Bid rigging in public procurement sector : a comparative analysis of India and EU

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September 8, 2021

This article has been written by Pushkaraj Ghorpade, pursuing the Certificate Course in Competition Law, Practice And Enforcement from LawSikho.

Table of Contents

Introduction

Free and fair competition is one of the fundamental pillars of any efficiently functioning market. Competition law has developed throughout the world with the very objective of facilitation of this healthy competition and providing equal opportunity for all. In India, this development began in 1969 and continues to evolve today. It aims to eliminate anti-competition practices. Being a market leader, the European Union (EU) has also developed its own laws to curb such practices. One such anti-competitive practice is that of bid-rigging which will be discussed in detail herein. In this paper, we will focus on a comparative analysis of India and the EU with regard to bid-rigging and evaluate the legal aspects therein with a primary focus on the public procurement sector.

Public Procurement refers to the acquisition of goods and services by the public sector and accounts for 15% of global GDP and 30% of Indian GDP. Such procurement is undertaken by various ministries, departments, the central governments, and governments of all levels in the case of federal structure. The primary purpose of public procurement is to provide for efficiency in the selection of the supplier i.e., to choose the supplier with the most value at least price. Healthy and vigorous competition is at the heart of such a practice. Bid rigging curtails this fundamental aspect and leads to loss of taxpayer’s money.

Bid rigging, also known as collusive tendering, refers to collusion of bidders to keep the bid at a pre-determined stage. This pre-determination of the bid amount is intentional and manipulative and can include actual or potential bidders acting in collusion with each other. Such collusion is detrimental to healthy market practice and takes away a fair chance from the public to participate in the process. Bid rigging in public procurement aims at eliminating competition in the public procurement process. Some examples include an agreement to submit identical bids, agreement to hurdle new entrants, geo-specific or rotation-based agreements, agreement to not bid against each other, etc.

Such acts or agreements essentially rid the market of competition that is the very basis of keeping a market flourishing and can have adverse effects on the markets. A bidding agreement is a horizontal agreement. Such agreements can be between associations, persons, or enterprises engaged in identical or similar arenas. It results in non-competitive bids and is a form of market manipulation.

Bid rigging in India and EU

Bid rigging results in the loss of taxpayer’s money and excludes more efficient competitors from the process. Bid rigging can also lead to a reduction in incentives for the suppliers and therefore a reduction in quality and innovation that is birthed from robust competition. Bid rigging is defined in the Competition Act, 2002 as any agreement between enterprises or persons who are engaged in similar production or trading of goods or services. The agreement includes the effect of bid-rigging as manipulation or elimination of competition for bids or adverse effect or manipulation of the process itself. The Act aims at prevention of practices having an adverse effect on competition, promotion, and sustenance of competition in markets, protection of consumer interest, and ensuring freedom of trade for other participants in the market. The formation of cartels in the market leads to the curbing of a healthy market and they have been called ‘cancers on the open market economy.’ Such agreements curbing competition in the market are expressly barred by the Indian competition law. Public procurement is said to be most prone to bid-rigging.

The establishment of an independent commission to look into matters of violation is provided under Indian law. The Commission puts paramount focus on twin principles of enforcement and advocacy. The Competition Commission of India has the duty to eliminate such practices. It has the power to identify anti-competitive agreements and also impose a penalty of up to 10% of the average turnover for the last preceding three years of the enterprise. The Commission also has the power to impose a penalty on each member (producer, seller, distributor, and/or service provider) of any cartel. It can also proceed against directors/officials of any company in violation of the competition laws in India. Under the Act, the Commission can conduct an inquiry of any contravention of a provision under Section 3(3) of the Act. The Commission has the same powers as a Civil Court of the land in such matters. A fair and equal market is guaranteed under the Indian Constitution itself.

