, then invest in it; otherwise, avoid it. Many people think that just because a company has a big name, they invest their money in it without thinking, influenced by others, believing it will give them a great return in the future. But this is foolish. It’s not necessarily true that a big-name company that has given good returns in the past will continue to do so in the future. Therefore, it is very important to stay updated on which sectors will grow in the future. Proper analysis, research, and attention to indicators and other tools are essential before investing. After doing all this, you’ll only be profitable in the future.

Key strategies for long-term success in stock market investments

Research and analysis

Fundamental analysis

Fundamental analysis means that whenever a person invests for the long term, he should do fundamental analysis. means you need to look at the stock you are thinking of investing in. You need to analyse a few things, like the growth of the industry, the growth of the company, its balance sheets, the goals of the company and how it will perform in the future. You can see all this in your fundamental analysis. This is best only for long-term investors.

Technical analysis

Technical analysis is for those who do short-term trading, like intraday trading and swing trading. For these things, technical is more important than fundamental. Since you are going to invest in the short term, it is all about focussing on the recent news, charts, and volumes, and only then can you make better decisions.

Portfolio diversification

Asset allocation strategies

Asset allocation strategy is very important. Whenever an individual invests, he invests in different asset classes like equity, debt, gold, etc. to reduce his risk and returns. From the looks of his portfolio, his portfolio is avoiding seeing bad losses.

Sector diversification

Sector diversification means you are investing your capital in multiple stocks. Multiple stocks do not mean that you just increase the stock numbers by investing in stocks in one sector in your portfolio. Because if you do this, you will incur more loss than profit. Therefore, to avoid big losses, diversify your portfolio into different sectors, which will reduce your chances of loss and keep you in profit.

Dividend investing

Importance of dividends

Whenever a company distributes a small portion of its profit among its shareholders, it is called a dividend. It is of great importance that if you take an entry in any stock and hold it for a long time, you get regular income as a dividend. The distribution of dividends depends on the financial health or management of the company. The valuation of shares of companies providing regular dividends is usually slightly higher because it indicates the profit and stability of the company. Tax rates on dividends are somewhat lower than taxes on capital gains, which means investors can also get tax benefits in the future.

Selecting dividend-paying stocks

It is important to keep a few things in mind while selecting dividend-paying stocks. Such as dividend payout ratio, dividend yield, dividend history, growth and debt levels, management and governance, etc. If investment is done after a good analysis, then investors can get capital appreciation along with regular income from dividend-paying stocks.

Long-term holding

Patience and discipline

It is very difficult to have patience, but in reality, it is very important if you want to achieve anything. So if you are thinking of investing in any stocks, then take a long-term view. To remember this, you will learn to have great patience, and only then will you get better returns. If you don’t have patience, you will never be able to achieve your goals and targets, or you will always regret and incur losses. Therefore, whenever you choose to hold any stock for the long term, make sure that your patience level is high to make better returns.

Benefits of compounding

Compounding has many benefits. But the most important benefit is time. Because you can earn more by increasing your investment. This helps with future retirement and goals. Plus, by reinvesting dividends, you get more returns in the future, which also increases your wealth over time.

Managing risk in long-term investment

Staying informed and updated

If you are a long-term investor and you have invested in some stocks, then you forget about them for 3–4 years and remain busy with your work. So listen, never make this mistake. Because it is very important to keep yourself updated with recent financial reports, news, market trends and all that. To keep yourself updated, you can subscribe to any reputable financial news source so that you will get daily financial news, industry reports, market trends and all other updates. And this will help you a lot in making your long-term investment decisions about which sector is growing in the market now and how it will do in the future. This way, you will be able to make better decisions, plus you can also manage investment risk.

Always keep a stop-loss

Whenever you invest in any stocks, it is very important that you set a stop loss. Many people do not set stop losses due to overconfidence, and due to this, they sometimes see huge losses to the extent that their capital is also wasted. Then, after making all these losses, they give up and get tied up in the stock market by investing. Therefore, never invest if you have overconfidence because you will see more losses than profits. Therefore, before investing in your stock, you should set your mind as to what percentage of loss you can afford. It may be 10-15% or how much. By applying stop-loss, you will save your capital; hence, managing risk is very important.

Keep a fixed target

It is very important to set a fixed target. So that your chances of making a loss are around 5% and your chances of making a profit are around 95%. Because whenever you invest in any stock, you should always set a fixed target from the beginning. Because sometimes what happens is that as much as we have set a target, the price goes above that, so we think that we are not going to sell it yet; we have given more measures to it, and we are waiting. But the biggest mistake is that you take too much risk with your invested capital and then the price goes straight below the limit instead of taking it. Whatever profit you had in your stock is gone, and your capital is also gone. Therefore, it is very important to set a fixed target and follow it strictly to reduce the risk level.

Common mistakes to avoid in long-term investing

Emotional trading

Emotional trading is a big mistake and should be strictly avoided. This means that the person trades because of his own emotions and overconfidence. Without looking at any chart patterns. The individual investor does not act logically but acts based on his own emotions, which causes mostly loss. Therefore, it is important to avoid emotional trading.

Avoid random advice and scams

Nowadays, many people give vague advice about the stock market through social media, which is totally false. The only way to avoid scams is to not trust the advice of any random person. Secondly, do not ever be greedy because these people will offer you that this is our special investment scheme, which will double your money and they will also try to manipulate you. If someone tells you the same, do not give any money to him and do not trust him. The main targets of the scammers are middle-class families and people who are greedy. They convince and manipulate them so they invest their money in their schemes and also tell them that they will handle your accounts. Henceforth, be aware of such scammers and think twice before investing your money in such fraud schemes.

Conclusion

Therefore, a person who invests with full research and analysis, manages risk, and has a good level of patience can make a profit from it. The stock market is for those who want to take risks, not for those who don’t want to take risks.

References

Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964)

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September 5, 2024

This article is written by Shreeji Saraf. This article talks about the case of Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964), which in turn deals with the rights to joint family property under Hindu law, particularly with respect to adopted children and natural born children. The article lays out the facts, issues raised, and arguments presented by both the parties and the judgement passed by the court while highlighting what were the legal aspects involved in the case.

Introduction

The case of Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964) highlights various concerns relating to the right of a person to adopt a son in a situation where a son has already been conceived. This case involves a question related to that of the right of the father to gift a property to the daughter for her maintenance and it even revolves around various adoption and partition rights.

One of the fundamental values highlighted by the Supreme Court is that the presence of the son in the mother’s womb does not invalidate the adoption. In addition to this, the court has rightly followed all the laws and provisions dealing with the rights of the daughters in receiving the property from the father as a gift. The court has cited various judgements with reference to this case.

This article covers the Trial Court’s decision and the High Court’s decision, deals in detail with the issues that were discussed in this case, arguments that have been presented by both parties, the rationale behind the judgement and also the relevant judgements referred to in this case. Let’s delve into it.

Details of the case

Case name: Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa

Name of the appellant:

1. Guramma Bhratar Chanbasappa Deshmukh And Others (In Ca No. 334 Of 1960)

2. Nagamma Bhratar Chanbasappa Deshmukh And Another (In Ca No. 335 Of 1960)

Name of the respondent:

1. Mallappa Chanbasappa And Another (In Ca No. 334 Of 1960)

2. Guramma Bhratar Chanbasappa And Others (In Ca No. 335 Of 1960)

Name of the court: Hon’ble Supreme Court

Hon’ble bench: Justice K. Subba Rao, Justice Raghubar Dayal and Justice J.R. Mudholkar.

Case type: Civil Appeal

Date of judgement: 19th August, 1963

Citation of the case: AIR 1964 SC 510

Facts of the case

Chanbasappa died on 8th January 1944, leaving behind his 3 wives, namely, Nagamma, Guramma and Venkamma. Apart from them, he also left behind two widowed daughters, Sivalingamma and Neelamma, children of his pre-deceased wife. While he was alive, he possessed a large immovable property. It was alleged that on 30th January 1944 Nagamma had adopted her sister’s son, Malappa. Further, it was also said that at the time of Chanbasappa’s death, Venkamma was pregnant and she subsequently gave birth to a son on 4th October 1944. A few days prior to his death, Chanbasappa executed deeds of gift and maintenance, in favour of his wives, widowed daughters, a son of an illegitimate son and a relative. Much before his death too, he had executed a maintenance deed and a gift deed of some property, in favour of Nagamma.

The main subject of legal action was the partition and possession of the large immovable property of Chanbasappa. One of his wives, Nagamma, filed a civil suit for the partition and control of 1/6th share of the property. Furthermore, she wanted her share in the property, after the alienations committed by her husband on 4th and 5th January 1944 were set aside. The following were the various parties involved in the case:

The other two other widows of Chanbasappa, namely, Guramma and Venkamma, were made defendants 1 and 2
The adopted son was considered to be defendant 3, while the son who was born after his death was made defendant 4 and the remaining alienees were defendants 5 to 8.

Trial Court’s decision

The learned Judge of the Trial Court was of the opinion that the adoption of defendant 3, by the plaintiff, was not considered valid by law. However, the court did confirm that defendant 4 was the posthumous son of Chanbasappa, born to Venkamma. Furthermore, the Judge noted that the plaintiff was not able to establish any proof or evidence in support of the contention that the deeds that were executed by Chanbasappa in favour of defendants 2, 5, 6, 7 and 8 were corrupted by fraud.

The court decided that the deeds executed by the deceased Chanbasappa, in favour of the defendants and of the plaintiff, were legitimate. The judge passed an order stating that:

Defendants 1 & 2 would be entitled to the same share as that of the plaintiff, that is, 1/6th share in the suit property;
Defendant 4 would be entitled to a 3/6th share in the suit property.

He further ordered an investigation in relation to that of the future mesne profits arising out of the said property.

Being aggrieved by the judgement and order passed by the Trial Court, the plaintiff and defendant 3 preferred an appeal regarding the same, to the High Court.

High Court’s decision

The High Court of Bombay took note of the Trial Court’s observation that defendant 3 had been adopted by the plaintiff and went on to declare it as valid. The court also agreed that defendant 4 was Chanbasappa’s posthumous son, born to Venkamma. The deeds executed by the deceased, in favour of defendants 6, 7 and 8, as well as the gift in favour of defendant 5, were ruled to be invalid. The court suggested that the property be re-distributed between the parties in the following manner:

Defendants 1 & 2 and the plaintiff would be entitled to the same share in the property, that is, 4/27th share in the suit property;
The adopted son would be entitled to 1/9th share in the suit property;
The posthumous son would be entitled to a 4/9th share in the suit property.

Additionally, the court directed that defendants 1 & 2 would not be entitled to a separate maintenance, as they were already receiving a share in the property.

Aggrieved by the judgement and order of the High Court, both Malappa and Nagamma filed appeals against the same, in the Hon’ble Supreme Court.

