This article is written by Samriddhi, a BA. LLB. student at Symbiosis Law School, Noida. This article analyses the history and the recent conflict that took place between Israel and Gaza.
Table of Contents
Introduction
The conflict between Israel and Gaza could be traced back to the nineteenth century. This conflict is more against Jews than anybody else. This world is well aware of the treatments given and situations faced by the Jews during the Hitler phase and even before that. After all the struggle for years, the war was on again recently, with Israeli warplanes bombarding Gaza City, compounding the civilian suffering in the coastal enclave. At the same time, the rocket barrage by Hamas, the militant group that has ruled Gaza since 2007 and does not recognize Israel, continued to take its toll on Israeli cities, including Tel Aviv, the commercial center of the country.
How it all started
Everyone is aware of the treatments faced by Jews during the Hitler phase, but very few look back at the history and recognize the problems faced by them before that. The crimes and suffering against Jews can be traced to 957 BC. During that period, as well as today, some people tend to believe that Jesus Christ was born in a Jewish family and that some Jews even wanted to crucify Jesus. This ideology affected the society for long enough and stayed with the Christian group taking a root in their minds. Later, the Crusades started happening and many Christians killed Jews based on the made-up ideologies and fake rumors, making it difficult for them to survive. In this manner, crimes against Jews kept increasing over time. Jews suffered the level of hatred which was rarely ever shown to any other religion.
After the 1800s, the Jews were not only hated because of the rumors, the authorities also considered them a different ethnicity.
The Jewish country
Due to all of these reasons and sufferings experienced by the Jews, the Jews began considering that they did not belong to any particular country. They desired to shift to a new country, built just for them, where they could feel like they belonged.
An Austro-Hungarian Jewish, namely Theodor Herzl, was a journalist, playwright, political activist, and writer, who was the father of modern political Zionism. Herzl formed the Zionist Organization and promoted Jewish immigration to Palestine to assassinate the right-wing from a Jewish state. In his 1898 pamphlet, he introduced a new political movement called Zionism. He raised the idea of creating a separate country for the Jews. During that period, the concept of Zionism was already popular and there were organizations and supporters of Zionism calling themself the Lovers of Zionism, promoting these ideas since the 1870s.
In the year 1881, the first large-scale Jew migration was recorded in the Palestinian area. Jews started making permanent settlements and started living in that area.
Why was Palestine chosen
Jerusalem is the holy place for the Jews, which is located in Palestine, Thus, Palestine was a significant place for the Jews to settle down. During that time, there was no Israel, Gaza, or the West Bank, but only a big plain land called Palestine. The whole area fell under the Ottoman Empire, where all Jews, Christians, and Muslims lived more or less peacefully.
Known in Hebrew as Yerushalayim and in Arabic as al-Quds, Palestine is one of the oldest cities in the world. It has been conquered, destroyed, and rebuilt time and again, and every layer of its earth reveals a different piece of the past.
1915
During this period of World War I, the British, Arab, and French revolutionaries were fighting the Ottoman empire. The British, with their cleverness during this period, promised the Arabs the area of Palestine for their support in defeating the Ottoman Empire. Arab revolutionaries were fighting for a unified Arab country from Syria to Yemen. The plot twisted and the British played the Arab revolutionaries when they promised the same Palestine area to the Jews.
The British did so with their ulterior motives but for the public; the motive was of appeasing the American Jews and gaining influence over American politics. In reality, the British made a secret deal with the French. As soon as the Ottoman Empire fell, the British and French divided the area of the Middle East in half. From 1918 to 1948, Palestine was totally under the control of the British, and at the same time, Hitler, in Germany, massacred millions of Jews. The Jews started escaping from Hitler-controlled Europe; some got refuge in America while others sought refuge in Palestine. In Palestine, the Jews were initially given refuge but were later denied. This event led to the start of the Israeli Nationalist Movement and the Palestine Nationalist Movement, demanding their land.
Birth of Israel
After years of struggle and a million deaths, the British finally left Palestine and let the Jews and the Palestinians make separate countries for their survival. This responsibility was handed over to the United Nations by the British.
The UN came up with a plan and released it in 1947. As Jerusalem was a holy place for all Muslims, Jews, and Christians, they kept it under International control. Jews accepted the offer and named their part ‘Israel’. However, on the other hand, the Arabs did not accept the plan and blamed the UN for colonization as well as starting a war against Israel. The war was called the First Arab Israeli War in 1948, with Israel winning it and occupying the majority area. 7 lakh Palestinians were left homeless and became refugees in other Arab countries. This came to be known as the Palestinians Exodus. Israel fought 2 more wars, in 1967 and 1973. However, there were no new changes made for Palestine, as Israel kept winning and occupying more areas including the Gaza Strip and West Bank. In the year 1964, the Palestinian Liberation Organisation (PLO) was established and was recognized in 1974 by the Palestinians to create their own country one day. PLO has been declared a terrorist organization by the USA and Israel. People over time started settling in the West Bank areas. This has been criticized by international organizations, who claim it to be illegal as it is against the UN plan. Palestinians call it colonization.
1993 Oslo Accords
After years of struggle for both countries, Israeli Prime Minister, Yitzak Rabin, in 1992, declared Palestine a country. Both the countries’ prime ministers met to talk about peace and clear division, which came to be known as the Oslo Accords. As a result, for the first time, the Palestinian government was established and called the ‘Palestinian Authority. By this time, Israeli people had permanently settled in the West Bank. Palestinians started living there in divided areas. Later, this area was divided into 3 parts to make it convenient for the public and the government.
Area A
Palestine Government
Area B
Israel and Palestine Governments
Area C
Israel Government
Later in the incident, the PM of Israel was assassinated by the right-wing extremists. After the assassination, a militant group was established called Hamas. HAMAS is a Palestinian Sunni-Islamic fundamentalist, militant, and nationalist organization. It has a social service wing, Dawah, and a military wing, the Izz ad-Din al-Qassam Brigades. In 2007, after facing internal disputes, Palestine got divided into two parts based on their ideologies. Hamas occupied the Gaza Strip as a terrorist group and the other side was occupied by Palestinian civilians, who were not a part of the terrorist group.
14 May 2021
While the war has been going on for years, it hasn’t escalated on a massive scale, until now. This war has escalated once again bombarding, both sides killing thousands of citizens on both sides. This fight is between Israel and Gaza. Gaza has been occupied by a terrorist group. While countries like the USA, Israel, and Japan have declared it a terrorist group, on the other hand, the UK and Australia do not regard it as a terrorist group entirely.
Israel and Gaza have always been in an ongoing fight as they keep throwing rockets against each other. Israel has a power shield, Iron Dome, which protects it from all the attacks.
The recent fight started because of orders being given to the Palestinians in Sheikh Jarrah to move from their homes. In August 2009, the al-Hanoun and al-Ghawi families were evicted from two homes in Sheikh Jarrah, and Jewish families moved in after the Supreme Court ruled that the property was owned by Jews. Therefore, the Palestinians were asked to relocate; some right-wing Israelis also started protesting against the Arabs.
On 7 May 2021, the Palestinians were protesting against the evictions, and with the flow, the protests became violent, resulting in injuries to both sides. On 10 May 2021, rubber bullets and smoke grenades were thrown at the Palestinians who came to pray at the al-Aqsa mosque. Due to this incident, Hamas gave an ultimatum to Israel to remove the troops from the mosque or they will start attacking. After a few hours, thousands of rockets were thrown towards Israel, and in response to that, Israel conducted 130 airstrikes, killing citizens including children.
Conclusion
The war between the two has been ongoing and there is still no scope for it to stop. When it comes to finding the wrongdoer in this situation, both sides have their individual views. This war has divided the world as well India in two parts, one supporting Israel and the other, Palestine. India had supported many UN resolutions favoring Palestine, until recently. In October 2003, India voted in favor of the UN General Assembly resolution against Israel’s construction of a separation wall. In 2011, India voted for Palestine to become a full member of UNESCO. Even now, after years of suffering, pain, assassinations, and harm to people of both sides, none of them is ready to make peace. This leads to the questions from the right-wing of the whole scenario on both sides. If Israel considers the decision provided by the UN, then why not give Palestine a part back? After the division of the West Bank was rightfully given to the Palestinians, where the Israelis overtime started living, and after peace was established between the two, the Palestinians were allowed only in segregated parts rather than being given a defined area. If Hamas is in favor of Palestine, then why not stop the killing and start rebuilding ties and a place for the people of both sides to live peacefully?
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Acontract is a legally binding agreement between two or more parties. This agreement creates mutual rights and obligations between the parties and governs the relationship between the parties to the agreement. It specifies detailed terms of the contract and what should be done in case of a breach of any terms of the contract. The contract may be oral or written but written contracts are more legally binding and easy to enforce. However, there are some contracts that are mandatory to be in written form. It is very essential and important to correctly include the terms in the contract to avoid the scope of misinterpretation’s main cause of disputes are conflicting or ambiguous wording of the contracts. Thus, contract interpretation is very much essential where there is a dispute over the terms of the contract or the definitions of language used in a contract.
Background of European contract law
The European contract law is a bunch of rules that are framed by Ole Lando (Lando Commission. Principles of European Contract Law were prepared by the European Contract Law Commission edited by Ole Lando and Hugh Beale. Members from each country of the European Union are included in the commission of European Contract Law. The Lando commission tried to create European Contract Law on the basis of the concept of “uniform contract law”. There are various purposes behind the formation of principles of European contract law (PECL):-
It states the common core of European contract law.
It contributes towards the future association of European contract law.
It provides codification of a set of rules that can be applied as a law and the very important thing is that the commission has provided a common European language for discussion on contract law. The aim of the commission behind the formation of PECL is that it should be used as widely as possible.
PECL was written in a very elegant style and the commission made every effort to draft the law and the general rules in simple, short and easy to understand language not only by law scholars but also by laymen. PECL was published in the English language and soon after the publication of the English version, the first part of the French translation was published. Law has been drafted in a very flexible manner so that there is a huge scope for future development. The structure of PECL is very straightforward and it consists of 131 Articles divided into 9 chapters which are subdivided into two or more sections and the basic purpose of contract law is to resolve conflicts between the parties to the contract and the system of contract law has to balance these conflicting interests.
Unlike most of the civil codes in Europe, the PECL contains the article relating to “freedom of contract” i.e. parties are free to enter into the contract. The focus of PECL is on Good Faith and Fairness in Dealing while applying the principles of the law. PECL is inspired by various European cultures and the commission had no intention to hide the fact; rather it claims that contract law has been inspired by various European legal cultures and this law has been created for the betterment of economic and social conditions subsisting in the country.
Chapter 1 deals with General Provisions and Section 1 consists of the application of principles and rules of contract law on European communities. Chapter 1, Section 2 is regarding general duties and each party owes the duty to obey these duties while;
Chapter 2 consists of the formation of contracts, managing the process of contract formation mostly through exchanging the declarations of will i.e. offer and acceptance. Once the acceptance is made, the contract becomes effective and parties are bound by the terms of the contract. Section 1 of Chapter 2 deals with Principles of European Contract Law dedicated to the general provisions of contract formation and Section 2 is regarding the formation of contract through offer and acceptance. Section 3 is related to liability for negotiations and confidentiality of information provided during the process of negotiation.
Chapter 3 governs the authority of an agent or other person binds principally with the third party in relation to a contract and its sections 2 and 3 deal with “Direct Representation” and “Indirect Representation”.
Chapter 4 covers the validity of the contracts and this chapter and does not deal with invalidity due to lack of capacity, illegality and immorality.
Chapter 5 consists of general rules of interpretation of the contract.
Chapter 6 relates to contents and their effects, the statements giving rise to contractual obligations.
Chapter 7 talks about the performance of the contract which includes the time of performance, order of performance, performance by the third party, etc.
Chapter 8 consists of the Non-Performance of the contract and the remedies available in general.
Chapter 9 talks about the detailed particular remedies available for non-performance of a contract.
Chapter 10 explains the plurality of parties and the plurality of debtors and creditors.
Chapter 11 deals with the assignment of claims under the existing contract by agreement.
Chapter 12 contains general rules relating to the transfer of contract, substitution of new debtors.
Chapter 13 describes detailed provisions relating to set off.
Chapter 14 talks about general provisions of prescription and period of prescription and its commencement.
Chapter 15 talks about illegality of contracts that are in contravention of fundamental principles.
Chapter 16 deals with conditions and contracts which depend on certain events for their performance.
Chapter 17 focuses on the capitalization of interest.
Meaning of interpretation
Interpretation of contract means the determination of the contents of the contract and meaning of the terms which are unclear, ambiguous. Contract interpretation is a must when a dispute arises over the terms and conditions of the contract. The main purpose of interpretation of the contract is to find out what is the intention of the parties behind entering into the contract. The court always interprets the contracts with the aim of finding the intention of the parties. Contract interpretation becomes necessary when mistakes have been made or ambiguities have been felt by parties during performing the terms of the contract.
Process of interpretation of contracts
The whole contract is to be considered: Look at the whole Agreement and read the nature and purpose of the whole contract. The interpretation should be based on the whole Agreement. Read all the clauses carefully to get a clear picture of what the contract is all about and to draw a clear interpretation of the contract.
Determine Intentions of the Parties: The first step to follow while interpreting a contract is to find out the intention of the parties. While interpreting contracts, the court always first attempts to determine the indentation behind the draft of terms of the contract. The primacy of contract language, the governing principle and text used are considered as the intention of parties concluding the contract.
Ordinary Meaning: In order to find out if the language used in the contract is clear, the court generally relies on the ordinary meaning of the words/terms which are in question. In interpreting contracts, ordinary words are interpreted according to ordinary meanings and technical or trade terms are interpreted according to trade or technical meaning.
External documents: When the terms of the contract are the cause of dispute then the court decides to disregard the contract and use some external documents to interpret the contract.
Lord Hoffman’s five principles for interpretation of contracts
The first article of chapter 5 of the Principles of European contract law states the following:
While interpreting a contract, paramount importance is to be given to the intention of the parties. The same shall be taken into consideration even if it differs from the literal meaning of the words specified in the contract.
If one party is able to establish that it intended the meaning of the contract in a particular way and the other party could not have been unaware of such an intention at the time of concluding the contract, the contract will be interpreted as per the intention of the first party.
However, if the intention of the parties cannot be established, the contract will be interpreted as per the intention of a reasonable man if he was placed in the same position as the parties.
After getting a brief idea of the general rules of interpretation in a contract, it is important to see how the basic clauses of a contract should be interpreted.
Interpretation of contents of contract
Title of the Contract: Every contract must contain a “title”, which gives a general idea about what the contract is all about by just reading it, the intent of parties behind entering into the contract. E.g. Transfer, rent or lease, or for granting something.
Introduction of Parties: It is very important to give a description of who the parties to the contract are. To get general information about the background of the parties, it is mandatory to provide the correct name, address, and identification numbers.
Recital: Recital explains the purpose and object of the parties to the contract. Basically, a recital contains an introduction of the contract; it is considered as a preamble of the contract.