Bid rigging is also addressed in the EU and is specifically violative of the Treaty on the Functioning of the European Union (TFEU). The EU practice does not distinguish between bid-rigging in private and public procurement and is treated at par with other violations that affect competition in the market like market sharing. Some countries of the EU like Germany and the United Kingdom have specific sanctions of criminal nature in cases of bid-rigging. The European Commission has the power to impose penalties on defaulters (up to 10% of the group’s worldwide turnover in the preceding business year). This is specifically calculated as per various factors like the gravity of the infringement, the value of sales, duration of the infringement, etc. The policy is based on the principles of deterrence, both specific and general. The policy also provides for protection to the whistleblowers (in terms of fines) and reduction of fines in case of cooperation. There can also be exclusion of an infringing party in participation in public procurement. This exclusion can be mandatory or voluntary and is subject to national laws. This exclusion has to be proportional depending on the gravity of the misconduct. In case a period has not been outlined in the judgment, the exclusion period should not exceed three years from the date of relevant events.

Trends seen in India and EU markets

There are various forms of bid-rigging seen in any market. The following five are the most common forms:

Bid suppression

One or more competitors, expected to bid or previously bid, refuses to bid or withdraws a bid and a predetermined bid is accepted.

Complementary/cover bidding

This is the most common form of bid-rigging and the least apparent one as well. In complementary bidding, the competitors either place a very high bid or a bid on special terms that shall be rejected. This gives the procurer an illusion of competition and the competitor with a low bid is declared the winner.

Bid rotation

In this instance, all the colluders take turns in submitting the lowest bid as per their accepted agreement.

Subcontracting

The colluders bid a losing bid and when the bid is given to a co-colluder at an exorbitant price, the other colluder (s) can subcontract and make handsome profits from the difference in the amount.

Market division

The competitors divide the market amongst themselves on various parameters. These parameters can be geographical, type or size of tender, price, etc. A cartel is slightly different from mere collusion to the extent that cartels are productive structures that involve many producers. These producers act together and form a monopoly in the market. There are various kinds of cartels prevalent in both India and the EU like territorial cartels (division on the basis of geography), syndicates (a united group of competitors against entrants), customer cartels (a division of customers), etc.

In a developing nation like India, corruption is rampant and it acts as both a source and cause for unethical practices like bid-rigging. In order to address corruption, understanding and analyzing the irregularities in public procurement is key. The mere magnitude of the market share of public procurement in India has a competitive impact on the entire goods and services market. This is not to say bid-rigging does not exist in developed nations.

Legal perspective and case laws

In India, there is a lack of a single central body that is responsible for public procurement or laying down guidelines, rules, procedures for the same which leaves scope for bid-rigging. The Ministry of Finance has also issued certain guidelines for model procurement practices. The guidelines can be read here. The EU laws, however, fail in the face of domestic laws and their stringent nature acts as an impediment for market players. There have been various bid-rigging cases that have been dealt with by the competition commission of India and the European Commission

Kerala Insurance Scheme Case

The commission encountered manipulation of the bid-rigging process in insurance tenders, violative of the competition laws of the land. The Competition Commission of India took suo moto cognizance of the case and penalized the parties. The manipulation of the bidding process was assessed by analysing the bidding patterns, minutes of meetings, and exchange of emails. It was held that the evidence was enough to prove a violation of laws and that the opposite parties had entered into anti-competitive agreements.

Essel Shyam Communication Limited Case

The Commission received information of exchange of commercial and confidential price sensitive information between ESCL and Globecast (Lesser Penalty Party) which resulted in bid-rigging of tenders for procurement broadcasting services of various sports events (2011-2012). Upon perusal of investigation reports of DG, the submissions of parties, and arguments, both the parties provided their assent to involvement in bid-rigging and the existence of a cartel in this regard. The Commission put a penalty on all the parties involved in the cartel. A 100% reduction was provided to Globecast while a 30% reduction to ESCL. ESCL was liable for payment of Rs. 22.36 crore.

Rajasthan Cylinders Case

The Supreme Court of India has held in this instance that mere instances of price parallelism cannot be the sole basis for an adverse finding. The Apex Court has held that the key test in bid-rigging cases is the situation of the market. The Court referred to European judgments with regard to oligopsony and allowed the appeal, in this case, thus setting aside the decisions of the Commission and the Appellate Tribunal.