Issues raised

Whether Nagamma’s adoption of Malappa, should be invalidated, as he was adopted when defendant 4 had already been conceived?
Whether an adopted son of a Sudra is entitled to the same share of property, as that of a natural born son?
Whether Chanbasappa’s transactions in favour of defendants 2, 5, 6, 7 and 8, were binding on the family?

Arguments of the parties

Appellants

Mr. Sastri, the counsel for the appellants, laid down an argument that the adoption of defendant 3 was void, invalid and unlawful, as defendant 4 was already conceived at the time of the adoption. As per Hindu Law, in the matter of partition and inheritance, a son in the womb of the mother or a son conceived, is the same as a son who is already born. This should apply in the case of adoption as well. Just as an unborn son possesses the right to challenge his father’s transfer of family property, a son adopted under such circumstances should also have similar rights.

It was further contended that since the High Court had overruled the alienations that Chanbasappa had made, the concerned alienated property should be added back into the pool for partition.

Mr. K. R. Chaudhari added that the High Court had committed a mistake in distinguishing between the documents executed in favour of the plaintiffs and those executed in favour of defendants 1 and 2. The documents in favour of the plaintiffs were upheld, but the documents in favour of defendants 1 and 2 were nullified.

Respondent

The counsel for the respondents contended that the gift deeds which were executed in favour of defendants 7 and 8, by Chanbasappa, should be considered as binding on all the members of the family. The High Court was of the opinion that since these gifts were made after defendant 4 was conceived, they were invalid. With respect to this, the respondents argued that these could be challenged only by defendant 4 and since he had accepted the same, defendant 3, who was born after these gift deeds were made, could not question their validity.

The respondents stated that the gift was made for pious purposes and therefore, must be held as legally valid.

The counsel for the respondents put forward that whether an adopted boy or a natural born son, both hold equal shares in the property of the family. They even highlighted that adoption of Malappa by Nagamma, cannot be invalidated merely because of the presence of defendant 4 in the womb. There is no Hindu Law that supports the contention or establishes a condition or requirement of non pregnancy of the wife in order to exercise their right of adoption.

Judgement in Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964)

The Supreme Court decided the following:

With the exception of the issue regarding defendant 8’s right to receive the concerned portion of the property, as maintenance, Civil Appeal No. 334 of 1960, filed by defendants 1, 2, 4, 5, 7, and 8, would be dismissed.
Defendant 8 was allowed to receive the property executed in her favour through a gift deed, by Chanbasappa.
Civil Appeal No. 335 of 1960, filed by the plaintiff and defendant 3, would be dismissed.

Rationale behind the judgement

The court observed that Hindu texts relating to adoption, particularly, Dattaka Chandrika and Dattaka Mimamsa, do not lay down any clear direction with respect to the question of whether a son conceived and in the womb, should be treated in the same manner as a son who has already been born. These texts, while implying that adoption is recommended for those who do not have a son, do not specifically state anything regarding a son who has been conceived. Nowhere has it been mentioned that a son in the womb is considered the same as a son who has been born. In fact, such an assumption could lead to a lack of certainty in the process of adoption.

Under Hindu law, the primary aim of adoption is to enable the adopter with spiritual benefits, as well as an heir. However, imposing a condition regarding the possibility of having a child of their own in the future, would lead to uncertainty. For instance, if while being unaware of his wife’s pregnancy, a man adopts a son, such an adoption would be considered invalid if the wife eventually gives birth to a son or even has a stillbirth.

No Hindu laws or texts specifically lay down any condition regarding pregnancy, for adoption. Some cases, such as that of Byreddi Chinna Narayana Reddi vs. Byreddi Peda Rama Reddi (1891), held that, before adopting a child, the person must be sure that they would not have a natural born child. However, in the case of Nagabhushanam vs. Seshammagaru (1878-81), the Division Bench of the Madras High Court decided that adoption by a Hindu parent, with the awareness of his wife’s pregnancy, would not be considered to be invalid. The High Court of Bombay, in the case of Shamavahoo vs. Dwarakadas (1888) was of the same opinion. In the case of Daulat Ram vs. Ram Laal (1907), the Division Bench of the Allahabad High Court was also in consensus with the same.

The main issue in this case is whether a son conceived and in the womb would be treated as equally as a son who has already been born, with respect to legal rights. The son who is in the womb has a right to the family property. When the son is in the womb, if the father makes any decision relating to that of the property, like selling or dividing the property among family members, the son, when he is born, can object to those decisions. The reason behind this is his right to the family property since birth. Adoption holds more of a spiritual purpose and hence, to prevent interference with the same, the court in this case, held that an adoption made by the father is not invalidated by the existence of an unborn son.

The court then went on to reject the appellant’s contention that the alienated property should be added back into the pool for partition. The property transactions, including those relating to defendants 1 and 2, were already invalidated by the High Court. Further, the property was ordered to be divided as per the decided shares and both the plaintiff and defendant 3 had accepted the same. Hence, there existed no need to further deliberate on this issue.

The court also rejected the appellants’ argument that the High Court had committed a mistake in distinguishing between the documents executed in favour of the plaintiffs and those executed in favour of defendants 1 and 2. The documents had been executed by the Chanbasappa in favour of the plaintiff at a time when he was the sole surviving coparcener, which implied that he had complete control over property transactions. However, when the documents were executed in favour of defendants 1 and 2, defendant 4 had already been conceived, which meant that Chanbasappa was no longer in complete control of the property. On the basis of this, the High Court had accurately declared the transactions made in favour of defendants 1 and 2, to be invalid.

Another point of contention highlights the fact that defendant’s 4 consent could not have been acquired because he was not born when the transactions of the property took place and when the lawsuit was filed, he was still a minor. At the time of alienation of the property, Chanbasappa had no power or entitlement to do so, because he had not obtained the consent of all the family members. His power was only limited to the divisions or alienations that were required to be made out of necessity or for the benefit of the property. Both the adopted son and the natural born son acquire an interest in the family property from the time of adoption and birth, respectively. A managing member or the karta of the family property has the right to alienate property out of necessity or benefit, with the consent of all the coparceners. A sole surviving member can alienate the property freely because nobody else holds a joint interest and he has the absolute power to do so, but If any other member is adopted or conceived before the alienation, this power is then limited. If Chanbasappa had alienated the property without any substantial reasons, the child who was in the womb (defendant 4) and the child who is adopted later (defendant 3), can raise objections to these alienations once they become aware of the same. Once defendants 3 and 4 attain the age of majority, they can hold these alienations as void, if Chanbasappa did not make them for any binding purpose of necessity or benefit.

The next question was to determine whether the gift deeds executed by Chanbasappa, in favour of defendants 7 and 8, were binding on the family. The High Court had agreed with the Trial Court and invalidated the gifts, on the ground that Chanbasappa did not hold the power to gift a family property. This court separately examined each gift, to determine its validity.

Chanbasappa executed a gift deed for immovable property worth Rs. 1500/-, in favour of defendant 7, who was a relative. The gift was said to be made out of love and appreciation. It was argued that since the gift was made for a “pious purpose”, as per Hindu law, it would be valid. Particularly under Mitakshara law, donations in the name of a “pious purpose” are allowed. As observed by legal scholars, the term “pious purpose” refers to any charitable act. The main issue here was whether a manager of property could gift an outsider with joint family property, on the basis of a pious purpose. Hindu law allows minor gifts to outsiders, for pious purposes, but it does not grant power to do so merely on the basis of charity, particularly with respect to joint family property. Therefore, this gift in favour of defendant 7 was declared to be invalid.

Chanbasappa also executed a gift deed, creating a life interest in the property, worth around Rs. 5000/-, in favour of defendant 8, his widowed daughter. It was stated that since her husband had passed away and the amount received from the previous property was not enough, she was given this property to maintain herself. The question here was whether a widowed daughter could be granted a life interest in joint family property, by the father. This court referred to the case of Jinnappa Mahadevappa Kundachi vs. Chimmava Krishnappa Kochari (1934) and observed that since the law must be upheld, the same must be examined to arrive at a decision regarding the legality of this gift. Most Hindu texts which govern the laws hold that there exists a moral obligation to support daughters, even though they do not hold a legal right to the family after their marriage. Several cases also stand in its favour. Anuvillah Sundararamaya vs. Cherla Seethamma (1911) held that gifts given to a daughter, later on even after marriage, for her maintenance, were legally valid. This was affirmed in other cases such as Ramalinga Annavi vs. Narayana Annavi (1922), Pugalia Vettorammal and Anr. vs. Vettor Goudan (1911) and Devabhaktuni Sithamahalakshmamma vs. Pamulapati Kotayya (1936). The crucial factor to be noted here is that the gifts must be reasonable, depending on the conditions and extent of property held by the family. Chanbasappa’s family possessed extensive property. Moreover, he allotted only a small portion of the property, as a life estate for his widowed daughter. Hence, Chanbasappa’s execution of a reasonable gift deed in favour of defendant 8, can be seen as the fulfilment of a moral obligation and thus, valid.

Moving on, with respect to the respondent’s stance that within the Lingayat community, which form a part of the Shudra caste, both a natural born son and an adopted son must have equal shares in family property, the court referred to the case of Tirkangauda Mallangauda Kashigaudar vs. Shivappa Patil (1943), which observed that Lingayats are governed by Hindu law, in the same manner as Shudras. The court also went on to state that there arose no need to determine whether Lingayats definitively fall under the ambit of Shudras. For the purpose of this case, the court decided to assume that either Lingayats are Shudras or the Hindu law which governs Shudras, governs Lingayats as well.

The court then looked into the details of Arumilli Perrazu vs. Arumilli Subbaraydu (1921) and Giriapa vs. Ningapa (1892). It observed that the state of Bombay never followed the Dattaka Chandrika, which laid down that natural born sons and adopted sons were entitled to equal rights in property. The court found no reason to change this and rejected the contention that natural born sons and adopted sons have equal rights in property.

Relevant judgements referred in the case

Arumilli Perrazu vs. Arumilli Subbarayadu (1921)

Facts

In this case, an appeal was filed against Subbarayadu, by Arumilli Ramanna and his three sons. Subbarayadu had adopted Arumilli Ramanna, back when he had no child of his own. He then went on to have two sons after the adoption.

Issue

The primary question which arose here was whether Arumilli Ramanna and the two natural born sons, would all be entitled to equal shares in Subbarayadu’s property. These parties were all those belonging to the Shudra community, in Madras.

Judgement

The court observed that in Madras, the Dattaka Chandrika was followed, according to which, a natural born son and an adopted son have equal rights in property.

Giriapa vs. Ningapa (1892)

Facts

In this case, the High Court of Bombay dealt with the matter of property shares between an adopted son and a natural son born later. The court was of the view that irrespective of whether governed by the Mitakshara law or the Vyavahara Mayukha, in the western part of India, if a legitimate son is born after the adoption of a son, the adopted son is entitled to only one-fifth of the father’s property. The Privy Council in the case of Arumilli Perrazu vs. Arumilli Subbarayadu (1921), held a similar opinion, and the same was also reiterated in Tukaram Mahadu Tandel vs. Ramachandra Mahadu Tandel (1925).

