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Taxation of cryptocurrency block rewards in Indian jurisdiction

By
Sneha Mahawar
-
0

This article is written by Nihaarika Sangwan. 

Introduction 

In early 2018, the Indian government declared that cryptocurrencies such as Bitcoin are not legal money in the country. Although the government has not enacted a regulatory framework for cryptocurrencies, an inter-ministerial government committee has drafted a bill titled “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019,” which is awaiting examination by all concerned departments and regulatory authorities before being introduced in Parliament.

The Bill aims to “prohibit cryptocurrency mining, holding, selling, trading, issuing, disposal, or use in the country.” 

The Reserve Bank of India (RBI) has issued a number of advisories urging people to use cryptocurrencies with prudence. The RBI has issued a warning to “users, holders, and traders about the risk of these currencies” and underlined that “no entity or firm has been given any licence or authorization to run such schemes or deals.” “In view of the related dangers, it has been decided that, with immediate effect, organizations regulated by the Reserve Bank shall not trade in VCs or provide services for helping any person or entity in dealing with virtual currencies,” according to the RBI notification. Such services include maintaining accounts, registering, trading, settling, clearing, lending against virtual tokens, taking them as collateral, opening accounts with exchanges that deal with them, and transferring/receiving money in accounts related to the purchase/sale of VCs. The RBI further specified that “regulated companies that already supply such services shall exit the partnership within three months of the date of this circular.”

On the other side, the Supreme Court of India overturned the Reserve Bank of India’s (RBI) 2018 circular prohibiting banks from dealing with cryptocurrency exchanges. The Court determined that a blanket prohibition was “disproportionate,” and that virtual currencies had caused no evident harm to the RBI-regulated institutes.

What is crypto-currency 

Cryptocurrency is a digital or virtual currency that is encrypted to prevent counterfeiting and double-spending. Blockchain technology, which is a distributed ledger enforced by a distributed network of computers, is at the heart of several crypto-currencies. Crypto-currencies are distinguished by the fact that they are not issued by any central authority, making them potentially impervious to government intervention or manipulation.

  • A cryptocurrency is a type of digital asset that is based on a network that spans a huge number of computers. They are able to exist outside of the control of governments and central authorities because of their decentralised structure.
  • The term “cryptocurrency” comes from the encryption techniques used to keep the network safe.
  • Many cryptocurrencies rely on blockchains, which are organisational mechanisms for ensuring the integrity of transactional data.
  • Blockchain and similar technology, according to many experts, will disrupt numerous industries, including finance and law.
  • Cryptocurrencies have been criticised for a number of reasons, including their use in illicit activities, exchange rate volatility, and the vulnerability of the infrastructure that helps to hold it up. On the other hand, their flexibility, divisibility, inflation resistance, and transparency have all been praised.

Backdrop

The currency’s origins may be traced all the way back to 1998, thanks to a computer programmer named Wei Dai. He first proposed the concept of cryptocurrency and called it B-Money which was anonymously distributed through an electronic decentralized cash system. This notion was carried forward and finally given substance in 2009 by Satoshi Nakamoto, the pseudonymous founder of Bitcoin, the most generally accepted and first decentralised Cryptocurrency.

According to Merriam-Webster, a digital currency is “any form of currency that only exists digitally, and is used to prevent counterfeiting and fraudulent transactions, as well as to govern the issuing of new units.  

The historic stance taken by the Indian Government 

In 2008, the term “crypto-currency” was coined for the first time. The first transaction took place in 2009 all over the world. Between 2012 and 2017, a slew of crypto-currency exchanges debuted in India, resulting in the birth of the Indian cryptocurrency market. Litecoin, Ripple, Dash, Monero, Ethereum, Zcash, and other prominent exchanges have all been built. The rising popularity of crypto-currency has caused the Reserve Bank of India to be concerned about a shift away from a traditional cult. Consider the RBI’s role as a statutory entity charged with establishing the Indian economy, as well as its powers and responsibilities, which include banking system management and monetary policy bodywork. Maintain price stability while controlling the pace of the economy’s expansion.

The Reserve Bank of India (RBI) recognised the shift in new technology in India in 2013 and released a press release cautioning the public against trading in virtual currencies, such as Bitcoin. However, after the demonetisation of high-value currency notes in November 2016, Bitcoin began to gain traction in India, resulting in a move away from traditional online banking services and the introduction of cryptocurrencies. The growing popularity and adoption of cryptocurrencies by various Indian consumers prompted the RBI to publish a press release in February 2017 reiterating its earlier concerns and clarifying that no business has been granted a licence to operate with Bitcoins. Siddharth Dalmia and Dwaipayan Bhowmickin filed two petitions in the Supreme Court in October and November 2017: one to ban the selling and purchase of cryptocurrencies in India, and the other to regulate cryptocurrency.

In addition, the Indian government established a high-level inter-ministerial group to regulate Bitcoins and virtual currencies. This committee published reports in July 2019 suggesting that private cryptocurrencies be banned in India; however, no such legal provision was enforced. The RBI issued a circular on April 6, 2018, forbidding banks from not just dealing with or settling virtual currencies, but also from providing any services to entities or organisations dealing with bitcoins or virtual currencies.

This cycle undermined cryptocurrency exchanges’ business operations, as they relied on banking services to convert cash to cryptocurrencies and vice versa. It had an impact not only on bitcoin exchanges, but also on conventional businesses, such as paying for office space, personnel salaries, server space, and so on.

The members of the Internet and Mobile Association of India (“IMAI”) filed a writ suit in the Supreme Court on the grounds that the RBI circular had dealt a severe blow to cryptocurrency activities, resulting in a significant reduction in transaction volumes.

Blockchain 

Blockchain is one use of distributed ledger technology (DLT), which is primarily used to maintain a decentralised database (that is, ledger), with no central authority to authorise and keep a record of the database. The value of a cryptocurrency is determined by demand, supply, media projections, and coin mining activities. Unlike gold, which backs a reasonably stable fiat currency, they are thought to be very volatile, with value swinging dramatically in both directions overnight.

Taxation is a key stumbling block when it comes to regulating cryptocurrencies. Many governments agree that cryptocurrencies should be taxed, but disagree on whether they should be taxed as a currency or a commodity. Border taxes are another flaw that has to be addressed, as the ease with which tokens may be brought through border checkpoints without paying border taxes underlines the need for a stronger framework both inside and between countries.

It was the world’s first cryptocurrency and one of the first Blockchain apps that did not require users to trust a central authority. The business adopted this new technology because of its fundamental advantages, such as reliability and distributed consensus.

Cryptocurrency’s purpose

Cryptocurrencies were created to make it easier for two people to send money without the involvement of a trusted third party such as a bank or credit card company. Instead, these transfers are protected by the use of public and private keys, as well as various types of reward schemes like: Proof of Work and Proof of Stake. In modern cryptocurrency systems, a user’s “wallet,” or account address, has a public key, whereas the private key is only known by the owner and is used to sign transactions. Fund transfers are conducted with low transaction costs, allowing users to avoid the hefty fees charged by banks and financial institutions for wire transfers.

Crypto-currency transactions are ideal for a variety of illicit acts, including money laundering and tax evasion, due to their semi-anonymous character. Crypto-currency supporters, on the other hand, place a high emphasis on anonymity, citing benefits such as whistleblower protection and demonstrators living under harsh regimes as examples. Some cryptocurrencies have a higher level of privacy than others. Bitcoin, for example, is a comparatively poor option for conducting illicit business online because of forensic study of the Bitcoin blockchain, which has helped authorities to identify and convict perpetrators. There are, however, more privacy-oriented currencies like Dash, Monero, and ZCash, which are significantly more difficult to trace.

Judicial approach to bitcoin

The Supreme Court struck down a long-standing circular prohibiting cryptocurrency circulation in the country on the following grounds in the case of Internet and Mobile Association v. RBI, a 180-page lengthy judgment by Justice V Ramasubramanian:

  1. The Reserve Bank of India (RBI) cannot abuse its regulatory authority over virtual currencies.
  2. Any exchange that supports the use of cryptocurrency is prohibited, which is disproportionate;
  3. It is also ultra vires under Article 19(1)(g) of the Constitution, which says that the basic freedom to engage in any activity, trade, or business protects businesses engaged in legal trade.

The key issues of the decision are worth noting because the court and petitioners conducted considerable worldwide benchmarking in defining cryptocurrencies, their identity, the instrument they include, and who has the jurisdiction to regulate them. Many organisations throughout the world regard cryptocurrency as having money-like characteristics, despite the fact that none of them have recognised it as legal tender, therefore the RBI has the authority to regulate virtual currencies in this scenario. 

The RBI has spoken in the past about confronting its entities and corporations to avert harm to the banking sector and the economy, but there is no actual evidence to support this claim. It is critical to pay attention to the three points listed below:

  • The RBI has not detected any harm caused by the virtual currency function’s actions in the last five years or more; 
  •  Virtual currencies are prohibited;
  • Even the Inter-Ministerial Committee, which was established in 2017 and recommended a specific legislative framework as well as the establishment of a new law, the Crypto-taken Regulation Bill 2018, aimed to regulate rather than prohibit the measures.

The court stated that RBI did not establish alternative procedures to protect against the aforementioned dangers. The court stated to the president of the European Union Parliament that the European Central Bank and Parliament had looked into not abandoning the cryptocurrency business, but instead recommended strengthening the financial system and regulatory schemes and that the RBI had overlooked alternative measures in this case.

In the case Modern Dental College and Research Centre v. State of Madhya Pradesh, 2016, the court looked at the four-prong standards set by the petitioners to evaluate the proportionality of the action that the RBI measures should pass, as follows:

  • RBI measures should be designed for a specific purpose;
  • They should be rationally connected to the purpose; 
  • And there should be no less invasive alternatives.
  • There should be a connection between the importance of goals and the restriction of rights.

The court stated that the RBI’s use of terms such as “money laundering” or “black money” does not qualify as a reasonable purpose, and that other options should have been investigated. The most important takeaway from this decision is that the Supreme Court chastised policymakers, three committees, and two draught bills for failing to take a clear stance on cryptocurrencies.

This ruling solely covers the firms listed in Article 19(1)(g), not amateurs ( hobbyists, traders in VCs, and VC Exchanges).

Why was it banned in India at first

Several crypto-currency transactions were unregulated after the introduction of Bitcoin in India since there was no clear regulation barring or regulating their use. The Reserve Bank of India released a crypto-currency circular in April 2018 that did not prohibit the usage of crypto-currencies outright but did restrict the provision of banking services to anyone who dealt in them. As a result, adopting a transaction prohibition helped the usage of crypto-currencies; nevertheless, the Supreme Court judgment gave those dealing with these currencies a short reprieve.

Tax treatment 

General Treatment

The Income Tax Act of 1961 governs the “levy, administration, collection, and recovery” of income tax in India. The Income Tax Department is a government body that collects direct taxes and is led by the Central Board of Direct Taxes. It is part of the Ministry of Finance’s Department of Revenue. There does not appear to be any clear guidance on the taxation of cryptocurrencies and mining-related activity from tax authorities. Despite the lack of clarity on cryptocurrency legality and taxation, it appears that cryptocurrencies are taxable. According to a tax expert quoted in an industry publication, “Indian tax requirements apply regardless of the legal status of income.” Furthermore, the research states that “even if a prohibition is implemented, taxes on crypto income will continue to apply, and it will not prevent tax authorities from pursuing unaccounted or untaxed revenues earned from dealing in crypto virtues.”

 The Indian Ministry of Finance’s Office of the Deputy Director of Income Tax, which is part of the Income Tax Department’s Investigation Division, “has reportedly been sending letters to Indians asking a long list of questions regarding their dealings in cryptocurrencies,” according to the expert. Such notices are issued when tax authorities have reason to believe that a person has concealed or is likely to conceal a particular income.

According to an article in an Indian online legal newspaper, “one must investigate the nature and manner in which the crypto-currency is held by the assessee in terms of tax treatment.” If it’s kept as an investment, it could be regarded as a capital asset that’s subject to capital gains tax when sold. If, on the other hand, the cryptocurrency is kept as stock-in-trade in the usual course of business, any earnings will be regarded as business income and subject to tax under the heading of profits and gains from business or profession. A 12-month holding duration can be used to determine whether a capital asset is a long or short term.”

Mining, Staking, Airdrops, and Forking

Mining, staking, airdrops, and forking are all activities that have no explicit tax guidelines.

Some experts regard bitcoin mined as a self-acquired capital asset taxable as a “capital gain” under Section 45 of the Internal Revenue Code. “Income obtained through bitcoin trading is not regarded as a normal income,” according to one Indian accounting firm. Instead, it’s considered a capital gain. Profits made from the sale of a movable or immovable asset are typically referred to as capital gains. Mining-generated cryptocurrency assets are referred to as “self-generated capital assets.” In the ordinary course, subsequent sales of such bitcoins would result in financial gains.” However, in order to compute “the cost of acquisition” (COA) for self-generated assets, one must rely on section 55 of the Act, which does not apply to cryptocurrencies, therefore no COA can be computed and no capital gains tax is owed.

According to a chartered accounting firm based in India:

It should be emphasised, however, that because bitcoin is a self-created asset, it is impossible to quantify the cost of acquisition. Furthermore, Section 55 of the Income Tax Act of 1961, which determines the cost of acquisition of some self-generated assets, does not apply. As a result of the Supreme Court’s judgment in the case of B.C.Srinivasa Shetty, the capital gains computation process collapses. As a result, there would be no capital gains tax on bitcoin mining.

This posture will be maintained until the government considers amending Section 55 of the Act. Given that the Indian tax rules are absolutely quiet on the taxability of bitcoins at present time, we believed it would be appropriate to comment on a possible contrary perspective by the income tax authorities.

It’s possible that the department won’t even view bitcoins as capital assets. As a result, the capital gains provisions would not apply at all. As a result, the value of bitcoins received from mining may be taxed under the heading “Income from other sources” by the income tax authorities. The emphasis in the original is mine.

According to one law journal article, “it is difficult to say that such gains would be tax-free for long,” and “reference may be made to valuation officer under Section 55A of the Act to ascertain the fair market value of cryptocurrencies at the time of creation, and that would constitute the COA of the capital asset.”

The Indian government contemplated putting a GST on cryptocurrency commerce in 2018, which would include classifying mining “as a provision of service because it generates bitcoin and involves rewards and transaction fees.” And that “tax should be collected from the miner on transaction fees or rewards, and individual miners will have to register under GST if the prize value surpasses Rs 20 lakh [approximately US$0.27].”

The Central Economic Intelligence Bureau, which operates as a think tank arm of the Ministry of Finance, performed research and proposed an 18 percent GST on bitcoin transactions at the end of December 2020.