British Sugar Cartel Case

The European Commission fined a total of 33 million pounds on the parties involved in cartelisation that resulted in inflated sugar prices for consumers and retailers for four years. The two companies and the two merchants involved in the case-controlled a whopping 90% of Britain’s white granulated sugar market. British Sugar that was the primary concern behind the cartel was fined 38 million pounds. It has been categorically held that there can be a concerted practice even in the absence of any actual effect on the market.

Lysine Cartel

Lysine is a feed additive, used by farmers globally. In this case, five major lysine producers around the world formed a cartel that influenced prices of the product around the world, down to a penny. The companies were fined a total of 105 million $ and Archer Daniels (One of the culprits) was fined 47.3 million Euros.

Precautions and suggestions

The precautions and suggestions for bid-rigging include detection of signs of bid-rigging, designing tenders to reduce bid-rigging, and a robust justice system. The warning signs for bid-rigging include geographic allocation, sudden withdrawal from the process, never winning any bids, always winning bids, very close bids, turns in the winning bid that defies chance, joint bids despite having the resources to bid alone, repeated sub contraction to losing bidders and holding meetings or communication between competitors before placing bids. In case of such patterns that seem to defy odds, there is a high possibility of bid-rigging.

It is important to keep in mind that punishment is proportionate to the impact. It is also important to avoid unnecessary restrictions and an unnecessarily complex system that fails to work, as in India. There should be a reduction of restrictions and transparency in size and content of procurement with no impediment on participation, like size, composition, nature of firms, etc. A reduction in foreign participation can also go a long way in fostering healthy competition. The qualification of bidders should not be pre-determined or expected so as to provide an environment of uncertainty which leads to less scope for collusion. A reduction in preparation of costs of the bid also goes a long way in encouraging new entrants. This can be achieved by a streamlining process across services, goods, or sectors. India’s lack of such streamlining is often blamed for bid-rigging. A distribution or allocation of lots in the project can also help smaller or mid-level firms participate in the process, provided it is done with due diligence. The factor of predictability should be eliminated wherever possible. The tender process should be designed in a way so as to render communication between competitors impossible or at least reduce it to a certain extent. Advocacy and generating awareness amongst staff is also key to dealing with bid-rigging.

Conclusion

Bid rigging is a pervasive market practice that leads to a hostile and monopolistic market that hinders growth in the economy. It has been categorically made illegal in law. In the case of public procurement, such practices lead to a loss of taxpayer’s money, disproportionate gains, undue influence on markets, and discouragement of vital competition. Both the EU and India suffer from bid-rigging in various forms. India, being a developing nation is plagued with corruption and despite the establishment of a competition commission in India, there is rampant bid-rigging. Although India has come a long way in the evolution of competition law, there is still a long way to go. The same is also true for the EU. The EU has stringent laws pertaining to collusive agreements but such cases still persevere. In the face of a massive global economy, there is a pertinent need to develop a vigilance authority in this regard along with the development of better laws, more awareness, and better strategizing.

References

MRTP Act (1969)
Competition Commission of India, Provisions relating to Bid Rigging (2009) https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Bid%20Rigging.pdf
Moses Manuel, Bid Rigging in Public Procurement Sector, Zerite Network (2021) http://zeritenetwork.com/dealing-with-bid-rigging-in-public-sector-procurement/
Competition Commission of India, Public Procurement and Competition Law 6, https://www.cci.gov.in/sites/default/files/presentation_document/p4.pdf?download=1
Fining guidelines, European Commission (2006)
Van Bael and Bellis, Bid-rigging and deterrence under EU law 3 (2017)
Directive 2014/24/EU, European Parliament (2014)
Connexxion Taxi Service BV v Staat der Nederlanden (Ministerie van Volksgezondheid, Welzijn en Sport) & Others, C-171 (2015)
Khemani, R.S and D. M. Shapiro, Glossary of Industrial Organisation Economics and Competition Law, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD (1993).
Jeffery Fear, Cartels and Competition: Neither Markets nor Hierarchies, Working Paper, Harvard Business School (2006).
Manual on Policy and procedures on purchase of goods, OECD
Cartelization by public sector insurance companies in rigging the bids submitted in response to the tenders floated by the Government of Kerala for selecting insurance service providers for Rashtriya Swasthya Bima Yojna. vs National Insurance Co. Ltd. and Others, Suo Moto Case No. 02, CCI (2014)
Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters. Vs. Essel Shyam Communication Limited & others, Suo – Motu Case No. 02, CCI (2013)
Rajasthan Cylinders and Containers Limited Vs UOI & Anr., 1718 SCC OnLine, SC (2018)
British Sugar plc, Tate & Lyle plc, Napier Brown & Company Ltd, James Budgett Sugars Ltd OJ [1999] L 76/1
Detecting Bid Rigging in Public procurement, OECD https://www.oecd.org/competition/cartels/42594486.pdf
Guidelines for fighting bid rigging in procurement, OECD (2009) https://www.oecd.org/daf/competition/guidelinesforfightingbidrigginginpublicprocurement.html