Issue

The main issue that was highlighted in this case was that the existence of the son in the embryo invalidates an adoption or not?

Judgement

The High Court of Bombay went to observe that the Dattaka Chandrika, which favours adopted sons, was commonly followed by the Sudras in Madras and Bengal, but not in the western region of India. The Dattaka Chandrika was never considered as a strong driving force in western India, and hence, it was decided that the regional principles is what should be followed in this case.

Jinnappa Mahadevappa Kundachi vs. Chimmava (1934)

Facts

This case pertains to the facts that a Hindu father had executed a gift of a portion of the joint family immovable property in favour of his daughter for her maintenance.

Issue

The main issue that concerned this case was whether the Hindu father had the right or power to grant a gift to the daughter out of the immovable joint family property and is the concept of gift considered to be valid as per the Hindu law.

Judgement

The Trial Court had passed the judgement in favour of the respondents, deciding that the Hindu father could do so. This was further appealed before the Bombay High Court, which set aside the judgement passed by the Trial Court and stated that the gift that was made by the father to the daughter was invalid. It was stated that under Mitakshara law, a father was not permitted to gift any portion of the joint family property to his daughter. These basic principles cannot be overlooked.

Analysis of Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964)

In this case of Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964), holds great importance in Hindu law, especially with respect to property rights, validity of gift deeds and adoption. The court’s decision in this matter, dealt with various complex issues while shedding light on principles that govern Hindu law.

One of the primary questions in this case was whether an adoption is deemed invalid by the existence of a son in the womb. The Supreme Court held that an adoption in such circumstances would be legally valid. No condition of pregnancy is imposed on adoption. This reduced ambiguity and laid out precise instructions for future instances of adoption. The aim is to ensure that neither the spiritual nor the legal purpose of adoption is compromised.

While deciding on whether in the Shudra community, a natural born son and an adopted son would have equal property rights, the court explained that western India, Bombay in this case, followed a different rule as compared to regions such as Madras and Bengal, where the Dattaka Chandrika is the governing rule. Pointing out and deciding the case at hand on the basis of this distinction, helped uphold and promote regional legal customs and rules.

Another important matter that this case dealt with was with respect to a Hindu father gifting any portion of the joint family property to his daughter. The court emphasised that maintaining one’s daughter was a moral obligation that must be fulfilled, which contributes towards achieving a legal system free from gender bias.

This judgement also played a role in safeguarding the interests of all the members of a family, even those still in the womb.

Hence, this legal case established a vital legal precedent, with regard to the rights of family members, especially various children, in joint property.

Conclusion

Guramma Bhratar Chanbasappa Deshmukh vs. Mallappa (1964) serves as a landmark judgement in the field of Hindu law, especially with the changing times wherein adoption and a gender bias free society are encouraged. This case dealt with complex and sensitive issues and shed light on topics such as moral obligations, collective ownership and regional legal customs as well. This case remains a significant reference to practitioners and scholars even today.

This case has not only highlighted the important provisions of adoption related to Hindu law, it has cited various case laws that are extremely insightful. The case laws give us an overview of the dealings of the court of law by the judgements passed. This case is one of the landmark cases.

Frequently Asked Questions (FAQs)

What are the laws that are concerned with the adoption of a child in India?

Till date, there is only one law that is concerned with the adoption of a child in India and it is under Hindu law, the Hindu Adoption and Maintenance Act, 1956 deals with adoption. No other personal laws in India have specific laws for adoption and hence, may approach this through the Guardians and Wards Act, 1890 or the Juvenile Justice (Care and Protection of Children) Act, 2015.

What is the maximum age of a child who can be legally adopted in India?

The maximum age of a child who can be legally adopted in India is 18 years.

Does a gift deed require registration?

As per Section 17 of the Indian Registration Act, 1908 a gift deed needs to be registered with a sub registrar.

What is the time period within which one can challenge a gift deed?

A gift deed can be challenged within 3 years from the date of execution or from the date when the donee becomes aware of it. However, the period may also vary depending on the reason behind the challenge.

References

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Anjali Kapoor vs. Rajiv Baijal (2009)

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September 5, 2024

This article is written by Namitha Udayan. The article covers the importance of considering the welfare of minors in deciding cases concerning the custody and guardianship of minors under the Guardian and Wards Act, 1890 through a detailed analysis of the Supreme Court’s judgement in the case of Anjali Kapoor vs. Rajiv Baijal.

Table of Contents

Introduction

The Guardian and Wards Act, 1890 is a comprehensive legislation that addresses the guardianship and welfare of minors. It is a secular legislation that applies to individuals of all castes and religions. While the Hindu Minority and Guardianship Act, 1956 establishes a hierarchy for guardianship, the Guardian and Wards Act, 1890 prioritises the welfare of the minor in cases related to custody and guardianship. It grants discretionary power to courts to make decisions based on the best interests of the child. Courts have consistently upheld this principle, as seen in various case laws.

It would be interesting to recall Lord Mackay’s remarks in the Hamlin Lecture, 1993, wherein he stated, “The pre-eminent qualities required of a Judge are good sound judgement based upon knowledge of the law, a willingness to study all sides of an argument with an acceptable degree of openness, and an ability to reach a firm conclusion and to articulate clearly the reasons for the conclusion”. Now, a question may arise as to why this statement is significant. The answer lies in its relevance to the application of the provisions outlined in the Guardian and Wards Act. Although the term “welfare” has not been explicitly defined under the Act, judges have effectively applied their morals and ethics in deciding cases related to the matter. This judicial approach is evident in landmark cases such as Rosy Jacob vs. Jacob A. Chakramakkal (1973), Bimla Devi vs. Subhas Chandra (1992) and Anjali Kapoor vs. Rajiv Baijal (2009).

In the case of Anjali Kapoor vs. Rajiv Baijal (2009), the Supreme Court reaffirmed this principle by granting custody and guardianship of a minor child to her grandmother. The court believed that the child’s welfare and interests were best served by her. Such decisions highlight the courts’ commitment to prioritising the welfare of minors. It further reflects the enduring importance of the Guardian and Wards Act, 1890 in shaping the landscape of family law in India.

Details of the case

Name of the case: Anjali Kapoor vs. Rajiv Baijal (2009)

Citation: AIR 2009 SC 2821

Name of the appellant: Anjali Kapoor (grandmother of the minor)

Name of the respondent: Rajiv Baijal (father of the minor)

Case type: Special Leave Petition (Civil)

Court: Supreme Court of India

Bench: Justices H.L. Dattu and Tarun Chatterjee

Date of the judgement: April 17, 2009

Laws involved: The Guardian and Wards Act, 1890

Background of the case

In examining the legal framework surrounding guardianship, it is essential to understand the relevant statutory provisions and the guiding principles that courts rely upon when making decisions in the best interest of the minor. The Guardian and Wards Act, 1890, along with the concept of the welfare principle, forms the bedrock of such determinations. These elements not only shape the legal discourse but also inform the courts’ approach to ensuring that the child’s welfare remains paramount. The following sections will delve into the specific provisions of the Guardian and Wards Act and explore how the welfare principle has been interpreted and applied in various judicial decisions.

Facts of the case

The appellant’s daughter, Meghana married the respondent in 1998, and they lived together in Pune, Maharashtra. Meghana moved to her mother’s residence in Indore to deliver her child. She gave birth to a female child in 2001 and died during childbirth. The child, born prematurely, was admitted to the intensive care unit and kept in an incubator. After being discharged, the baby was taken to the appellant’s home and named ‘Anagh’’. During this period, adding to the agony, the appellant’s husband also passed away during this period.

It was at this stage that the respondent filed a case under the Guardian and Wards Act at the Family Court in Indore, seeking custody of his daughter. He claimed that the child was not properly looked after by the appellant and that it was unsafe for her to remain in the appellant’s custody. He also stated that he had repeatedly requested for custody of the child due to the incapacity of the appellant. The appellant argued that the respondent had not visited the hospital where the child was admitted to the intensive care unit and pointed out his dire financial situation. The court, however, ruled in favour of the respondent, stating the reason that the financial status of the respondent could not be equated with incapacity. The appellant, the grandmother of the minor, then filed an appeal with the Indore High Court.

The High Court also decided in favour of the respondent, stating that there was no significant reason to deny his plea for custody, as he was the natural guardian of the child. The court also took note of his consistent struggle to obtain guardianship despite the appellant’s opposition. Additionally, the court also noted that the appellant had suffered a financial setback owing to the demise of her husband. Aggrieved by this decision, the appellant approached the Supreme Court through a Special Leave Petition.

Issue involved in the case

In the present case, the court addressed the following issue regarding the guardianship and custody of the minor:

Shall the custody and guardianship of Anagh be ordered to be given to the appellant or the respondent?

Arguments by the parties

The appellant and the respondent presented various arguments in support of their respective claims in the lower courts. However, the respondent failed to appear before the Supreme Court despite being served several notices, including a dasti notice (a notice sent by the petitioner to respondent through a court order and not by any registered postal service) and notices in two widely circulated newspapers in Pune, Maharashtra.

Below is a summary of the arguments presented by both parties. The respondent’s arguments were made before the Family Court, Indore and Madhya Pradesh High Court (Indore Bench), as he failed to appear before the Supreme Court.

Arguments by the appellant

The main arguments presented by the appellant before the Family Court (Indore), Madhya Pradesh High Court (Indore Bench), and the Supreme Court were as follows:

The appellant submitted that the respondent had not visited the child when she was hospitalised owing to her premature birth.
A contention was raised regarding the nature of the respondent’s job, which required him to be away from home most of the time. It was also submitted that he did not live with his parents, leaving no one available to care for the minor child if the custody were granted to him.
The financial status of the respondent was questioned, as he had taken loans from several individuals and had even sought financial assistance from the appellant and her family to repay the same.
Before the Supreme Court, the appellant raised the argument that she was financially sound and capable of caring for the child due to her successful garment business. It was also brought to the notice of the court that she had enrolled the child in a notable public school.
The appellant raised concerns about the respondent’s meagre income and his parents’ declining health.
The appellant’s counsel also put forward that neither the respondent nor his family members or relatives had enquired about the child after the custody order was passed. The fact that he had a second marriage and consequent loss of interest in this case was also pointed out.

Based on these facts and circumstances, the appellant therefore claimed that the respondent was not fit to be the minor child’s guardian and granting him the custody was not conducive for the welfare of the child in question.