Definitions: Definitions in the contract give the meaning of the terms which are repeatedly used, it is good practice to define these words to avoid ambiguity in the contract.
Subject Matter of the contract: The Subject Matter of the contract is (the Product or Service) for which the parties entered into the contract. The subject matter of the contract should be described in detail so that the prudent person could reasonably understand contract details. If the contract is regarding granting the right to use something then specify that in the contract if it is an exclusive right. It is also appropriate to specify the geographical area covered by the contract.
Place and Date: If the contract is Regarding Products and Services it is very important to specify Delivery Dates.
Other Terms And Conditions: There must be a clause in every contract regarding the Obligations of the parties and the power and responsibilities given to the parties under the contract should be described clearly and precisely, everything important to the parties to perform in the contract should be mention in detail all the terms and conditions should be fulfilled.
Payment: There must be details given in every contract regarding Payment. When and how payment should be made, after performance of duties or in advance? In arrears (current account basis) or all at once. What will be the consequences for non-payment or delay in payment? Everything should be clearly specified in the contract to avoid future disputes.
Term and Termination of Contract: It is very important to mention how long a contract remains in force, e.g. from the date on which the contract has been signed by the parties for a specified period. It also needs to be covered when the contract can be terminated.
Disputes: In case of dispute, it is advised to try to solve it through Agreement because settling a dispute through arbitration or through the court of law will be a long and expensive process. But parties can also resolve their dispute through other ways of dispute settlement process in contract e.g. Mediation, conciliation or other alternative forms.
Clauses regarding any dispute which are to be settled by arbitrators are required to mention primarily in the contracts between businesses. Arbitration is a very expensive process, but faster than normal court procedures’ if the parties do not agree in the contract on the method of dispute settlement then the dispute will be settled in any general court.
Chapter 6 of principles of European contract law is on content and effects it clarifies the element in the contract there is potential for dispute.
e.g.
Statements that form a part of the contract
implied obligations
How price, quantity, quality and ending the contract are dealt with if not included in the actual contract terms.
Both the parties are expected to behave reasonably while dealing with issues where there is any confusion or doubt.
Signatures: Specify the Date and Place on which the contract is to be signed by the parties.
Conclusion
This article provides basic rules related to the interpretation of contracts of European contract law. Interpretation of contracts becomes relevant at three stages of contract at the time of formation, at the time of performance, and at the time of settlement of the dispute. The goal of contract interpretation is to clarify the original intent of the parties. In order to avoid disputes and contact interpretation, it is required that both parties should ensure everyone understands the terms of the contract and both parties are on the same page.
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This article is written by Ishan Arun Mudbidri, pursuing B.A.LLB from Marathwada Mitra Mandal’s Shankarrao Chavan Law College, Pune. Through this article, the author seeks to explain copyright infringement in light of the recent Instagram copyright scam.
Table of Contents
Introduction
Social media today has become more than just connecting with people far from us. It has become a world in itself. In this virtual world, Instagram has made its name. A single picture, a controversial story, a viral meme on Instagram can change people’s lives forever, sometimes in a good way and sometimes in a bad way. Celebrities and verified accounts are always in the spotlight on social media for some or another reason. This time, however, some celebrities have caught the eyes of fraudsters who are sending copyright infringement notices on their posts and posing some serious questions about Instagram’s security policies.
What is copyright?
Copyright is a type of intellectual property. It gives a legal right to the author of a literary/artistic work. Copyright entitles the owner to restrict other people from using his/her without his/her authorization. However, he/she may provide certain people with the right to use his/her work, under certain terms and conditions. The people who have been given authorization by the owner have the right to recreate that content/work. Each product created by a person is his/her original product. Hence, it is regarded as the intellectual property of the person so that no one else lays any claim on it. The original material can be in the form of a youtube video, a painting, lyrics of a song, movies, video games, etc. All of this material can be protected by copyright. When the copyright is being unauthorizedly used by a person, it is known as an infringement of the copyright.
Indian Copyright Act
The Indian Copyright Act was established in 1957. Section 14 of the Act defines ‘copyright’. According to it, copyright means that a person has an exclusive right to authorize the use of his work, including, reproduction, distribution, adaptation, public performance, etc. In the case of original literary, dramatic, musical and artistic works, the duration of the copyright is the lifetime of the author, and 60 years, counted from the year following his/her death. In the case of films, sound recordings, photographs, posthumous publications, works of government, and works of international organizations, the copyright is given for a period of 60 years which is counted from the year following the date of publication. The transfer of copyrights from assignor to assignee is known as a copyright assignment.
Copyright infringement
Section 51 of the Indian Copyright Act 1957 states the terms and conditions for when a copyright is infringed. This Section specifies the conditions for infringement of copyright:
A person does any act which is the exclusive right of the owner without his/her permission.
A person allows any place to be used for communication of unauthorized work, despite being aware of the fact that such an act will result in a violation of a copyright.
The authorized holder of the copyright can obtain certain remedies for copyright infringement. According to Section 55 of the Act, on infringement of any copyright, the owner will be entitled to remedies in the form of damages or injunction. According to Section 63 of the Act, the person who infringes the copyright is liable to punishment which may extend up to 3 years and a fine of up to 2 lakhs.
Exceptions to copyright infringement
Section 52 of the Indian Copyright Act states the conditions where a person who infringes copyright can get exempted from punishment. The following are the exceptions:
Taking prior permission from the owner
If a person who is accused of infringing a copyrighted work, takes the defence that he/she has taken prior permission to use the copyrighted work from the owner of the copyright, he/she will be saved from punishment for infringement.
The doctrine of fair dealing
The doctrine of fair dealing or fair use is another important exemption to copyright infringement. According to this doctrine, a person can have limited access to copyrighted work without the authorization of the owner. The only condition to this exception is that the person using the work should make sure that he/she does not harm the interest of the owner by using that extracted portion. In India, there is no explicit mention of how much content can be extracted.
The Berne Convention
The Berne Convention suggests that the infringement of copyright can be accepted only when,
The infringement does not spoil the interests of the owner.
Does not exploit the original work.
And when it covers special cases.
A look into the Instagram copyright infringement scam
The Instagram infringement scam has gone viral on social media recently. Various Bollywood celebrities and singers claimed that they received copyright infringement notices from Instagram. So how does this work? The user receives a message from an account claiming to be from the Instagram copyright infringement centre. This message is usually sent to verified accounts or famous personalities. The message states that some of the posts from this account have violated Instagram’s community guidelines. Further, a copyright appeal form is attached to this message, and not filling up this form will lead to the deletion of the user’s account within three days. This appeal form asking for feedback from the user is basically a phishing link.
Concept of a phishing link
A phishing link is a kind of weapon that is created by hackers and fraudsters to gather the personal information of the users for selfish motives. Many say, this is one of the oldest forms of cyber attack. The attackers send a message or an email that looks really genuine and from a trusted entity. Due to this, the users fall prey to hackers and fraudsters.
Phishing kit
A phishing kit is an important tool that is used while sending phishing links. A phishing kit can be acquired from a phishing website and should be installed on a server. After acquiring a phishing kit, the attackers can send fraud emails and messages to the users. With a phishing kit, the chances of a user clicking the phishing links are very high. Sometimes, huge companies can also be cheated with the help of phishing kits. All phishing websites can be accessed through the dark web.
Types of phishing
The different types of phishing are:
Spear phishing
Spear phishing is a form of phishing where the attackers target a particular person of a company or in general. For example, the attackers may target someone from the accounts department of a particular company. The attackers use fake addresses and make them look genuine.
Smishing
Smishing is a form of phishing where the attackers send messages that consist of a phishing link. If the link contains a message to verify the bank account, that means the attacker has access to the user’s bank account.
Whaling
Whaling is a form of phishing that targets people holding a very high post in a company, for example, a CEO or Chairman. This can be a time-consuming process but, the attackers generally benefit the most when the victims are at a higher post.
The attackers generally target a particular event or crisis going on in the country. This is because the people are desperate and there is a sense of urgency during times of crisis. Any information regarding the crisis is like a ray of hope for the users and this is what the attackers take advantage of.
How to report a copyright infringement case on Instagram?
The users can report a case of copyright infringement on Instagram. This can be done by:
Filling the copyright infringement form available on Instagram.
Another thing that can be done is filing a request for copyright infringement on the Digital Millennium Copyright Act. Then the user will have to contact the DMCA agent. The users will have to update the DMCA agent about the whole copyright infringement claim.
Instagram’s copyright infringement policy
We as users generally ignore the terms and conditions for the use page when we install an app. That is a very important page. Terms of use mean the various policies of the app which the users should abide by while using the app so that no inconvenience is caused. The same is the case with Instagram. The app has loads of terms and conditions for the users enjoying the benefits of the app. One of such policies is that of copyright infringement. Instagram mentions that no person can post or share anything which violates the legal rights of the owner. Instagram further mentions that the content in the form of posts and videos shared on the app is the responsibility of the user and not that of the app. The pop-up that appears which asks the users to either allow or deny the permissions given to the app must also be read carefully. This is because clicking the ‘allow’ option gives Instagram a non-exclusive license to modify, create, distribute, and perform the content of the users. In case of a copyright infringement, Instagram will send a notification to the person infringing another’s copyright and will remove the post also mentioning the reason. If the same person infringes the copyrights again and again then, the app will disable the account of the user and he/she may not be able to access it again.
How to avoid copyright infringement on Instagram?
Create your own content
The users must make sure that they create their own content and not copy anyone else. Every person is born different, so no one has a right to copy from others. If many people have created that content, then it is necessary to mention who owns that content.
Share short clips
Posting short one-second to three-second video clips can save a person from infringing copyright. This was also mentioned in the doctrine of fair use. If a video is small, it cannot get copyrighted.
Take permission
If a user wants to share another person’s content, then he/she should take prior permission from the owner of the content. If the owner grants permission then and only then, as the user should post their content.
Change the original content
If, by any chance, the user wants to use the author’s content then, he/she can change or modify that content so that it may look like it’s an original one. This will not come under the radar of Instagram’s copyright infringement policy.
Read all the terms and conditions available
Lastly and perhaps the most important thing, for making sure that the content does not get infringed, is to read all the terms and conditions for use of the app. The terms and conditions of not just the copyright infringement policies but also, all the other terms provided about how to use the app.
Conclusion
Instagram today has grown so much that security issues are bound to occur. Every app tries its best to satisfy the users and not bring any inconvenience to them. So, it is up to the people using the app to be more vigilant and aware. The same thing should be followed while posting any content. Hackers and fraudsters are just waiting with various new cyber-attacking tools to make the users fall into their traps. But, this would not be the case if the users read all the terms and conditions before using the app and show some originality in their content.
If you are planning to start a business, it is important to know that the business may not become as successful as you have planned for it, if you do not create a strong foundational structure for it. You may be excited about getting together with friends, family or colleagues to leverage your strengths and turn your great ideas into a successful business project, you may be looking forward to a blossoming business in order to reap the economic benefits of its growth. However, you need to stop and think about the possibility that the business may totally fail due to one major problem- you failed to create a management structure with your friends, family or colleagues when you ventured into starting that exciting business. You basically did not give the business direction or a foundational plan. In order to protect yourself from this disappointment, there is a need for the founders of the business to discuss crucial details about how the business will be run or managed by them. This discussion should be reduced into writing in what is known as a Founders’ Agreement.
This write-up will help the owners/founders of any business start-up to appreciate the importance of executing a Founders’ Agreement as a very important step preferably before they establish or incorporate a business.
Many entrepreneurs may start up a business without knowing the implications of not having a foundation on which each owner’s interests in the business are protected through an agreement.
The article will therefore cover the scope of the agreement including the important questions the founders must discuss before the business is established., the important clauses of the agreement, benefits and the importance of this agreement.
Who is a founder?
A founder is a person who starts their own company. They are the ones who come up with the business idea and act on it. For example, Jeff Bezos is the founder of Amazon, one of the world’s largest online business shopping centres. In business, a founder is a person who comes up with an idea and then transforms it into a business startup. Two or more persons can be known as founders. A small business is defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business. Some examples of small businesses may include catering services, hairdresser services, cleaning services, among others. A small business is also referred to as a company when it is fully registered and incorporated into a company according to the laws that govern the incorporation of a company. The founders are therefore the top-level managers who are responsible for controlling and overseeing the entire business.
This agreement is therefore very important to guide the smooth management and operations of the business during its lifetime. The goals of the business are achieved better through a solid foundational structure for its management which the founders must strictly follow. It is a mutually agreeable framework that shall serve as the foundation for the Founders to successfully develop their business concept.
As a founder, you need to know what a founders’ agreement is in detail, the scope of this agreement, the important clauses in this agreement, its benefits and the importance of having such an agreement.
A brief insight into Founders’ Agreement
It is important for a company’s founders to discuss amongst themselves what their business concept and strategy is even before creating an entity. A Founders’ Agreement is a product of conversations that should take place among a company’s founders at the early stages of formation rather than later during the life of the company.
The goal of these conversations is to have an open and honest discussion about the expectations, attitudes, fears and aspirations of individuals involved with the start-up, so as to minimize the likelihood of heated conflicts or disagreement as the company continues to grow. The outcome of these discussions should be to have each founder’s business interests protected.
What is a Founders’ Agreement?
A Founders’ Agreement is a contract that a company’s founders or owners enter into which governs their business relationship. It is a document, involving a company with two or more founders, specifying the details of the management and administrative structure of the company, such as the share of ownership and guaranteed obligations of the different founders. It is legally binding and maybe a standalone document or it may be incorporated into corporate bylaws, an LLC operating agreement or a partnership agreement. It is designed to protect each founder’s interests and to prevent conflict between or amongst the founders when operating the business.
The agreement lays out the rights, responsibilities, liabilities and obligations of each founder. Generally speaking, it regulates matters that may not be covered by the company’s operating agreement. Ultimately, Founders’ Agreements are designed to protect each founder’s interests and ensure that all founders are in agreement about the venture’s basic structure and how the founders will work together to move their business forward. Forging an agreement between all founders helps mitigate the risk of a lawsuit over who owns the business.
Scope of the Founders’ Agreement
As earlier noted, the founders should have a conversation or a discussion on what their interests and expectations are in terms of the general structure of the company. Their discussion will cover the scope of what the founders will agree upon or what they should have in mind. Below are some of the important questions that the founders should discuss in order to have a comprehensive agreement that will protect their interests and avoid any future unnecessary conflicts.
The strategy of a Founders’ Agreement
What is our overall vision for the start-up?
What goals do each of us have for the start-up? What goals do we have for ourselves?
What objectives should we consider in order to achieve those goals?
What are our respective timelines for achieving these goals?
Ownership structure
What will we each contribute to the company? Should this be valued in terms of a percentage interest in the company?
How much capital are we each contributing and how will it be spent?
Should we consider making personal additional capital contributions to the business if it is struggling financially?
Is the percentage of ownership shares subject to vesting based on continued participation in the business?
How many shares are we each buying into the company?
Who owns the Intellectual property of the company?