Bitcoins stored as a form of investment are exchanged for actual money

If bitcoins, which are capital assets, are held as an investment and then transferred in exchange for real cash, the increase in value will result in either a long or short-term capital gain, depending on how long the bitcoin has been held. Long-term profits would also be taxed at a 20 percent flat rate, but short-term profits would be taxed at the individual slab rate. After taking into account the benefit of indexation, the cost of acquisition for long-term capital gains will be estimated.

To better comprehend this, consider the following example:

Reiterating the income tax authorities’ likely opposing viewpoint described in Point 1 above, the IT authorities may not regard Bitcoins to be a capital asset, and so capital gains regulations would not apply. As a result, income tax authorities may elect to tax bitcoin gains under the heading “Income from other sources.”

Furthermore, if the income is taxed as “Income from other sources,” the individual will be required to pay taxes at the rate relevant to his tax bracket. For example, if his taxable income exceeds Rs 10 lakh, he will be taxed at a rate of 30%, rather than the flat rate of 20% he would face if he were taxed. If taxed under income from other sources, the benefit of indexation that would be available if taxed under capital gains would not be available.

Bitcoins held as stock-in-trade are exchanged for actual money

The gains derived from bitcoin trading activity would be liable to taxation at the individual slab rates because they are derived from a business.

Bitcoins are used as a form of payment for products and services

Bitcoins received in this manner will be regarded in the same way as money. In the hands of the recipient, it would be considered income. Furthermore, because the recipient’s income was earned through a company or profession, he would ordinarily be taxed under the heading earnings or gains from a business or profession. There is still a lack of clarity on the bitcoin disclosure required on income tax return forms.

“112 Distributed ledger system or blockchain technology permits the organization of any chain of data or transactions without the need for intermediaries,” our Finance Minister, Mr. Arun Jaitley, noted in the 2018 budget speech. The government does not consider cryptocurrencies to be legal cash or coins and will take all necessary steps to prevent them from being used to finance illegal activities or as part of the payment system. The government will investigate the use of blockchain technology in a proactive manner in order to usher in the digital economy.”

Furthermore, the Central Bank has opted to reaffirm its earlier warning to “users, holders, and traders of Virtual Currencies (“VCs”), including bitcoins, about the potential economic, financial, operational, legal, customer protection, and security risks involved with dealing with such VCs.” As a result, given that bitcoin transactions are rapidly increasing in India while laws regulating them are mostly lacking, we are confident that the government would issue a notification soon to clear up the ambiguity around bitcoin’s legality, taxability, and transparency requirements.

Conclusion

As a healthy democracy, we must assure reasonable and fair regulation in light of the forthcoming technological advancements in society; yet, the Supreme Court has ruled that crypto is not a fundamental part of the blockchain. The court mentions crypto as a “by-product” of such innovation in its decision; this is the crux of why India’s positions and cryptocurrency are out of step with the rest of the world due to a lack of investigation into the technical function of cryptocurrencies and how to keep network incentives in place.

It is crucial to note that the judgment only applies to businesses under Article 19(1)(g) and not to hobbyists (hobbyists, dealers in VCs, and VC Exchanges) as described in the current case, therefore people in this group are not protected. Given India’s economic growth, the future of cryptocurrencies is dependent on the RBI, as well as legislative action or legislation to ban or legalise cryptocurrencies.

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Religious institutions under RTI Act, 2005 : a controversy

By
Sneha Mahawar
-
0

This article has been written by Arundhati Roy.

Introduction

The Parliament enacted the Right to Information Act in 2005 (hereinafter called the RTI Act 2005) to entitle the citizens to access information pertaining to a government department or any Public Authority. The right to information or RTI is a cardinal part of freedom of speech & expression guaranteed under Article 19(1)(g) of the Constitution of India, which has been turned into a statutory right with the passing of this Act by the legislators. Significantly, this right enables the citizens to enjoy democracy in its true spirit as it intends to make the government accountable to the governed and make its working mechanism transparent. It is to be noted that the RTI Act has also been brought into existence to restrain the prevailing corruption in the government system. 

On bare perusal of the RTI Act, it is not stated that information concerning religious institutions is exempted from disclosure. As there is no explicit provision, it is a conundrum whether religious institutions should be obligated to provide information under the RTI Act, 2005. Until now, any information sought under RTI Act, 2005 regarding religious institutions such as temples, mosques, and churches has eventually landed into a controversy, raising the question of whether religious institutions come within the ambit of Section 2(h) of the RTI Act, 2005. In the present article, the impugned question, whether religious institutions can be brought under the scope of the RTI Act has been discussed in the light of the judgments made by the Madras High Court, Central Information Commission, Hyderabad High Court, and Kerala High Court.

RTI queries related to Ayodhya Ram temple construction

After the Supreme Court’s Landmark verdict on Ayodhya Land dated 9.11.2019, the Central Government had constituted the Shri Ram Janmbhoomi Teerth (SRJBT) Kshetra by a gazette notification on February 5, 2020. However, it is to be pointed out that even after the passing of a year, the Ministry of Home Affairs (MHA) has failed to provide any particulars regarding the appointment of a Central Public Information Officer (CPIO) of the SRJBT Kshetra, which is mandatory under Section 5(1) of the RTI Act. Under Section 5(1) of the RTI Act, it is mandatory to appoint a CPIO after establishing a Trust.

The Shri Ram Janmbhoomi Teerth Kshetra came into the limelight after the media reported that the trust had collected a whopping Rs 2100 crore as of January 2021. The fact that the amount collected by the trust was mostly public money should be taken into account, which makes it crucial that the trust maintain transparency. Another point of consideration is that, since the public has contributed to the trust, they have the right to know how their money is being spent. The trust can show its accountability only by providing information under the RTI Act, which is not the current scenario.

It is pertinent to know that an RTI activist had filed an RTI  with the Ministry of Home Affairs and the SRJBT Kshetra. The RTI Application sought the details of the Central Public Information Officers (CPIO) and First Appellate Authority (FAA) for the SRJBT Kshetra, which is a public authority as the Central Government has established it.

The activist was surprised to see that he did not receive any reply from the SRJBT Kshetra. Aggrieved on receiving ‘no response,’ the activist filed a First Appeal dated 24.02.2021 with the Ministry of Home Affairs and sought information by asking the same query. This time also, the activist met with sheer disappointment as the reply received from the MHA dated 8.03.2021 stated that they do not have the information asked for. Furthermore, it was also stated in the reply that:

  1. The Ram Janbhoomi Trust is an autonomous organization/body.
  2. Information on SRJBT Kshetra’s CPIO is not available with the MHA.

On perusing the whole reply as provided by the MHA, it is nowhere stated that the Ram Janmbhoomi Trust does not come within the ambit of the RTI Act. So, this is again a suspicious factor as to why MHA did not provide information regarding the CPIO of the SRJB Kshetra.

Why should Shri Ram Janbhoomi Trust come under the scope of the RTI Act, 2005

The objective of the RTI Act says that it is an “Act provide for setting out the practical regime of right to information for citizens to secure access to information under the control of Public Authorities, in order to promote transparency and accountability in the working of every public authority.”

It is clarified from the objective of the RTI Act that every public authority shall come within the purview of the RTI Act and hence are responsible for furnishing any information sought under the RTI Act.

Section 2(h) of the RTI Act defined the term “Public Authority,” which means any authority or body or institution of self-government which is established or constituted:

  1. by or under the constitution;
  2. by any other law made by Parliament;
  3. by any other law made by the State legislature;
  4. by notification issued or order made by the appropriate government;

and includes any-

  1. body owned, controlled, or substantially financed;
  2. Non-governmental organizations are substantially financed, directly or indirectly, by funds provided by the appropriate government.

Moreover, Section 2(a) of the RTI Act provides for the definition of an Appropriate Government for better understanding. According to Section 2(a) of the RTI Act, “Appropriate Government” means “appropriate government” in relation to a public authority which is –

  • Established;
  • Constituted;
  • Owned;
  • Controlled;
  • Substantially finance.

by funds provided directly or indirectly – 

  1. by the Central Government or the Union territory administration, the Central Government;
  2. by the State Government, the State Government.

In order to determine whether any authority, body, or institution is a public authority, it has to fulfill the criteria as laid down under Section 2(h) of the RTI Act. As per the gazette notification issued by MHA for the constitution of SRJBT Kshetra dated February 5, 2020, the Ram Janmbhoomi Trust is a public authority without any uncertainty. Thus, it comes within the ambit of the RTI Act and is obligated to provide information under the RTI Act.

Premanand, Hereditary Trustee Etc. v. The Commissioner H. R. & C. E., Etc. 

In the instant matter, the writ petition was preferred under Article 226 of the Constitution of India and was filed challenging the impugned circular issued by the Commissioner of the Hindu Religious and Charitable Endowment Department on March 27, 2012. Through the said impugned circular, the Commissioner of HR & CE informed all Zonal Joint Commissioners and Assistant Commissioners of the HR& CE Department that in respect of temples in which hereditary trustees are administering the temple as well as where there are scheme decrees, the trustees of the concerned temple were to be appointed as the Public Information Officers. This became necessary as there was a delay in providing information to an information seeker from those temples and also, the Tamil Nadu Information Commission also made a recommendation.

The petitioner contended that a temple coming under the purview of the HR&CE Department is not an administrative unit or an office of a Public Authority. Therefore, it cannot be brought under the definition of Section 2(h) of the Right to Information Act, and the petitioner had relied upon the judgment in the matter of “Bhanunni v. Commissioner, Hindu Religious and Charitable Endowments (Admn.) Department by the Kerala High Court.”

The decision of Madras High Court

The Madras High Court dissented the petitioner’s contention that the temple cannot be brought under the purview of the RTI Act.

The Court observed that “in the present case, the temple is a public institution. Merely because a hereditary trustee administers it, the public character of a temple will not disappear. Temples are clearly brought under the HR&CE Act, and further, public collections are made for conducting various activities of the temples including rituals.”

The Court also pointed out that “the State Government also spends huge amounts every year for administering the department to manage the temples and releases various grants for conducting Kumbaghishekams periodically.”

“Therefore, the temple is not a private institution for the RTI Act. In fact, the temple is substantially financed by the State either in the form of administrative expenses or in the form of non-recurring expenditure; certainly, it would be the institution covered by the provisions of the Act”, held the Court. 

With this observation, the Court dismissed the petition and further said that “once it is held that the provisions of the RTI Act cover the temple, certainly the unit will have to have a public information officer. In respect of hereditary temples and units run by scheme decrees, the information is only available with the trustees or trust boards. It is too much for the executive to seek information from those trustees and thereafter pass on the information to an information seeker. As rightly found in the impugned order, having dual authority will only create bottlenecks in the free flow of the information. As to what information is to be provided is also circumscribed by the provisions of the RTI Act.”

Thus, in the instant matter, the Madras High Court had brought the temples within the scope of the RTI Act. Furthermore, the Court highlighted that “under the RTI Act, even a private body which the State substantially funds is covered by the RTI Act. When information is sought for and if the temple’s activities will be kept secret, it may deteriorate the temple administration. There cannot be such contention that temple activities are private activities and not covered by the provisions of the RTI Act.”

Central Information Commission (CIC) and Tirupati Trust

A social activist, BKSR Ayyangar, had filed an RTI application with the PMO with the query that what action was being taken by the Government of India on his representation for declaration of Tirumala Tirupathi Devasthanam (TTD) temples as historical and national heritage monuments and had asserted that unless Tirumala Tirupathi temples are protected as ancient monuments, the nation will “lose its ancient structures, historical evidence with inscriptions, and cultural heritage.”

As Ayyangar was dissatisfied with the reply received from the PMO, he had approached the First appellate authority, the Ministry of Culture, who had transferred the appeal to the FAA of Archeological Survey of India (ASI). On being unsatisfied with the reply of the First appellate authority, the activist had gone for a second appeal which was filed before the Central Information Commission. The ground for filing the second appeal was that “incomplete information about the action in preserving the heritage structures in Tirumala Tirupati” was provided.

While holding that the Union Ministry of Culture and its Department of Archaeology have a duty to protect national monuments and ornaments of the Vijaynagar empire, the CIC had also observed that TTD had declined to answer under the Right to Information Act. The CIC held that being a public authority, the trust managing the affairs of the temples was answerable under the RTI Act.

Noting the submissions made by the activist Ayyangar in his petition, the CIC held in its order that “the TTD, being an intricate part of endowment administration, came into existence by an exclusive chapter in Andhra Pradesh (AP) statute, is a public authority. It deals with the people’s money and is totally controlled by the Government of AP, through Endowments Department, its members and chairman are appointed by the Government of AP. It is answerable as trust, as receiver of donations, as manager of ancient national monuments of the world heritage, whether declared or not under the Central and State Acts, as representative/part of the Government of Andhra Pradesh under the Act of AP and also under RTI Act, 2005.”

“Based on facts, law, their acquiescence, and judicial precedents, the Tirumala Tirupathi Devasthanam has to be a public authority covered squarely under Section 2(h) of the RTI Act,” said the Central Information Commission.

G. Rajenderanath Goud v. Government of Andhra Pradesh 

Various religious institutions, charitable endowment trusts, and some of the trustees/Executive Officers of temples had filed writ petitions in G. Rajenderanath Goud v. Government of Andhra Pradesh before the High Court Telangana and Andhra Pradesh. All these writ petitions were heard together as they were filed challenging the circulars issued by the government, which directed the respective organizations to designate and constitute ‘Public Information Officers’ and other officers to operationalize the mechanism for providing information under the RTI Act, 2005.

The learned counsel for the petitioners contended that temples/charitable institutions do not answer the description ‘public authority as defined under Section 2(h) of the RTI Act 2005; hence, there is no obligation on Trustee, Chairpersons, Trust Boards and Executive Officers of the subject institutions to respond and furnish information concerning the temples/ temples institutions under the RTI Act. 

Further, in support of their contention, the counsel for the petitioners had placed reliance on the judgment of the Kerala High Court in the matter of “Bhanunni v. Commissioner, Hindu Religious and Charitable Endowments (Admn.) Department” [W.P. No.23149 of 2009], besides other judgments. In the instant case of Bhanunni v. Commissioner, the Kerala High Court had held that “Hindu Religious institutions and endowments are not the ‘public authorities’ as defined under the Right to Information Act, 2005 and the provisions of that Act do not apply to those institutions and their offices, officers and employees and the Executive Officer if any appointed by the government.”

Adjudication by the Telangana and Andhra Pradesh High Court

The Court, after taking consideration the submissions made by the learned Counsels, said that “on a close examination of Section 2(h), applying the tests laid down in the definition, it would be clear that the same does not fall under Section 2(h) (a) (b)& (c) as the temple is not established or constituted by or under the constitution, or by any other law made by the Parliament or State Legislature. The establishment or running of the temple’s affairs cannot be either owned, controlled, or substantially financed by the government. Though a temple could be said to be a non-governmental organization, as it does not depend for its finances, in any way, much less substantially, on the government either directly or indirectly, the same is also outside the purview of Section 2(h)(d)(ii).”