Arguments by the respondent

The main arguments presented by the respondent are as follows:

The respondent claimed that as the natural guardian of the child, he was entitled to her custody and guardianship.
The respondent argued that the appellant did not adequately care for the child and that she was unsafe in her custody.
He contended that even after his constant requests for custody over the child owing to the appellant’s incapacity, she had refused to hand over the child to him.
The respondent also contended that the appellant had suffered a financial setback due to the death of her husband which rendered her incapable of providing for the child.

Laws and legal concepts discussed in Anjali Kapoor vs. Rajiv Baijal (2009)

The Guardian and Wards Act, 1890

The Guardian and Wards Act defines a ‘guardian’ as ‘a person having the care of the person of a minor or his property, or both his person and property,’ and a ‘ward’ as ‘a minor for whose person or property, or both, there is a guardian’. The second chapter of this Act outlines the sections relating to the ‘Appointment and Declaration of Guardians’. This chapter includes Sections 7 and 17, which address ‘the power of the courts to make orders as to guardianship’ and ‘the matters to be considered by the Court in the appointment of a guardian,’ respectively. Section 8 enumerates the ‘persons entitled to apply for an order’.

Section 7 of the Act expressly states that a court can issue an order appointing a guardian for a minor’s person or property, or both. Here, the primary consideration is the welfare of the minor. This section also includes provisions for the removal of any guardian who has not been appointed by the court or who is non-declared, i.e., not officially recognised. As per Section 8, a person who wishes to become a guardian or claims to be a guardian, as well as a relative or a friend, can apply to be appointed as a guardian. The Collector having jurisdiction over the area in which the minor resides, or where the minor has property, or who has authority with respect to the minor’s class can also be appointed as a guardian. Section 17 also expressly provides that the court must consider the welfare of the child when appointing or declaring a guardian. Thus, Section 7, read together with Section 17, recognises the welfare principle applied by the courts when deciding matters related to custody and guardianship.

Welfare principle

The observation in Re McGrath (infants) by Lindley, L.J. that the word ‘welfare’ should be understood in the broadest sense, encompassing not just the physical well-being of the child but also their moral and religious welfare. This laid the foundation for what is now known as the welfare principle. Similarly, in J vs. C (an infant) (1969), Lord MacDermott emphasises that when considering all relevant factors, including the relationships, wishes of the parents, and potential risks, the decision should always prioritise what is best for the child’s welfare.

UK’s Children Act of 1989 provides a list of factors to be considered before making any order with respect to a child. These factors include the child’s wishes and feelings, their physical, educational, and emotional needs, their age and sex, and the capability of parents to meet those needs. While this list is not exhaustive, courts in India may take these factors into account while deciding cases regarding the welfare of a child.

The welfare principle, as defined by Black’s Law Dictionary, refers to the ‘resources and conditions needed for healthy and comfortable living’. This principle has been adopted and expanded through various judgements in India. For example, in Fulkumari Bibee vs. Budh Singh Dhudhuria and Anr. (1914), it was held that the interest, well-being, health, education, and happiness of the minor ought to be the main and paramount consideration for the court when selecting the guardian of a minor. In R.V. Srinath Prasad vs. Nandamuri Jayakrishna & Ors, (2001), the court observed that a balance must be struck between the attachment and sentiment of the parties towards the minor child, with the welfare of the minor being of paramount importance.

Judgement in Anjali Kapoor vs. Rajiv Baijal (2009)

The Supreme Court allowed the appeal, granting custody of the minor child to the appellant till the time the child attains the age of majority, i.e., turns eighteen years of age. In order to reach this decision, the court took several key judgements into consideration, which are listed below.

Precedents referred to in the case

The Supreme Court, while deciding the case, considered the following precedents and factors.

Sumedha Nagpal vs. State of Delhi (2000): It was held that the father is the natural guardian of a minor child unless he is found to be unfit. It was also held that in deciding such questions, paramount consideration should be given to the welfare of the child, and such a question cannot be decided merely based upon the parties’ rights under the law.
Rosy Jacob vs. Jacob A. Chakramakkal (1973): The court identified two key factors which must be considered while deciding on the fitness of a guardian. They are:

(i) The father’s fitness or otherwise to be the guardian, and

(ii) The interests of the minors.

The court, while deciding this case, also held that children are not mere chattels nor are they mere playthings for their parents.

Mrs. Elizabeth Dinshaw vs. Arvand M. Dinshaw and Another (1986): The court observed that whenever a question relevant to the custody of a minor child arises, the matter is to be decided on the sole and predominant criterion of what would best serve the interest and welfare of the child rather than the legal rights of the parties involved.
Muthuswami Chettiar and Another vs. K.M. Chinna Muthiswami Moopanar (1934): The Madras High Court held that if a minor has lived with his/her grandparents or near relatives from a tender age, and during that period, the minor’s father has shown little to no concern over the minor’s affairs, then these set of affairs will have considerable bearing on the decision of the court. The Supreme Court agreed with this view.
Re McGrath (infants) (1893): The Supreme Court also considered this UK Court of Appeal ruling to decide the case at hand.
Walker vs. Walker (1981): The Supreme Court of Georgia, in this case, decided that ‘welfare is an all-encompassing word’ and that includes material welfare within its meaning. It was also considered by the Apex Court.

In addition to the above precedents, the court took into account the thirty-ninth volume of the second edition of American Jurisprudence, wherein it is mentioned that the court may consult the child in matters as to its custody if the child has sufficient judgement.

It is hence evident from the precedents that the ‘welfare’ of the minor must be understood in its broadest sense and is of utmost importance in determining guardianship and custody. Therefore, the guardianship and custody of the minor may be awarded to the appellant if it best serves the welfare of the child, even if she is not the natural guardian.

Rationale behind the judgement

The Supreme Court observed that the father of the child is the natural guardian unless he is disqualified by unfitness. The court emphasised that when making decisions like this, the welfare of the minor child is the most important factor to be considered, and such a question cannot be determined solely based on the rights of the parties involved. The court said so while reiterating the principle set forth in the case Sumedha Nagpal vs. State of Delhi (2000). The court also cited various precedents to underline the importance of the ‘welfare’ of the minor when determining guardianship, which has been enlisted above.

The court thoroughly examined the competency of both the appellant (the grandmother) and the respondent (the father) in terms of who should be awarded the custody and guardianship of the minor child. In this case, the appellant had been the primary caregiver since the child’s birth, especially during the critical period when the child was admitted to the intensive care unit of the hospital. The photographs submitted to the court, which were undisputed, put to view the extent of love, care, and fondness the grandmother has for the child. The fact that Anagh was enrolled in a reputable public school was also noted as a significant factor in the child’s welfare. These factors were held to have a persuasive and significant hold over the question of guardianship. The emotional bond between the appellant and the minor child was another critical factor considered by the court.

On the other hand, the court took note of the living conditions and financial difficulties of the respondent, including his borrowing from a number of individuals and his meagre income. The respondent’s utter lack of concern was reflected in the fact of his non-appearance before the Apex Court, despite repeated notices. Additionally, the fact that the respondent had remarried, which could place the child under the care of a stepmother, was a factor that weighed in favour of the appellant.

The court held that the right of the natural guardian to have custody of the child is not absolute and that it is subject to the condition that it is appropriate for the well-being and comfort of the child. The fact that the child had formed an emotional bond and attachment with the members of the appellant’s family was also a key consideration while formulating the judgement.

After duly considering all these factors, the court concluded that the welfare and best interests of the child would be best served if her custody were entrusted to the appellant. Consequently, the custody of the minor was awarded to the appellant, and the impugned order was set aside.

Analysis of the case

The judgement of the court and the cited precedents clearly underscore that the welfare of the child is paramount in decisions regarding custody and guardianship. In the current case, although the natural guardian, the father, is present in the picture, the appellant has approached the court seeking custody of the minor under Section 8 of the Guardian and Wards Act, 1890, which granted her the authority to plead the same. The court carefully analysed the facts and circumstances of the case to decide where the best interests of the minor lie.

The ‘welfare principle’ is a progressive and humane approach to guardianship, allowing the court to consider each case individually, assess the facts, evaluate the circumstances, and make a decision that best serves the child’s welfare. It is well-established that the welfare of the minor is the ultimate guiding principle in such matters.

In this case, although the respondent initially showed enthusiasm in seeking custody, he lost interest after his second marriage. His contentions about the appellant’s alleged incapacity and financial difficulties were effectively refuted by the appellant. On the other hand, the appellant constantly strived to be awarded custody and guardianship, demonstrating her commitment to the child’s welfare. The minor, who has been under her grandmother’s care and protection since birth, especially considering her days in the intensive care of the hospital, would surely be served to the best of her interests, by remaining in the custody and guardianship of her grandmother. This was considering their strong bond and the love and care the grandmother provides. Despite the respondent’s claims that the appellant had lost both her daughter and her husband, the appellant provided a supportive and nurturing environment for the child. She cares deeply for the child, as evidenced by the photographs she produces. These facts substantiate that the interests of the minor would be best served in her custody.

Therefore, in the present case, in light of its facts and circumstances, the court rightly vested guardianship and custody with the grandmother, recognising that this decision best protects the minor’s welfare and interests. The judgment sets a thoughtful and compassionate precedent, aligning with the welfare principle. It ensures robust protection for the child’s well-being and rights.

Conclusion

The case Anjali Kapoor vs. Rajiv Baijal provides valuable insight into the application of the welfare principle as established by the Guardian and Wards Act, 1890. It tells us how the court interprets legislation with the interest of the public in mind. Here, the welfare of the child is considered the key criterion for deciding the case, instead of merely reading the law in the strict sense. This precedent underscores the principle that justice is best served by considering the child’s needs and circumstances comprehensively.

Frequently Asked Questions (FAQs)

What is meant by the welfare of a minor child?

The ‘welfare’ of a minor child refers to the conditions and resources needed for their healthy and comfortable living. This includes their well-being, health, education, and happiness. Courts in India consider factors such as the child’s needs, wishes, and the ability of potential guardians to meet those needs.

Can any other relative of a minor be appointed as a guardian in the presence of a natural guardian?

Yes, a court can appoint another relative as a guardian if it believes the child’s best interests would be served. This has been established in cases like Muthuswami Moopamar and Anjali Kapoor, where guardianship was granted to relatives other than the natural guardian.

What factors do courts consider when deciding custody and guardianship?

Courts evaluate the child’s needs, such as their physical, emotional, and educational requirements, along with the child’s wishes and the capabilities of the prospective guardians.

How does the court determine if a guardian is unfit?

The court assesses a guardian’s ability to meet the child’s needs and their overall suitability based on their conduct, living conditions, and involvement in the child’s life.

Can the welfare principle be applied in cases other than custody and guardianship?

Yes, the welfare principle can also be applied in other legal matters involving minors, such as adoption and child protection cases, to ensure the child’s best interests are prioritised.

How does a court balance the welfare principle with parental rights?

Courts aim to balance parental rights with the child’s best interests by considering how each parent can meet the child’s needs and the overall impact on the child’s well-being.