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Can a foreign decree be executed in India

By

Diva Rai

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September 8, 2021

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Senior citizen — Image source - https://bit.ly/3l3Ls1S

This article is written by Anindita Deb, a student of Symbiosis Law School, Noida. This article aims to deal with the technicalities of a foreign decree and its execution in India.

Table of Contents

Introduction

At present, money decrees passed by Superior Courts in other countries can be executed in India as if they were passed by the District Courts before which the execution of such decree is being sought. However, this was not the case before. Before the introduction of Section 44A of the Civil Procedure Code (1908), a suit needed to be filed on the basis of the foreign decree, before it could be executed in India.

What is a foreign decree

A foreign decree or a foreign judgment is defined under Section 2(6) of the CPC as a judgment given by a Foreign Court. Section 2(5) of CPC defines a Foreign Court as a court that is located outside India and has not been established or being continued by the authority of the Central Government.

Explanation II of Section 44A defines “decree” with reference to Superior Court as any decision or judgment of such Court requiring payment of a sum of money, other than a sum payable in respect of taxes or other charges of a similar nature, or fine or other penalties, but not an arbitration award, even if such an award is enforceable as a decree or judgment.

What does Section 44A of CPC impart

Under Section 44A of the CPC, foreign decrees can only be executed in India if they are passed by any “Superior Court” of any “reciprocating territory”. The Central Government notifies from time to time as to what are the Reciprocating territories and the respective Superior Courts. ‘Reciprocating territory’ refers to any country or territory outside India that the Central Government may declare a reciprocating territory for the purposes of Section 44-A by notification. When referring to any such territory, a “higher court” refers to the courts listed in the notification.

Recently, India added UAE to the list of reciprocating territories. With this, the reciprocating territories of India now include UAE, United Kingdom, Fiji, Singapore, Malaysia, Trinidad & Tobago, New Zealand, Hong Kong, Papua, and New Guinea, and Bangladesh. In the case of non-reciprocating territories, the foreign decree can be enforced only by filing a suit in the district court for a judgment based on that foreign judgment. Additionally, only decrees under which a specific sum of money (except for taxes and charges of similar nature or fine or any other penalty) is payable are eligible for execution under Section 44A of the CPC. According to Section 44A(1), where a certified copy of the decree is filed in the District Court, it may be treated as if it had been passed by that District Court.

Can a foreign decree be executed under Section 44A

If a foreign decree fulfills all the conditions provided under Section 44A, it can be executed in India as if it was a decree passed by the District Court. However, it is essential that the judgment passes the test of Section 13 of the CPC which states certain exceptions under which the foreign decrees become inconclusive and therefore unenforceable.

A foreign judgment acts as a res judicata except for the exceptions stated under Section 13 of the CPC, which states the circumstances in which a foreign decree becomes inconclusive and consequently unenforceable. The circumstances may be any of the following:

Where the decree has not been pronounced by a Court of competent jurisdiction;
Where a decree has not been given based on the merits of the case;
Where it appears to be founded on an incorrect interpretation of International law on the face of it or a refusal to recognize Indian law in cases in which such law may be applicable;
Where the judicial proceedings are opposed to natural justice;
Where the judgment has been obtained by fraud;
Where the decree sustains a claim that has been founded on a breach of any law that is in force in India.