Moreover, the Court took note of the counsel for the petitioner’s reliance upon the verdict of Kerala High Court in the matter of Bhanunni v. Commissioner, Hindu Religious and Charitable Endowments (Admn.) Department wherein it was held that Hindu Religious Institutions are not public authorities as per the RTI Act.

The Court agreed with the contentions of the various religious institutions, which can be inferred from the further observation of the Court. “The argument of the learned Counsel so far as the power of the State or its authorities concerning monitoring certain affairs of the temple cannot be denied; however, the question which begs consideration is whether, in the first instance, the institution falls within the definition of ‘public authority,’ as defined under the Act and not as understood either in general parlance or for the purpose of Article 12/226 of the Constitution which expanded the parameters of the ‘State.’ The answer would be a definite ‘no’ on account of the statutory provisions restricting the scope and authority in the Act,” observed the Court.

With the above observation, the High Court of Telangana and Andhra Pradesh held that “Religious institutions like temples, churches, mosques, which are not financed/funded by the government, do not fall within the purview of Right to Information Act, 2005.” The Court gave the said verdict on November 14, 2018.

Parting observation by the Court

The High Court, after giving the above judgment in the matter of G. Rajenderanath Goud v. Government of Andhra Pradesh, further held that since the religious institutions, nowadays, are receiving enormous amounts through different sources in the form of donations, “it is desirable to amend the Act at least to bring in its fold all the registered temples/institutions having income over and above a particular limit, to furnish information so as to have a greater vigil with respect to utilization of the monies, conducting affairs transparently and to achieve the objects of the RTI.”

Conclusion

After analyzing the decisions by the Madras High Court, Kerala High Court, High Court of Telangana and Andhra Pradesh, and the Central Information Commission, it is perspicuous that religious institutions which receive enormous amounts of donations from the public,  substantially funded by the State or are managed or under the control of the State are a public authority as per the meaning given in the RTI Act and therefore answerable under the RTI Act, 2005. However, it is also pertinent to note that religious institutions such as temples, mosques, churches, which do not receive any financial aid or are funded by the government, do not fall within the ambit of the Right to Information Act, 2005 and hence are not under any obligation to provide information under the RTI Act. Therefore, it is essential to apply the test laid down under Section 2(h) of the RTI Act to declare any authority or body or institution as ‘public authority,’ to bring it within the purview of the Right to Information Act, 2005. 

Also, in the words of Justice Challa Kondana Ram, in the matter of Rajenderanath Goud, huge amounts of donations that the religious institutions receive should be brought under RTI Act as to know how the money is being spent, how the affairs of these institutions are managed, everything should be transparent to the public. Therefore, to conclude, it can be said that the Right to Information Act should be amended so as to include religious institutions explicitly within its purview. Further, as it can be seen from the Ram Janmbhoomi Trust, wherein they have failed to comply with the provisions of the RTI Act, 2005 even after being clearly falling within the definition of a public authority, it stresses the point that RTI Act needs to be implemented stringently and a need to set up a mechanism to keep a check that the government is taking the efforts whether Central or State to implement the Act to achieve its objective to the fullest. In addition to this, it is paramount that the religious institutions that come within the ambit of the Right to Information Act, 2005 should endeavour to take all efforts necessary for providing information under the RTI Act and must comply with the provisions of the Act.

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All you need to know about the world’s first-ever Patent granted to an Artificial Intelligence system by South Africa

By
Oishika Banerji
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0

This article has been written by Krati Agarwal pursuing the Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho.

Introduction

For the first time in history, an Artificial Intelligence System has been recognized as an inventor of the innovative machine and granted a patent for it’s invention in South Africa. The invention here is a “food container based on fractal geometry,” which provides an interlocking system, more accessible for robots to grab. However, the most striking feature of this patent is its inventor. The inventor is DABUS (Device for Autonomous Bootstrapping of Unified Sentience), an AI created by Stephen Thaler. DABUS is a “creativity machine” that uses Machine Learning principles to learn and come up with its unique ideas. This patent grant has received several backlashes from around the world, especially from Intellectual Property experts calling it an invalid grant. It is important to note that the application for patent was filed with patent Offices around the World from the USA to the UK to Australia, where it was rejected except South Africa. South Africa has become the first country globally to recognize that an AI system is capable of holding rights, in this case, patent rights. Soon after, even Australia granted it patent in consequence of its Court ruling in favor of the applicant in Thaler v. Commissioner of Patents [2021 (FCA)879]. This article covers in detail; the invention and AI machine, the concept of patents in general, the legal implication of this step, and whether this is a step in the right direction or not.

Invention & AI

DABUS was created by Dr. Stephen Thaler, who is considered a pioneer in AI and the programming world. He has been given the title of patent owner for this invention, while DABUS is granted the title of inventor.  The invention comprises a system in food containers that provides accessible grabbing capacity for robots. The AI machine itself has developed this innovative idea without the help of any human. At this juncture, let us understand how DABUS functions.

DABUS works on Machine Learning. This means that DABUS has an artificial neural network in which various algorithms are coded. This neural network then studies and identifies the patterns between the information given to it and comes up with its understanding of the concept. This is just like a human brain but in an artificial way. DABUS further learns new concepts based on new data and can comprehend any existing problem and provide solutions for it. Hence, DABUS came up with this unique patentable idea, making it easier for robots to grab foot containers and thus increasing their efficiency.

Ingredients to qualify as Patent

A patent is an intellectual property right granted to the owner of an invention to use and exploit it exclusively for a fixed period. This exclusive right is granted in exchange for making the information about the invention public. The system of patent law has been created to promote research and development. Without it, there would be no incentive for inventors and developers to come up with innovations. This invention was not granted a patent from many jurisdictions, including the USA, UK, and Australia, with reasons discussed below. Thus, it becomes crucial to have a look at the laws of patents of these nations.

There are similar criteria for making any invention eligible for patent around the World. These qualifications are:

  1. Novelty: It should be something new, original, and different.
  2. Non-obviousness or an inventive step: The invention shouldn’t be obvious to a person skilled in that industry area.
  3. Utility: There should be some usage of the invention; it should serve a purpose.

The present invention ticks all the boxes of novelty, non-obviousness, and utility. However, it still wasn’t granted patent in many countries. The reasons stated by them while rejecting its application were:

  1. Their national patent laws only recognize humans as inventors. This is because of the usage of pronouns “him” “her” in the legislative language. Since the inventor here is not human, they cannot grant it a patent.
  2. The idea behind granting a patent is based on the “mental faculty” or “mental conception” of a person. These are absent in an AI-based system. (Even though the artificial neural network is the same as mental conception)
  3. Granting a patent means giving a right. A machine cannot own any right, and hence the application was rejected. 

(These are common reasons based on the existing patent laws around the world. Some can argue changes to be made to the rules based on the latest developments, but whether the changes are a good idea or not is discussed in the next segment.)

Nevertheless, South Africa granted it the patent. However, South Africa’s patent office has not yet released any statement citing reasons for such a grant. We can only anticipate reasons like South Africa wants to promote itself as a supporter of IP rights or wants to be ahead in technical discussions and surpass the EU and USA. This means South Africa is the only jurisdiction that recognizes that machines can own rights, are capable of holding patents, and have a mental capacity.

Is it a step towards future innovations?

To determine whether it is a right step or not, it is essential to analyze the role of patents. patents, as stated above, provide an exclusive right to the inventor or owner to exploit its invention for a specific period. This exclusive right is the incentive for inventors around the world to innovate and come up with various works based on deep research. This promotes a culture of productivity and innovation and is necessary for the development of humankind and society as a whole. By taking the exclusive right to exploit, the inventor shares the information with the public, which other innovators can work upon to develop more unique concepts and solutions to complex problems. This cycle is thus very essential. Today we are engulfed by technology. Not only has it made our jobs more accessible but also made us more productive and creative. Any invention created by AI should be recognized as it contributed to the growth of society.

Arguments in favor of AI being granted Patent 

Artificial Intelligence is the product of human creation. AI replicates the human mind as it also works on a Neural Network, much like we humans function on a system of neurons. A human mind capable of the invention is rewarded for it by the patent laws. These laws use the term “mental conception” as a necessary element for recognizing any innovation. It is argued that “mental conception” is similar to “machine conception” because both require comprehension based on its information. Even a human mind is not born with information; it collects it over time. Similarly, machine learning takes inputs from its surroundings. Both of them then comprehend the data based on their perceptions. There is no role of humans at this phase in a machine. Hence, a machine deserves a patent.

Arguments against AI being granted Patent

Although it might seem right in the interest of society that AI should be granted patent rights, it is not as simple as saying it. It poses many practical legal questions.

To be granted a patent, the AI should be capable of holding rights. AI doesn’t have any legal personality, and hence it cannot own, transfer or assign rights. There have been debates around the world about granting legal personality to AI. Legal personality carries with itself certain rights, duties, and responsibilities. An AI is not able to exercise any of them. Similar debates arose at the time when a self-driving car killed a woman in the USA. Although eventually the case was settled out of court, this incident brought meaningful discussions on board. In such a scenario, can an AI machine be held responsible for this accident? Clearly no, then how can we talk about giving it a legal personality.

Possible solution

It’s clear that we need some recognition of AI-based inventions to promote growth in society. However, legal personality isn’t the way forward. A separate category of personhood needs to be created to achieve this goal. In 2017, The European Parliament passed a resolution considering the possibility of creating “electric persons”. They opined, “creating a specific legal status for robots in the long run, so that at least the most sophisticated autonomous robots could be established as having the status of electronic persons responsible for making good any damage they may cause, and possibly applying electronic personality to cases where robots make autonomous decisions or otherwise interact with third parties independently”. It is interesting to note that the Indian Parliamentary Standing Committee came up with a report to incorporate AI-based advancement into Intellectual Property Regime in India this year. They also suggested that a separate category of personality should be created to further the growth of AI system-based innovations.

Conclusion

An AI getting inventor status is a piece of big news. It challenges the settled principles of law and demands an amendment to be made in its favor. As discussed, a legal personality is not the way to go; instead, a separate personality can serve the purpose. This separate personality will have rights but not have responsibilities of its own. Jurisprudential concepts have to be dug into to come up with a perfect solution.  Meanwhile, it can be argued that it is not necessary to grant inventorship/ownership to the AI system. Instead, the status can be granted to the owner of the AI system. This will increase innovation. How will a machine be motivated to innovate? Surely it can think like humans, but it doesn’t have the same aspirations as them. Nevertheless, if the legal systems grant these titles to AI systems, this will be the most exciting outcome of the technological revolution. 

References

  1. https://spicyip.com/2021/08/parliamentary-standing-committees-recommendations-concerning-ai-and-ip-a-little-late-or-way-too-early.html.
  2. https://www.mondaq.com/advicecentre/content/1022/Patent-Law.
  3. https://www.managingip.com/article/b1sx9mh1m35rd9/dabus-south-africa-issues-first-ever-patent-with-ai-inventor.
  4. https://www.thehindu.com/sci-tech/technology/in-a-world-first-south-africa-grants-patent-to-an-artificial-intelligence-system/article35817497.ece.

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Analysis of Protection from Online Falsehoods and Manipulation Act of Singapore

By
Sneha Mahawar
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0
Protection from Online Falsehoods and Manipulation Act of Singapore
Image Source: https://rb.gy/mazpnq

This article is written by Pratyush Bhattacharjee, a student of Symbiosis Law School, Noida. The article discusses the Protection from Online Falsehoods and Manipulation Act of Singapore and its various provisions along with the concerns it brings over free speech. 

Background

Addressing the spread of false information has always been a challenge for governments around the world. With the internet becoming widely accessible to the general population since the last decade, this challenge of appropriately regulating the spread of information without endangering freedom of speech has become more difficult due to the transfer and accessibility of information becoming easier. False information or as it is commonly known as “fake news”, refers to fabricated information without actual facts baking them up. Such news is believed to be capable of causing turmoil among the population along with posing a threat to national security. 

In most countries, the government’s response to the spread of such information has ranged from fines and imprisonment to actual shutdowns of internet services. Singapore on the other hand decided to introduce legislation in 2019, called the Protection from Online Falsehoods and Manipulation Act (POFMA) with the objective of tackling the propagation of false information through the internet. The inception of the Act first began in 2017 with the speech delivered by the then Minister of Law and Home Affairs, K Shanmugam, who sought to bring the issue of fake news into the public eye. He reasoned that fake news can prove to be significantly detrimental to innocent people since it creates chaos and often leads to the authorities chasing ghost trials which eventually leads to a waste of emergency resources which could divert the attention and resources from legitimate emergencies. The Bill was subsequently tabled for the first time in the parliament in 2019 and finally enacted on 3rd June 2019. 

Purpose of the Act

Section 5 of the POFMA clearly defines the purpose for which the Act has been created. The primary purpose it serves is to prevent false statements of fact from being communicated in Singapore and to enable the government to take countermeasures against such communication. The Act also seeks to put an end to the financing, promotion, and other forms of support of online locations that are involved in the communication of false information in Singapore. It also enables the authorities to take measures that are required to locate and control coordinated activities involving the communication of false statements and also deal with the usage of online accounts and bots for such purposes. Lastly, the Act allows the use of measures to be taken to.

The procedure laid down by the Act

The salient provisions pertaining to the procedure established by the Act are mentioned in Parts 3, 4, 5, and 6 of the POFMA. 

Part 3 of the Act deals with the issuing of directions by the competent authorities to the person who communicated the statement of the subject in Singapore. The provisions listed under this Part are essentially the same under Part 4, the main difference being that the former deals with the individual directly communicating the statement and the latter is for the intermediary through which the communication is made. Section 10 allows any minister to instruct the competent authority to issue a Part 3 direction provided the subject material contains a false statement of fact. The non-compliance with the direction may call for a fine of up to $20,000 or imprisonment for a term not exceeding 12 months or both in the case of an individual. In any other case, a fine not exceeding $500,000 can be imposed. 

In a situation where 3 or more separate statements that are the subject of one or more active Part 3 or Part 4 Directions are being communicated in Singapore, the location from which the statements of the subject have emanated can be declared as an ‘online location’ provided the statements were made within 6 months of the declaration. Once the declaration has been made, the competent authority must publish a notice in the Gazette stating that a declaration has been made under Section 32 and provide a copy of the same to the person operating the online location. If the operator of the location fails to comply with the requirements, a fine not exceeding $40,000 or imprisonment for a term of a maximum of 3 years, or both, maybe imposed in case of an individual and a maximum fine of $500,000 in any other case. 

Part 6 of the Act deals with inauthentic online accounts and coordinated inauthentic behaviour. Inauthentic accounts are created by people other than the ones representing the account for the purpose of misleading other users. Similarly, coordinated inauthentic behaviour means the use of 2 or more online accounts created with the intent of misleading end-users in Singapore. 