References

https://lddashboard.legislative.gov.in/sites/default/files/A1890-8.pdf
B.B. Mitra, Guardian and Wards Act, Fourteenth edition, 2000.
https://blog.ipleaders.in/welfare-principle-in-guardianship/
https://delhidivorcelawyers.com/what-is-welfare-of-child-concept-in-a-child-custody-case/
https://articles.manupatra.com/article-details/WELFARE-OF-THE-CHILD-AFTER-PARENTS-DIVORCE-OR-SEPARATION-KEY-ANALYSIS
https://www.legislation.gov.uk/ukpga/1989/41/contents

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Section 35 of Trade Marks Act, 1999

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September 5, 2024

This article is written by Vishwendra Prashant. It explains Section 35 of the Trademarks Act, 1999, the ingredients of this Section including its judicial interpretation by the courts and the difference between Sections 34 and 35 of the Act. Moreover, this article highlights the exceptions to the bona fide use under Section 35 with the most recent judgements. In this way, it covers all the important aspects of this Section.

Table of Contents

Introduction

Intellectual properties (IP) consist of artistic, literary, technical, or scientific creations. These are the outcomes of human intelligence and creativity that results in tangible materials that can be owned and commercialised. Subsequently, intellectual property rights (IPR) are the rights granted to the creators or inventors in compliance with the statutes. The creators or inventors get such rights by revealing the process of creation or invention in the public domain. Moreover, such rights permit them to do the following:

To use or sell the intellectual properties;
To distribute the same;
To offer for sale; and,
To ban other individuals from using such properties without their consent.

Trademarks are one of the types of intellectual properties that come under industrial designs. They are signs, symbols, numbers, names, or designs that help customers identify and differentiate the goods and services of one company from those of others.

The globalisation of businesses has increased the significance and value of trademarks. The Trade-Related Aspects of Intellectual Property Rights, 1994 (hereinafter referred to as TRIPS) acknowledged the need for reliable security and enforcement mechanisms. Therefore, the Parliament enforced the Trademarks Act, 1999 in compliance with the TRIPS agreement.

The Act protects the rights of registered trademark owners by facilitating the remedies for the infringement of such trademarks. We will discuss the objectives of the Act in detail. Coming to the provisions of the Act, we will discuss Section 35 which justifies the declaration of trademark infringement.

Section 35 of Trade Marks Ac t: Saving for use of name, address or description of goods or services

Essential Ingredients of Section 35

This Section postulates that no provisions in the Act authorise the owners or registered users of registered trademarks to interfere with any authentic uses by individuals of their own names or that of their sites of business, or the names of the sites of business, or the names of any of their predecessors in business, or the uses by any individuals of authentic descriptions of the characters or qualities of their goods or services.

Given below are the essential ingredients of Section 35:

There must be registered trademarks as per the Act;
There must be owners or registered users of these trademarks;
No provisions should authorise such owners or users the right to interfere with any bona fide uses of the trademarks:

By individuals of their own names; or
That of their places of business; or
The names of the places of business; or
The names of any of their predecessors in business; or
The uses by any individuals of authentic descriptions of the characters or qualities of their goods or services.

Judicial interpretation of Section 35 of Trade Marks Act, 1999

In Somashekar P. Patil vs. D.V.G. Patil (2018), the defendant used a trademark ‘PATIL FRAGRANCES’ similar to the plaintiff’s because they used the surname ‘PATIL’. The plaintiff filed a suit against the defendant as the latter infringed the former’s trademark. Moreover, the plaintiff filed two interlocutory applications for an interim injunction against the defendant. Initially, the trial court granted the interim injunction to prohibit the defendant from using the disputed trademark. After that, the defendant filed an interlocutory application to quash the interim order. The learned judge quashed the same.

The plaintiff filed an appeal before the Karnataka High Court. He (plaintiff/appellant) requested to revoke the judge’s order and dismiss the application filed by the defendant (respondent). The appellant contended that the respondent infringed his trademark by using the trademark and the business name ‘PATIL and PATIL PARIMALA WORKS’. The respondent argued that he was a member of the Patil family and the appellant was his relative. The Karnataka High Court accepted his argument.

The court observed that Section 35 of the Trademarks Act does not permit owners or users of registered trademarks to question other individuals’ authentic uses of their own names or the names of their business sites. The brands of the appellant and respondent were ‘Ullas’ and ‘Hitushree5’ respectively. The respondent authentically used the surname ‘Patil’ as per his well-known family identity.

The court deduced that the appellant has no authority to prevent the respondent from using ‘Patil’ in his trademark solely based on the respondent’s surname being ‘Patil’. Therefore, the respondent had the right to use a surname that had been in use for generations. His family members were using the same surname in their businesses.

The Karnataka High Court considered the constitutional right granted by Article 19(1)(g) of the Constitution of India that authorises to engage in any businesses or trades. The court observed that this right adheres to reasonable limits imposed by central and State laws. The courts must be cautious before prohibiting individuals from exercising this right.

As per Section 35, the High Court ruled that the respondent has the legal right to use the word ‘Patil’. The court disregarded the appeal and supported the learned judge’s order.

In Precious Jewels & Anr. vs. Varun Gems (2014), the plaintiff and defendants, being from the same family, operated jewellery stores named ‘Rakyans Fine Jewellery’ and ‘Neena and Ravi Rakyan’ respectively. They shared the same surname ‘Rakyan’. However, the plaintiff sued against the defendants to prevent them from operating their jewellery store. He alleged that they used his surname ‘Rakyan’ in their trademark.

The defendants (appellants) filed an appeal before the Supreme Court. They argued that they had the right to use their own names for their business as per Section 35 of the Act. The Supreme Court accepted the appeal and ruled that the appellants could continue using the ‘Rakyan’ surname as per the Section because they acted legitimately. The court allowed them to use their own names for their business.

In Jindal Industries Private Limited vs. Suncity Sheets Private Limited and Anr. (2024), there were two defendants (Defendants 1 & 2) named Suncity Sheets Pvt. Ltd. (SSPL) and Rachna Nitin Jindal respectively. Defendant 2 was Nitin Kumar Jindal’s wife (he was the Manager of SSPL). The plaintiff (Jindal Industries Pvt. Ltd.) filed an interlocutory application requesting an order of interim injunction. He declared that the defendants infringed his registered trademark “JINDAL” by using the trademark “RNJ RN JINDAL SS TUBES LABEL”. According to the defendants, they authentically used their surname “JINDAL” in their trademark as per Section 35 of the Trademarks Act. Moreover, “JINDAL” was a commonly used surname. If they used their own surnames as trademarks, such usage was inherently authentic.

The Delhi High Court rejected the plaintiff’s interlocutory application as he was not eligible for the interim injunction. The court explained that the defendants endeavoured to diminish potential confusion between the trademarks by using the initials “RNJ” before defendant 2’s ownership name “RN JINDAL STAINLESS STEEL”. The court’s verdict was that they authentically used ‘JINDAL’ and did not infringe the plaintiff’s registered trademark “JINDAL”. The defendants got the benefit of Section 35 as Defendant 2 had used the mark “RNJ RN JINDAL SS TUBES LABEL” in good faith.

In Goenka Institution of Education & Research vs. Anjani Kumar Goenka & Anr. (2009), the defendant was using ‘Goenka’ for his schools and trusts, some of which are given as follows:

Goenka Public School (used since 2000);
Mohini Devi Goenka Mahila Mahavidyalaya (used since 1995);
Shree Lal Goenka Charitable Trust (used since 1990);
Goenka College of Pharmacy;
Mohini Devi Goenka Girls B.Ed College;
Mohini Devi Goenka Girls Mahavidyalaya;
Goenka Girls School; and,
Goenka Shiksha Avam Sodh Sansthan.

The trustees of the trust i.e., (iii) were Shyam Sunder Goenka and Ashutosh Goenka. A society (managed by the trust) was operating (ii). Moreover, the plaintiffs had been operating “G.D. Goenka Public School” since 1994. They tried to prevent the defendant from operating their institutes by requesting an order of interlocutory injunction. The plaintiffs contended that ‘Goenka’ was the surname of their trustees and they were entitled to use it as per Section 35.

The learned Single Judge granted the injunction and restrained the defendant from using ‘Goenka’ in (i), (iv) and (vii). The judge held that the defendant infringed the plaintiffs’ registered trademark ‘Goenka’. But, the judge permitted the defendant to run (ii), (v), (vi) and (viii).

The defendant filed an appeal before the Delhi High Court. This court ruled that the defendant (appellant) used ‘Goenka’ before the plaintiffs. Section 35 applies where individuals use the registered trademark in good faith. The court permitted the appellant to use ‘Goenka’ as it did not lead to confusion.

Exceptions to the bona fide use under Section 35

Various courts have weighed the exceptions to this Section. In Mr Anil Rathi vs. Shri Sharma Steeltech (India) Pvt. Ltd. (2020) the plaintiff and defendants were employed in manufacturing and trading steel products with the Rathi Foundation using the trademark ‘RATHI’. A Memorandum of Understanding (MoU) and a trust deed among the Rathi family governed the usage of this mark. Hence, a family agreement regulated its usage, and the defendants were beneficiaries under this agreement.

The plaintiff filed two interlocutory applications against the defendants before the Delhi High Court. He requested the court to prohibit the defendants from using the trademark ‘RATHI’. Moreover, the defendants filed a plea to use the same trademark.

The High Court observed that the ‘RATHI’ trademark licences issued by one of the defendants to third parties went beyond the scope of the MoU and Trust Deed. The defendant infringed the plaintiff’s registered trademark by granting licences to third parties and the same will not come under Section 35. He contended that he is entitled to use ‘Rathi’ as the trademark under this Section because his surname was ‘Rathi’.

The court ruled that this Section was inappropriate for this case as it only confines the personal usage of trademarks and does not encompass the issuance of licences. The court also ruled that the defendants did not authentically use the disputed trademark ‘RATHI’. Moreover, the recipients of the licences were operating the same business as the Rathi family. The court disregarded the defendants’ plea and affirmed that they did not authentically use the trademark ‘RATHI’.

In Manju Monga vs. Manju Mittal (2012), the plaintiff operated a firm ‘M/s Manju Monga Cookery Classes’ using the trademark ‘MANJU MONGA’S COOKING CLASSES’. Moreover, the defendant used her name ‘Manju’ in “Manju Cookery Classes”. The plaintiff filed an interlocutory application before the Delhi High Court to prohibit the defendant from using the same trademark ‘Manju’.

The court ruled that the defendant infringed the plaintiff’s registered trademark ‘Manju’. Therefore, she was not eligible for defence under Section 35 of the Trademarks Act as she could not prove that she authentically used the trademark. Moreover, she had a malafide intention to damage the plaintiff’s business reputation.