If the decree passes all the above tests laid down by Section 13 and satisfies the conditions under Section 44A, it can be executed as it is in India without any further inquiry or fresh suit. Even in the case of decrees from non-reciprocating countries, if they pass the tests under Section 13, it is treated as conclusive evidence and is converted into a decree of the Domestic Court.

Furthermore, only a judgment debtor, or the party against whom the judgment or decree was rendered, can have a foreign decree executed against them. However, under the Code of Civil Procedure, 1908, an Indian court can issue a “garnishee order,” which instructs a third party owing money to a judgment debtor to pay the judgment creditor rather than the judgment debtor.

Indian Courts also have the authority to partially recognize and enforce a foreign judgment. This is possible if a part of the judgment or decree has already been satisfied or if the court has declared a part of the judgment or decree invalid.

Appeals on the conclusiveness of foreign decrees

Decisions in relation to the recognition and enforcement of foreign judgments can be appealed. In some cases, a court decision on the conclusiveness of a foreign judgment or decree can be appealed or reviewed under the Code of Civil Procedure, 1908. In addition, if these procedures fail to produce a result, any party can file a special leave petition before the Supreme Court of India challenging subordinate court orders. The applicant has the provision of seeking injunctive relief while the appeal is pending.

The limitation period for execution of the foreign decree in India

The issue of the limitation period for execution of a foreign decree is one which various courts have struggled with for years until the Supreme Court ruled on the same last year. Following are the views given by lower courts on different cases regarding the limitation period for the execution of a foreign decree in the country:

The Madras High Court view:

In the case of Sheik Ali v. Sheik Mohamed (1967), the Madras High Court stated that the purpose of Section 44A(1) was solely to make the procedure for execution of Indian decrees applicable to foreign decrees and that the limitation period for execution of Indian decrees, i.e., 12 years (according to Article 136 of the Limitation Act, 1963) shall not apply to the execution of a foreign decree under Section 44A. What shall apply is the residuary provision, i.e., 3 years from the date on which the right to apply accrues (according to Article 137 of the Limitation Act, 1963) which in this case accrues only after a certified copy of the foreign decree has been submitted in the District Court. Also, while there isn’t any limitation period for filing a certified copy of the respective foreign decree, it is not possible for a foreign decree to be executed if its enforcement is barred by limitation in the reciprocation country whose Superior court delivered the judgment.

The Punjab & Haryana High Court view:

In Lakhpat Rai Sharma v. Atma Singh (1971), the Punjab & Haryana High Court held that the effect of Section 44A(1) is to treat a foreign decree as an Indian decree for all purposes. To simply put, the limitation period for the application for execution of an Indian Decree, i.e., 12 years from the date of the decree, shall apply to the application for execution of foreign decrees under Section 44A as well.

The Supreme Court view:

In its recent decision in the case of Bank of Baroda v. Kotak Mahindra Bank (2020), the Supreme Court delivered its ruling on the limitation period for the execution of a foreign decree in India under Section 44A of the Civil Procedure Code.

The Supreme Court laid down that Section 44A only empowers a District Court to execute a foreign decree as if it had been passed by the District Court but it does not have the power to deal with the period of limitation. The limitation period of 12 years from the date of the decree which applies to Indian decrees will not apply to foreign decrees under Section 44A of the CPC. Instead, the law of the cause country (the reciprocating territory whose Superior Court passed the decree) shall be used to determine the period of limitation. Simultaneously, the limitation period for making an application for the execution of a foreign decree will be 3 years from the date on which the right to apply accrues. There can be two distinct situations when the question arises as to when the right to apply accrues, which are as follows:

If the decree-holder fails to take steps to execute the decree in the cause country, the right to apply accrues when the foreign court issues the decree. The limitation period in such cases would be what is prescribed under the laws of the cause country and would be deemed to have commenced on the date on which the decree had been passed in the cause country.
If the decree-holder takes steps to execute the decree in the cause country but it is not fully satisfied, the right to apply accrues when the cause country’s execution proceedings are completed. From the date on which such execution proceedings are concluded, the decree-holder may make an application for the execution of the foreign decree before the relevant district court under Section 44A within 3 years, in accordance with Article 137 of the Limitation Act, 1963. The Supreme Court has also clarified that the time spent in obtaining the certified copies of these foreign decrees shall not be exempted from consideration in the process of calculating the limitation period.