When such accounts are identified with the spread of false statements of fact or inauthentic behaviour, the competent authority with the instruction of any minister can issue a direction to the internet intermediary through which the activity was carried out, requiring it to stop the services for the subject accounts or disallowing any person from using one or more specified online accounts to interact with any others users of the intermediary service in Singapore. 

Codes of practice for tech companies

Part 4 of the POFMA explains the provisions for directing the internet service providers and mass media services. 

Any Minister has the power to instruct the competent authority to issue the directions mentioned under part 4 of the POFMA, provided the following conditions are satisfied:

  1. The subject material must include a false statement and has to be communicated in Singapore. 
  2. The minister is of the opinion that it is necessary to issue a direction to protect the public interest. 

Directions listed under Part 4

Three directions can be provided to the tech intermediaries under Sections 21, 22, and 23 of Part 4 of the POFMA. 

  • ‘Targeted Correction Direction’ is defined under section 21 and is issued to the internet intermediary responsible for providing the service through which the subject material has been or is being communicated in Singapore. Under this direction, the intermediary would be required to communicate notice to all end-users in Singapore who have accessed the subject content through their services, which contains a statement of the communicated content being false and/or a specified statement of fact, or a reference to a specified location where the specified statement of fact may be found, or both.
  • Section 22 defines a ‘Disabling Direction’ which is issued to the internet intermediary through which the subject material has or is being communicated in Singapore, requiring them to disable access to the subject material by the users of the service in Singapore.  The intermediary may also be required to communicate a correction notice to the users who have accessed the subject material. The competent authority is required to publish a notice in the Gazette upon delivering the Disabling Direction. 
  • A ‘General Correction Direction’ under section 23, requires a person mentioned in subsection (1) to deliver a correction notice, the mode communication of which relies upon the position of the specific person under subsection (1).  
  • Section 25 states that all Direction or Remedial Orders under Part 4 can be issued to a person residing in or outside Singapore and such a person may be required to do an Act mentioned under Part 4 of the Act. It further states that the direction must clearly identify the material of concern and the statement it carries. 
  • In case a person to whom a Direction or Remedial Order under Part 4 is issued, fails to comply with it in the absence of a reasonable excuse, the person shall be liable for an offense under Section 27, for which the punishment shall be a maximum fine of $20,000 or imprisonment for a period of 12 months or both in the case of an individual and a fine of up to $1 million in any other case. The fine may extend up to $100,000 for every day or part of a day during which the offence continues after conviction in case of a continuing offence.
  • POFMA through Section 28 allows the IMDA upon the order of a minister to block access to the subject content in situations where the internet intermediary fails to comply with a Direction/Remedial Order under Part 4, the subject material containing the false statement is being communicated in Singapore on an online location, and if the Minister has reason to believe that the online location has been accessed by one or more end-users through an Internet Service Provider. In case of non-compliance with such a blocking order, the service provider shall be guilty of an offence for which a fine up to $20,000 can be imposed each day upon non-fulfillment of the order which can accumulate up to a total of $500,000.  

Criticism of the law

The largest criticism of the Act is regarding its ability to impede free speech. Facebook in 2019 displayed their concern over the Act by saying that the Act grants broad powers to the Singaporean government allowing them to remove the content they deem to be false by simply delivering a government notification to its users. This was expressed by Facebook after several of their posts had to be removed owing to the new guidelines. 

Perhaps the most striking flaw in the Act is the vagueness of the definition of the term “false statement of fact” which the entire Act is centered around. According to the definition given in Section 2 of the Act, the validity of a statement of fact relies on the perspective of a reasonable person which gives rise to ambiguity since it is not clear what could constitute as being reasonable and the same would also differ according to the context.  Furthermore, although the Act seeks to suppress false statements and not mere opinions, the line between opinions and false statements is not always distinct and this creates a risk of people’s opinions being misinterpreted. 

Since any minister has the power to issue directions under Section 10 of the Act to disable or correct any particular content they view as hate speech or false statements, the power being abused is a legitimate concern. Furthermore, the law has also been criticized due to the fact that the POFMA is not consistent with other laws since it is not subjected to judicial process and instead relies on the executive. It has been suggested that the executive should file a request to the courts who will then assess whether or not it is necessary to issue directions against the subject content which would make the process more transparent and fair. 

Another important concern over the Act is with respect to Section 61 of the Act which enables the minister to exempt a person or class of persons from any provision of this Act. This leaves a possibility that in case the law is abused by government officials, they would not be held accountable for their actions. This provision also opens up the risk of the incumbent government spreading false information for election purposes and not having to worry about consequences.

Conclusion

Fighting fake news is by no means an easy challenge. However, successfully dealing with fake news without suppressing free speech is an even greater challenge for the government. 

The Protection from Online Falsehoods and Manipulation Act offers the government of Singapore a wide arsenal of measures for the purpose of dealing with false information quickly. However, this amount of control has left the power with the government to decide what is fact and what isn’t. Companies such as Facebook and Twitter who have offices in Singapore have expressed concern over the Act since they have had to remove content from their websites which the government claims are against public interest and not complying with the order would invite severe penalties. 

It can clearly be inferred that while the Act allows the government to Act swiftly against false information and the people communicating it, the law itself has proven to be authoritarian and carries the risk of being used as a tool for censorship. 

References

 

 

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

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Modern concept of rule of law

By
Diganth Raj Sehgal
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0
Independence of judiciary

This article is written by Aishwarya Majumdar and Pranjal Chaturvedi, students of Sharda University School of Law.

Introduction

The term Rule of Law is derived from French phrase “La Principe De Legality” (the principle of legality) and this very doctrine is ascribed to British Jurist and Great Constitutional theorist A.V Dicey, The writing of Dicey in 1885 on British Constitution gave three kindred of Rule of Law, Absence of Arbitrary Power, Equality before Law, and Individual Liberties, while he cautiously ventured through Constitution of USA, where individual liberties are not product of Judge made concept, that constitution containing just seven Articles, he found in accordance of principle of rule of law, because very core of concept was getting satisfied on scale of components of principles, with change in time, in modern world there are many more noble values and principle added, as of Judicial Review, Habeas Corpus, no arbitrary form of government, so on and so forth, ultimately these values, also somewhat and somewhere come in ambit and strengthen three fundamental principles, laid down by Dicey, but taking all modern concept in consideration separately and classifying them independently, it could be brought into umbrella of just three components, Legal Supremacy, Legal Equality and Legal Certainty. 

Principles considered by Dicey under the ambit of Rule of Law

Absence of Arbitrary Power – It is to be taken as, no man is above law, and law is supreme regarding man, there is to be a similar mechanism for every individual, and no person could be punished on fiat and whimsical wishes of government where there is discretion, on that place arbitrariness may emerge, discretion gives power and power corrupts, but the application of Absence of Arbitrary Power, limits unbridled discretionary power of government or statutory authority, at a time when Dicey was investigating pulse of British Constitution on golden principles, that he derived, found constitution in accordance of this very rule of “Rule of law”.

The second considered principle by Dicey was Equality before Law, as per this every man will be equal in eyes of law, and will be treated equally before the law; whosoever he is doesn’t matter on what designation he is ascribed or what political/social/economic power he enjoys. There is special mention of this in articles – 14, 15and 16 of the Indian Constitution. In India, there are some codified exceptions to this rule, as Article – 361 of the Constitution, in which protection is granted to the President, Governors and Rajpramukhs, indeed this is an exception, but to run, state machinery smoothly.

The third principle considered is Individual Liberties, principle of British Constitution and principle of individual liberties in Britain are judge made concept, It is peculiar to Britain, where as there are large number of other countries, in which individual liberty is not a result of judicial exercise, it is ensured in fundamental law book of land itself, that following fundamental rights will not be violated accept, due process of law or procedure established by law, as Constitution of United States of America, Japan and India, In context of India, life and liberty of individual, is of paramount importance and constitution protects and preserves and ensures the same, “no person shall be deprived of his life and personal liberty accept procedure established by law”, what was concerning Dicey was not, individual liberty is result of Written Constitution or output of judicial exercise, for him what matters is, is individual liberty recognized, considered, cherished, protected and preserved, this is why, Dicey while examining USA Constitution, found that in accordance of his derived principles, rule of law, taking example of value of individual liberty, in recent in case of Arnab Goswami, “Indian Journalist and Editor in Chief of news network Republic TV”, 2 judges bench of Hon’ble Apex Court, comprising J. Indira Banerjee and J. D.Y Chandrachud protects individual liberty of accused Arnab Goswami, by granting interim bail and Justice D.Y Chandrachud observed that “If we don’t interfere in this case today, we will walk on the path of destruction”.

Dicey has set three principles, but as society and democracy evolves and evolves continuously, apart from all settled and traced rules, there are some other existing and later evolved rules/principles, which is a product of spirit to strengthen, individual liberty as “no arbitrary form of government”, the government is expected to be democratically elected, which is supposed to be by the people and for the people, working in accordance and consonance of fundamental law of land, “Constitution”.

Supreme Court cases contributing in strengthening the Rule of Law

In India this was very well observed in landmark, unfortunate, dark but historic judgment in “ADM Jabalpur V. S. Shukla, 1976” (Habeas Corpus case) during the emergency era, the case which was there, but should not have been, contrary to the majority opinion of four Judges, Justice Khanna delivered very articulate dissenting, judgment, and observed that “rule of law is the antithesis of arbitrariness ……. Rule of law is now an accepted norm of all civilized societies, everywhere it is identified by the liberties of individuals.

 In another landmark and historic judgment of “Bacchan Singh V State of Punjab, 1982”, Justice P.N Bhagwati, emphasized that rule of law excludes, arbitrariness and unreasonableness, further suggested, to make laws it is important to have, democratic form of government, but the power of the legislature is not to be unfettered, and there should always be independent judiciary to protect citizens from excessive powers of legislature and executive, 

Another derivation of rule of law is Judicial Review, the doctrine of a judicial review originally originated from the United States of America; It was not expressly given even in American Constitution, holding seven Articles, but was developed by the Honourable Supreme Court of America in a landmark and historic judgment of Marbury v Madison. In Indian Constitutional observation, power of judicial review is ascribed pre-independence and pre-constitution, Supreme Court is the successor of federal court, which was exercising the power of judicial review, after Independence of India or India turning Indian Democratic-Republic, Supreme Court inherited the great tradition, established by Federal Courts, by virtue of Constitution of India, power of Judicial Review is derived from Article 32 of Indian Constitution to honourable Supreme Court and by Article 226 of Indian Constitution to honourable High Court.

In the landmark and historic judgment of L Chandra Kumar v. Union of India, 1973 seven judges, constitutional bench of honourable apex court held judicial review as basic structure of constitution, and stated that “power of judicial review over legislative action vested in High Court under Article 226 and in Supreme Court in Article 32 in the constitution and is integral and essential feature of the constitution constituting part of its basic structure, judicial review not only looks and determines constitutionality of law but also looks and takes care of validity of administrative action, another offshoot of rule of law is upholding of individual liberties, Indian constitution ensures, protects, preserves and cherishes the individual liberties, in Part 3 of Indian Constitution, which is of paramount importance and looked very cautiously, another emerged and important feature of rule of law is habeas corpus, (writ issued to produce/bring body before the court, in common law system) In India power to issue certain writ is with High Court under Article 226 & Article 32 with Supreme Court, and one of such five writ is habeas corpus, referring to particular habeas corpus, A.V. dicey said “Habeas Corpus is equal to hundred constitutional articles, securing individual liberty”. Generally, this writ is issued when, law enforcing agency has wrongfully or arbitrarily detained any person, for what so motive, but detention is against the spirit of the constitution or not in accordance of law or is contrary to Part 3 of Indian Constitution and violative of Individual Liberty, hence also against rule of law.

In DC Wadhva v State of Bihar, 1987, the Supreme Court used rule of law to decry state government which was too frequently using its ordinance making power as a substitute of legislation by the legislature.

In Yusuf Khan V Manohar Joshi, the Supreme Court has laid down proposition that, it is the duty of the state, to preserve and protect the laws, and constitution, and that it may not permit any violent act, which may negate, rule of law.

Codification of rule of law

Combining all, modern concepts and principles, it would be better to codify and classify “rule of law” in just three phrases:

  • Legal Supremacy;
  • Legal Equality;
  • Legal Clarity.

A) Legal Supremacy: The principle is, society should be regulated by an authoritative set of rules and regulations, instead of might as a right or whimsical wish of an individual and moving towards a state of nature, where bigger fish eats little, ones.

B) Legal Equality: Legal Equality means the law is to be applied equally on all; even monarch, executive head, or elected head of state is not above law, or beyond the grasp or holding of law.

Steps towards legal supremacy and legal equality were taken, by the several states of Greek, initially during the archaic period during 750-500 BCE., by bringing magistrate under subordination of written laws, further in Athens as a result of the reform of Solon, of 594/3 BCE, legal protection of the law was clearly established, several of solon’s reformed aimed at, the remedy of law to be available to every citizen, doesn’t matter how so ever low, downtrodden a citizen is, how poor and infirm his condition is, but has accesses to the benefit and remedy of law. What is important and to be noted is, establishment of Legal Equality and Legal Supremacy is even before democracy, but despite traces are found pre-democratic era, clear reorganization are made post-democratic rule.

In the context of India, in P Sambhumurthy v State of Andhra Pradesh, 1987, the Supreme Court has declared the provision of executive interference, with tribunal justice, unconstitutional. 

C) Legal Certainty: This means law should be clear in meaning and understanding, assessable, approachable, and predictable; it is within reach of common man, not just turns, the bread of some, for aristocrat, privileged or nobleman. 

Traces of legal supremacy and legal equality and it’s clear establishment has been, regarded, but most debatable and controversial among all three is legal clarity, It is highly debatable among scholars, constitutionalist, constitutional philosophers, that to what extent, legal clarity is possible, Even in the modern era there is plenty of disagreement between, how far legal clarity is possible and attainable, as in civil law tradition of western-Europe the principle of legal clarity is not accepted, but is believed to be achieved on high degree, as Jams Maxeiner states, legal intermediacy may govern – Americans, but for Europeans, it is not acceptable, legal certainty – not legal intermediacy is guiding principle for Europeans.

Above two (a) and (b) are straightforward, but (c) has a very wide ambit, which generally turns matter of intense debate and discussion. It is very easily understandable, that disputes are to be resolved peacefully, within the ambit of law, and law is to be might not individual, organization or institution, the law will be equally applicable on law, whosoever he is, whatsoever power he enjoys and howsoever important he is or his designation is, is of no meaning and use, in the ambit of law and ultimately law is to be certain and clear in meaning.