Management
How are key decisions and day-to-day decisions of the business to be made? Should we decide by majority vote, unanimous vote, or should certain decisions be solely in the hands of the CEO?
How should we handle disputes?
How often should we have meetings to discuss company matters?
What remuneration/salaries are we entitled to? How can that be modified as the company grows?
Who should take up certain roles or positions and why? Which positions should we create?
What are our responsibilities?
What happens if one of us wants to leave?
If one founder leaves, does the company or the other founder have the right to buy back that founder’s shares?
What happens if one of us wants to sell the company, raise money, lend money to the company or dissolve the company?
What happens if one of us becomes disabled or dies?
Can we each launch other startups while working on this project?
Can any of us start a business similar to this one once this one dissolves or does not succeed? What about if one of us leaves and the business is still running, can they start a similar business?
Under what circumstances can a founder be removed as an employee of the business?
What happens if one founder is not living up to expectations under the founders’ agreement? How would this situation be resolved?
If it turns out the business is not taking off and we decide to end our venture, can one of us take the idea and try it again?
If we need to raise start-up capital, where will it come from and how much of the company are we willing to give in exchange for that start-up capital.
Importance of entering into a Founders’ Agreement
It governs the founders’ business relationships. It acts as a guide for the business relationship between the founders. In this way, it spells out the roles, rights, responsibilities, liabilities, obligations and share of ownership of each founder in the business.
It protects the founders’ interests and ensures that all founders are in agreement about the business ventures’ basic structure.
It ensures that the founders are in agreement about how they will work together to move the business forward.
Benefits of having a Founders’ Agreement
It aids in harmonious management or running of the business by the founders.
It guarantees the security of ownership of the business since each founder will know their stake/share in the business.
It puts in place parameters for the management of the business by the founders.
It minimizes conflict between and amongst the founders when managing the business.
It helps to mitigate the risk of a lawsuit over who owns the business.
It guarantees the growth of the business since the goals of the business and the business relationship of the founders are clearly spelt out.
It is important to note that failure to have such an agreement leaves huge management and administration gap. The founders of the business will each do what they please or believe is right for the business which opens room for conflict and hence the collapse of the startup.
Important clauses in a Founders’ Agreement
1. Nature and type of business
This clause should describe the nature and type of business entity that the founders are incorporating. This defines the main purpose of this agreement, for example, that the founders have teamed up to incorporate a marketing and advertising start-up. This clause may also cover the objectives of the business start-up as agreed by the founders.
2. Business strategy
The founders’ business strategy should clearly be defined. This should define the vision and mission of the business entity. The goals and objectives of the business should also be spelt out here. The founders should have a discussion on each one’s goals and expectations of the start-up, their targets and how they think these can be achieved which will all be merged under this clause.
3. Ownership structure
Every founders’ agreement must spell out each founder’s contribution to the business start-up. This includes the percentage interest contributed or the number of equity shares held by each founder. The founders may agree to contribute equally to the capital of the company. For example, if the company’s authorized capital is agreed at Rs 1,00,000, it shall be divided into 10,000 equity shares of INR 10 each. This would mean that in the case of two co-founders, each will be allotted 5000 shares and shall therefore each have a 50% shareholding in the business. They may further agree to have the same rights and liabilities in all respects regardless of the shareholding.
4. Roles and responsibilities
It is important to assign clear roles and responsibilities to each founder depending on their area of expertise. For example; founder 1 shall be responsible for consultancy relating to business development, day to day operations and management. Founder 2 will be responsible for sales and marketing while founder 3 shall be appointed the Chief Executive Officer (CEO) or Managing Director. It is also necessary to specify that the company shall be managed by a Board of Directors(“Board”) which shall constitute all the founders to be referred to collectively as directors. This clause encourages efficiency since each founder knows what is expected of them. This also leads to the development of a system of accountability whereby it is easy to identify a particular founders’ responsibility for a particular task. If the roles are not specified then there will be room for conflict amongst the founders in terms of who takes responsibility for certain tasks.
5. Decision making
This clause defines the mechanism put in place to guide the members on the decision making procedure for general issues. There is a legal presumption that each share in a company provides the owner with the same rights and liabilities as every other share. This is called the “presumption of equality” (this presumption can be displaced by the company issuing shares with different rights attached to them). Each founder in this case is entitled to one vote each (voting rights) with respect to decisions regarding the day to day management and operations of the company.
The founders shall endeavour to make all strategic decisions and budget approvals unanimously. If this is not possible then decisions shall be determined by the majority vote of the founders. Major decisions related to bringing investment or funding, mergers, business collaborations, among others, shall be determined by voting of the founders. The number of votes cast by each of the founders shall be in proportion to their shareholding in the company where each share corresponds to one vote. This clause should therefore be all-inclusive and capture the entire decision-making strategy for general and major decisions.
6. Transfer of shares
This clause answers the question of how a founder’s shares should be handled in case they want to leave the business or if they plan to sell their shares. What should be the process of having their shares transferred? Will the company buy back those shares and how will the directors/founders be involved? This clause may put a restriction on the sale, transfer, assignment, pledge or disposal of shares without the written consent or approval of the other founders.
7. Remuneration
The agreement should clearly lay down the payment scheme. The question is how much should each founder be entitled to and how often should this payment come in. A decision on how the remuneration will be determined should also be included. This should also include a notification that this clause will be modified by mutual agreement depending on the growth of the business entity. This clause is crucial because it avoids any upcoming dispute in relation to each founder’s entitlement after their hard work and contribution to the success of the business.
8. Ownership of Intellectual Property Rights
As the company grows, it acquires property that identifies it as its own unique business entity known as intellectual property. The founders must therefore assign exclusive ownership of all the acquired intellectual property and rights there-under to the company. This property may include trademarks, trade names, patents, copyrights and trade secrets that are necessary to operate the business. This clause is very important because a dispute could arise where a founder claims ownership of the intellectual property of the company since they brought the idea or created it or were substantially involved in its evolution.
9. Resignation and removal of a founder
The founders must agree on the circumstances under which a founder can be disqualified and removed from the company. The procedure taken by the founders to exclude such a founder must also be spelt out. The company is bound to follow the Articles of Associations or Regulations that govern companies under the Companies Act, 2013 in terms of the procedure to be followed. The majority of founders or shareholders are responsible for making this decision. Some grounds may include incompetence, mismanagement and misappropriation of funds, among others.
A founder should not be tied to the company if they decide to leave or resign. Any founder may resign from the partnership in the company for any reason or no reason at all by giving written notice to the other founders. This clause should therefore spell these circumstances out.
10. Representations and warranties
Each founder represents and warrants that he or she is not a party to any other agreement that would restrict such founder’s ability to perform its obligations as set forth in the Founders’ Agreement. Each founder represents and warrants that no third party can claim any rights to any intellectual property or other proprietary right possessed by that founder as it relates to the business concept.
11. Confidentiality
Under this clause, the founders will spell out what amounts to sensitive business information which should not be disclosed to the public except by agreement. The founders will further define any and all confidentiality obligations related to the business concept within the agreement. For example, if the business is a fast foods hub or restaurant business in nature, they may agree that their special recipes for certain foods which are not known to the public are confidential except to third parties where it is legally acceptable to disclose such information. A famous example is a recipe for coca-cola soda which is a trade secret to this day and only known to the founders.
12. Non-compete
The founders here shall agree that a founder shall not engage in activities that are in conflict with the company’s business. This means that should a founder decide to leave the company, he or she shall not engage in a business venture which is in direct competition with the company for a specified number of years after their exit. For example, it can be specified that for a period of two (2) years after their exit, the founder shall not engage directly or indirectly (through their agents) with an entity or in an activity that will compete with the company’s business.
13. Additional capital contributions
This clause is important to show that any founder may make additional capital contributions in form of cash and prepaid expenses to the company from time to time where there is a need for funding its ongoing capital and operating needs with the written consent of all other founders. It is not mandatory for a founder to make such contributions and that is why the written consent of the other founders is necessary.
14. Term and termination
It is important for the founders to discuss the circumstances under which this agreement will come to an end. This clause specifies the effective date of the agreement from the date it is executed or signed by the founders and it reflects that the agreement shall be valid until it is terminated for example by execution of revised agreements between the founders or through mergers and acquisition of the company. The founders here agree to dissolve the company by unanimous consent through winding up its affairs. They may also agree to jointly terminate the agreement at the time of their exit from the company and they will no longer be bound by it.
15. Dispute resolution
This clause lays out the mode of settlement of any disputes that may arise between the founders. This will guide the founders on how to deal with contentious matters which may not easily be decided by a unanimous decision. The founders may choose the most appropriate mechanism including negotiation, meditation, arbitration and litigation or recourse to the court.
16. Governing law and jurisdiction
This clause clarifies the laws which will govern that agreement in general and the laws to be followed in case of dispute resolution. The agreement is normally governed by and construed in accordance with the laws that govern the state or country where the company is founded.
Conclusion
It is crucial for every founder to consider having a Founders’ Agreement to protect their interests in the business. You do not want to invest your hard-earned money into a business venture only for it to crash because you did not put in place parameters to guide the business’ operations. This agreement focuses on only the top managers/owners in terms of how they agree to run the business, who is responsible for what role, what are their rights, what are their obligations and liabilities, what are they entitled to, among others.
The structure of governance of the business should be put in writing to ensure smooth operation and running of the entire business in order to achieve the major goal of building a successful enterprise. The aspect of management and administration should be nipped in the bud from the start of the business and should never be left to a gamble or speculation that the business will succeed on its own due to the combined expertise of the founders.
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This article is written by S A Rishikesh, from Institute of Legal Studies, Shri Ramswaroop Memorial University, Lucknow. This article highlights the plight of couples who exercise their right to choose their spouse while discussing the case of Chandrashekhar D Chavan v State of Maharashtra.
Table of Contents
Introduction
Marriage is an essential institution of society that binds two people together as spouses, both legally and socially. Legally speaking, marriage is a union of two persons; it is a consensual, sexual, and contractual relationship. This relationship is duly recognized by law, legitimated by law, and can only be dissolved by law. The basic elements of a marriage are:
The parties must be legally competent to marry each other.
Mutual consent of the people that are going to get married.
A marriage contract as required by the law of the land.
Family is the basic unit of society and it starts with marriage. It is important for the preservation of morals and civilization. Traditionally it was the legal duty of the husband to provide food, shelter, clothes and meet other demands of the wife, while the wife had to maintain the home and take care of the children in return. Though the concept of a legal contract remains intact, the roles are not the same as they were before. Marriage has gone through a lot of changes. For example, in the year 1967, the Supreme Court of the USA held prohibiting interracial marriages was against the principles of equality. The Supreme Court legalized same-sex marriage in the USA in 2015. The Court observed the nature of marriage is that, through its enduring bond, two persons together can find other freedoms, such as expression, intimacy, and spirituality. This is true for all persons, whatever their sexual orientation.
Changes have occurred in India too, but not very significantly. The survey by The Lok Foundation-Oxford University, along with the Centre for Monitoring Indian Economy (CIME) shows Indians still marry the way their grandparents used to marry. As of January 2018, 93 percent of the respondents had arranged marriages, 3 percent had love marriages, and 2 percent were‘ love-cum-arranged’.
Possible issues over love marriages among youngsters and the Indian society: scope of the law
The Constitution of India guarantees every individual, the right to life and liberty through Article 21. The Supreme Court in various judgments from time to time has held that the right to marry a person of one’s choice is an integral part of Article 21. The right to marry is a universal right mentioned in Article 16 of the Universal Declaration of Human Rights. Hinduism recognizes marriage as one of the sixteen sacraments, a sacred bond that is not broken even after the death of a spouse. Modern Hindu law also recognizes marriage as a sacrament but also gives the liberty to adults to marry the person of their choice and dissolution of marriage by divorce. Muslim personal law recognizes marriage as a civil contract. To sum up, the right to marry also comes with the right to marry a spouse of one’s choice.
The right to choose one’s spouse refers to a ‘love marriage’. By marrying a spouse of one’s choice, he or she may not have violated any legal provision in India but definitely, it is not accepted by certain Indian families. The story of a Sikh woman Jas Kaur is an example of the same, where she was boycotted by her parents because she exercised her right to choose her spouse. Going against the tradition and culture of the society is never encouraged, rather, comes down heavily. Even today, Indian parents believe that their children are not wise enough to choose their life partners and it is their responsibility to find them a perfect partner. Even if the love marriages turn out to be successful, they are shown in a bad light and still, many elders do not approve of love marriages or consider them legitimate.
Another aspect that comes with love marriages is inter-caste and inter-religious marriages; this makes the matter more complex or taboo. Even today, caste plays a dominant role in marriages, and going against the social system is considered a sin. The couples who go with their choice, against their parent’s will are no less than black sheep in the eyes of Indian society, and their act is considered a revolt against the social customs. In a particular example, Ravindra Parimar, a Dalit boy married Shilpaba Upendrasinh Vala, a Rajput. The girl had to flee from her parental home to marry the boy of her choice. This shows that such couples feel a constant threat to their life for this and continuously change their place and city of residence to stay together. BBC even reported in 2012 that a village just about 40 km from the Indian capital had banned love marriages. Honour Killing is another phenomenon that makes love marriages more difficult for couples. Khushboo, a 19-year-old, married, pregnant girl, was killed by her father for marrying a boy of her choice. Delhi also reported a case of Honour Killing in June 2021; the case was covered under the title ‘Kindly protect us’: Target of honour killing wrote to Sonipat Police. Even in Karnataka, similar incidents took place in June 2021. Which makes it very clear that the issue of honour killing is prevalent all over India, even in 2021. The latest survey of the Pew Research Centre is evidence of unacceptance of interfaith and inter-religion marriages in India. The survey has been further explained by Ms. Rama Srinivasan, an anthropologist based in Germany. Religion, caste, patriarchy are all responsible for the fact most Indians are not allowed to choose who they will get married to. Ms. Rama even explains the uncooperative nature of bureaucracy and the need for a strong law that allows interfaith marriage.
The Special Marriage Act, 1954 was one of the steps taken by the government to help the inter-faith and inter-religion couples, recognizing their marriage and granting them police protection if the couple feels there is a threat to their life. However, the ground reality has always differed from the law in books. The Apex Court has noted that the human rights of a daughter, brother, sister, or son are not mortgaged to the so-called or so-understood honour of the family or clan or the collective. The Supreme Court has said the society must learn to accept intercaste, interfaith marriages; it would hardly be a desirable social exercise for parents to shun their children only because they decided to marry outside their caste or community.
An analysis of the case of Chandrashekhar D Chavan v. the State of Maharashtra
False cases being filed against couples by their family members, a technique used to separate them, is not uncommon. A similar case was brought before the Bombay High Court by the name of Chandrashekhar D Chavan v. the State of Maharashtra (2021).
Facts of the case
A missing complaint was filed by the petitioner, Mr. Chandrashekar D Chavan. The complaint stated that his daughter Maithili Chandrashekhar Chavan, eighteen years old at that time, had been kidnapped by a boy aged 20 years. The petitioner alleged a threat to the life of her daughter and prayed for the writ of Habeas Corpus. The petition was filed on February 1, 2021.