Conclusion

If a foreign court issues a judgment or decree against an Indian defendant, the judgment or decree may not be enforceable against him due to the application of Section 13 of the CPC. The plaintiff must either come to India to have the foreign judgment executed under S. 44A or file a new suit to have the judgment enforced.

Hence, by obtaining a judgment in a foreign court, the plaintiff not only avoids the difficulty of having to present evidence in Indian courts but also exposes himself to a considerably greater danger under S. 13. Therefore, if the defendant is in India, it may be preferable for a foreign plaintiff to file claims in India if he is willing to go through the lengthy judicial procedures in civil disputes.

In India, the legislation governing foreign judgments is straightforward, and the process of enforcing them is simple. A foreign judgment can be implemented in India if a few conditions are met. India has a well-developed legal system for the enforcement of foreign judgments.

References

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Private banks under court’s writ jurisdiction in light of the case of M/s Pearson Drums & Barrels Pvt. Ltd

By

Diva Rai

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September 8, 2021

0

This article is written by Raslin Saluja, from KIIT School of Law, Bhubaneswar. This article analyses the court’s decision to cover private banks under the writ jurisdiction.

Table of Contents

Introduction

Article 12 of the Indian Constitution includes the bodies as covered under the definition of the State according to the Constitution. The State is defined as the Government of India, the Parliament as well as the legislature and Government of the States along with local and other authorities as per the Constitution. In the present case of M/s Pearson Drums & Barrels Pvt. Ltd. v. The General Manager, Consumer Education & Protection Cell of Reserve Bank of India and others (2021), the Court has even widened the interpretation by including private banks under the ambit of the writ jurisdiction.

Facts of the case

The petitioner in the case is M/s Pearson Drums & Barrels Pvt. Ltd which is a company under the Micro, Small and Medium Enterprises Act, 2006 and is engaged in the business of manufacture and supply of M.S. Barrels to the Oil Sector and various other sectors.
The IndusInd Bank (a private bank, respondent no.4) had granted a credit facility (loan) worth Rs.25.05 crore to the petitioner subject to the final sanction of the credit committee. A processing fee of 0.60 per cent of the total sanction amount along with the appropriate rates and taxes were to be paid by the petitioner for availing the financial assistance.
By way of an email dated 29.09.2015, the petitioner was asked to deposit Rs.14,27,850 as processing fees including service tax. It also stated that if for any reason the sanction did not go through from the Bank’s end, then the amount shall be refunded. Pursuant to this, the petitioner paid the amount.
Subsequently, on 06.11.2015, a fresh sanction of credit was issued by respondent no. 4 in the favor of the petitioner. The petitioner was asked to return to the bank the duplicate copy of the sanction communication along with annexures with required signatures of the authorized signatory and the guarantors to represent the acceptance of terms and conditions within 30 days of the letter, otherwise, it would be presumed that the petitioner is not interested in the continuation of the services. However, an additional condition was included in the fresh sanction that processing fees would be non-refundable post-acceptance of the sanction letter and in the event of the applicant being unable to comply with the sanction conditions or refusing to take disbursal, on which event the amount paid as processing fees shall be forfeited.
The petitioner communicated to the Bank on 16.11.2015 seeking a refund of the processing fees of Rs.14,27,850/- against delay and non-receipt of final sanction letter. The petitioner refused to accept the sanction and sought a refund of the processing fees on several occasions. The petitioner stated the grounds for doing so, one of which was an inordinate delay of 50 days between interactive sanction dated 24.09.2015 and the sanction dated 06.11.2015 which, according to the petitioner, had jeopardized the petitioner’s financial planning and almost defeated the purpose of switching over from the petitioner’s present banker, that is, the State Bank of India. Further, there were many deviations between the interactive sanction dated 24 September and the final sanction dated 16 November.
However, the petitioner was informed through an email dated 05.04.2016, that the processing fee was non-refundable as per terms of the sanction. There was also a representation by the Managing Director and the CEO of respondent no 4 to the bank on 25.07.2016 reiterating the grounds for not accepting the fresh sanction. This was followed by a complaint by the petitioner on 03.11.2016 who was given a notice for hearing by a Sub-Committee of the State Level Inter-Institutional Committee (SLIIC), promoted by the Reserve Bank of India (RBI) to hold meetings periodically to address problems of MSMEs, mostly finance-related issues. SLIIC suggested having a cap on the actual expenditure extent of 25 percent of the same and the balance 75 per cent of the processing fee should be refunded to the petitioner-company.
The petitioner then approached RBI with a similar complaint. RBI intimated through an email on 25.11.2016 that processing fees were non-refundable as per the terms and conditions of the sanction letter of the concerned Bank. However, respondent no.2 Assistant General Managers of the Consumer Education & Protection Cell of Reserve Bank of India (CEPC) called a meeting (suo moto) on 13.01.2017 with the petitioner and respondent no.4 and took a contrary view.
Respondent no. 2 intimated respondent no.4 via email on 25.01.2017 that the petitioner complaint related to refund of processing fee for a loan facility wherein there were lapses by both the parties and urged respondent no.4 to take urgent action. This was followed by several reminders from the petitioner to act on the decision of SLIIC.
Finally, respondent no.4 intimated to the petitioner via an email dated 12.05.2017 that GM, CEPC, RBI Kolkata had suggested in the meeting held on 13.01.2017 that the dispute be settled with respondent no.4 waiving 50 per cent of the processing fees collected from the petitioner.
However, the petitioner through subsequent communication reiterated its claims disputing the communication of the bank with regard to the meeting on 13.01.2017. Grieved from the inaction, the petitioners thus filed the present writ petition under Article 226 on the Indian Constitution before the Calcutta High Court, asking for a 100 percent refund of the processing fee along with the interest for not accepting the sanction letter dated 6.11.2015 and for setting aside the impugned letter dated 12.06.2017 issued by respondent no.4.