The Constitution of India, by its very nature, protects and cherishes, individual liberties and promotes rule of law, through many of its provision, as the government is to be democratically elected, through adult suffrage, separation of judiciary from the executive, the supremacy of fundamental rights, Supreme Court by being the custodian of Indian Constitution, separation of power between, legislature, judiciary, executive, judicial review, power to issue writs with High Court and Supreme Court, under Article 226 and Article 32, the extraordinary power of doing complete justice and lot more. 

Democratic form of government (of the people, by the people, for the people) can only sustain, thrive and prosper with the protection and strengthening spirit of rule of law, this is that golden principle which is essentially required in any civilized and mature democracy and direly required in diverse democracy like India, what we can understand from “rule of law” is rule of law not of man, Dicey’s rule of law, hold three components, ABSENCE OF ARBITRARY POWER, EQUALITY BEFORE LAW and INDIVIDUAL LIBERTIES, and further rules, principles and doctrines have emerged later, as separate judiciary, power of judicial review in hands of judiciary, power to issue writ of habeas corpus, mechanism to secure individual liberty and freedom, guarantee of basic rights, as it is widely addressed in Part – 3 of Constitution of India “it will not be regarded as rule of law or when there is no proper mechanism to get laws in accordance of rule of law, it can’t be said its rule of law”, combining all this, newly emerged and recently developed principles, we can categorize, just in three, legal supremacy, legal certainty and legal equality is core of rule of law in modern society, but even this will not remain static, rule of law is like democracy, enhances, enriches and standardizes its values and principles and will add more components, in future, as civilization and civilizational values, enhances and grows with time. 

Conclusion

The Rule of law is one of the most widely used term in political discourse same as democracy, it is god of constitutionality “omnipresent” some find it relevant and some scholars also find it of no use, because it is so widely used with such different meaning but it imbibes golden values and principles, basic tenant of Dicey’s rule of law is power is to be derived from law and is to be exercised strictly in accordance of law, the term rule of law has no particular articulate connotation, even though Indian Judiciary, gives very high importance to this and uses very repeatedly, the broad emphasis or sense of rule of law is absence of any centre of unchecked, arbitrary power, even if frequent government intervention in ordinary pursuit of citizens, is on increase may give rise to arbitrariness of government, which will be contrary to rule of law, informed citizenry is strongest foundation laying under and with pillars of democracy, they are the subjects and they are the authority as well, in tussle between supremacy of state and limitation of state, via constitutional principles, it’s only citizens “we the people” who will have to ensure government is upholding pre-set golden benchmarks and endeavour to strengthen, spirit of rule of law, Indian Constitution framers have addressed these golden principles very sincerely and cautiously, hence have given these values upper hand, but again ultimate is “source of constitution”, The thing, essentially to be remembered is, words of Dr. Baba Sahib Ambedkar, which he spoke in final speech in the Constituent Assembly –“however a good constitution may be, it is sure to turn out bad because those who are called to work is it, happen to be bad lot, however bad a constitution may be it may turn out to be good, if those who are called to work It happened to be good a lot” 

References 

1 https://www.lawteacher.net/free-law-essays/administrative-law/origin-and-concept-of-rule-of-law-administrative-law-essay.php#:~:text=The%20term%20%E2%80%9CRule%20of%20Law,law%20and%20not%20of%20men.&text=No%20individual%20whether%20if%20he,and%20they%20should%20obey%20it.

2 Dicey, A.V., – “INTRODUCTION TO THE STUDY OF LAW OF THE CONSTITUTION” – Chapter – 4.

3 Constitution of India, 1950, Article-21,

4 https://www.barandbench.com/news/supreme-court-grants-bail-to-arnab-goswami

5 AIR, 1976 SC 1207

6 1982, 2 SCC 1324

7 (1997) 3 SCC 261.

8 Ibid

9 https://lsa.umich.edu/content/dam/classics-assets/classicsdocuments/FORSDYKE/ForsdykeRuleOfLaw.pdf

10AIR, 1987 SC 63.

11 AIR 1987, SC 579

12 Maxiner- 2007: 543.cf.pp544-5.

13 Abraham Lincoln 

14 Shklar, 1987 with response to Waldron 2002.

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How to argue that the pre-arbitration dispute resolution clause is not enforceable

By
Abanti Bose
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0
Image source: https://bit.ly/362mklH

This article is written by Tanisha Kohli, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.

Introduction

A pre-arbitration dispute resolution clause essentially provides that; prior to arbitration, the parties will attempt to resolve the dispute through other means such as negotiation, mediation, or deliberations. In other words, it can be understood as an agreement between the parties to engage in a multi-tier dispute resolution process. For instance, the clause may provide that at the first tier, parties will resolve the dispute by negotiation. If the dispute is not resolved by negotiation, then parties will proceed to the second tier. The second tier may provide that the parties will resolve the dispute by mediation. If the dispute is not resolved by mediation, then parties will proceed to the third tier. The third tier may provide that the parties shall resolve the dispute by arbitration.  

Sometimes, a party may bypass a tier, and directly proceed to the next tier. For instance, a party can initiate arbitration directly, without resorting to negotiation. In such a case, the other party can argue that the arbitral tribunal does not have jurisdiction to decide the dispute, as the jurisdiction is ousted by the existence of a valid and mandatory pre-arbitration procedure clause, which is a condition precedent to arbitration. 

This article provides some ideas on how to argue that the pre-arbitration dispute resolution clause is not enforceable, and thus the jurisdiction of the arbitral tribunal is not ousted. It deals with pre-arbitration dispute resolution clauses in an international commercial arbitration agreement. 

Sample pre-arbitration dispute resolution clause

“The parties shall try to resolve any disputes arising out of or in connection with this agreement amicably through good faith negotiations and deliberations. In the event that such attempts should fail within 30 (thirty) calendar days from the first written request for negotiations and deliberations by either party, either party may refer the dispute to arbitration in accordance with the arbitration rules of the Singapore International Arbitration Centre (“SIAC Rules“) for the time being in force. The tribunal shall consist of one arbitrator who shall be appointed in accordance with the SIAC Rules. The language of the arbitration shall be English. The seat of the arbitration shall be the City of Lakes, Iliria. The decision of the tribunal shall be final and binding upon the parties. The expenses of arbitration shall be borne in accordance with the determination of the arbitration.” 

This clause was a part of the moot problem of the 6th NLIU – Justice R.K. Tankha Memorial International Arbitration Moot, 2021.

The pre-arbitration dispute resolution procedure is unenforceable because it is not valid

It is a cardinal principle of law that an agreement has to be sufficiently certain to be enforceable. Though intended to be enforceable, if the terms of the agreement are so vague that there is no standard for deciding whether the agreement had been kept or broken, or to fashion a remedy, and no means by which such terms may be made certain, then there is no enforceable contract. This was said in the case of Candid Productions v. International Skating Union. Moreover, the court must be satisfied that each part of the clause which was intended to be operative can be given certain legal content and effect. Thus, it can be argued that in the concerned dispute, the pre-arbitration dispute resolution procedure is too uncertain and vague. To buttress this submission, it can be argued that the conditions laid down in the case of Wah v Grant Thornton Int’l Ltd are not met.

In this case, the court stated: “In the context of a positive obligation to attempt to resolve a dispute or difference amicably before referring a matter to arbitration or bringing proceedings the test is whether the provision prescribes, without the need for further agreement, (a) a sufficiently certain and unequivocal commitment to commence a process (b) from which may be discerned what steps each party is required to take to put the process in place and which is (c) sufficiently clearly defined to enable the Court to determine objectively (i) what under that process is the minimum required of the parties to the dispute in terms of their participation in it and (ii) when or how the process will be exhausted or properly terminable without breach.” 

There is no sufficiently certain and unequivocal commitment to commence a process

Agreements to agree and agreements to negotiate in good faith, without more, must be taken to be unenforceable. As held in the Candid Productions case, such an agreement is nebulous since it implicates so many factors that are indefinite and uncertain and the intent of the parties can only be fathomed by conjecture. It has also been recognised that there is a practical and legal impossibility of monitoring and enforcing the process of ‘good faith’ negotiation. For instance, it may be argued that in the sample pre-arbitration dispute resolution clause, it merely provides that the parties shall try to resolve any disputes arising out of or in connection with this agreement “amicably” through “good faith negotiations and deliberations.” There is no indication as to what is meant by the words “amicably” and “good faith negotiations and deliberations”. Thus, there is no sufficiently certain and unequivocal commitment to commence a process.

It is not possible to discern what steps each party is required to take to put the process in place and what is the minimum required in terms of their participation

A clear set of guidelines to measure any party’s best efforts is essential for the enforcement of such a clause. In Fluor Enters. Inc. v. Solutia Inc the court enforced the contractual negotiation procedure which provided for a minimum number of meetings, the designation of the person who would request the meeting to take place and the number of days within which the meeting must take place. 

In White v. Kampner, The court enforced the mandatory negotiation clause which provided the minimum number of negotiation sessions that the parties were required to undertake. It may be argued that these indications in the above two cases are absent from the concerned arbitration clause.  For instance, in the sample clause, the pre-arbitration dispute resolution procedure provides for “the first written request for negotiations and deliberations by either party”. 

However, it is not clear that when either party makes a written request for negotiation and deliberation, what is the step that the other party is required to take in order to meet the criteria of good faith negotiation and deliberation. Moreover, there is no indication about who is to be involved in the process of negotiations and deliberations. Thus, the process is not sufficiently certain because there is the need for an agreement at any stage before matters can proceed.

It is not possible for the court to determine objectively when or how the process will be exhausted or properly terminable without breach

During negotiations, either party is entitled to withdraw from these negotiations, at any time and for any reason. There is no obligation to continue to negotiate until there is a ‘proper reason’ to withdraw. Thus, it may be argued that it is not possible for the court to determine objectively when or how the process will be exhausted or properly terminated without breach. For instance, in the sample clause, it can be argued that, the phrase “in the event that such attempts should fail” does not make it sufficiently clear what would constitute a failure of the good faith negotiations and deliberations. 

The pre-arbitration dispute resolution procedure is not mandatory

Assuming but not conceding that the pre-arbitration dispute resolution procedure is valid, the claimant may submit that it is not mandatory. Doubts regarding the mandatory character of contractual negotiation provisions should generally be resolved in favour of their aspirational, non-binding nature. Only in cases involving unequivocal language, should a pre-arbitration negotiation provision be regarded as a mandatory requirement. Here, the parties will have to examine the language of the clause, to see whether the words used are “shall” and similar words or “may” and similar words. Usage of “shall” will be a strong indication of a mandatory obligation. 

The pre-arbitration dispute resolution procedure does not constitute a condition precedent

A number of national court decisions have concluded that certain pre-arbitration procedural requirements were not the conditions precedent to commencing arbitral proceedings – even where they were valid and mandatory. These decisions have instead reasoned that pre-arbitration procedural requirements were contractual obligations, whose breach only entitled a counterparty to damages. Provisions that specifically provide that a particular pre-arbitration step is a “condition precedent” or “condition” will generally be more likely to be characterized as foreclosing access to arbitration if they are breached. 

The claimant may thus argue that there is no express language providing that the good faith negotiations and deliberations are a “condition precedent” to arbitration. 

The claimant has complied with the pre-arbitration dispute resolution procedure

Assuming that the pre-arbitration dispute resolution procedure is valid, mandatory, and a condition precedent to arbitration, the claimant can argue that it has complied with the pre-arbitration dispute resolution, by highlighting the scope of efforts required by the party, and the instances of compliance with these requirements. For instance, in a matter where negotiation was agreed upon as the pre-arbitration dispute resolution procedure, the claimant may argue as follows. 

Negotiating ordinarily means no more than indicating availability to exchange views about a dispute and imposes no obligation to compromise, to consider compromises, to volunteer a new or revised position, or otherwise to engage in bargaining with a counterparty. It may suffice that a discussion should have been commenced, and it may be very short. Thus, to argue that it has complied with the pre-arbitration dispute resolution procedure the claimant may rely upon communications between the parties, such as those in which each party was maintaining its position and those positions were far apart, with little prospect of a compromise. Other facts which show that prior to commencing arbitration, the claimant attempted to settle the dispute amicably, and complied with the pre-arbitration dispute resolution procedure can be relied upon. 

Conclusion

In sum, the claimant can argue that the pre-arbitration dispute resolution procedure does not oust the tribunal’s jurisdiction. This is because the pre-arbitration dispute resolution procedure is unenforceable as it is not valid, and nor is it mandatory. It is, at most, a contractual obligation, and does not constitute a condition precedent to commencing the arbitration proceedings. Without prejudice to the aforementioned submissions, the claimant can submit that it has complied with the pre-arbitration dispute resolution procedure. 

References

  • Candid Productions v. International Skating Union, 530 F. Supp. 1330 (S.D.N.Y. 1982)
  • Wah (aka Tang) v. Grant Thornto n Int’l Ltd, [2012] EWHC 319
  • Halifax Fin. Servs. Ltd v. Intuitive Sys. Ltd, [1999] 1 All ER (Comm)
  • Mocca Lounge,Inc.v.Misak,94 A.D. 2d761,763(N.Y.App.Div.1983)
  • Fluor Enters. Inc.v. Solutia Inc.,147F. Sup p.2d648,649n.1(S.D.Tex.2001)
  • White v. Kampner, 641A.2d1381,1382 (Conn.1994)
  • Holloway v. Chancery Mead Ltd., [2007] EWHC 2495
  • GARY B BORN, INTERNATIONAL COMMERCIAL ARBITRATION 636 – 942(2nd ed. Kluwer 2014)
  • Final Award in ICC Case No.11490, X XXVIIY.B.Comm.Arb.167(2012)
  • Greece v. Britain, (1924),PCIJSer.A,No.2

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Legitimacy of a child born in a live-in relationship

By
Diganth Raj Sehgal
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0
Image source: https://bit.ly/2GbLf8s

This article is written by Sukriti Mathur and Mayank Raj Maurya.

Introduction

We are living in the era of developing thoughts and culture, a country like India is totally based on the traditional values, culture and religion. Sometimes this generation gap of thoughts or the difference between the old traditions and new culture gives birth to the new concept. Live-in relationship is one of those concept which stands on the line of the generation gap. India, where marriage is seen as a sacramental institution where if a woman and a man want to live together, they have to get themselves tied in the institution of marriage. The concept of the live-in relationship has to come out of its closet and gain full recognition by a larger Section of the society. 

In simple words, the live-in relationship means a kind of a relationship where both partners live-in under one roof without being married to each other with their own will. They are free from any type of the responsibility and accountability towards each other. So, it is also resanable to consider that there is no liability if one person wants to leave the other partner. But this thing will change when a child is born in a live-in relationship. The legal status of a child born in live-in relationship is not clear and because of this reason many courts provided a description on the concept of the live-in relationship through various judgments. 