The record placed in the court by the Investigating Officer of the case stated that this case involves a love angle which the petitioner is reluctant to accept. The alleged missing girl was undoubtedly an adult and has eloped from her parental house with the boy, who is also an adult but not of marriageable age. The boy was twenty years old. The legal age of marriage in India is 18 for women and 21 for men.
The contention of the petitioner
The petitioner, father of the girl Chandrashekhar D Chevan filed a writ petition invoking the writ of habeas corpus. He apprehended that there was a danger to the life of his daughter.
Findings of the Court
The petition was filed on February 1, 2021. The matter was first heard on March 16, 2021, and the court observed the following:
Based on the information provided by the Investigating Officer, it is learned that the missing girl is an adult and the missing boy is said to be born on March 29, 2000. He is less than twenty-one years of age.
The court observed that a love angle is present in this case which the petitioner is reluctant to accept.
The court asked the concerned District Superintendent of Police to look personally into this matter as the petitioner has some serious concerns and his daughter needs to be produced alive.
The matter was further posted to March 19, 2021.
On the next date i.e., March 19, 2021, the honourable court made the following observations:
On the directions of the court, the District Superintendent of Police made a team of two police officers, to be monitored by the Additional Superintendent of Police.
The police requested time till March 31 to submit the progress report.
The petitioner has faith in the actions taken by the police officials and this matter will now be taken further on March 31, 2021.
If required, the police authorities will also take the assistance and help of the petitioner in finding his daughter.
March 31, 2021, was the final date of this case. The girl was produced before the court. The identity of the girl was established by her Aadhar Card. The photostat of the same was collected by the Investing Officer and now was a part of the police record.
Upon questioning, she revealed before the court her date of birth, that she is of 18 years of age, that she is in love with the boy accused by her father, that she and the accused had planned to marry once he attains the marriageable age of 21 years. She then requested not to record her current place of residence as she believed her father would use that to trace her and cause physical harm to the couple.
On being asked whether she desired to meet her father and talk to him, she offered the following answer; “I do not wish to meet my father or talk to him. I should not be forced to meet him or my mother. I do not desire to return to the home of my parents. I should not be forced to return to Morewadi, Tq. Ambejogai. I am accompanied by respondent No.5 (accused boy), who is not present in the Court Hall but is standing away from the Court at a distance. I will accompany him to the place from where we both travelled voluntarily to this Court, today.”
She also confessed that she had left her home voluntarily and she has not suffered any physical harm, physical abuse, or any form of tormentation and is happily living with the boy.
Judgment
Justice Ravindra V. Ghuge and Justice B.U. Debadwar said since the missing girl is an adult and the boy is also an adult, though not of marriageable age, the law has no reason to detain the girl, especially considering the replies given by her.
The Court also added that if the missing girl or the respondent suffers any physical harm and if they allege that the petitioner has caused it, the petitioner would be held liable for action under the law. The Court expects the petitioner to show restraint and reciprocate by not committing any offence against the respondent.
Similar case laws
Seema Kaur And Anr v. State Of Punjab And Others (2021)
Facts of the case
Ms. Seema Kaur and Mr. Gurpal Singh filed a petition in the Punjab and Haryana High Court seeking protection of life and liberty from none other than the family members of the girl herself. The girl was 17 years of age and the boy was 20 years of age. The parents of the girl came to know about the love affair and tried to get her married to the boy of their choice. In response, the girl left her paternal home and started living with the boy in a live-in relationship, till the time they did not attain marriageable age. Further, the petitioner had also stated that her relationship would never be accepted by her parents as the boy belonged to a different caste, and her father, the respondent in the case, had already threatened to kill her.
Observation and Judgement
Justice Sant Parkash, while granting protection to the couple, observed that the couple has decided to live together and it is not for the court to judge them. Granting them protection may socially be considered wrong, but not granting them protection would mean failure of the court in protecting the life and liberty of the individual enshrined in Article 21 of the Indian Constitution.
The bench also highlighted the issue of honour killings prevalent in some parts of the country and hinted that it can also not be ignored in this case. Further, the court went on to say that once the individual is an adult and has chosen his or her life partner, it is for no one, be it a family member or any other person of the society, to cause hindrance to their peaceful life.
Shakti Vahini v. Union Of India (2018)
Facts of the Case
A writ petition was brought before the Supreme Court of India under Article 32 of the Indian Constitution. It sought directions for the state government and the central government to combat the crime of honour killing and frame a national framework for the same.
Observation and Judgement
Justice D. Mishra disposed of the petition but made some important observations in the due course of the case. He quoted French philosopher and thinker, Simone Weil, “Liberty, taking the word in its concrete sense, consists in the ability to choose.” Justice Mishra added to it, “We don’t live in a world in which there exists a single definition of honour anymore, and it’s a fool that hangs on to the traditional standards and hopes that the world will come around him.”
The case of Lata Singh v State of Uttar Pradesh(2006) was also quoted in the following case, which said, “…This is a free and democratic country, and once a person becomes a major he or she can marry whosoever he or she likes. If the parents of the boy or girl do not approve of such inter-caste or inter-religious marriage the maximum they can do is can cut off social relations with the son or the daughter, but they cannot give threats or commit or instigate acts of violence and cannot harass the person who undergoes such inter-caste or inter-religious marriage.”
Gulshan v. State of Uttar Pradesh (2021)
The Allahabad High Court observed, “In the opinion of this court there is no place for citizens in our society who act in derogation of the much cherished constitutional values of individual liberty, and, instead, repose faith in archaic social values of family honour to an extent that they would go to eliminate a family member choosing a life partner for herself.”
Supreme Court guidelines
When a boy and a girl get married with their free consent, with a bonafide intention, committing no criminal and civil offences, and are also competent to marry, no individual in the society can question them. Taking it into account the Supreme Court has drawn certain guidelines to protect the fundamental rights of young individuals.
Instruction to the states to identify the districts where incidents of honour killings have occurred in the past. And a Deputy Superintendent of Police rank officer to keep in check the same does not occur again.
Urged the local administration to take some proactive and positive action and provide all logistic support to such couples for solemnizing the marriage.
Conclusion
Giving direction and implementing them effectively remain two different things. Apart from legal measures, it is a social issue that requires changing the perspective of society. There is a need to run educational awareness campaigns across India to make the people understand that young adults must be given the choice to choose their spouses. Creating trouble in their lives in the name of custom and traditions will only attract a legal suit. Whenever there will be a conflict between the custom and the law of land, the law in existence will deal with it.
The world in which we live seems to be in constant flux. Everything that is considered new today becomes old and outdated in a blink. In this fast-changing and highly competitive scenario, every organisation and in fact, every country seems to be in a rat-race to attract consumers either by offering new and innovative products and services or by improving the quality of the existing ones and reducing related costs to maximize economic benefits.
With modernisation playing such a significant role in every country, developed or developing, knowledge and technology have attained paramount importance. Creation, acquisition and/or adoption of new technology have become an absolute necessity for all countries, as well as for all large and medium-sized organisations wishing to procure or retain a competitive edge in the market.
A new version of an old Chinese proverb goes like this; “Give a man a fish and you feed him for a day. Give a man a fishing rod, and he feeds himself and his family for as long as the rod lasts. Help a man develop the knowledge and means to improve the fishing rod and to design and produce new ones, and he may feed himself and his society for years to come.”
Clearly, the key component of economic development, for all economies, is leveraging technological knowledge. In this regard, the developed countries have made notable progress in the development of innovations, and thus have managed to attain a monopoly over innovative technology. However, the developing and least developed countries, due to the lack of resources to create and the availability of a vast pool of foreign technology for exploration and exploitation, obtain such technology from the developed ones, giving rise to the concept of technology transfer and technology diffusion.
The transfer of exclusive rights pertaining to technology requires a legal agreement between the owner of the exclusive rights and the person or entity acquiring such rights. Such agreement depends on a number of factors out of which a few will be discussed in this article in the light of intellectual property rights (IPR) and Competition Law.
While IPR entitles the holders to prevent unauthorised use of the protected technology and to exploit it as per their wish, these exclusive rights do not exempt IPR from the intervention of Competition Law. The two areas of law thus interact to create the current competitive dynamics in the marketplace.
Let us dig deeper into this interplay between IPR and Competition Law and find out if this relationship actually controls abuse while regulating in the market.
What is technology transfer?
Technology Transfer has become the heart of the international business. It may occur between countries, industries or even between research laboratories and their clients and involves the specific transfer of products, processes or people.
The transfer of technology can be achieved through contractual agreements between the source of the technology and the recipient for the transfer of:
Tangible knowledge: Information expressed in physical objects and codified in blueprints, plans, technical articles including licensing and management arrangements, technological assistance agreements, purchase of machinery equipment and assemble apparatus, recruitment of foreign specialists.
Illustration: Company A agrees to transfer [*] machinery to Company B.
Intangible knowledge: In the form of skills, expertise, techniques, experiences and knowledge through technical assistance, know-how, turnkey projects.
Illustration: Company X agrees to transfer its [*] know-how to Company Y.
Technology transfer primarily takes place through the following:
Technology transfer agreements,
Non-Disclosure Agreements (NDA),
Patent licensing (both voluntary and compulsory),
Know-how supply agreementsForeign Direct Investment (FDI),
Joint ventures,
Knowledge agreements,
Licensing agreements,
Management agreements,
Turnkey agreements.
Technology Transfer Agreement
A Technology Transfer Agreement (TTA) sets out the terms and conditions for the transfer of technology in writing and creates legally binding rights and obligations of the parties. As with the other types of contracting and sales agreements, a TTA mainly consists of the following:
Consent of the parties,
Exchange of technology or technical information,
Predetermined financial consideration.
Essentially, a supplier or licensor assigns or licenses registered industrial and intellectual property rights, technical assistance and know-how to a licensee under a TTA. The licensee can then manufacture and distribute the products in a defined territory using the licensed technology.
A TTA can be for domestic transactions in case the licensor and licensee are based in the same country. When both the parties are in different countries the International Technology Transfer Agreement can be used.
Negotiation of Technology Transfer Agreements
The negotiation of TTAs involves several legal processes and laws that govern the transfer and hence is considered to be an extremely complex process.
While negotiating a TTA, both parties must be mindful of the fact that each party has its respective interests that they will bring to the table. A successful negotiation depends on knowing what that interest is as well as understanding the needs and aspirations of both parties.
Important clauses under the Transfer of Technology Agreement
Sample clauses
Below are a few sample clauses that can be seen in a TTA:
Technology
An organisation’s strategy, objectives, resources and capabilities can dictate the extent of a technology transfer. A contract must specify how and to what extent knowledge will be transferred. Moreover, there should be a clear explanation for what is not included in the license. Provisions like this should be drafted very precisely, without ambiguities or uncertainties. Generally, the transfer of technology may include:
Technical knowledge
Hardware or goods
Knowhow
Field of use limitation
Sample clause:
This technology is developed and invented by Licensor in the course of the execution of a research project [*]. Licensor owns all rights, title, and interest in the Technology as well as all intellectual property rights vested therein.
Grant of license
This clause specifies the scope and extent of the licensee’s rights and any limitations on those rights. Clear and proper grant language allows the licensee to clearly understand what he or she is entitled to do.
Sample clause:
Licensor hereby grants to Licensee a non-transferable, nonexclusive, royalty-free right to manufacture, use and sell the Licensed Products under the Licensed Patents for research and development in the Territory.
Representations and warranties
The representation and warranties clause states that the technology conveyed is free of all liens, security interests, and other encumbrances, and the licensor is the rightful owner of the licensed technology under the provisions of the contract. A typical licensor’s representation will be that all technical information delivered by the licensor under the clauses of the agreement is accurate and complete; and that the licensor has the power and authority to execute, deliver, perform the terms of the agreement and that all licensed patents and patent applications under which rights have been granted have been secured.
Sample clause:
Licensor hereby warrants and represents to Licensee the following:
Licensor has full legal right, power and authority to execute, deliver and perform its respective obligations under this agreement.
The execution, delivery and performance by the Licensor of this agreement do not contravene or constitute a default under any provision of law applicable or of any agreement, judgement, order, injunction or other instruments.
All licenses, consents, authorization and approvals, if any, required for the execution, delivery and performance by the Licensor of this agreement have been obtained.
The licensor is the exclusive owner of the licensed technology and such ownership is free from all kinds of encumbrances.
There is no doubt that the choice of law is the most controversial and complex clause in TTAs. In most international TTAs, parties from different legal systems are involved. Therefore, it must be decided by the parties in such cases – what law will govern the enforcement of the contract and which court shall be called upon if a dispute arises. A governing law determines the rules of interpretation, validity, and performance of the contract, as well as the consequences and corresponding obligations upon a breach of the contract.
Sample clause:
This Agreement shall be governed by the laws of [*] and shall be subject to the jurisdiction of the courts at [*].
Indemnification
If the licensor is not adequately compensated, the Licensee will engage in illegal or improper uses of the intellectual property, resulting in legal actions. If the intellectual property is not properly protected or for some reason third parties alleged infringement, the licensor will normally have to indemnify the other party.
Sample clause:
Subject to the terms of this section, licensor/licensee hereby agrees to indemnify, defend and hold harmless the other party and its officers, directors, agents, attorneys, accountants and affiliates from and against any and all losses, claims, obligations, demands, assessments, penalties, liabilities, costs, damages, reasonable attorneys’ fees and expenses (“Damages”) asserted against or incurred by the other party by reason of or resulting from a breach by Licensor/Licensee of any representation, warranty or covenant contained herein, or in any agreement executed pursuant thereto.
Arbitration
If there is a dispute between the parties, this clause specifies the procedure to be followed. In case of any dispute between the parties, this clause will serve as the predetermined way to resolve the matter; parties can settle it through an arbitrator without going to court. Arbitration is a type of Alternative Dispute Resolution (ADR) used to resolve disputes between parties.
Sample clause:
During the term of this agreement, at any time a dispute, difference, or disagreement arises in respect of this agreement, its meaning and construction hereof, such dispute, difference, and disagreement shall be referred to a single arbiter agreed by the parties, or if no single arbiter can be agreed, then an arbiter or arbiters shall be appointed in accordance with the rules of the [*] and such dispute, difference or disagreement shall be settled by arbitration in accordance with [*] and a court with jurisdiction can enter judgment on the award rendered by the arbitrator.
Notices
There will be designated principal contacts, addresses and modes of delivery for handling correspondence, faxes, telephone calls, notices, royalty payments, technical assistance, training, patent administration, etc in a contract.
The agreement must specify the language to be used for communication if the parties speak different languages.
Sample clause:
All notices given under this agreement must be in writing and shall be deemed to have been duly given when delivered by:
(i) Hand;
(ii) Reliable overnight delivery service; or
(iii) Facsimile transmission.
IPR, Competition Law and Technology Transfer
IPRs protect the creations of the mind and ensure that the creators earn benefits from their creations. Some of the protection tools under IPR are trademarks, patents, copyrights, etc.