Issue

A dispute arose between the petitioner, and the IndusInd Bank with respect to refund of processing fee paid by the former, to the latter, pursuant to a prospective loan facility. The petitioner has claimed a refund of the full processing fee from the Bank (respondent no.4) and challenged the communication dated 12.06,2017 of the Assistant Manager, CEPC, RBI which closed the dispute raised by the petitioner regarding the return of processing fees.

Contentions by the petitioner

The Petitioner submitted that the Bank had assured that in the case for any reason the sanction did not go through from its end, it would refund the fee. Since there was a deviation in the fresh sanction from the in-principle sanction and, further the fresh sanction was also delayed defeating the purpose for which the petitioner took the credit facilities in the first place, the petitioner refused to accept the fresh sanction.
That the clause regarding the non-refundability of processing fee found in fresh sanction was inserted later and was not found in the in-principle sanction. Therefore, no question of the applicability of such a clause can arise.
There was no acceptance given to the fresh sanction therefore no question of post-acceptance non-refundability of the processing fees can arise. However, when the Petitioner sought a refund of the processing fees against delay and non-receipt of final sanction letter, the Bank claimed that the processing fee was non-refundable.

Contentions by the respondent

They argued that the decision taken by the SLIIC Sub-Committee on 18.11,2016 for refunding 75 per cent of the processing fee was not binding on the Bank. That the framework for revival and rehabilitation of MSMEs by the RBI only contemplated suggestive/advisory decisions of the Sub-Committee, which by virtue of Memo No. 209/SLB/PS-17 dated 08.03.2017 was discontinued. Besides, the suggestion of the Sub-Committee does not hold an equal footing with guidelines or statutory direction that are given by RBI.
In the present case, it was the petitioner who refused to accept the sanction that was granted by the Bank. The payment for a processing fee to be paid by the petitioner was indicated in the in-principle sanction and email dated 29.09.2015 clearly stipulated requiring the petitioner to pay processing fees, that the same would be refunded only if the sanction did not go through from the Bank’s end.
The fresh sanction issued on 06.11.2015 also indicated regarding the non-refundable processing fee post-acceptance of the sanction letter and if the applicant was unable to comply with these conditions/ refuses to take disbursal the processing fee will be forfeited. Since herein the petitioner refused to accept the sanction, no liability is cast upon the petitioner to return the processing fees.
The processing fee was an upfront payment and was utilized by the petitioner for taking necessary steps to process the application for the loan made by the petitioner, getting approval of the relevant credit committee and drawing up and issuing the fresh sanction. Hence, there is no scope for a refund of such fees on the petitioner’s refusal to accept the fresh sanction.
They also referred to the case of Federal Bank Limited Vs. Sagar Thomas and Others (2003), and argued that a writ petition under Article 226 of the Constitution is not maintainable against private banks.