In a case name, Tusla and Ors v. Durghatiya and Ors.(see here).The Hon’ble Supreme Court said that the “child born in a live-in relationship are not be treated as illegitimate but in that case, there are certain pre-conditions which are like the parents must have cohabited for a considerable amount of time under a roof, so that society recognizes them as husband and wife.” There are many rights also given to the child who born in a live-in relationship, but that’s not enough, there is still urgent need for proper legislation on the live-in relationship. 

Laws governing Live-in Relationships in India

As of now in India, there are no specific laws related to live in. The top echelons in Indian culture are increasingly accepting of live-in partnerships, but the middle class remains under cultural expectations, and the same cannot be seen in this strata of society. While some countries have recognized the concept of a live-in relationship and given it legal legitimacy by creating the concept of “registration” of a live-in relationship, which is nothing more than a cohabitation contract, others have not. Countries such as Canada and China use this technique.

Despite the fact that live-in partnerships do not have legal status or recognition, this concept is slowly gaining traction and is reflected in recent legislative advancements. The Malimath Commission for Criminal Justice Reform (see here) was established by the Supreme Court in 2003. According to the report submitted by this Commission: “The definition of ‘wife’ in Section 125 should be changed to include a woman who lived with the man as his wife for a reasonable period of time during the first marriage’s subsistence.”

A female live-in partner has the right to demand alimony as a result of this. In 2008, a report from the National Commission for Women reaffirmed the same requirement in order to protect women in live-in relationships.

The Protection of Women from Domestic Violence Act of 2005 (see here), which included Section 2(f) (see here) to protect women in live-in relationships, brought about a reform to protect women in live-in relationships. The aggrieved person who can seek protection is defined in Section 2(a). This has heightened issues of live-in partners and provided them with legal protection. In addition, the Maharashtra government passed a petition in 2008 that stated that a woman who has been in a live-in relationship for a “reasonable length” should be granted legal wife status.

In the Indian context, it is critical to identify such relationships by legislation that empowers both parties with rights and establishes obligations and responsibilities, thereby limiting the scope of such relationships.

Rights of a child born in a live-in relationship

A toddler who is born out of a live-in relationship, have four very important rights:

  • Legitimacy of the Child– When a child is born in a live-in relationship, where couples are not married in that situation the legitimacy of the child is in danger. But now the first and the foremost right of a toddler born in a live-in relationship is to have the right to legitimacy, this right will form the basis for all others rights which are available to a toddler in India. In a landmark judgment SPS Bala Subramanyam v. Sruttayan (see here), the Hon’ble Supreme Court said, “If a woman and a man are living together or cohabiting some years without marriage, there will be a presumption under Section 114 of the Evidence Act (see here), that they live as Husband and Wife and the toddler born to them is legitimate.” This was a very first case where the Supreme Court upheld the legitimacy of the child born in a live-in relationship. 

Article 39(f) of the Indian Constitution (see here), which lays down the responsibility of the state to provide children with adequate opportunity to develop in a normal manner and safeguard their interests.

  • Custody of the Child– Due to the lack of legislation, the issue custody of the child is ambiguous in comparison to married couples. This issue arising, at the time of separation is dealt in a manner as in a case of marriage due to the absence of specific laws. In Hindu Law, the Hindu Minority and Guardianship Act, 1956 (see here)  clearly said in Section 6, “the male or the father is the natural guardian of his minor legitimate children” as it has been laid down in the case name Githa Hariharan v. Reserve Bank of India (see here). In case the male or the father is not capable of acting child guardians then mother will be the natural guardian of that child. Section 6(b) of the same act seems to deal with live-in relationships in an indirect manner as it grants the custodial rights to the mother in case toddler born in illegitimate relations. Section 13 of the Hindu Minority and Guardianship Act, 1956 (see here)  which talks about “the welfare of the concerned minor to be of utmost consideration.” In a case name Shayam Rao Maroti v Deepak Kisan Rao Tekam (see here) respected Court held, “the word ‘welfare’ used in Section 13 of the act has to be inferred literally and must be taken in its broad sense. Such an interpretation is in unanimity with the development of the toddler as a capable and independent individual.

On the other hand in Islam Law, there is no obligation as such to maintain the toddler who born in a live-in relationship. The custody of the child belongs to the mother and she can’t deprived of her rights of custody of the child in all cases and this right under the Islam Law is known as Hizanat and it could be used against the father of the toddler.

  • Maintenance– Maintenance of a child who born in a live-in relationship is a big question because the guardians are not married. It is a very important aspect in the case of live-in relationship. Under the Hindu Adoptions and Maintenance Act, 1956 (see here), Section 21,(see here) “a legitimate son, son of a predeceased son of a predeceased son, so long he is a minor or a legitimate unmarried daughter of a son or the unmarried daughter of a predeceased son of a pre-deceased son shall be maintained as dependants by his or her father or the estate of his or her deceased father. A toddler who born in a live-in relationship had not been covered under this Section of the given act and subsequently had been denied the right under this statue. 
  • Right to Property– This right is also given to the toddler who born in a live-in relationship. Hindu Succession Act, 1956 (see here) says, “a legitimate child has the right including both son and daughter from Class-I heirs in the Joint Family Property”. On the other hand in Hindu Law, “the illegitimate child could only inherit the property from his or her mother’s side and not be alleged father.” 

Important Cases on Child Born In a Live-in Relationship

As there is no explicit statute that acknowledges the status of couples in live-in relationships, the law governing the status of children born to such couples is equally ambiguous. In a rights-based world where protecting children’s rights are at the top of every legislator’s agenda, the necessity to determine their status becomes even more critical. It is for this reason that by the following judgments we can understand the rights of these children.             

The Supreme Court of India held in Bharata Matha & Ors. V R. Vijaya Renganathan & Ors. (see here) that a child born out of a live-in relationship may be allowed to succeed inheritance in the parents’ property, if any, and thus given legal legitimacy. In the case it was found that the differential treatment of children from live-in relationships and marital partnerships, even though both are viewed as legal, can amount to a violation of Article 14 (see here), which guarantees equality before the law.

In a historic decision, Dimple Gupta v Rajiv Gupta (see here), the Indian judiciary used its power to establish social justice, holding that even an illegitimate child born out of an unlawful connection is entitled to maintenance under Section 125 of the CrPC (see here). And it is from this decision that it can reasonable said that child born from live in relations are entitled to maintenance. Denial of maintenance rights to children born out of live-in relationships can also be contested under Article 32( see here ) as a breach of the Constitution’s fundamental rights. In PV Susheela v Komalavally (see here), the Kerala High Court recognized Article21 (see here), which gives the right to life and personal liberty, and that rejection to maintenance can deprive such individuals of their right to live their lives with dignity.

Property rights are also an important matter of discussion in this regard In Vidyadhari v Sukhrana Bai (see here), the Supreme Court made news by granting inheritance to children born from the live-in relationship in question and granting them the status of “legal heirs.” In light of the current situation, it is reasonable to infer that, while certain laws, such as Section 16 of the Hindu Marriage Act 1955 (see here), offer legitimacy to children born out of live-in partnerships, their rights to ancestral property and maintenance remain contested and vary from case to case. This is in violation of Article 39 (f), and the existing situation is uncertain. Similarly, despite the presence of Section 6(b) of the HMGA, 1956 (see here), custody of a child born out of a live-in relationship is up to interpretation. With the current legal situation, it is possible to assume that the kid of a live-in relationship would face a lack of consistency in life regarding his or her legal status, origin, and eventual rights. 

The Supreme Court ruled in “Indra Sarmavs V. KV Sarma” (see here) that all live-in partnerships are not marriage-like. The Court further made following observations in this case.

  • Such a commitment can last a long time and lead to a pattern of reliance and vulnerability, and the growing number of such relationships necessitates proper and effective protection, particularly for the woman and children born from the live-in relationship.
  • Of course, the legislature cannot advocate premarital sex, while such relationships can be intensely personal at times, and people are free to express their views on both sides.
  • As a result, the Parliament must consider these concerns, introduce appropriate legislation, or amend the Act to ensure that women and children born from such partnerships are protected, even if the connection is not in the type of a marriage.

It is crucial to highlight that Sections 494 (see here)  and 495 of the IPC (see here) declare any marriage of a person during the lifetime of her or his husband or wife illegal and penal unless the marriage is permitted by the concerned individual’s personal law. As a result, a live-in relationship between a married man and a woman, or a married woman and a man, cannot be considered in the “nature of marriage” because it is specifically forbidden by law. Children born from such a relationship, while not considered legitimate, would be entitled to all of the same rights as other children.

Conclusion

It is very important to change or reform the laws with the evolution of the culture or society. In India, we can see many problems not only in live-in relationships but also when a toddler born in this type of relationship. To avoid all these types of problems and loopholes, clear laws and amendments should be made. Legislative and Judiciary should grant clarity on the status of child born out of live-in relationships. To prevent this, explicit legislation should be enacted, as well as changes to ambiguous words in existing laws, to provide clarification on the identity and rights of children born in a live-in relationship. This will maintain consistency and help the youngster create emotional, mental, and biological stability.

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Concept of contributory copyright infringement claim with special emphasis on the recent case of Harold Davis vs. Pinterest

By
Abanti Bose
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0
Image Source: https://rb.gy/eqoor6

This article is written by Triveni Singal, pursuing a Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho.

Introduction

Among the various kinds of intellectual property rights, copyrights are one. A copyright subsists in any original literary, artistic, dramatic, musical works, cinematograph films, and sound recordings (Section 13 of the Copyright Act, 1957). It confers exclusive rights on the copyright owner regarding the reproduction, translation, adaptation, sale, performance in public, etc. of the copyrighted work, or authorizing someone else to do them (Section 14 of the Copyright Act, 1957.)

Copyright infringement occurs when a third person uses/exploits the copyrighted work without the authorization or consent of the copyright owner (Section 51 of the Copyright Act, 1957). For example, the inclusion of any copyrighted artistic work in a film without authorization from the copyright owner amounts to infringement. Contributory copyright comes into play when a party has induced or substantially contributed to copyright infringement by another party. In this article, we will focus on the concept of contributory infringement, discussing it in the light of case laws with a special emphasis on the case of Harold Davis vs. Pinterest.

What is copyright infringement?

Copyright infringement can further be divided into two categories depending on the intriguing party;

  1. Direct/primary infringement- As the name suggests, here the infringer is directly involved and is himself carrying out the acts leading to copyright infringement. 
  2. Indirect/secondary infringement- Here, the infringer either assists indirectly or receives benefits from copyright infringement. It can further be classified into two kinds;
  • Vicarious infringement,
  • Contributory infringement.

In the case of Perfect 10 v. Amazon.com (487 F.3d 701 (9th Cir. 2007), 731), the court stated that the fundamental difference between the two kinds of secondary infringement is that contributory infringement is grounded on the infringer’s failure to preclude its own actions which facilitated third party infringement, on the other hand, if the infringer is unable to stop the third party from continuing their directly infringing activities, he may be liable for vicarious infringement.
Thus, contributory copyright infringement can be said to be based on the principle that if someone indirectly contributes to infringement, he should be held liable. In other words, a person will be liable under this, if he intentionally induces or encourages another person’s direct infringement, either through personal assistance/conduct or by providing the requisite materials and machinery. 

Elements of contributory copyright infringement 

Essential elements that must be proved for a successful claim of contributory copyright infringement are;

  1. There has been a direct infringement by a primary infringer.
  2. The accused/defendant had knowledge of such infringement: A general knowledge regarding the occurrence of any infringement activity or while such an activity is in the process is not sufficient.
  3. The accused/defendant materially contributed to the infringement: Here, the court investigates whether the defendant had provided fundamental service to the infringer which facilitated the infringement activity, or whether he was just a “passive conduit”. 

The following landmark judgments and the recent case of Pinterest on contributory copyright infringement provide a greater understanding of the concept. 

Landmark judgements on digital contributory copyright infringement 

Staple article of commerce doctrine

This doctrine was applied in the case of Sony Corp. of America v. Universal City Studios Inc. (Sony Betamax Case) (464 U.S. 417 (1984)). According to this doctrine, if the defendant established that the product was “capable of substantial” or “commercially significant non-infringing uses”, it would be sufficient to defeat a claim of contributory copyright infringement. This doctrine, therefore, restricts liability to cases of grave fault rather than the mere understanding that one’s products could be misused. The Betamax videotape recorders were held to have substantial non-infringing use. 

Therefore, the U.S. Supreme Court denied that the sale of videotape recorders amounted to contributory copyright infringement liability even though the defendant knew the machines were used to infringe because such constructive knowledge of the infringing activity could not be imputed from the fact that Sony knew the recorders, as a general matter, could be used for infringement.

A&M Records Inc v. Napster

This case stated that for proving contributory infringement, a plaintiff must show that the defendant had knowledge of the infringement, and not particularly knowledge of specific acts of infringement. The concept of “specific knowledge” was highlighted in this case on the ground that for contributory liability, the infringer must know/have reason to know about the direct infringement taking place. Therefore, in certain cases constructive knowledge would be sufficient, but not in cases where “substantial non-infringing use” was involved. The court affirmed that in the digital context, evidence of actual knowledge of specific acts of infringement is mandatory to be established. 

Metro-Goldwyn-Mayer v Grokster Ltd.

One of the main issues, in this case, was whether the mere existence of a product’s non-infringing uses could be sufficient to protect a software distributor from indirect infringement liability. 

The court relied on the principle that when someone distributes a device to expand its use to infringe copyright, he shall be liable for the resulting acts of infringement by acts of infringement of any third parties. If the evidence showed is beyond the characteristics of the product/knowledge that it can be used for infringing acts to statements/actions leading to the promotion of infringement, Sony’s doctrine would not be applied to prevent liability. 

This case gave rise to two kinds of contributory infringement, firstly, where infringement is actively induced/encouraged through specific acts, and secondly, where products (not capable of substantial non-infringing uses) are distributed for infringement.

However, the extent of applicability of Sony’s doctrine in the products that passively allow infringement and the extent of non-infringing uses that must exist for being safeguarded by the doctrine remains unclear. 

Perfect 10, Inc. v. Giganews, Inc. 

In this case, it was held that direct infringement mandates causation/volitional conduct by the defendant. Further, it was also clarified that a computer system operator would be liable under the “material contribution” theory only if firstly, it has actual knowledge that using its system a specific infringing material is available, secondly, it can take steps to prevent it but it does not and continues to provide access to infringing works. 

Harold Davis v. Pinterest, Inc.

Facts and background 

This case was filed by Harold Davis (plaintiff), a reputed digital artist and professional photographer against Pinterest (defendant), an online platform wherein users can create their own “virtual” boards by “pinning” or attaching images to their boards. These images can either be the user’s original captures/pictures or they can be copied from other sources on the internet. 