Competition Law can be defined as the set of laws that regulates the competition in the market. These laws ensure that both the producers and the consumers have access to an ethical market that fosters real competition.
Any TTA that violates a consumer right by imposing unreasonable conditions or such conditions other than essential to protect the IPR is considered anti-competitive.
Following instances of TTAs may be called anti-competitive:
Patent pooling wherein two or more companies come together and cross-license the technology relating to a particular technology to each other so as to restrict others to acquire it.
Tie in arrangements to tie a product with another product that is patented so that the acquirer has to get the other product also from the patentee.
Prohibiting licensees from using technology from rival companies.
Prohibiting licensee from challenging the validity of intellectual property rights.
Objectives of IPR and Competition Law : Conflicting or complementary?
The inherent conflict
In today’s technology-driven society, IPR and Competition Law prima facie appear to have conflicting objectives.
IPR consists of a bundle of legal rights conferred on the holder that allows them to exploit their innovation commercially. During its period of exclusivity, the holders can exploit the IPR as per their wish and are rewarded for the effort invested in creating it. Essentially, IPR grants a monopoly right to the holder for a limited period of time as well as a right to pursue enforcement of these rights through the courts where an unauthorised use occurs.
However, the transfer of IPR, particularly where competitors are involved, can affect competition negatively, especially when prices are fixed, the output is limited or markets are consolidated, partitioned or foreclosed. Hence, even though the IPRs are not abusive of the dominant position, they do form a legitimate upper hand in the market.
This is where Competition Law steps in to ensure that there is absolute fair competition in the market. It aims to prevent anti-competitive conduct, regardless of whether it is coordinated or conducted unilaterally.
Dominance over a specific area of a market can be earned by any enterprise through monopoly power, this is not per se violation of antitrust law but abuse of this position is illegal and has a detrimental effect on the market. An enterprise tends to become dominant if the relevant market is narrowly defined and it ceases to be so if it is defined widely.
Though, the basic concept of competition is the main driving force of both IPR and Competition Law, contextually, ‘competition’ has different interpretations within the legislations. IPR encourages fierce competition among the innovators and simultaneously curbs that competition in a number of ways so that at the end of the specified period the rights are transferred to the public domain. Whereas, Competition Law prevents abusive practices in markets, sustains competition, and ensures access to good quality and reasonably priced products and/or services to the consumers and at the same time preserves the right to compete in the markets.
How are they complementary then?
The inherent conflict between IPR and Competition Law stems from the fact that the IPR seeks to provide protection and monopoly benefits to the creator while Competition Law seeks to eliminate any cartels or monopolies in the market.
In spite of this, if we look closely at the objectives of both laws, it becomes evident that they have much in common, particularly the objective of balancing the interests of right holders, consumers and the society at large. While IPR seeks to grant a monopoly, Competition Law maintains that innovation should be encouraged while preserving competitiveness in the market.
IPRs actually spur technological innovation, which eventually contributes to the dynamic growth of the economy. This is also the core objective of the competition policy. Thus, it is clear the two laws are rather complementary to each other in certain respects.
Now, let’s take a look at how different countries have devised their laws to counter the complexities surrounding IPR and Competition Law.
IPR and Competition policy under various International Conventions
Paris Convention
Article 10(b)(2) of the Paris Convention defines unfair competition as “any act of competition contrary to the honest practices in industrial and competition matters”.
The free play of market sources offers little hope of fair competition. Paris Convention identifies acts that are confusing, misleading, discrediting competitors or involving disclosure of confidential information, free riding and comparative advertising as unfair competition. This list of unfair competition continues to grow as new cases are added and handled in various countries.
In order to prevent such unfair competition, a certain amount of regulation is required.
Trade-Related Aspects of Intellectual Property Rights
While negotiations for the TRIPS agreement were underway, many countries had raised concerns about the regulation of unfair competition and the abusive power of IPR holders.
According to Article 40, certain licensing practices or conditions pertaining to IPRs which restrain competition may adversely affect trade and impede the transfer and dissemination of technology. The members may adopt measures to prevent or control anti-competitive practices that constitute abuse of IPRs under Article 40.2. These practices include exclusive grant backs, clauses that prevent validity challenges, and coercive package licensing, although this list is not exhaustive. Anti-competitive agreement practices are generally permissive under Article 40 (particularly) rather than prescriptive
There is also the compulsory licensing policy under the TRIPS agreement which is a statutory measure intended to avert concentration of IPR in the hands of the right holders who refuse to part with the right without an ostensible reason or do so in consideration of commercial gain that deviates from the existing market practice. In other words, it is a mechanism by which the state can affect the non-voluntary transfer of copyright from its owner to anyone who is willing to republish such work to the public without having to pay any royalty to the original owner. Article 31 permits the grant of compulsory licensing under certain circumstances such as national emergency or other conditions of extreme urgency or insufficient exploitation of the patent in the country.
IPR and Competition policy in Europe
The European Union (EU) prohibits licensing agreements that restrict competition. These agreements may, however, have benefits that outweigh the restrictions they have on competition. TTAs now have a greater degree of certainty due to the new ‘block exemption’ regulation and guidelines. This exemption ensures that the TTAs comply with Competition Law.
In March 2014, the European Commission adopted a Technology Transfer Block Exemption Regulation (TTBER), replacing a 2004 text. It clarifies how EU Competition Law (in this case, Article 101 of the Treaty on the Functioning of the EU) applies to certain categories of licensing agreements and the criteria used to assess these agreements. Like its predecessors, it is accompanied by guidelines that provide guidance on the application of the rules.
The TTBER exempts licensing agreements between companies that have limited market power (i.e. the market share of under 20 % for agreements between competitors and 30 % for agreements between non-competitors), and that fulfil certain conditions. These are deemed to have no anti-competitive effects or that, if they do, the positive effects outweigh the negative ones and thus do not contravene EU antitrust rules.
Furthermore, following the COVID-19 outbreak, to cope with the impact of the crisis the European Commission adopted:
Communication from the Commission is a temporary framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak.
By not only giving guidance, but also providing adequate certainty and comfort to individual initiatives in situations of extreme urgency, this enables the Commission to offer exceptional guidance and assistance. The enforcement of laws remains a top priority, especially in times of crisis, since this is vital for recovery. As a result of the economic downturn caused by the pandemic, a smaller number of operators may emerge and concentration may increase, and maintaining competition between remaining operators and preventing cartelization of the market or abuse of dominant positions is essential now more than ever.
IPR and Competition Policy in India
Our country has seen rapid development in technology advancement over the past few decades, whereas the IPR and Competition regulations in India are still in the development stages. India, like some other developing countries, does not follow the same development policies as the developed nations; instead, it focuses on maximizing its technological advantages.
Provisions of various laws such as the Patents Act 1970, the Trademarks Act 1999, the Design Act 2000, etc. are incorporated into the TTAs. Also, initially, India had a very conservative approach to international technology transfers, imposing a number of restrictive regulations. However, the regulatory environment has been more liberalized in the recent past to allow more international technology transfers. Though, national IP legislation to deal with issues that arise from international technology transfers is still not in place.
As far as regulating competition is concerned, in India, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP) was the first legislation to restrain the abuse of market power. In 2009, MRTP was replaced by the Competition Act, 2002 (Act).
Section 3(1) states: “No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.”
Section 3(5), offers a blanket exception for IPR, to show that it does not interfere with the policies of IPR. The said Act, however, deals with the abusive use of dominant positions that infringe IPR in Section 4. In this way, the Competition Law complements IPR instead of conflicting with it and actually works in conjunction with IPR, rather than competing with it.
The government has also opened technological transfer offices (TTO), and educational institutions. BIRAC under National Biopharma Mission has roped in FITT, IIT-Delhi to facilitate research, development, collaborations and technology commercialization in North and parts of the central region of India. Towards this, FITT has established an Innovation Technology Transfer Office (i-TTO) which will provide requisite services to incubation centres, innovators, entrepreneurs, start-ups, industries and academia.
Mission Statement of i-TTO
To support and promote the technology transfer ecosystem in India.
To enhance academia-industry collaboration.
To protect and manage the Intellectual Property Rights resulting from R&D efforts.
To create mechanisms for commercialization of IP through different modes.
In addition, among the various leading cases that showed the path to the issues relating to Competition and IPR policies are Aamir Khan Production vs. The Director General, 2010 and Kingfisher vs Competition Commission of India, where it was held that cases pertaining to IPR and competition issues can be dealt with by the Competition Commission of India (CCI). The CCI is a quasi-judicial body established under the Act which is responsible for enforcing the provisions of the Act.
Microsoft Case
This is one of the landmark cases in relation to this issue of competition and IPR policy during the TRIPS regime. In 1998, Microsoft was accused of abusing its monopoly power by tying its operating system and web browser and selling them together. Because of this, other web-browser competitors could not compete since Windows operating system users already had Internet Explorer (the browser Windows tied with its operating system). It was argued that Internet Explorer was an entirely separate entity since a separate version is found for each operating system.
The court found that Microsoft had distorted its dominant position in order to crush other operating systems and that Microsoft committed monopolization, tying, and antitrust violations under the Sherman Antitrust Act sections 1 and 2.
In response, Microsoft appealed the decision and it was then decided that two components should be separated, one for the Internet browser and another for the operating system.
From the above case, it is clear that the role of IPR is to protect the rights of the creator and owner, while the role of Competition Law is to control the market. With limited choices for customers, there is always the risk of a particular product gaining hegemony, disrupting the economic competency of the market. It is not necessarily the hegemonic position granted by IPR that is in breach of Competition Law; it is the use of that position that is. And, by creating a harmonious balance between the two laws, they can be understood as having the same objectives.
Conclusion
In a nutshell, IPR is a right or a reward that the State grants to the inventor to exploit the right commercially for a limited period of time whereas the Competition Law is a legislation that is seen as a rigid shackle over the market. However, despite the fact that these laws appear to be contrary in nature, it turns out that they are in fact complementary, and back each other up when one is abused.
Over the years, changes in the legislation have resulted in two laws that have a common objective but have different ways to achieve it. It all boils down to the fact that IPR’s dominant position per se does not violate the Competition policies, but how that position is abused does.
Hence, this article concludes that objectively, both laws seek to prevent dominance abuse in the respective markets and share the same objective that is the promotion of consumer welfare and efficient allocation of resources.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:
This article is written by Adithya Prasad, pursuing Diploma in International Business Lawfrom LawSikho.The article has been edited by Aatima Bhatia (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).
“THE FUTURE OF BUSINESS AND LAW CAN BE TRICKY”
Table of Contents
Introduction
With the conquest of space imminent by humanity, the future must begin to focus its efforts on adapting human life to migrate from the ‘earth species’ to ‘interplanetary species’. With such ambitious plans, we see ourselves with a challenge, the challenge of adapting our activities for inter-planetary use. The central idea being a hassle-free transition into the space age living.
The most important activity ever to be practised by humans would be the art of business. On ground-level, it’s as simple as two parties meeting with each other for a particular purpose. However, when one decides to scale it into space then things get difficult. This article shall discuss the following points:
The capacity for business in space, is there a scope?
Legal issues of the future
Conclusion
History has proven one thing; humans have an innate need to expand into the horizon, through idea adaptation and territorial acquisition. Taking any point in histories such as the Spanish inquisition, the German-Nazi command or even the race to space. A great sense of pride and honour is granted to the first who sets foot in a place never before discovered.
Is space open for business?
With many billionaires visiting the edge of the Earth, space is now accessible to the general mass. General mass here, means the civilian section of society. The idea like any other is to spend a lot of money and go to space, just like your regular tourism. So, is space open?
Well for the upper echelon of the global human society, going to space seems more like an open house which takes time to enact over the general impossibility of having that ability to space. As such, to solve this, many pioneers have taken it on themselves to become a business that can take and help you experience space for a few brief moments (as of now).
The simple answer to this question would be yes, space is open for business. Taking the industrial complex race towards space, companies such as Blue-origin and SpaceX, pride themselves on being the first private contractors to haul goods and personnel to space. However, before we go any further, we must understand the scope of business in space. What about space makes it a valuable commodity?
Space has the capacity for its own tourism. Private companies announcing the possibility of a space tourism service for the general public was received with great awe. Since humans mapped the stars, their intention was to be among the stars itself. Through various folktales and religions, they expressed a desire to have a seat in heaven. With that coming to reality, the industry of tourism is about to get the most attention since the invention of ships to sail the seven seas.
Valuable resources that can be harvested from an asteroid and its deposits on planets; Despite having resources both private and public entities are questioned and even puzzled on their limits to space use. There are some arbitrary terms that allow for an understanding but that does not suffice. Space as recognized by the UNOOSA, is an environment that is a common heritage to all men and therefore cannot be tampered with at any cost.
This was an argument that further gained recognition during the race to the moon and now mars. Countries that do manage to achieve, through their own or assisted efforts to travel and set foot on, any planet, planetoid or any other sustainable mass does not make it that country’s land. Like the north and south pole, countries can have outposts that control certain parts of territory much like guardianship but not ownership.
In more recent news, the moon is said to have a variation of helium, Helium-3 ions were discovered in the Moon’s upper crust after the Apollo 17 lunar mission brought back soil samples from the Moon. Helium-3 is a non-radioactive hydrogen isotope with one neutron and two protons.
“The reason helium-3 is highly sought after is due to its unique properties. It can fuel non-radioactive nuclear fusion reactions to produce safe, clean, and large quantities of energy, thereby transforming the future of energy generation on Earth. Fusion reactions are much more efficient than fission reactions that are currently used in nuclear plants. He-3 allows energy to be generated with a very limited amount of waste as well.”
Colonization and expansion efforts; Administration in itself is a huge business, despite hanging the veil of welfare and societal evolution, good administration in itself can be a great source of business for parties involved as it is both the contractor and facilitator for human development. When such colonization efforts do happen, human adaptation in all its activities will be paramount.
These are but a few points on how space in itself is a huge commodity, and companies now announcing civilian experiences offered into space open a new section of laws that must be explored before time runs out, our clock ends when spaceflight is affordable to more than the top crust of society’s purchasing power.
Legal issues of the future
Space law is the youngest sibling of the international law family, least explored and dedicated amongst most laws and this is the problem. The future demands a closer look into space law. In the current day scenario, we have the following treaties among other smaller agreements that govern space-related activities:
However, these treaties are not enough to act as foundational sources of law that could be called upon to serve the need of legislation or any other form of legal representation. What kind of sources should we be looking for?
When looking into the concept of space tourism which isthe first and most important step of space integration into society, we must look at elements of labour law, safety, and tourism laws. The first issue that we will face is the concept of force-majeure or the act of God. Despite the existence of “the doctrine of damnum sine injuria” which translates to damages caused without legal injury. The application of which shall be seen through consent forms and other agreements that tend to exonerate themselves from the liability of any legal injury. The problem? We are still discovering the controllable aspects of space which still remains a hostile environment. How are we going to ensure that no legal injury is sustained without knowing for certain what can constitute an Act of God in space in all its operations.