In Sangeetha Caterers and Consultants vs. New Sangeetha Restaurant (2023), the plaintiff and defendant operated restaurants ‘SVR Sangeetha Veg Restaurant’ and ‘NEW SANGEETHA RESTAURANT’ using the trademarks ‘SANGEETHA’ and ‘NEW SANGEETHA’ respectively. The plaintiff sought a permanent injunction to prevent the defendant from violating his registered trademark ‘SANGEETHA’.

The Madras High Court observed that they operated a similar business and the defendant deceitfully used the plaintiff’s trademark. The plaintiff’s trademark included ‘SVR’ (in small letters) as a prefix to ‘Sangeetha’ (in bold letters) comprising the suffix ‘Veg Restaurant’. The defendant’s trademark included ‘NEW’ in small letters instead of ‘SVR’.

After comparing both parties’ trademarks, the court observed that the main term ‘SANGEETHA’ was in bold letters and their prefixes and suffixes were in small letters. The court ruled that the defendant’s trademark could confuse the average public with imperfect memory. Therefore, the defendant’s case was regarding Section 29(2)(b) of the Trade Marks Act. His continuous usage of the disputed trademark ‘NEW SANGEETHA RESTAURANT’ amounted to an infringement of the plaintiff’s registered trademark.

In Kirloskar Diesel Recon (P) Ltd. v. Kirloskar Proprietary Ltd. (1995), the Bombay High Court held that the individuals deceitfully using their names as trademarks are not eligible for defence under Section 35 of the Act. When it comes to incorporated companies, the chosen names for the trademarks are a matter of preference. On the other hand, in cases involving natural persons, using surnames is not a matter of preference. However, the court prohibited the defendant from using the trademark ‘Kirloskar’ as a business name.

In Skipper Limited vs. Akash Bansal & Ors. (2016), the Calcutta High Court held that Section 35 has no application on juristic persons operating businesses under fictitious names. It authorises juristic entities to operate businesses under fictitious names. Moreover, the Section has no application on properly established partnership firms if it is found that:

They have not used their partners’ full names; and,
They have fraudulently used such names.

Difference between Sections 34 and 35 of the Act

These Sections safeguard the owners of unregistered trademarks by prioritising them over the owners of the registered trademarks.

However, there are some differences between these Sections. Section 34 safeguards the rights of owners using unregistered trademarks before other individuals for a certain period. According to this section, no provisions of the Act authorise the owners of registered trademarks to infringe the individuals’ right to use similar trademarks before the first use of the latter trademark or the registration of the new trademark. Meanwhile, Section 35 states that owners of registered trademarks have no authority to prevent other individuals from authentically using their names or surnames as trademarks during business.

Conclusion

Trademarks assist customers in recognising brands and their products from those of other competitors in the markets.

Section 35 obstructs the owners of the registered trademarks from restricting other individuals who authentically use the same registered trademarks during trades. To address such situations, evidence must prove the following:

The defendants (someone who has infringed the plaintiffs’ trademarks) did not use registered trademarks with malafide intentions;
They had used the plaintiffs’ registered trademarks for authentic purposes; and
Such use did not harm the businesses of the trademark holders (plaintiffs).

Frequently Asked Questions (FAQs)

What do you mean by TRIPS? What is its purpose?

It is a global legal agreement that involves all the members of the World Trade Organization (WTO). It sets out basic guidelines for how national governments can regulate various types of intellectual property (IP) concerning citizens of other WTO member countries.

The Preamble and Article 7 of the TRIPS agreement explicitly outline the objectives of TRIPS which are as follows:

To minimise distortions and obstacles to international trade.
To promote effective and sufficient protection of intellectual property rights.
To ensure that mechanisms for enforcing intellectual property rights do not hinder legitimate trades.

What do you mean by unregistered trademarks?

The trademarks which are not registered in compliance with the Trademarks Act. The owners of such trademarks have no protections against infringement. They have no authority to use the ® symbol. Moreover, such trademarks have ™ logos that hint they are not registered but are identifiable from other identical goods and services.

Is registration of trademarks compulsory? Which provisions of the Trademarks Act deal with the registration of trademarks?

No, the registration of trademarks is not compulsory. However, it provides proof of ownership for the registered trademarks. No individuals can take legal action for the violation of unregistered trademarks.

These are the provisions of the Act that deal with the registration of trademarks:

Sections 3 to 17 of the Act are provisions related to the registrars and the requirements for the registration.
Sections 18 to 26 are related to the procedures of registration and its duration.
Sections 27 to 36 deal with the effects of registration.

What are the main types of intellectual properties?

There are four main types of intellectual properties:

Trademarks [Section 2(1)(zb) of the Trademarks Act 1999];
Copyrights [Sections 13 and 14 of the Copyright Act 1957];
Patents [Section 2(1)(m) of the Patents Act 1970];
Designs [Section 2(d) of the Designs Act 2000].

What are the objectives of the Trademarks Act?

This Act provides statutory defence for rights related to trademarks in India. As far as its objectives are concerned, these are as follows:

To modify and unite the statute regarding the trademarks;
To facilitate the registration of trademarks;
To encourage fair protection of trademarks; and
To prohibit the use of defrauding trademarks.

References

Dr. Jyoti Rattan, Bharat’s Trademarks Law, 1st Edition, 2021.
V K Ahuja, Law Relating to Intellectual Property Rights, LexisNexis, 3rd Edition, 2017.

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Section 11 of Trade Marks Act, 1999

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September 5, 2024

The article is written by Kaustubh Phalke. This exhaustive article provides a legal analysis of the relative grounds for refusal to register a trade mark under the Trade Marks Act, of 1999. The author has tried to briefly introduce the topic, the meaning of trade mark, registration of trade mark and the advantages of registration of a trade mark, and the grounds for grounds of refusal for trade mark registration. This also contains the meaning of the relative grounds for refusal of registration of a trade mark under the Act and a clause-wise explanation of the provision. Further, the author has discussed the ways to avoid such ground and its defences. The article also consists of leading case laws ending with a conclusion and FAQs.

Table of Contents

Introduction

Trade mark is an ancient concept. In early times, businessmen used to use special and unique marks that were made by themselves or by local craftsmen. They used to mark them to make them innovative and creative and to distinguish them from the products in the market that are beyond their localities. Most businessmen used to engrave their signatures and then export them. These marks started to play a huge role in the increase in their sales and they gradually became an important factor for international trade and market-oriented economies.

A trade mark is a unique mark that a trader or a businessman uses to distinguish his product from other products in the market. It gave consumers an insight into the quality, quantity, and other features of the product.

Seeing this, many other competitors started using the same marks which confused the consumers. Hence the Trade Marks Act, of 1999 (hereinafter referred to as the Act) was enacted to curb this problem, protect the rights of consumers and businessmen, and promote trade and business. Section 9 of the Act dealt with the absolute grounds for the refusal of registration of the trade mark and Section 11 dealt with the relative grounds for the refusal of the trade mark. Relative grounds are those grounds that arise out of the conflict with another party’s trade mark or his existing rights over it. The provision prescribes that any mark that resembles an already registered trade mark under Section 23 of the Act or is employed for similar goods won’t be allowed for registration.

The article deals with Section 11 of the Trade Marks Act, 1999 which states the relative grounds for the refusal of registration for trade mark.

What is a trade mark

A trade mark under Section 2(1)(zb) of the Act is defined as a unique mark that can be represented graphically and is used by enterprises to make their product different from others. It is a type of intellectual property i.e., a property which is created by using intellect and is intangible in nature. These marks include shape, size, or some special combination of colours or any other such creative feature by which a consumer gets assured about the product quality as well as quantity. This builds his trust in the enterprise and eventually helps the seller as well as the consumers to choose the best product as promised by the enterprise.

Trade marks may include a brand name, product, company name, or any logo. Most enterprises use words and pictures or logos to distinguish their products whereas anything which can be represented graphically can be used as a trade mark as per law. These are valuable assets of any business and hence are protected by the law, however having a trade mark is not compulsory for any business, but it is always advisable to have a registered trade mark in order to protect and get relief for the violation of rights. Another benefit of having a trade mark is to mark all the services or products in the name of the proprietor and prevent the goodwill and loss of reputation due to counterfeit products.

A trade mark is valid for 10 years only but can be renewed for an indefinite number of times by paying additional fees for the same. These give the owner of the trade mark personal rights for the protection and use of this mark. It is governed by the Trade Marks Act, of 1999 which is in conformity with the Paris Convention, of 1883 and the TRIPS agreement, of 1995.

Registration of a trade mark

Registration of a trade mark refers to getting it registered under the Act. Chapter 3 of the Act deals with the procedure and the duration of the registration of a trade mark and Section 23 of the Act deals with the registration of the trade mark.

The following are the rights which arise from the registration of a trade mark:-

Exclusive right to use the trade mark

The owner of the trade mark holds the statutory right to prevent any other competitor from using its trade mark. It works as a legal shield for the owners of the trade mark. Trade marks encapsulate the essence of the brand and the quality supplied by it hence the trade mark owner gets an exclusive right to use the mark only for his product in the market. Other competitors in the market cannot use a mark that resonates with a registered trademark. On using such deceptive marks they can be heavily fined by the courts. The owner of a registered trade mark gets relieved from the liability to prove the authenticity and legality of the mark every time. This exclusive right maintains and increases the trust of the customers in their products and brands.

Presumption of validity and non-disputability

This presumption means that a registered trade mark is considered to be valid and legally enforceable. In a complex web of legal battles where every point can be argued endlessly, this presumption gives a refreshing certainty. They get an evidentiary benefit and preference through this. The registration of a trade mark along with this presumption simplifies the process of enforcement of rights in the court. This presumption helps the owners of the trade mark to stand out in a favourable position on the legal battlefield.

Global protection and public notice

When a trade mark is registered then the identity of the mark is elevated for legally recognised status and many other benefits, one of which is the trade mark being recognised at the global and national level i.e., the rights give protection within the boundaries of the country and beyond that as well.

The registration gives legal protection to the trade mark in the jurisdiction in which it is registered. It is important nowadays to protect the goodwill of the business and brand uniqueness whereby the registration keeps both factors untarnished.

The registration of the trade mark is brought to the public notice which has the dual effect of reducing the chances of the trade mark being used by the competitors to tarnish the brand reputation and alerting the competitors from using similar marks preventing costly and time-consuming legal battles. More than just a legal tool, registration is a strategic move to protect the goodwill and enhance the business returns.

The registration of a trade mark has several advantages such as exclusive protection of rights by the law, one can use the same trade mark for several products of the same category which are mentioned in the application, helps in maintaining goodwill and brand value, creation of a valuable intangible asset for the enterprise, and global recognition. It builds a good market for the product and attracts customers. It simplifies the process of execution of rights on the infringement of the trade mark rights, the owner of the trade mark gets relieved from presenting extensive shreds of evidence to prove his innocence. The registration makes the process expeditious and helps the owner to get a legally secured environment.