The plaintiff alleged the following against the defendant;

  1. There is no screening system employed by the defendant to screen the “Pins” for copyright notices or other indications of copyright ownership associated with the ‘pinned’ images.
  2. Instead, the defendant commercializes those images by displaying and distributing them to its users, which are incorporated with targeted advertisements.
  3. Users can also download the images easily through the platform, which can subsequently be displayed by the user on their own web pages. 
  4. The defendant deliberately removes signs of copyright ownership to render its paid advertisement more effective and to actively oppose the efforts of copyright owners, to police the misuse of their works on and through the platform.
  5. There are many instances where the plaintiff’s federally copyrighted images have been used by the defendant to market goods and services.

Thus, based on these allegations, the plaintiff filed a complaint on November 20, 2019, accusing the defendant liable for both direct and contributory copyright infringement by third parties. Defendant subsequently moved to dismiss the plaintiff’s contributory infringement claim which was granted by the court. 

The plaintiff then presented an amended complaint on March 11, 2020, wherein an additional claim of violation of the Digital Millennial Copyright Act, and to bring the action on behalf of a putative class was added. Again the defendant moved to dismiss the contributory infringement claim, and the court granted the motion on July 22, 2020.

Plaintiff, therefore, filed his second amended complaint on November 11, 2020, and the defendant again moved to dismiss the contributory infringement claim, which has once again been granted by the court through this present order. 

Legal Rules

The legal standard on which the complaint has been dismissed as the Federal Rule of Civil Procedure 8(a) which mandates a complaint to contain a short and plain statement of the claim showing that the pleader is entitled to relief. Therefore, a defendant may seek to dismiss the complaint about failing to state a claim upon which relief can be granted under Rule 12(b) (6). 

The court relied on the following precedents in this regard;

  1. Mendiondo v. Centinela Hosp. Med. Ctr. (521 F.3d 1097, 1104 (9th Cir. 2008))- If a complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory, it is liable to be dismissed under Rule 12(b)(6).
  2. Bell Atl. Corp. v. Twombly (550 U.S. 544, 570 (2007))– The plaintiff need only plead sufficient facts to state a claim to relief that is plausible on its face for surviving Rule 12(b)(6). 
  3. Ashcroft v. Iqbal (556 U.S. 662, 678 (2009))– A claim becomes facially plausible when the court can draw the reasonable inference that the defendant is liable for the misconduct alleged from the factual contents of the plaintiff’s pleading. 
  4. Manzarek v. St. Paul Fire & Marine Ins. Co. (519 F.3d 1025, 1031 (9th Cir. 2008))– While considering the plausibility of a complaint, the court shall assume the factual allegations to be true and construed the pleadings in the light most favourable to the nonmoving party. 
  5. In re Gilead Scis. Secs. Litig. (536 F.3d 1049, 1055 (9th Cir. 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001))– However, merely conclusive facts, unwarranted deductions of fact, or unreasonable inferences shall not be accepted as true allegations by the court.

Now that we understand when a complaint is liable to be dismissed, let’s study why the present complaint (particularly the claim of contributory copyright infringement) by the plaintiff was dismissed by the court.

Discussion

The defendant has continuously challenged the plaintiff’s second cause of action for contributory copyright infringement. The plaintiff in the present case alleges both material contribution and inducement to establish the defendant’s liability, both of which were challenged.

The defendant contended that the plaintiff had not alleged that the defendant had actual knowledge of specific acts of third-party infringement (reference was made to the Amazon case and Giganews case described above), which was admitted by the plaintiff.

However, the plaintiff relied on constructive knowledge and willful blindness, both adequately alleged, as sufficient to stage the said allegations (The plaintiff cited two cases to support his argument that constructive knowledge is sufficient, first Erickson  Prods., Inc. v. Kast (921 F.3d 822 (9th Cir. 2019)) and A&M Records, Inc. v. Napster, Inc.(supra)).

However, the plaintiff had not alleged that the defendant had knowledge (actual/constructive) of the specific acts of infringement. The plaintiff in his complaint pointed out photographs that were available on the defendant’s website but does not allege that the defendant knew or had a reason to know of them. Further, the legal notices sent by the plaintiff also do not specify any specific acts of infringement, although the defendant also sought them including reference files of the images that the plaintiff wanted to be removed which was not provided by the plaintiff. 

Regarding the allegation of the plaintiff regarding willful blindness by the defendant, it is a settled principle that for this claim to be successful the plaintiff must allege that;

  1. The defendant subjectively believed that infringement was occurring on their platform and, 
  2. The defendant still took deliberate actions to avoid learning about such infringement (Luvdarts, LLC v. AT & T Mobility, LLC, 710 F.3d 1073 (9th Cir. 2013)).

But here also, specific acts of infringement to which the defendant was willfully blind must be shown and not just to general copyright infringement (Willful blindness of specific facts would establish knowledge for contributory liability. (emphasis added). 

However, in this case, the plaintiff fails to furnish factual support for his allegations and to show how the defendant was willfully blind. The allegations only indicate that the defendant operates a platform indifferent to the risk of copyright infringement generally and to the difficulty copyright holders may have in identifying misuse of their works.

Thus, the court concluded that the plaintiff had inadequately alleged that the defendant had knowledge of the infringement, which leads to the failure of his claim for contributory copyright infringement. 

Conclusion

Thus, this case also emphasizes that knowledge (actual/constructive) of specific acts of infringement is crucial for a successful claim of contributory copyright infringement. The court has also elaborately elucidated the reasons that led to the failure of the plaintiff’s claim.

Further, the court enumerated what should have been pleaded instead for a successful claim, which would act as a guiding tool for future lawsuits against Pinterest or other such platforms.

There is no mention of secondary liability in either the U.S. Copyright Act or the Indian Copyright Act. From the first case in 1971 (Gershwin Publishing Corp v Columbia Artists Management Inc (443 F 2d 1159, 1162 (2d Cir 1971), 14 ALR Fed 819, 170 USPQ 182) where the concept of contributory copyright infringement was articulately expressed, to the recent Pinterest order, the concept has evolved continuously through the various court judgments and orders.

References

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How to draft a patent royalty agreement

By
Shoronya Banerjee
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0

This article is written by Anushree Modi, pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho.

Introduction

Firstly, understanding what patent royalty agreement is important before beginning to draft it. It is a type of contract that delineates the terms and conditions under which a licensee can use a licensor’s patented product. It is put in place when a licensor licenses the rights to their invention (in full or in part). Subject to certain terms this kind of agreement grants rights to manufacture, sell and/or use a patented innovation, to licensee.

The word ‘Patent’ in a patent royalty agreement is the exclusive right granted for an invention, which can either be a product or process and offers a new way of doing work or provides a new technical solution to an existing problem. The word ‘Royalty’ in the patent royalty agreement means the remuneration or money given to the licensor fixed in this agreement in exchange for patent rights to the licensee.

Parties involved in the patent royalty agreement

  • Licensor/s- Individual or a group of people (can be a company as well) who have the patent ownership rights over the invention.
  • Licensee/s- Individual or group of people (can be company/ companies as well) to whom the licensor will give the right to use the patent for providing goods or services in exchange for compensation (i.e., royalty).

Advantages of properly drafting patent royalty agreement

There are various advantages of patent royalty agreement such as: 

  • transferring the risk involved in manufacturing and designing the products to the Licensee/s; outreaching towards global markets; 
  • exclusive rights of patent remaining intact due to limited period agreement and competent advantage of using the clientele of large cooperation by assigning them rights. 

As the saying goes “with greater perks comes greater responsibilities” and such can be ensured by incorporating the fundamental principles of drafting a patent royalty agreement. Therefore, let’s look into various aspects which need to be taken care of while drafting the patent royalty agreement.

Important points to keep in mind while drafting a patent royalty agreement

While drafting a contract or agreement one must ensure to import all the necessary clauses and revise the agreement as much as possible to avoid lengthy legal consequences in the future in case of any breach or dispute between the parties. 

For ensuring this one must first confirm that all prerequisites if any, procedures, and documents have been completed and ready before drafting the agreement. Example patent specification, checking the competency of both licensor and licensee, etc. 

Secondly, after ensuring that all the legal procedures and documents required before agreeing to come into a patent royalty agreement, one must ensure exhaustively that all the general and specific clauses (if any) are laid in the agreement. Which would ensure no confusion in the future and quick dispute resolution between the parties. Due diligence must be performed by both parties in this agreement.

A patent royalty agreement must include the following information

  • In the name clause, detailed identification of licensor and licensee should be mentioned.
  • Activities in which licensee and licensor are involved including the project/purpose of entering into this agreement.
  • What exactly is being licensed (Example: a license to make, use and apply company A’s patented design for creating new device intricacies). 
  • The geographical scope of the license.
  • Date when the agreement is signed and duration of the patent agreement.
  • Details of the license’s exclusivity.
  • Restrictions and conditions on the licensee’s use of patent (Example: Company B has no right to sub-license the patented technology).
  • The extent and duration of the patents.
  • Royalties must be paid by licensee in exchange for the use, manufacture or/and sale of the patent (including the royalty rate, royalty base, other payments and payment schedule).

Thirdly, it is necessary for drafters to have a good technical understanding of the intellectual property itself, as well as the business arrangement planned by the parties with respect to the intellectual property rights for a more detailed draft to come out.

Defining royalties in agreement

The most important clause in the patent royalty agreement is the compensation clause or we can say in this agreement : royalty clause. Both the parties mutually agree for the royalty to be given to the licensor by the licensee for using the patented product. The patent royalty agreement must mention the following:

  • The patent royalty rate: It is basically agreed upon based on the percentage of sales.
  • The royalty base: Usually consists of gross/net revenue or sales.
  • Minimum patent royalty payments: For safeguarding the rights of the licensor and his patent an amount is fixed which the licensor needs to pay each year or monthly, regardless of generated sales, profits etc.
  • Royalty payment schedule: The schedule according to which the royalty needs to be paid viz. monthly, quarterly, annually, or as per another schedule fixed mutually between the parties.
  • Other payment: When licensee pays an upfront fee on top of the regular royalties or share from any other benefit extricated by the licensee by using, manufacturing or selling the patented product. 

Common mistakes that are to be avoided while drafting a patent royalty agreement

There are certain common mistakes that should be avoided from both sides while considering drafting a patent royalty agreement.

  • Before consenting to the patent royalty arrangement, the licensor often awards the option to utilise a patented item to the licensee which results in patent encroachment. In this way, Licensee ought to be sure of consenting to the arrangement before utilising, assembling, or selling the item comprehensive of development. 
  • Also, the licensee should ensure that the licensor is the sole proprietor of patented items and check every legal record associated with the patent before entering into an arrangement. 
  • While securing numerous licenses frequently, the licensor mostly while finding financial backer/licensee winds up conceding permits to some non-skilled person, organisation, or company. This leads to their patented products landing into wrong-hands and being misused. This could lead to failure of the purpose of the licensor in bringing out the creativity in the market.
  • The licensee can suffer losses as a result of the owner’s lack of understanding of his/her obligations. Even during the licencing period, the licensor remains the owner of the patented product or design. As a result, he may be held accountable for his innovation even while under licence.

Sample of the patent royalty agreement

THIS AGREEMENT is made on <date along with day> day of <month> of <year> in <<place>>. 

BETWEEN 

<Name of licensor company or individual> a company registered in <country of registration> under <act/law under which registered> bearing number <company registration number> whose register office is at <office address> (hereinafter referred to as “Licensor”)

AND

<Name of licensee company or individual> a company registered in <country of registration> under <act/law under which registered> bearing number <company registration number> whose registered office is at <office address> (hereinafter referred to as “Licensee”)

Licensor and the Licensee together referred to as the “Parties” or individually as “Party”. 

WHEREAS:

  1. The licensor has developed and is the beneficial owner of the substantial body of valuable Technical Information as defined below relating to the manufacture, assembly, and commercial operation of the Product(s) and is the beneficial owner of Patent Rights relating thereto as defined below. The licensor is the sole and exclusive owner of and has the sole and exclusive right to grant licences under Letters Patent of <country> issued to it specifically<number> entitled <patent name> and <number >, entitled.
  2. No agreement in conflict with this agreement has been entered by the licensor and the licensor has not granted any other person, firm, or corporation any right, license, shop-right, or privilege granted under this agreement.
  3. The licensee wishes to receive, and the licensor is willing to grant a license on the terms and conditions set out in this agreement to use such information and to work under the set Patent Rights in order to manufacture, use, sell or otherwise deal in the product(s).

1. Definitions and Interpretation 

In this agreement unless the context otherwise requires to falling expressions have the following meanings:

2. Grant of License

The licensor awards to the licensee the select rights and permit to produce, sell, and use the contraption encapsulating, utilizing, and containing the creations protected in the previously mentioned Letters Patent all through the <country> and its regions, to the full finish of the terms all terms for which such Letters Patent have been or might be without a doubt, and any reissue or reissues of such Letters Patent, except if this arrangement is ended before such term or terms, as given beneath.

3. Schedule of Royalties      

The Licensee consents to pay the Licensor, initiating <date>, and after that date, during the duration of this arrangement, eminences on device exemplifying and containing the previously mentioned developments, which are fabricated, sold, and gave by the Licensee; and such sovereignties will be figured in the accompanying way and according to the timetable set out as follows:

4. Rate of Royalties    

  • The licensee will have the right, choice, and privilege of choosing the pace of eminence to be paid by the timetable contained in the Article 3 of this understanding and for that reason licensee may, for three quarterly times of any monetary year pay sovereignties on the base premise, in the last quarter report upon the premise of the real number of contraption sold during the year, and the sovereignty for the whole will be figured based on such diminished eminence, and the change and instalment made likewise. 
  • It is concurred, notwithstanding, that the base ensured yearly sovereignty of the licensor under this understanding, starting <date> will be <amount> and that licensor will in no one year (or some other timetable picked by parties) after <date>, during the duration of this arrangement, gets not exactly that entirety; and Licensee will not be chargeable with any total in the abundance of <amount>, except if the assertions delivered by show sovereignties because of the licensor to be in overabundance of <amount> in which the occasion the licensee will pay the real eminences due in the way indicated.

5. Statement of Sales/ Account

The Licensee within 15 days after the main day of <January, April, July, and October or first month of quarters> in every Year during the constant of this arrangement, consent to outfit to the licensor composed articulations having sworn to tell the truth, indicating the all outnumber of contraption typifying and containing the previously mentioned innovations sold by the licensee during the former quarter, such explanation to be joined with a money order in an instalment of the sovereignty for the time frame covered. The primary assertion will be delivered not later than 15 days of the <month, year> and will cover the date from the day of this consent to <date>.

6. Infringement 

The licensee will have the sole option to establish and indict all suits to charge all infringers of the previously mentioned Letters Patent; and now and again during the continuation of this understanding, and its own cost, may organize any suit or suits which are made in vitality. The licensee will have the sole option to establish and arrange such suits and to utilize its own advice for such suits, and licensee will pay for all administrations delivered by counsel so held, for every accidental expense and costs.