Another fundamental problem that must be addressed is property laws in space. Due to the severe restrictions technologically and economically for regular access to space. The issue of property is not really a concern today, however with growing efforts to acquire assets of space origin, the law through its makers and practitioners must produce ways that ensure the sanctity of space as a heritage to all mankind whilst also allowing a way for research and development.
Considering this, another issue that we will tackle would be pollution laws. As of the last decade, out of the 7,389 satellites that currently orbit the earth as of April 2021, 1,486 are from private parties in the United States alone. This growing satellite race, with the announcement of Elon musk’s new internet service called ‘Star-link’, seeks to employ even more satellites in the orbit. This has caused the global community to now acknowledge the space pollution problem, formed through debris and other destroyed man-made objects. The problem isn’t in the fact that it orbits the earth, but the physics of all objects that orbit in space.
All objects will see a decline or decay in the orbit of an object around a particular mass, their re-entry into our atmosphere can cause air pollution and other environmental harm depending on the circumstances of the debris itself.
This, however, does not end here. The law will still not be prepared to handle the mantle of guiding an interplanetary species. In August of 2019, the case of Anne McClain hit headlines for being the first-ever space crime committed to date. The crime was minor but opened the eyes to the need for criminal law, with enough provisions to be enforced in space. How would you put someone who commits a crime from space? Despite happening before, the Anne McClain case was judged as a crime that was done on land.
Conclusion
This is but the beginning, legal problems are rampant in any society that is subject to constant change. The Primary challenge of law is that it is never enough, as a society always morphs into something beyond comprehension at that point in time. However, throughout human history, this change has been constant. One that can be seen and experienced due to many common grounds. Space, however, is an entirely new element, one that is extremely hostile to mankind.
Therefore, as humanity’s next stand, we must prepare ourselves for the greatest change in all our histories put together. Our march into the stars!
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:
This article has been written by Kumar Rajiv Ranjan, pursuing a Diploma in General Corporate Practices from LawSikho. The article has been edited by Amitabh Ranjan (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho)
Table of Contents
Introduction
While scrolling on social media, I came across a hilarious but thought-provoking message of Stand Up Comedian “Raju Srivastava”. The Quote was “I wish to lead a life of an anonymous person. Just waiting for my bank loan to get approved”. A bit satirical but there cannot be a more apt description of what is happening around us today and the helplessness of a common man. Bank frauds, siphoning out money through loans and subsequent default by corporate, online frauds and complete helplessness of authorities to make the recoveries effective or punishing the guilty persons is what we are witnessing every day.
Bank frauds have now become such a routine feature today that many banks are fast losing the confidence of the people as the most secure way of storing money. YES BANK case, PNB case or Nirav Modi Case, Vijay Mallya case are some of the glittering examples. And the case which has as recently as in August 2021 rocked our economy yet again is another plus 1000 crore embezzlement of funds by VMC Systems Limited and Punjab National Bank [PNB] is again at the central stage. The situation is day by day becoming gloomier and we do wonder whether there is any light at the end of a long drawn-out tunnel.
The RBI Annual Report 2019-20, has painted a very grim picture of the Indian Economy’s current state. It has been stated that despite the best efforts by the Government, the amount involved in frauds has gone up by a whopping figure of 159%. The RBI report further stated that during Financial Year 2019-20, banking sectors reported 8707 frauds involving a total of Rs 1.85 Trillion as against 6799 cases during 2017-18 involving 71543 Crores. The situation only slightly improved in 2020-21 as the value of the fraud was reported to be at Rs. 81901 Crores as per RBI Annual Report 2020-21.
But the corporate frauds with active connivance of banking personnel are just one mode of embezzlement of funds. With the banking operations becoming more and more digital, and physical forms of banking transactions getting substituted by digital and electronics mode, the fraudsters are every day devising new methodologies for siphoning out precious public money/hard-earned money of common people.
We are witnessing ATM frauds through the cloning of ATM Cards. Fraudsters are often successful in deciphering the PIN or SECURITY CODE. System hacking has become too frequent and if what is happening today is not arrested, soon the banking structure may collapse and the entire economy shall be doomed. We have already witnessed how YES BANK has failed and also witnessed how PNB is struggling. Today we are sitting atop a volcano, uncontrolled siphoning of money shall have a catastrophic effect and it may be sooner than later.
To analyze what is happening around us, let us first analyze what changes have been brought into the banking system in the new digital world.
Evolution of banking structure: from physical to digital
The entire banking system has undergone sea changes during the last twenty years. Gone are the days of long queues at bank counters, cumbersome processes, physical transactions etc. Our banking system has quite successfully and most efficiently embraced the digital world. In the era of e-banking, new modes of transactions like RTGS [ Real-time gross settlement],NEFT [National electronic fund Transfer], ECS [Electronic cleaning services], EFT [ Electronic Fund Transfer] have emerged. Bank passbooks have now been replaced by NET BANKING. Physical cheque books have now been replaced by e-cheques.
Bills of exchange, promissory notes being a significant instrument of money transfer under Negotiable Instruments Act are fast becoming obsolete. Fund transfer has now become fully electronic with modes like POS transactions, online transactions, Debit and Credit Cards, ECS mandate, transfer through ATM channels embracing the banking system. With the fast development in electronics and computer hardware as well as software, various user-friendly apps like SBI YONO,PAYTM,BHIM UPI have been embraced by the Banking Sector. Banking transactions have become fast beyond imagination. Now the entire world has come under your fingertips with USER ID and PASSWORD mode of banking transactions becoming our everyday routine.
But the more technologies we are embracing, we are also witnessing its abuses in the digital world with the fraudsters developing more and more skills and technologies for duping banks as well as our hard-earned money. Events of ATM Cloning, deciphering PIN and passwords, phishing or fraudulently influencing customers to give their own information and thereafter duping money from their account is happening almost every day. These frauds are still more individual-centric and do not have much impact on the economy as a whole.
However, more organized and systemic banking frauds, that we are witnessing, are in the corporate world with the active connivance of the banking personnel which is eating into our economic systems like white ants and cancers and required to be paid more attention to. Hacking of the system is another big challenge that is required to be addressed considering the fact that Artificial Intelligence [AI] is fast becoming the new watchword in the digital world and we are required to equip ourselves accordingly otherwise the concerned banking sector may go the NOKIA WAY. Not long ago, NOKIA was the most prestigious brand in the mobile world but they were not receptive to the changes taking place in the electronics world and soon they were outsmarted and outscored by APPLE, Samsung and scores of Chinese mobile companies with highly advanced systems and highly user-friendly interface.
As a result, NOKIA went out of the market. So, in the fast-changing electronics and computer world, the banking sector management should be highly receptive to the changes taking place around them and exhibit sufficient flexibility to survive, adopt the new technologies and remain competitive. However, any mega banking fraud due to hacking of the system or use of Artificial Intelligence has not been reported as yet.
Non-corporate banking frauds in digital world: an analysis
As stated in the preceding paragraph, banking frauds in the digital world today may be categorized into two heads:
Non-corporate e-banking frauds
Corporate banking frauds
Non-corporate e-banking frauds are not as dangerous as far as their impact on the economy of the country is concerned. It is more individual-centric. For the persons, however, suffering such damages at the hands of the fraudsters, the impact may be catastrophic. Considering the criminality of such acts, these are required to be also handled strongly as per applicable criminal laws to send a strong message. Some types of e-banking frauds which do occur regularly in our everyday life are being enlisted below:
1. Stolen or lost credit/debit card and its abuse by fraudsters.
2. Cloning of debit/credit cards.
3. Phishing or fraudulently influencing customers to give their own information and thereafter duping money from their account.
4. Stolen PIN numbers and banking passwords
5. Hacked accounts and mobile apps
6. Stolen CVV and OTP number.
7. Online shopping frauds. In such cases, fraudsters set up fake online shopping platforms.
8. Luring people to share their confidential information like AADHAR details, ATM PIN, Account password e.t.c. in the name of some attractive gifts or lottery and duping money thereafter.
But, as I have stated above, the impact of these frauds are not as heavily felt as in cases of fraudulence by body corporate as in the cases listed above, mostly the impact is individual-centric and the amount involved is not as big as in cases of corporate frauds and corporate defaults.
Corporate banking frauds in digital world: an analysis
As I have stated in the preceding paragraphs, it is the Corporate Banking frauds that are more challenging as their impact on our economy and banking system is catastrophic. The collapse of YES BANK is one such example. Normally such frauds do happen in the form of bank loans or abuse of banking instrumentalities with the active connivance of some insiders in the banking systems. For such frauds, the Corporates use their guile and professional expertise as they present before the banking authorities highly inflated financial statements which are accepted by the banking authorities on its face value without much verification.
The Satyam case and misdeeds of its CEO B Ramalinga Raju is a big example of how an organization’s financial statements can be altered to present a very rosy picture while the actual scenario was much different and this case is a big blot on corporate governance in India. I would also consider some big names in the world of financial sectors, Chartered Accountants, Cost Accountants, Company Secretaries equally responsible as all these financial statements are duly audited and signed by them.
These inflated statements are used to obtain Loans running into multi-crores of Rupees or some other banking instrumentalities like BG [Bank guarantee], LoC [Letter of Credit/Letter of Comforts] e.t.c. which are abused by such corporate houses for furthering their business goal and at the same time, they easily become defaulters sending the lending bank into a deep mess as they are left with not much grounds to recover.
Mostly, it is the Public Sector Banks [with an exception to Axis Bank and Yes Bank in few cases] which found itself at the receiving end and thereafter, the battle in the form of filing of FIRs, investigation by CBI, long extended battle in courtrooms begins while the fraudster Corporates peacefully enjoy their time, mostly in some other country of their choice and ably assisted by a team of high profile lawyers and financial experts in court room’s battles.
To understand the modus operandi of these corporations, let us examine a few cases in detail.
Case study no.1 : the case of VMC systems limited, Hyderabad
The corporate world was rocked in early August 2021 when a news item appeared that the Enforcement Directorate arrested Vuppalapati Hima Bindu, Managing Director of VMC Systems Limited, Hyderabad in connection with the 1700 crores Punjab National Bank [PNB] loan fraud case. This case was also a classic example of bureaucratic latches and delays as it was in September 2018 when CBI registered an FIR against the company and V Hima Bindu, Rama Rao and Ramana charging them with criminal conspiracy, cheating and forgery but the first arrest of Hima Bindu was made nearly three years later in Aug’2021.
VMC systems Limited, Hyderabad is a telecom equipment manufacturing company based in Hyderabad which was incorporated in February 1997 with an authorized share capital of Rs 65 Crores and paid-up capital of Rs 50 Crore. In 2018, when the case was registered, it had pending dues of Rs.33 Crores only which was to be received from BSNL but the Company declared this figure at 262 Crores which was accepted by PNB authorities without proper verification.
The company had claimed certain receivables from other private companies also were found out to be false. These inflated and false financial figures were used by VMC Systems Limited to secure loans from PNB and a consortium of some other banks. At the time of filing of the charge sheet by CBI, VMC Systems owed Rs. 539 crores to PNB and 1207 Crores to a combination of State Bank of India, Andhra Bank and JM Financial assets Reconstruction Company. VMC Systems defaulted on repayment of loans and the outstanding liability has now swelled to Rs.3316 Crores which is to be paid by the defaulting Company to the consortium of Public Sector Banks.
CBI enquiries further revealed that VMC circulated loans to various related entities to inflate its books e.g., PISL, a related entity was given 3% commission from all receipts from BSNL even though it did not have any role in state run’s BSNL tenders.
It was also found that VMC had obtained various letters of credits [LoCs] worth Rs. 692 Crores in the name of fake/dummy entities which were subsequently transferred and passed over to other entities. The Company had also created false/exaggerated operational revenues by generating fake sales/ purchase invoices through companies controlled by their Directors/family members to dodge the banks. A part of the proceeds was also remitted by V Hima Bindu to overseas entities controlled by her family members.
The investigation still continues.
Case study no.2: the case of Nirav Modi and Mehul Choksi: PNB scam 2018
Nirav Modi, once a big name in the Diamond business, is a fugitive businessman today charged by Interpol and the Government of India for criminal conspiracy, criminal breach of trust, cheating, dishonesty, money laundering, and breach of contract. The fraudulent manner in which Punjab National Bank [hereinafter referred to as PNB] was cheated rocked the nation in 2018 and today the fraud is estimated at over USD 2 Billion. This PNB Scam is related to the issuance of fake Letters of Undertaking [LoU] by the Bankers at PNB’s Brady House Branch in Fort, Mumbai. These LoUs were opened in favor of branches of Indian Banks in overseas destinations for the import of pearls and other costlier stones for a period of One Year even though the RBI had prescribed a total time period of 90 days only from the date of shipment. But these guidelines were bypassed by the overseas branches of Indian Bank and they did not even share what documents/ records were made available to them by the diamond merchant/his firms at the time of availing credit guarantee from them.
These loopholes in the working of the Banking System were wonderfully exploited by Nirav Modi, his uncle Mehul Choksi & their team as they successfully obtained a total of 1212 LoUs within a period of 74 months from his first fraudulent guarantee which he obtained from PNB on March 10, 2011.
For the purpose of this fraud, PNB employees, who had joined hands with Nirav Modi, had abused the international banking financial communication system SWIFT from PNB banking network to send messages to overseas branches of other Indian banks, including Allahabad Bank, Union Bank of India and Axis Bank on fund requirements for which the banking personnel used their allotted SWIFT Password but the transactions were never recorded in the core system of the Bank. As a result, the top management of PNB remained oblivious of what was going on.
Further, Nirav Modi obtained LoUs mostly in favour of dummy firms that were operating from the British Virgina Island and the fund received through fraudulent LoUs was transferred into their account.
Somehow, the fraudulent manner of fund withdrawal came to the notice of top management of PNB and they filed a formal FIR with CBI on 29th January 2018 admitting a bank fraud worth Rs 2.8 Billion making Nirav Modi, Ami Modi, Nishal Modi and Mehul Choksi, all partners of M/s Diamond R US, M/s Solar Exports and M/s Stellar Diamond, as the Prime accused.
The matter is under investigation by CBI, ED and also by INTERPOL and through subsequent investigation, the value of the scam has now ballooned to over Rs. 14000 crores.
Mr Nirav Modi is still evading his arrest and we are in the middle of a long extended legal battle for his extraditionto India.
Case study no. 3: the case of Vijay Mallya
Vijay Mallaya, once a ROCKSTAR business Tycoon is today a fugitive businessman charged with a bank loan default case of over 9000 Crores which involved his now-defunct Kingfisher Airlines. This is rather a simpler case where a consortium of Banks, led by the Public Sector giant, State Bank of India, kept on extending loans without the exercise of due diligence as a result of which the loan amount swelled to over 9000 Crores and Vijay Mallya’s UB group [ United Breweries Holding Limited] become a defaulter. The problem compounded with the failure of Kingfisher airlines and finally the Consortium of Banks filed a criminal case against Vijay Mallya.