The registration of a trade mark is not compulsory in India but to secure the right and to prevent the trade mark from being used by other parties, the registration is mandatory. However, action against the passing of the trade mark (using a registered trade mark for its own benefit) can be taken without registering a trade mark. An important factor that is to be proved in this case is the malafide intention of the offender but to get relief under this Act, the registration makes the case stronger in favour of the owner of the mark. It embarks on the journey of the business for the international voyage by increasing its brand value at the global level and constantly pushing the business to grab bigger and better opportunities. The goodwill of the business gets enhanced leading to miraculous benefits for the business.

Amplifying compensation measures and remedies

The registration of a trade mark improves the legal position of the victim who has approached the court on the passing of his trade mark. It is a valuable asset for the company therefore protecting it becomes more crucial in every way. By registering the trade mark, the owner gets legally powerful by obtaining certain rights that give the mark its uniqueness and the owner can then apply for an injunction i.e., stop using the mark for profits with immediate effect. This injunction protects the reputation of the owner of the trade mark.

One of the most potential benefits of the registration is enhanced compensation for infringement of rights. This compensation may include lost sales, damage to reputation, and costs incurred to indemnify the effects of the infringement. The owner gets a right to statutory compensation.

These enhanced compensations give the owner a sense of security that their rights are protected under the statute and secondly, they act as power deterrents for the infringers to think thrice before committing any such act because of the financial consequences they will be facing for their acts.

Trade mark acts more as a shield than merely a mark. It provides businesses confidence that their rights are not only recognised but powerfully defended keeping in mind their losses, reputation, sales, etc.

Prevents unfair competition and reduces the chances of trade mark-related disputes

Registering a trade mark works as a brahmastra in the arsenal for the owner of the trade mark. It provides the owner with some unbeatable weapons to combat trade mark infringement and unfair competition.

Unfair competition means to gain using unethical means such as false advertising, and deceptive methods of promoting the product. This has dual effects i.e., the reputation of the businesses is hampered and the buyers are trapped for inferior products and services. By registering the trade mark, the businessman can obtain an edge over unfair competition and ultimately reduce the chances related to the trade mark.

It makes a clear boundary and alerts them of the consequences of their acts through heavy fines and compensations and other dire consequences. Using similar trade marks can deceive customers and confuse them regarding the origin of the product leading to poor choice of inferior products and services. Registering a trade mark protects the business actively as well as passively. Actively, by maintaining the uniqueness of the mark, and passively, by protecting the rights of the owners and provisioning high compensation on infringement.

Refusal of trade mark registration

The Act does not discuss the grounds for registration of a trade mark rather it discusses the grounds for refusal of the same. It can be classified under two categories i.e., as per Section 9, the absolute grounds for the refusal of registration, and Section 11, relative grounds for the refusal of registration. It is mandatory for the registration of the trade mark to pass from certain grounds mentioned under Section 9 and Section 11 of the Act, which are mentioned in the later part of the article.

The absolute grounds for the registration of a trade mark are generally related to public policy. The objective of this provision is to secure the rights of the public as well as the owners of the trade mark. It protects the genuine and bonafide intention of the owners as well as the public. These are generally made on the inherent qualities of the mark. The absolute grounds for the refusal of a trade mark under the Act are as follows:-

Non-distinctive marks: If the mark resonates with the other marks in the market then it can be a ground for the refusal of registration of a trade mark. These marks are generally very generic.

Common marks used in established trade practices- The other grounds for refusal of registration of a trade mark are using signs and symbols that are currently being used to designate kind, quality, quantity, values, etc.

Deceptive marks or scandalous marks- These are the marks that can deceive the consumers of the product they want to purchase or are associated with. Deceptive marks can be one of the factors for loss in business and goodwill.

Obscene and offensive marks- Marks that are obscene or are offensive to any religious group or community are rejected from being registered under the Act. Obscene refers to vulgar or offensive imagery, immoral language, or design.

Customary marks or indications- Marks that have become an integral part of the current language cannot be used as trade marks. It includes bonafide and established trade practices in India such as units, symbols, etc.

Statutorily prohibited marks- The marks prohibited under the Emblems and Names(prevention from Improper Use) Act, 1950 cannot be used and registered as trade marks.

Certain derived shapes- The mark cannot be used as a trademark if it is of such a shape that has been derived from the nature of goods, a shape that is necessary to obtain a technical result or a mark that gives substantial value to the goods.

Relative ground for refusal of trade mark registration (Section 11)

After the submission of the application for registration, the application is examined by the registrar and calls for objection thereon, and any objections pertaining to the trade mark being registered are called upon. As discussed above the trade mark has to pass without any objection from absolute and relative grounds which are discussed under Section 9 and Section 11 of the Act respectively.

Relative grounds for the refusal of trade mark registration in this context mean if the registrar finds another mark that resonates with the mark presented for registration. The objections under the relative grounds are easier to deal with as compared to the objections under absolute grounds for refusal of registration of a trade mark. One can proceed with the registration if the objection under relative ground is clarified.

Clause-wise explanation of relative ground for refusal of trade mark registration (Section 11)

Section 11 consists of 11 clauses out of which:

Clause (1-3), covers the relative grounds for the refusal of registration of a trade mark.

Clause (4-5), covers the grounds on which the registration of the trade mark under special circumstances.

Clause (6-7), covers the points to be taken into consideration for determining a well-known trade mark in India.

Clauses (8-11), cover the procedures to be followed for the above-mentioned clauses.

The following is the clause-wise explanation of Section 11 of the Act:-

Clause (1)

Subclause (a) states that if the mark is identical to an earlier registered trade mark or has the similarity of goods and services covered by the trade mark then this becomes the ground for refusal for registration of a trade mark.

Subclause (b) states that if the mark is similar and not identical to the already registered trade mark or identical or similar to goods and services covered therein then this too becomes a ground for the refusal of the registration of the trade mark.

The objective behind this provision is to avoid confusion amongst the consumers and to protect their trust in the product they are associated with.

Clause (2)

As per this clause, if a trade mark is to be registered then the following two conditions need to be fulfilled:

The trade mark in question shall not resonate with some other earlier registered trade mark.
The goods and services covered therein are different from the earlier registered trade marks of some different proprietors, such an earlier registered trade mark is well known in India, and this stands as a ground for the refusal of the registration of the trade mark.

The objective behind this clause is to protect the unfair advantage obtained by the trade mark in question. This is also done to protect the distinctive character and any harm to the reputation of the earlier registered trade mark.

Clause (3)

As per this clause, a trade mark is not entitled to registration if the trade mark is barred from being registered by any law in India. Especially the law preventing the passing off of unregistered trade marks in India. It also protects the marks which are prevented from being registered by virtue of the Copyright, which is governed by the Indian Copyright Act, of 1957.

Clause (4)

As per this clause, the trade mark can be registered under special circumstances mentioned under Section 12 of the Act. If the proprietor of the earlier registered trade mark or the holder of any rights on this behalf gives his consent to the registrar to register the trade mark.

For the purpose of this Section, an earlier trade mark means the following:

A registered trade mark
An application bearing an earlier date of filing under Section 18 of the Act.
An international registration is mentioned under Section 36E of the Act.
A conventional application is mentioned under Section 154 of the Act, which is earlier than the trade mark in question.
A trade mark that is well known before the date of application for registration of the trade mark in question.

Clause (5)

As per this clause, if the proprietor of the already registered trade mark does not raise an objection on any ground during the opposition process then the registration of the trade mark shall not be refused.

Clause (6)

The registrar of the trade mark holds the power to consider any fact that he deems relevant for determining whether the trade mark is a well-known trade mark or not. The following are some special facts to be considered while determining a well-known trade mark:-

The knowledge and recognition of that trade mark in India and amongst the public in the above relevant clauses.
The duration, extent, and geographical area to which the trade mark is to be used.
The duration, extent, and geographical area at which the promotion of the trade mark is done.
The record of successful enforcement of rights, if the mark has been recognised as a well-known trade mark by any court or registrar.

Clause (7)

The registrar while determining the trade mark as known or recognised in the relevant section of the public for the purpose of clause (6) shall also consider the following points :

The number of actual or potential consumers of the goods or services.
The number of persons involved in the channel of distribution.
The business circle deals with goods and services.

Clause (8)

As per this clause, if a trade mark has been determined as a well-known trade mark by virtue of any court or registrar, then the registrar shall consider it as a well-known trade mark for the purpose of this Act.

Clause (9)

The registrar while determining if the trade mark is well known or not, may overlook certain points if:

The trademark has been already used in India.
If the trade mark is already registered or an application has been filed for registration.
If a trade mark is registered or well known or for which an application has been filed for registration outside India.
If a trade mark is well-known in India.

Clause (10)

The clause discusses the duty and objective of this provision through two sub clauses which are as follows:

i) To protect well-known trade marks from identical or deceptive trade marks.

ii) To take into consideration the malafide intention involved in the application or the person raising an objection.

Clause (11)

If a trade mark is registered before the commencement of this Act and it is identical or similar to a well-known trade mark, it is used in a bonafide manner by disclosing the material information to the registrar then nothing in this Act shall affect the validity of registration of such trade mark.

Ways to avoid refusal of trade mark registration

Avoiding refusal of trade mark registration against the objections raised under Sections 9 and 11 is the most crucial step in the process of registration, the following are a few steps to avoid such objections :

By conducting a thorough research

The objection can be avoided by conducting thorough research and finding out the already existing trade marks in India. The research will also help the applicant in finding the pending application with an image. If an applicant feels that his trade mark resembles an already registered trade mark then he may change it beforehand and avoid such oppositions.

Using logos and devices instead of words

Using logos and devices can be beneficial instead of using words. Words can be similar or identical to an existing trade mark and the oppositions for words cannot be avoided so easily whereas using logos or devices can be helpful here as the uniqueness of the logo and colour may protect it from the oppositions raised.

Applying for a specific description of goods and services

It is indeed a difficult task to specifically mention certain products and services from one class of trade mark but this is the best way to deal with the objections raised under Section 11. If two similar trade marks are in two entirely different areas of business then there is no chance of them being deceptive to the public.

Defences available against the trade mark infringement

As we know, Section 11 deals with the relative grounds for the refusal of trade mark registration, following are some defences that can be taken by the defendant to be deemed as an exception for these grounds:

Bona fide use of the trade mark

One can take the defence of using the trade mark for a bona fide purpose. If the defendant proves that he has used or applied for the registration of the trade mark with the permission of the proprietor of the already registered trade mark. He can take the defence that he has no intention to fraud or deceit the customers and the proprietor. He can state that he is using the mark for descriptive purposes and for not any specific purpose.

Old user

The defendant can prove that he has been using the mark for longer than the proprietor who has raised the opposition. If he is using the mark for a longer time than the registered mark, he will be given the benefit of the same because of the goodwill of his business associated with the trade mark.