7. Joinder and Licensor 

The licensor concurred that the licensee may join as gathering offended party the licensee should think that it’s important or attractive in any suit or suits which the licensee me foundation including the previously mentioned letters patent, it is concurred that in such even the licensor will not be chargeable for any expense or costs by reasons of being joined as gathering offended party, however that licensee will bear every such cost.

8. Cooperation of Licensor

The licensor consented to execute any papers, archives, or different instruments which might be discovered to be important or alluring to impact the restrictive right and permit conceded to the licensee; and furthermore to execute any papers which might be discovered fundamental or attractive in any suit or suits brought under the compliant with this understanding; and the licensor further concurs that it will affirm in any impedance or lawsuit, at whatever point mentioned to do as such by the licensee, all and cost of the Licensee.

9. Invalidity of the agreement

If in any suit involving a Patent, pursuant to which the exclusive right and license has been granted, infringement of such right and license, the Patent agreement should be declared to be invalid by the court, or be construed by the court as not to cover a defendant’s apparatus, pertaining especially to <specify>, then the royalty agreed to be paid under this agreement shall be afterward be waived, and the licensee shall be immediately released off and from any and all obligation under this agreement.

10. Injunctive Relief

The Licensee acknowledges that if he sub-licenses a third party with Right to patent, without the consent of the Licensor or breaches any of its obligations under this Agreement and that monetary damages shall be inadequate to compensate and causing irreparable damage to the Licensor. Consequently, the Licensee acknowledges that, in addition to any other remedies of rights, the Licensor shall have the right to obtain injunctive relief to enforce the terms of this Agreement. 

11. Governing Laws and Jurisdiction  

a. Any dispute, controversy, or contradiction between the parties relating to this Agreement or in case of breach of Agreement by either of parties firstly would be amicably resolved through dispute resolution. The resolution proceeding shall be governed by the Arbitration and Conciliation Act, 1996, and shall be in the English language. The arbitrator/arbitral panel shall also decide on the costs of the arbitration proceedings. 

b. If the dispute is not resolved amicably between the parties that both parties reserve the right to file a suit. The jurisdiction of the court of <place> would prevail.

12. Termination 

a. It is agreed that this agreement shall continue during the life of the above mentioned licensor, but that the licensee shall have the night at any time, upon <2> years (or any duration mutually fixed by both parties, by notice in writing, delivered to licensor by licensee, at its last known address (and for that purpose mailing of notice by registered mail shall be deemed sufficient), to terminate this agreement and at expiration of the <2> years from that date of the such delivery of such notice, this agreement shall cease and terminate for reasons stated in Article 9 above, or if the patents have become of no value to licensee in view of other patents or other improvements in the <specify> industry, and become null and void.  

b. Any and all rights which licensee shall have for possession under this agreement shall be by its relinquishment and surrender to the licensor; except that the licensee shall have the right to sell all apparatus already manufactured, embodying the inventions upon which royalties will be paid as provided for above.

13. Indemnification

The Licensee hereby provides complete indemnity to the Licensor for any loss or damage caused to the Licensor or any of its affiliates and assignees due to breach of obligations of the Licensee under this agreement.  

14. Binding Effect

a. This agreement shall bind and apply to the successors and assignees of the licensor, and may incur to the benefit of, may be transferable to, and be binding upon the successors and assignees of the licensee.

b. This Amendment may be executed in two counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 

IN WITNESS WHEREOF, the parties have executed this agreement at <place of execution> as the day and year first before written,  

LICENSOR 

______________________________________

Authorized Signature

______________________________________

Print Name and Title 

In the presence of

<Name and Address of Witness>

LICENSEE

______________________________________

Authorized Signature

______________________________________

Print Name and Title 

In the presence of

<Name and Address of Witness>

Conclusion

The clauses set forth in the patent royalty agreement must be constitutional and statutorily legal. It is to be noted that every contract is different not just because of different party names but also due to different products, procedures, inventions, processes, restrictions, duration, nature of contract or royalty rates, etc. Therefore, the contract should be drafted very precisely and carefully as they lay down the foundation for future relations between the contracting parties.

In this article, we looked upon different aspects and factors to keep in mind while drafting the patent royalty agreement. The clauses and the inclusion in them that are deemed necessary and also vary from product to product. 

References

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

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

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

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The elephants’ right to passage and the Nilgiri elephant corridor

By
Rachit Garg
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0
Image source: https://bit.ly/3AayjKY

This article has been written by Sonia Shrinivasan.

Introduction

Indian history bears testimony to the importance animals hold in our age-old customs and beliefs. From being considered as vehicles of deities in certain cultures to worshipping them as gods themselves, we consider it our sacrosanct duty to nurture and protect these creatures. 

The Asian Elephant, also known as the Asiatic Elephants by many, is known to be the only surviving species of the Elephas genus, centered in and around the Indian Subcontinent and Southeast Asia. The largest living animal on land in the Asian continent is culturally revered all across and yet sadly finds itself enlisted as an endangered species in the International Union for Conservation of Nature’s Red List of Endangered Species, popularly known as the Red Data Book, since 1968.

These figures indicate that despite being traditionally revered all across and being given very strict protection under the wildlife protection laws operating in the country, the species is prone to a lot of challenges in the country. The root cause of this, like for all environmental imbalances in the country, is the unavailability of land, thanks to the population explosion in recent years, resulting in a rapid expansion of human dwellings for building roads, houses, dams, growing crops, etc. This directly impacts the forest cover rather negatively, thereby endangering their habitats.

Project Elephant

According to the 2017 census, their population in the wild was estimated to be around 27,312 individuals; India single-handedly accounting for almost 55 per cent of their global population. Predominantly found in 29 elephant reserves, known to be spread over 10 states, covering almost 65,814 square kilometres of forests throughout the country.

To ensure the welfare and survival of the Asian Elephant species, the Ministry of Environment Forests and Climate Change in 1992 launched a nationwide program- Project Elephant, majorly focusing on elephant frequented states- i.e., West Bengal, Uttar Pradesh, Tripura, Uttarakhand, Tamil Nadu, Odisha, Nagaland, Meghalaya, Maharashtra, Kerala, Karnataka, Jharkhand, Chhattisgarh, Assam, Arunachal Pradesh, and Andhra Pradesh; aiming at ensuring the protection of the natural habitats, migration corridors, etc. in order for the long-term survival in the country. Essentially, it is a centrally sponsored scheme launched with the objective to minimize human-animal conflict, save these animals from being poached, hunted, and dying unnatural deaths, restorative of their natural habitats and migratory routes; along with ensuring the welfare of captive elephants and building and establishing rehabilitation and rescue shelters for them. 

Due to this project, the entire concept of developing and maintaining ‘Elephant Corridors’ was given the central government’s nod and has yielded great results in furthering the aims and objectives of this ambitious project.

Elephant Corridors

Elephants, being huge animals that move in large herds, are dependent on vegetation in the wild to meet their food intake and hence require vast areas of land to move freely in search of water and food. Environmentalists believe that the home range of an average-sized elephant herd can vary from as small as 250-meter squares (as seen in Rajaji National Park) to 3500-meter squares (as observed in the state of West Bengal). The figures give an impression of vast territorial lands, but more often than not, include human settlements in some form or another, unless they lie under the reserved or protected forest areas. Hence, mostly, these elephant reserves are not legally protected habitats in themselves.

Also, it has been seen that increased and continuous degradation of forest land forces these large creatures to wander further away, in search of food and water, more often than not leading them into human dwellings, giving rise to man-animal conflicts.

The man-animal conflict involving elephants on one end of this balance is a cause of great concern, and rightly so. Their huge size- individually as well as collectively (their herds) has been known to cause damage worth millions to property and crops. This results in retaliatory actions by humans, mostly non-scientific methods like electrocution and poisoning in order to safeguard their holdings; inherently dangerous to elephants. Not to forget the killings done in order to obtain priceless ivory from these animals.

Even though most of the elephant population is concentrated in protected and reserved areas, there still exists a vast area of their habitat that is unprotected and highly prone to encroachment by humans. This is precisely why Elephant Corridors are needed. With rapid population growth, the forest cover stands the risk of being compromised in order to meet and provide for the needs of this growing population. By extension, the elephants are at the risk of losing their habitat. 

As discussed earlier, the elephant population in India is majorly concentrated in protected national parks and forest areas in the North East, Central regions of India, along with the Himalayan Foothills and the Eastern and Western Ghats. The Indian climate can majorly be dubbed as being subtropical, with different parts of the country experiencing different levels of extremities in the summer, winter, and monsoon seasons. Therefore, in order to meet their food and fodder requirements all year round, the elephant herds are known to transmigrate between these protected forest areas through narrow passages of forests, connecting two major forestlands, known as ‘Elephant Corridors.’

Keeping all these points in mind, the Wildlife Trust of India (WTI) has been tirelessly working towards ensuring the elephants’ ‘right to passage’ within these narrow passages between major forestlands is legally protected in order to meet their food and water requirements perennially

The year 2005 saw WTI, in collaboration with its researchers, animal welfare groups, and NGOs identified 88 such corridors throughout the country in their detailed report- ‘Right of Passage: The Elephant Corridors of India.’

The WTI uses a self-evolved approach while determining, securing, and subsequently protecting these designated elephant corridors in the country and enlists four modes of acquisition of forestlands for this purpose- namely, the Private Purchase Model (the land is question is directly purchased and transferred to the concerned forest department for protection); the Community Securement Model (easements of collectively owned lands set aside); the Government Acquisition Model (the government formulates policies for acquiring the prime corridors and the needed technical assistance) and finally the Public Securement Model (a rather ambitious model, aiming towards creating a network comprising of local stakeholders, for monitoring of the corridors thus secured).

Among those corridors identified, the Thirunelli – Kudrakote (Kerala), Edayarhalli – Doddasampige (Karnataka), Kaniyanpura – Moyar (Karnataka), Siju – Rewak (Meghalaya) corridors stand secured, and several others in the states of Assam, Karnataka, etc. are in the process of being secured.

The Nilgiri Elephant Corridor

The Nilgiri Elephant corridor, also known as the Sigur Elephant Corridor, stands out of all those numerous corridors identified and is one of its kind. Its uniqueness is that it connects the Eastern Ghats with the ecologically fragile Western Ghats, helping in facilitating more than 6 thousand elephants from the states of Tamil Nadu, Kerala, and Karnataka. This particular corridor is the sole link between different habitats and is extremely crucial for maintaining a substantive elephant population in the region.

Upon execution, the corridor is said to connect the regions of Mudumalai, Nagarhole, Bandipur, Nilgiri North, Sathyamangalam forest areas in the three states, simultaneously being beneficial to other animal species like Asian king vultures, white striped hyenas, tigers, blackbucks, and four-horned antelopes; thereby bringing huge long-term benefits to flora and fauna of the Nilgiri Biosphere Reserve.

However, the identification of this corridor is said to potentially displace well over 12 thousand people and hundreds of families. A vast number of vacation homes and resorts falling in the designated corridor face closure, leading to loss of livelihood among the locals. This has earned stringent criticism by the local tribals and human rights activists for the lack of community forest management and endangering the idea of coexistence of man and nature. 

The Nilgiri Elephant Corridor Case

The instances of conflicts between Elephants, based out of the Madumalai Tiger Reserve and owners of resorts in the neighbouring tourist spots, which usually result in the death of the former, highlight the fight over the land which is being reserved exclusively for the corridor, alleging displacement of thousands of people and the consequent loss of their livelihoods.

In 2006, the Tamil Nadu Chief Conservator of Forests proposed the acquisition of almost 202 acres of private land for the corridor, which was subsequently increased to 7000 acres of privately owned lands and revenue holdings. The owners of these landholdings were mostly tribals, Dalits, and Adivasis. This is when the locals started objecting to their potential displacement and began opposing this new, expanded corridor.

In 2008, many Animal Conservation Societies and NGOs approached the Madras High Court through a PIL, seeking removal of the encroached settlements in the corridor, and in 2011, the HC ordered the removal of all the settlements in the 7000-acre area, within three months of passing the order.

This decision of the Madras High Court was challenged before the Supreme Court in HOSPITALITY ASSOCIATION OF MUDUMALAI v IN DEFENCE OF ENVIRONMENT AND ANIMALS AND ORS. , Wherein the order of closure of as many as 821 constructions, including Resort Complexes, Houses, Public Utility (Water Tanks, Schools, Public Toilets, Temples, etc.), Estates, plantations,etc. were questioned on the grounds of it leading to the loss of livelihood for countless families and opposed the expansion of the said corridor. The hospitality association cited the loss of employment opportunities for the local tribals employed in these establishments, without which the crime rates may potentially increase.

In its judgment on the dispute in the matter in October 2020, a three-judge bench of the Supreme Court, comprising the then CJI SA Bobde along with Justices S Abdul Nazeer and Sanjeev Khanna, recognized their right to the passage and awarded them the status of a   National Heritage Animal.

In its 44 page judgment, the Apex Court held that forests in the Sigur-Masinagudi region have shrunk and witnessed fragmentation due to the region’s various developmental activities and encroachment. This forces the elephants of the region to wander off into human-dominated regions, paving the way for man-animal conflicts.

The Supreme Court has directed the removal of all human establishments and settlements in the Sigur Elephant Corridor Area, sparing those of the tribals and traditional forest dwellers while enforcing the corridor. Further, a three-member committee has been constituted, consisting of K Venkatraman, Former Judge of the Madras High Court; Praveen Bhargava, Trustee of Wildlife First and Former Member of National Board for Wildlife; and conservationist Nandita Hazarika, in order to hear the grievances of the locals and determine the extent of compensation to be awarded to all those directly affected by the said order.

Conclusion

A lot has been said about how important elephants are to the wildlife diversity of the country. Many environmental conservationists opine that the seclusion of human beings from the elephant habitats and migratory routes will leave the elephant population thriving in their habitat, away from human encroachment and interference.

However, India boasts of community-inclusive practices when it comes to saving its flora and fauna, and the said exclusion of humans from the reserved corridor areas is a major setback for collective forest management. The Nilgiri Elephant Corridor is situated in close proximity to the Mudumalai Tiger Reserve in the state of Tamil Nadu, the Bandipur Tiger Reserve of Karnataka, and the scenic hill station of Ooty, attracting swarms of tourists annually. Hence, the Hospitality industry stands the worst affected by the ordered closure.

As is the case in most of the clashes between man and the environment, where human interests and environmental protection are in conflict with each other,  recent judgments of the Supreme Court on the lines of the Mudumalai judgment, upholding the rights of these innocent creatures to their habitat can be considered to be a step in the right direction, prioritising wildlife conservation over the material aspects of economic development. 

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