The lack of wisdom by Banking authorities reflected from the fact that the news of business failures of Vijay Mallya kept appearing in newspapers since early 2000 but, the Banks, a total of 17 in number, kept lending loans to him to meet his need of extravagant business expansion. From the loans obtained, he bought Deccan Airlines and merged it with Kingfisher Airlines but the Project turned out into a misadventure. At one point in time, the company ran out of cash and was not able to even pay salaries to its employees.
His Company Kingfisher also held back service tax as realized from passengers, PF recovered from the employees, Income Tax recoveries made at source as it was left with no money to deposit the same either with IT Department or with PF authorities. At one point in time, SBI declared Kingfisher Group Bankrupt but other Banks kept extending Loans to him and one attributable reason according to many Financial Observers is the fact that he was also a two times Member of Parliament in the upper House and had very close connections with the power centres in the government, both in his state in Karnataka as well as at centre in New Delhi.
This case is also being investigated by CBI and ED but Vijay Mallya himself fled to the UK. In June’21, ED issued a statement stating therein that the Banks had recovered Rs 1357 Crores by the sale of the shares which were attached under the Prevention of Money Laundering Act [PMLA] by ED. Like Nirav Modi, he is also facing an extradition case in the UK.
Case study no.4: Yes Bank fraud case and DHLF
The rise and fall of Yes Bank is a perfect example to demonstrate what damages the deadly tentacles of mismanagement and banking frauds may cause to the Banking Sector. It is yet again almost the same story. Uncontrolled extension of loans which became bad loans, the parties becoming defaulters very coolly and the banking system collapsing as it failed to garner sufficient capital for its retrieval. The Yes Bank was incorporated in November 2003 and it started its operation in August 2004. Very soon, it became one of the leading Private Sector Banks. From its very inception, it started extending corporate loans lending aggressively to the corporate houses by compromising on prudence.
This aggressive lending policy led to NPA [Non Performing assets] stress from as early as 2015 with the majority of the loans extended becoming BAD LOANS as the Corporate debtors started defaulting. Major debtors like Reliance Group led by Anil Ambani have now become bankrupt, Cox and Kings failed and DHLF, which has a lion share of the Bad Loan, became serious defaulters. As per the reports of the ED, YES BANK disbursed nearly Rs.20000 Crores of Bank Loans to Corporates without following the RBI Guidelines. The Bank bought debentures from DHLF worth Rs.3700 crores and in return thereto, DHLF booked loans to a Company owned by the daughter of Bank’s owner Rana Kapoor against a mortgage worth Rs 40 Crores. This has been considered by CBI as bribery given by DHLF to Rana Kapoor and his family on a quid pro quo basis and a case was registered by CBI in 2020 for alleged cheating, fraud, criminal conspiracy in sanctioning of loans by YES Bank in exchange for receiving bribes from DHLF promoters Dheeraj and Kapil Badhwan.
All this suspicious dealing finally caused the exit of Mr. Rana Kapoor from YES Bank at RBI instructions in 2019. Presently, all operations of YES BANK are under serious restrictions as imposed by RBI.
And the list goes on and on and on as there are many such cases.
Defining fraud from a legal angle
Now, to find out the legal remedies, first of all, we shall have to understand what banking fraud means. Such frauds are an outcome of transactions wherein one party by fraudulent and dishonest means wrongfully gains and the other party wrongfully loses. It is different from misappropriation or embezzlement. In the case of the State of Maharashtra throughCBI Vs Vikaram Anantrai Doshi & others,it was observed that banking frauds cannot be put in the same bracket as an individual or personal wrong rather it is a social wrong. The Indian Penal Code, 1860 does not define the term “fraud” exclusively however certain provisions of the said Code are always applied while handling bank frauds. The Indian Contract Act, 1872 handles the subject of Agreements and Contracts and its Section-16 coined the term of “influence in contracts” which can be considered as a lesser degree of fraud but in an extension of very high valued bank loans to big corporate personalities like Vijay Mallya, influence and political clout play a very important role.
In Oriental Bank Corporation Vs John Fleming, the Court categorically analyzed the concept of constructive fraud. Surprisingly, the Banking Regulation Act, 1949 does not deal with banking frauds directly which is a big deficiency of the act and the fraudsters are taking advantage of these big loopholes. The Information Technology Act, 2000 introduced a new domain of technology-related offences and Section 94, of the Act also amended certain provisions of RBI Act, 1934 and the concept of digital forgery, unauthorized access to the computer networks, data alteration, skimming and online identity theft and impersonation were included. Payment and Settlement Systems Act 2007 was also introduced for controlling and curbing online transactions frauds.
Conclusion and suggestions
In India, the e-banking mode of transactions is maturing slowly but steadily. It is also cost-saving and time-saving. The banks are obliged to maintain the secrecy of customers’ accounts and RBI also provides regulations and guidelines for reducing the risks of hacking but many a time, these guidelines are not taken seriously, thus resulting in fraud. The general public deposits their money for security purposes and this trust is broken whenever such fraud occurs. However, as I have repeatedly stated, the dimension and impact of individual-centric e-banking frauds are not as catastrophic. Except, some personal losses, it shall not affect the Indian economy much. Still, it is a criminal offense that is required to be dealt with strongly as per the criminal laws to control and curb this growing menace. Both Banks and the individual concerned are required to be extremely cautious and conscious not to fall prey to such fraudsters. Banks shall be also required to regularly update their security control system to check any unauthorized entry into their systems. The customers and general public shall be also required to keep altering their security password at regular intervals and in no case, it shall be shared with any outsider.
However, despite all precautions and taking recourse to different online security systems, if someone still suffers a banking transaction fraud at the hands of the fraudster, the matter should be forthwith reported to the Bank as well as the cyber cell of the police so that appropriate action for nabbing the fraudster may be taken by the Police and Banking Authorities should also work towards improving the existing securities.
But, the bigger menace is the corporate banking frauds which are extremely damaging as the value of a single fraud alone may be around 1000 Crores. In 2021 alone, 13 bank frauds, each of a value of more than 500 Crores, were reported by the State run Banks to have taken place up to June’21 itself as per a written reply tendered by Union Minister for Finance before Rajya Sabha [ Upper House]. It was further stated in the reply that such types of cases were 79 in 2019-20 and 73 during 2020-21.
In all these frauds, almost similar methodology is adopted; that is forged financial statements, use of forged instruments, manipulated books of accounts, borrowing of funds against fictitious accounts, unauthorized credit facilities, fraudulent foreign exchange transactions and managerial failures at the stage of credit sanctions/disbursement. Considering all these, some preventive measures, tightening of administrative setup, enactment of new rules e.t.c. would be required and a few suggestions are recorded herein below:
1. For handling e-banking frauds of smaller magnitude and for handling online transaction offences, there are now separate provisions under the Payment and Settlement Systems Act-2007 but to expedite the settlement process with legal force, it is suggested that Section-25 of Payment and Settlement Systems Act-2007 may be linked with Section-138 of NI Act which handles cheque bounce cases. Additional provisions may be included allowing electronic mode of communication of demand notice by Payee/Holder in due course to the Drawer, electronic filing of complaints before the competent court in cases of failure of payment by the drawer to the payee either in physical or electronic mode. Appeal against conviction may be filed in electronic mode and Court proceedings may be also conducted electronically with provisions for online tracking by complainant/ defendant through the case and individual-specific password.
2. Better professional management and appointment of professional experts to handle business transactions of high values may be given a thought.
3. There are also shifts in focus from social banking to profit-making leading to more and more corporate business financing but as our experience of YES BANK speaks, such uncontrolled lending is required to be handled with care and some prudence is needed.
4. There must also be an upper limit of lending linked with paid-up share capital and free reserve of the company to avoid the loan becoming non-recoverable in the event of default by the debtors. The provisions of the Companies Act, 2013, RBI Guidelines may be accordingly modified thereby putting a cap on external borrowing.
5. The legal system is also required to be made more robust to handle bank fraud cases. There are a large number of legislations but still not a single legislation to handle bank fraud cases alone. The parliamentarian should pay attention to this aspect.
6. The Vigilance System has to be strengthened as it has been observed that a number of bank fraud cases have taken place due to the involvement of internal employees. Penal provisions and penalties are required to be made more stringent.
7. The institution of Independent Directors may be strengthened with appointment only from the Data Bank of Registered Professionals maintained by IICA [ Indian Institute of Corporate affairs.
8. Penal actions provisions may be included in our existing laws for taking actions against Auditors/ Auditing Firms/Chartered Accountancy firms/Company Secretaries/Financial Experts who play a major role in presenting inflated and fraudulent Financial Statements of the Companies owned by Corporates enabling them to borrow from the outside market including Banks an unreasonable amount without having the capacity to repay. This uncontrolled borrowing and lending have to be controlled very strictly.
9. Compulsory auditing at the bank level also of the financial statements submitted by the Prospecting Debtors before any loan is extended. Guidelines in this regard have been issued by RBI/Govt of India after PNB fraud was unearthed in 2018.
10. Examination of every NPA valued at more than 25 Crores and the report to be kept as a reference point before extending a second credit/ loan to the Corporate Houses.
11. Completely banning LoC [ Letter of Comfort/letter of Credit] and LoU[ Letter of Undertaking]
12. Revision in the Companies Act, 2013, issuance of Fresh SEBI Regulations and other measures by the Government of India making the Penal Provisions stringent.
13. In every insolvency proceedings before NCLT, the recovery of the Principal amount has to be considered paramount by the Judicial System to lend support to our banking system.
14. Other Statutory Measures. Introduction of Fugitive Economic Offender Act, 2018 was a welcome step as this Act was introduced to deter economic offenders from evading the process of law by remaining outside the jurisdiction of Indian Courts as we are witnessing in the cases of Nirav Modi and Vijay Mallya etc.
15. Development of a scientific system for early detection of fraud cases. In the annual reports of RBI, it has been stated that the average lag between the date of occurrence of frauds and their detection by banks and financial institutions was 24 months during 2019-20. This lag time was even more in cases involving a huge amount of money which is a matter of huge concern.
These are some of the suggestions to curb and control the menace of Corporate Bank Frauds which is fast eating up into our economy and the collapse of YES Bank, the failure of Kingfisher Airlines and the woes suffered by their employees are just a few examples of howdamaging it could be if the entire banking sector collapses due to cash crunch as most of the loans extended to Corporate houses are fast becoming NPA[ Non-performing Assets].
Bibliography
1. RBI Report 2019-20 as published in Business standards by Subrata Panda & Anup Roy.
2. RBI Report 2020-21 as e-published in livemint.com
3. VMC Systems Case and arrest of its MD Hima Bindu by ED
as published in Indian Express dated 06th Aug’2021
4. PNB Scam and Nirav Modi: From Business Standard and Wikipedia
5. Vijay Mallya Case: As published in Business Standard
6. YES BANK SCAM: As published in online Law Journal NJLRII
7. 13 fraud Cases over 500 Crores each reported by Govt Banks
till June’21:Says Finance Minister- A digital News published in
ET Now Digital dated 28th July’21.
8. The SATYAM SCANDAL: A Case Study as e-published in Lexforti
Legal News Network dated April 23’ 2020
9. “Why did NOKIA Fail…….” By Brand Minds as published in Magazine MULTIPLIER
10. Oriental Bank Corporation Vs John Fleming: A case study by Arun Kumar
published by Lawkaran Consultancy
11. State of Maharashtra through CBI Vs Vikram Anantrai Doshi
& others: From Indiankanoon.org
12. The Contract Act, 1872
13. Negotiable Instruments Act, 1881
14. India Penal Code, 1860
15. RBI Act, 1934
16. Banking Regulation Act, 1949
17. Information Technology Act, 2000
18. Fugitive Economic Offender Act 2018
19. The Companies Act, 2013 & some other references not quoted.
This article is written by Ronika Tater from the University of Petroleum and Energy Studies, School of Law. In this article, she discusses the recent Bill passed by the state government of Haryana. It also provides a relation between the fundamental rights of the protestors and the right to protest peacefully with the support of case laws and other relevant provisions.
Table of Contents
Introduction
Recently, the Haryana Government passed the Haryana Recovery of Damages to Property During Disturbance to Public Order Bill, 2021 (hereinafter referred to as the “Bill”) amid the protest by the opposition. The Bill provides for the recovery of damages to public or private property by protestors during times of agitation. It also states that if any person is leading, organizing, planning, exhorting, instigating, participating, or committing any incidents which would lead to public or private damages, they would be liable to pay compensation as per the provisions mentioned. On the one hand, this Bill has been considered as a move to victimise the innocent or the politics of the ongoing farmer’s protest. On the other hand, this Bill protects the public and private property of the people from any unknown agitation around the State. Similarly, earlier the Uttar Pradesh Government has also passed a Bill named Uttar Pradesh Recovery of Damages to Public and Private Property Act, 2020.
Key points about the Bill
The following are some of the key points mentioned in the Bill:
The Bill provides for the recovery of damages to public or private properties caused by any person during the times of agitation by an assembly, lawful or unlawful consisting of riots, protest and violent disorder.
The Bill not only provides compensation for public and private properties but also includes the amounts spent in using additional police or paramilitary force to maintain peace during disturbance to public order.
It ensures compensation to the victims in the same manner as the arrears of land revenue. The officials also have the power to attach the property or bank account of the person involved in the disruption of public order.
The Bill provides for the establishment of a tribunal to determine the liability, assess the damages caused and accordingly award compensation.
The Bill also provides that any party aggrieved by the award may appeal against the order of the tribunal before the High Court of Punjab and Haryana. Further, it states that no civil court shall have the jurisdiction to determine any question in relation to the claim for the compensation amount.
The tribunal is vested with the power to award exemplary damages to be paid by the person into the Consolidated Fund of India. It may charge a simple interest of 6 per cent on the compensation amount.
The Bill provides to charge 20 percent of the compensation amount with the collector before appealing against the order of the tribunal.
Need for this Bill
This Bill has received a vociferous protest from the leaders of the opposition claiming it to be “anti-people”. It takes away the very essence of democracy and encourages dictatorship. They also pointed out that the motive of the Bill is to harass innocent people and there is already a law regarding the destruction of public property in the Indian Penal Code, 1860 (IPC). This Bill also violates the fundamental rights under Article 19 and Article 21 of the Constitution of India. The State Government stated that it is not anti-people or violative of fundamental rights. The government also stated as follows:
It is the responsibility of the state government to protect the property of the state whether it is private or public.
While ensuring to uphold the principle of democracy, the government states that everyone has a right to speak and protest as per Article 19. However, no one has a right to damage property during the time of protest.
There is a need to establish a legal framework to cause apprehension in the minds of the perpetrators of violence or causing public disorder such as the planners, instigators, participants, etc
Legal provisions
The Prevention of Damage to Public Property Act, 1984 (“PDPP Act”) provides the provision for punishment to any person who commits mischief by doing any act to damage any public property with a term of imprisonment for five years and a fine or both. The provision of this law is synchronous to the provisions of IPC. Despite a law against the destruction of property, there is still an increasing rate of incidents of rioting, vandalism, and arson during the time of protests across the country. Subsequently, in 2007 the Supreme Court took suo motu cognizance of these incidents and constituted two committees headed by former Apex Court judge Justice K T Thomas and senior advocate Fali Nariman to provide suggestions to the said law.