Non-identical or dissimilar from the registered trade mark

The defendant can prove that his trade mark is different from the proprietor’s trade mark. He can prove that his mark does not create any confusion for the customer and hence does not affect the business or goodwill of the proprietor. The court compares the phonetic similarity and features while giving a decision on such marks.

Non-use of the trade mark by the proprietor

If the defendant succeeds in proving that the proprietor is not using the trade mark for a long period of time, he will be given the benefit of this defence. The burden of proving the same is on the defendant. Further, he needs to prove that he is interested in using the mark with a good intention and that the mark is similar due to the non-use of the trade mark by the proprietor.

Delay in a suit or bringing no suit

The right of the plaintiff gets waived off once he delays filing the suit or does not file any suit or raises any opposition for the infringement of his trade mark rights. The person intending to register his trade mark will be given the benefit of this and allowed under special circumstances.

Relevant cases

Toyota Jidosha Kabushiki Kaisha vs. Prius Auto Industries Ltd. and Ors. (2017)

Facts of the case

The plaintiff, in this case, is a Japanese-incorporated automobile manufacturer. The respondents are also automobile manufacturers and respondent no. 2 and 3 are their partners. The fourth respondent is a private limited company in which 2 and 3 are the majority shareholders.

The plaintiff in the instant case brought a suit against the respondents for passing off their trade marks named Toyota, Toyota Innova, Toyota devices, and Prius, of which he was the prior user according to his claim. As per the plaintiff, his marks gained good popularity in India as well as in the global market, it was a well-known trade mark. He registered these trade marks in different classes from 1989-2003. He averred that the goods sold by the defendants were adversely affecting his goodwill and reputation, therefore, infringing his rights of trade marks.

The plaintiffs launched the world’s first commercial hybrid car in Japan in 1997 which was called Prius. It was also released in other countries later in 2000 and 2001. He registered his trade mark in different parts of the world until 1990 except in India. Later, the car was released in the Indian market in 2009 following the registration of his trade mark in India. As per his claim, Prius gained good popularity in India with due time and was considered to be a well-known trade mark as per law. He later discovered that the defendants were using and registered the same mark in auto parts and accessories and were using it for the purpose of carrying out their trade.

He approached the registry of trade marks to raise an objection against the defendants for using the plaintiff’s trade mark for unfair advantage without any authorization. The plaintiff’s reputation was hampered in this way. The plaintiff prayed for a permanent injunction against infringement of his trade mark rights.

Issues of the case

Whether the Appellate Bench of the High Court of Delhi right in reversing the order of the Trial Court while holding that the grant of injunction in favour of Plaintiff insofar as the Trade name ‘Prius’ is concerned was not justified?

Judgment

The Supreme Court in the instant case held that it is necessary for the court to determine whether there has been any spill over the reputation of the person asserting the passing of his trade mark or not. As soon as the claimant proves his goodwill in the market and its infringement thereby by the defendants then he must be relieved from the burden of proving the confusion arising out of the passing off of the trade mark. It is clear that the trade mark Prius of the claimant had gained good popularity in the market prior to the use and registration of the same by the defendants. But if the matter is to be governed by the laws of the land, it is the duty of the claimant to show that goodwill existed in the Indian market too.

As per the claimants, it is contested that the goodwill was acquired before the launch of the vehicle in the Indian market through the Internet and other publications, this will not be a safe basis to consider substantial goodwill of the brand in the Indian market seeing to the limited exposure to the internet in 2001. The Supreme Court agreed with the fact of lack of goodwill in the Indian market and the lack of information and knowledge of the brand amongst a significant section of the Indian population. The court agreed with the High Court of Delhi, which stated that the plaintiff’s brand had not acquired enough goodwill in the Indian market to proceed in the matter of passing off against a registered owner of the trade mark. Hence the matter was decided in the favour of the defendants.

M/S. Nandhini Deluxe vs. Karnataka Co-Operative Milk Producers Federation Ltd. (2018)

Facts of the case

The dispute, in this case, is regarding the trade mark ‘NANDHINI’ and ‘NANDINI’. The respondents in the instant case have been using this mark since 1985 and were producing milk and byproducts. The mark was registered under classes 29 and 30. The appellant was running a restaurant in the name of a similar trade mark ‘NANDHINI’ from the year 1989. The appellant applied for the registration of this mark for the foodstuffs sold in his restaurant. The respondents raised opposition to the registration of the trade mark on the grounds that it was deceptively similar, which was rejected by the registrar, and the registration was allowed in the favour of the appellant in 2007.

As per the respondents, the mark has gained substantial goodwill and is well associated with the people i.e., it is well known to the people who are associated with their brand due to its long and sustained use. The respondents contested that the mark is likely to deceive and confuse the customers which is against the profits of their business. They contended that using ‘NANDINI’ as a trade mark was their exclusive right. On rejection of these contentions, the respondent approached the intellectual property control board, Chennai to cancel the registration granted to the appellants. The plea of the respondent in front of the intellectual property control board was accepted and the High Court of Madras confirmed the same. The appellant approached the Supreme Court for relief.

Issues of the case

Whether such a registration in favour of the appellant would infringe the rights of the respondent or not?

Judgement

The entire case of the respondent revolves around the submissions that the adaptation of this trade mark by the appellant, which is phonetically similar to that of the respondent, is not a bona fide adaptation, and this clever device is adopted to catch up on the goodwill which has been generated by the respondent in respect of trade mark ‘NANDINI’. On that premise, the respondent alleges that the proposed trade mark ‘NANDHINI’ for which the appellant applied for registration is a similar trademark in respect of similar goods and, therefore, it is going to cause deception and confusion in the minds of the users that the goods in which the appellant is trading, in fact, are the goods which belong to the respondent. Precisely, it is this controversy that needs to be addressed in the first instance.

The Supreme Court did not sustain the conclusions of the Intellectual Property Appellate Board and the High Court of Madras that the marks would cause any deceptions or confusion to the public. The visual appearance of the trade marks is different and so is their relation which is entirely different products. It is difficult for an average man of ordinary would get confuse the products of the appellant with those of the respondents due to trade mark seeing to the manner in which they are traded by the appellant and the respondent. The items for which the trade mark is registered by the appellant do not belong to class 29 or 30 instead they belong to class 16, hence there is hardly any chance of deception or confusion.

In the case of Nestle India Ltd. vs. Mood Hospitality Pvt. Ltd.(2010) conditions which needed to be satisfied for applicability of Section 11(2) of Act were laid down :

(a) mark had to be identical with or similar to an earlier trade mark and is to be registered for goods or services which were not similar to those for which earlier trade marks were registered-both afore-mentioned conditions (forming Sub-section (a) and (b) of Section 11(2)) of Act, had to be satisfied and not just one, due to use of the word and between them.

(b) registered trade marks must have a reputation in India.

(c) use of the mark in question must be without due cause

(d) Such use must take unfair advantage of or be detrimental to the distinctive character or repute of the registered trade mark. All ingredients laid down in Section 11(2) of the Act, as explained by the Delhi High Court in Nestle India Ltd., had not been satisfied.

The court believed that the trade mark was not used with the intention of taking unfair advantage of the trade mark of the respondent. The registration of the appellant was allowed to keep a condition that the trade mark would not be given for milk or its products. The appeal was allowed.

Starbucks Corporation vs. Sardarbuksh Coffee and Co. and Ors. (2018)

Facts of the case

The facts of the case are that the plaintiff in this case is Starbucks, a well-known coffee chain in India. The Starbucks Corp. registered their trade mark and logo in 2001 in India. The defendants in the case are Sardarbuksh Coffee and Co., who started their coffee chain in 2015 with a logo depicting a commander wearing a turban and green coloured waves in his background, the logo was surrounded by a circular black band. The plaintiffs found it deceptive and asked the defendants to change it by a letter of demand. The defendants changed the colours of the logo and resumed their business in response to this letter. In 2018, the defendants started making business operations under the same name. Interestingly, the services provided by the plaintiffs and defendants were the same. The plaintiffs in this case filed a suit in the High Court of Delhi against the defendants for using a similar deceptive mark and hence infringing their rights.

Issues raised in the case

Whether the mark was deceptively similar to the plaintiff’s mark?

Judgment

The High Court held that for deciding the question of similarity and deceptiveness, the courts should consider certain tests such as tests of likelihood, confusion, goodwill, etc. The court decided the matter by determining that the similarity test can only be tested successfully by presuming the man of ordinary intelligence. If the two marks raise confusion for such a person then it shall be considered as deceptive. The court ordered the defendants to change the name of the business to Sardar-ji Buksh Coffee and Co., two shops were given exemption which were operational earlier.

The defendants made the required changes and the defendants were allowed to file a suit for passing off if someone else uses the term ‘Buksh’ in their trade mark.

Conclusion

Trade marks are the valuable assets of an enterprise and it is crucial to protect them and the rights available under the law regarding trade marks. Registration of the trade mark is not only a regulatory requirement of business but it is also known as the best evocative measure to adopt to safeguard business interest. However, sailing through the grounds of refusal for trade mark registration is of utmost importance in ensuring the successful registration of a trade mark. This helps to simplify the process of trade mark registration.

It is clear that there is no absolute rule that a mark that is devoid of distinctiveness cannot be registered as a trade mark. The trade mark pattern and usage are increasing globally and hence India should take all the necessary measures for the protection of the rights of proprietors and consumers globally.

The relative and absolute grounds play an important role in protecting the earlier registered trade marks, and their goodwill and deter the people from using it for the purpose of fraud or deceiving the customers. The Act is concerned with the distinguishing character of the mark used for the goods and services that are sought to be protected. The onus is always on the applicant that his mark is distinctive from other similar marks and not likely to cause any confusion amongst the consumers.

The law expects the users of the trade mark to be aware of the grounds for refusal to avoid any delay in registration. The judiciary plays an active role in protecting the rights of the proprietors and their goodwill.

Frequently Asked Questions (FAQs)

Can a trade mark be refused for registration because it resonates with the different marks associated with a different class of products?

Yes, a trade mark that is similar to some other mark in use can be refused for registration even if it belongs to some different class. The facts like well-known trade marks will be considered while refusing the registration. A well-known trade mark shall be protected beyond the scope of its goods and services.

What is an exception to Section 11 of the Trade Marks Act, of 1999?

An exception to Section 11 of the Trade Marks Act, is the permission or consent of the registered trade mark owner. In such a situation the registrar may allow the registration under Section 12 which is marked as special conditions.

What is the difference between absolute and relative grounds of refusal for registration of a trade mark?

The basic difference between both is that Section 9 talks about the absolute grounds of refusal whereas Section 11 talks about the relative grounds of refusal of the trade mark. Absolute grounds are those grounds in which a trade mark fails to show distinctive features from another trade mark or is identical or similar to another trade mark. Relative grounds are those grounds which are raised by the claimant claiming his rights to protect passing off his trade mark.

References

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