Thomas committee
Following are some of the recommendations mentioned by the Thomas committee:
In criminal law, the burden of proof is on the prosecutor, however, the committee recommended reversing the burden of proof against protestors. Hence, the courts should presume the accused to be guilty.
The PDPP Act must incorporate a rebuttable presumption that the accused is guilty of the offence.
It should contain provisions to make the leaders of the organization liable who calls for direct action and are guilty of abetment of the offence.
To provide the police officers to arrange videography of the activities damaging public property.
The Supreme Court accepted the above-mentioned suggestions.
The Courts should lay down principles on which liability and damages could be assessed.
In case any injury to the property is caused, the compensation for reparation by way of damages should be such that it puts the party who has suffered the damages in the same position as he would have been before the damage was caused.
While dealing with extracting damages for destruction from the rioter, it stated that it should be made strictly liable and compensation must be collected for all the damages done.
It also stated that the Supreme Court should take suo motu cognizance and set up a machinery to investigate the damage caused and award compensation accordingly.
The Court accepted the above-mentioned suggestions.
Guidelines by the Supreme Court
The Court has the power to issue guidelines, in the case of Union of India v. Association, (2002), it was held that the Courts are not envisaged with the power to amend the Act and the Rules. It also stated that while providing directions it should be contrary to the Parliament Act and the Rules. However, in a case where the Act or the Rules are silent on a particular subject, the courts can issue necessary directions or orders to fulfil the vacuum or void of the said law enacted. In the instant case of In Re: Destruction of Public & Private Properties v. State of A.P and Ors.,(2009), the Supreme Court issued the following guidelines based on the recommendation of the two expert committees:
Whenever there is a case of mass destruction to the property at the time of protest, the High Court may issue suo motu action and investigate the damage to accordingly award compensation to the accused.
In the case of more than one state involved, such action may be taken before the Supreme Court.
The power of the High Court and the Supreme Court is extended to appoint a sitting or retired High Court Judge or District Judge to be a Claims Commissioner in order to investigate and estimate the damages caused.
An assessor may be appointed to support the Claims Commissioner in its finding and report.
The Claims Commissioner and the assessor may seek instructions from higher courts in the case to summon the existing video recording to investigate the damage and find out the perpetrators of the damages.
The principle of absolute liability shall be applied once the accused and the nexus with the event caused is established.
The liability will also be borne by the organizers of the incident.
Damages should be in the form of exemplary and the award granted should not be greater than twice the amount of the damages liable to be paid. Exemplary damages are not compensatory in nature but they are awarded in order to punish the accused to prevent him from committing similar behaviour in the future.
Damages can also be assessed for public property, private property, injury, death, or any case borne by the actions of the authorities to take preventive measures to avoid public disturbance during the time of protest.
The Claims Commissioner has to furnish a report to the higher courts after hearing both the parties at the time of the proceedings.
Recent case law
In the case of Koshy Jacob v. Union of Indiaprotects, (2017), the petitioner who was forced to spend more than 12 hours on the road after undergoing surgery due to the ongoing agitation moved a petition to the Supreme Court seeking the implementation of the guidelines issued under Re: Destruction of Public & Private Properties v. State of A.P and Ors. The recommended amendments included making such agitations accountable and punishable under the criminal law, preventive measures such as videography and award for damages. Despite such recommendations, no legislation for the speedy mechanism has been put into action by the concerned authorities. Since no law has been into force, the petitioner had to approach the Supreme Court for suitable direction to seek compensation.
Moreover, the Court reiterated that the laws need to be amended and the following recommendation has been made to the concerned authorities as follows:
If the officer-in-charge of a police station or any other law enforcing agency receives any information either declared or undeclared of any destruction or damage to public property, he shall appoint the service of the video operators. Even a panel of local video operators shall be constituted in each police station.
The officer-in-charge of a police station or any other law enforcing agency receives any information either declared or undeclared of any destruction or damage to public property, he shall accompany the videographer to the site or any other site where the action may take place.
The organizers of the protest must meet the police to review and revise the Constitution for a peaceful march or protest.
All the weapons which are apprehended to cause destruction to any property shall be prohibited such as knives, lathis, etc.
An undertaking must be provided to the organizer of the protest to ensure a peaceful protest.
In case of any incident, the police officer in charge must report to the state government and accordingly a report of the incident should be forwarded to the higher court for speedy remedy and action.
That the amended law may provide for a speedy mechanism for criminal liability, action for administrative failures, and remedies to the victims.
It is also suggested to establish one or more district/additional district judges by the State Government in consultation with the high courts to deal with the current rise in agitations.
The following are some of the suggestions made by the Union of India to the concerned authorities to consider while making a proposed law, however, the Court in this instant case did not grant the petitioner any compensation since the evidence against the organizers were not brought before the Court.
Suggestions made by the Union
Following are some of the suggestions below-mentioned:
The right to protest and participate in peaceful protest is the right of the people in this country, however, every organiser of a protest should provide a clear declaration ensuring that the participants of the protest will not damage any public property.
With the advent of technology, tools such as facial recognition technology, camera surveillance could be monitored by the police to hold down the agitations and provide a speedy remedy.
Conclusion
India’s history of protests derives its origin from Mahatma Gandhi’s path of civil disobedience, dandi march, and other non-violent protests which were a sine qua non of our freedom struggle. This legacy continued over the years and thereafter the right to protest peacefully was envisaged under the Constitution of India as a fundamental right. Over the years, these bandhs, hartals, and protests have taken the form of agitations and violence disrupting public property. Consequently, anything which is contrary to democratic values and morals should be checked and brought to the notice of the public with the right amount of justice.
This article is written by Ronika Tater, from the University of Petroleum and Energy Studies, School of Law. In this article, she discusses the constitutional validity of entry tax with the support of the said case and various other relevant constitutional provisions and cases.
Table of Contents
Introduction
In the historic judgment ofJindal Stainless Steel Ltd. & Anr v. State of Haryana & Ors.,(2016), the Supreme Court upholds the constitutional validity of entry tax legislations. In its 900 page order, the Supreme Court has explained the entire history, evolution and the various parameters of entry tax.
Constitutional provisions
The Seventh Schedule of the Constitution of India provides the three lists namely the Union List, the State List and the Concurrent List. Article 246 of the Constitution of India provides the subject matters on which the Parliament or the state legislatures have the power to make laws. Entry 52 of the State List provides for a levy of entry law thereby making entry tax valid in the constitutional scheme. Entry tax is a type of tax imposed by the state governments on the movement of goods between states. It is paid to the government of the states while entering the goods. Following this provision, many states have passed and notified entry tax legislation. However, a law mentioned in the Seventh Schedule does not make it constitutionally valid unless it is in consonance with other provisions mentioned in the Constitution. Article 301 of Part XIII of the Constitution of India provides guarantee to the right to freedom of movement of goods throughout the territory of India with certain saving clauses as mentioned under Article 304 of the Constitution of India. Article 304 provides restrictions on trade, commerce, and intercourse among States. It provides the power to the State to impose such reasonable restrictions on similar goods manufactured or produced in that particular State or the interest of the public.
In the case of Atiabari Tea Co. Ltd. v. the State of Assam, (1961), while stating the objective of Part XIII, the Supreme Court held that the taxing laws are included in Article 301 and they do amount to restrictions on the freedoms guaranteed to trade. Thus, the restriction on free trade is not absolute. It also stated that taxes as directly and immediately would restrict trade and fall under Article 301 and restriction on imposition of tax on the carriage of goods or their movement by the State Legislature can only be levied after satisfying the condition mentioned under Article 304(b). Further, in the case of the Automobile Transport (Rajasthan) Ltd. v. the State of Rajasthan, (1962), the Supreme Court established a judicial doctrine of “compensatory taxes” in order to overcome the confusion presented under Part XIII. The Court stated that the imposition of the levy is not in the nature of “tax” but it is a “compensatory levy” which means that it is a regulatory measure for the use of trading facilities and not violative of Article 301 or saved by Article 304 of the Constitution of India.
Case analysis of Jindal Stainless Steel Ltd. v. the State of Haryana, 2002
Facts
In the case of Jindal Stainless Steel Ltd. & Anr v. State of Haryana & Ors.,(2002) the petitioner (Jindal Strips Ltd.) is an industrial manufacturing product within the State of Haryana. The raw material is purchased from outside the State and no sales tax is paid on the input of the raw material. Similarly, the finished products are sent to other States and no sales tax is paid on the export of finished products. Thus, the State of Haryana introduced the Haryana Local Area Development Act, 2000 (“Act”) for levies and collection of tax on entry of goods into the local area. The Act imposed entry tax not only on the vehicles bringing goods into the State but also vehicles carrying goods from one local area to another. Hence, the petitioners challenged the provisions of the Act for being violative of Article 301 and Article 304 of the Constitution of India before the Haryana High Court.
Issue
Whether the Haryana Local Area Development Act, 2000 is violative of Article 301 and Article 304 of the Constitution of India?
Judgment
The High Court referred to the case of Bhagatram and Bihar Chamber of Commerce, (1962) where the High Court stated the concept of compensatory nature of tax has a wider meaning and there is a substantial link between the tax and the facilities extended to the manufacturer, hence the levy of tax cannot said to be invalid. Thus, in the instant case, the High Court upheld the validity of the said Act. It also stated that the entry tax was compensatory and did not violate Article 301 and Article 304 of the Constitution of India.
Further, in a subsequent judgment of Jindal Stainless Ltd. v. the State of Haryana, (2006), a Division Bench of the High Court held that the levy of entry tax was not compensatory in character and it is violative of the constitutional provisions. Thereby, the State of Haryana repealed the Act and enacted the Haryana Tax on Entry of Goods into Local Areas Act, 2008. Considering the importance of the issues in relation to Article 301, Article 304 and other provisions of Part XIII, inJindal Stainless Ltd. & Anr v. State of Haryana & Ors, (2010), the earlier judgments were referred to a larger bench of nine to decide the constitutional power of levy of entry tax on various parameters.
Case analysis of Jindal Stainless Steel Ltd. & Anr v. State of Haryana & Ors.,(2016)
Facts of the case
In Jindal Stainless Ltd. & Anr v. State of Haryana & Ors, (2010) it was held that the matter to decide the constitutional power of levy of entry tax on various parameters should be referred to a larger bench of the nine-judge bench. Hence, these appeals questioning the interpretation of Article 301 to Article 307 under Part XIII of the Constitution are the subject matter of this Constitutional Bench. The questions raised before the Constitution Bench are of great public importance; they involve the question to decide on the power of the State Legislature to levy taxes and the following judgment would affect the federal character of our Constitution, Centre-State relationship, and fiscal policy matters.
Issues involved
Whether the State Legislative enactments to levy entry tax should satisfy the test mentioned under clauses (a) and (b) of Article 304 separately or individually or together?
Whether the imposition to levy entry tax in relation to Entry 52 List II of Schedule VII violative of Article 301 of the Constitution?
Whether Entry 52 List II of Schedule VII of the Constitution only provides taxing entries and nothing expressed or explicit is mentioned under Entry 52 List II of Schedule VII which would compel the State to spend the tax collected within the local area?
Whether the entry tax levied on the goods meant for being sold, used, consumed come to standstill after the movement of goods stops in the “local area”?
Whether the interpretation of Article 301 to 304 in the context of tax on vehicles mentioned in the Atiabari case and Automobile Transport case apply to the entry tax case and if yes, then to what extent?
Whether the non-discriminatory indirect State tax passed on by traders to the consumers violates Article 301?
Whether a tax levied on goods within the State directly hurdles the trade and thus violates Article 301 and can be saved by Article 304 or any other article?
Whether entry tax levied under Entry 52 List II of Schedule VII of the Constitution is in the nature of a compensatory levy?
Whether the entire State or any part will be covered as a “local area” for the purpose of entry tax?
Whether there is a balance of freedom of trade and commerce in Article 301 in consonance with the State’s authority to levy taxes under Article 245 and Article 246 of the Constitution in the context of movement of trade and commerce?
Cases referred
Several cases and concepts of the law were referred to answer the questions raised before the Constitutional Bench. The power to levy tax is inherent in the people and acts as an attribute of sovereignty. Article 245 deals with the extent of laws made by the Parliament for the whole or any part of the territory of India and the legislature of a State can make laws only for the State or part. Article 246 provides for the distribution of the legislative powers. In the case of Synthetics and Chemicals Ltd v. the State of U.P, (1990) it was recognized that in India, the Centre and the States both enjoy exercising the sovereign power within the constitutional limits conferred upon them. While interpreting the provision of Part XIII, the Court referred to the case of ITC Ltd. v. Agricultural Produce Market Committee and Ors, (2002), where it was held that the Constitution of India must be interpreted in such a way as it does not temper the power of the State Legislature. An interpretation should be made to ensure the promotion of federalism while upholding central supremacy. Further, while deciding on the question of non-discriminatory fiscal measures, hurdles to free trade, commerce, and intercourse under Article 301 should be answered in the view of the Constitutional Scheme stating the separation of power in a federal system of governance.
The Court referred to the case of Kesavananda Bharati v. the State of Kerala, (1973) where the 13-Judge Bench stated that the Constitution should receive pragmatic interpretation that harmonizes and balances the aims and objectives in order to attain national goals. The Court observed that Article 301 enables goods, services, persons and capital to deal in trade, commerce and commercial intercourse throughout the territory of India. The expression “throughout” extends the ambit of freedom across and within state boundaries. The freedom guaranteed under this Article is not absolute; hence, it is subject to legislative control by the Parliament and the State Legislatures.
Judgment
The Supreme Court made the following observation:
The expression ‘Free’ used in Article 301 does not mean “free from taxation”.
Taxes that are non-discriminatory in nature are only valid and those taxes which are discriminatory in nature are unconstitutional.
A levy that violates Article 304(a) cannot be saved even if it satisfies the procedure under Article 304(b).
The concept of compensatory tax evolved in the Automobile Transport case and Jindal’s case (2002) is flawed and has no legal basis.
The judgment of the above-mentioned cases in Atibari, Automobile Transport and Jindal and all other judgments relating to the extent of the same subject matter is overruled.
Entry tax is levied on goods into a local area for use, sale or consumption is permissible however, similar goods are not produced within the taxing state.
States are within the powers to form their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State are not discriminated against. Also, such measures taken by the State should not contravene Article 304(a).
The question of whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the State from another country is yet to be decided.
Conclusion
The judgment does not resolve all the questions with regard to the levy of entry tax. In the instance case, the examination of the power of entry tax legislation will have to be decided on the discriminatory nature by the respective courts. Moreover, the levy of entry tax goes against the principle enshrined under the Goods and Service Tax (GST) regime. The aim and objective of GST are to create a common market throughout India without any taxes levied on the inter-state movement of goods. A constitutional amendment Bill may be required to facilitate the implementation of GST effectively.
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