Judgment and analysis

Scope of Article 12

As regards the first issue, the Court struck down the objection regarding the maintainability of the writ petitioner since the Reserve Bank of India is an instrumentality of the State, it comes squarely within the meaning of “State” as contemplated in Article 12 of the Constitution. This has also been laid down in one of the cases of R.D. Shetty v. International Airport Authority (1979), the instrumentality or agency test which was later confirmed in the following year’s judgment of Ajay Hasia vs Khalid Mujib Sehravardi (1980). The test laid down is as follows:

Whether the entire share capital is held by the government.
Whether the corporation enjoys monopoly status conferred by the state.
Whether the functions of the corporation are governmental functions or functions closely related thereto which are basically the responsibilities of a Welfare State.
If a department of the government has been transferred to the corporation.
The volume of financial assistance received from the state.

The Court added that private banks fundamentally function most of the time towards the fulfilment of the public duties and hence cannot escape from being called state actors. They carry out duties of public nature and that the issue raised in the present case rather holds a wider connotation in regard to the liabilities of banks in respect of a refund of processing fee. This brought all the private banks within the purview of the Court’s writ jurisdiction along with the RBI and other bodies, so far as the discharge of public duties is concerned. Further, the Bench refused to apply the principle laid down by the Supreme Court in the Federal Bank Limited case and stated that in the present case, the writ petition is maintainable.

Bank to pay the refund

The Court observed that as per the communication and the in-principle sanction dated 24.09.2015 which contained a clause for charging processing fees with rates and taxes, it cannot be said that the upfront payment was confined to the initial processing charges only. The expression ‘upfront’ can have different connotations, which could be initial payment for the first phase of processing as well as the payment for processing of the entire loan sanction. In the present case, the fees were charged as a percentage of the total sanction facility according to the prima facie presumption, such fees cover the entire charges for loan sanction. This presumption has not been rebutted by the bank.

Within five days from the in-principle sanction on 29.09.2015, the Bank emailed the petitioner requesting the deposit of the processing fees mentioning the Bank would refund the fees if for any reason sanction does not go through from their end. The next communication that followed was on 06.11.2015 which intimated fresh sanction with variations as pointed out by the petitioner while refusing to accept the fresh sanction. Thus, the Court differentiated between the initial “in-principle” sanction and the fresh sanction.

It observed that the in-principle sanction was not finalized in its initial form and a fresh sanction was offered by the Bank, wherein it failed to go through the motions of giving a logical conclusion to the in-principle sanction by a final sanction on the same terms, after the approval of its Credit Committee. This novation of the terms indicates that the fresh sanction was a different proposal from the in-principle sanction.

Since the processing fees was asked immediately after the in-principle sanction and that sanction did not go through from the Bank’s end, that read in association to the phrase “by any reason” preceding the phrase regarding the sanction not going through from the bank’s end, is wide enough to take within its purview a fresh sanction being issued by the Bank on terms different from the in-principle sanction.

The petitioner never accepted the additional clause regarding the processing fees which was introduced in the fresh sanction, by virtue of not accepting the fresh sanction as a whole. Therefore, the clause cannot be binding on the petitioner as far as processing fees are concerned. The relevant provisions would only include those contained in the in-principle sanction and the email dated 29.09.2015 regarding the processing fees. Further, even if it was assumed that the said clause in the fresh sanction would be binding on the petitioner, it clearly states that the processing fees would be non-refundable post acceptance of the sanction letter.

The Court said that this post facto clause has to be read in the context of the fresh sanction which was never accepted by the petitioner and not the previous in-principle sanction. On similar logic, the question of the petitioner being unable to comply with the sanction conditions or refusing to take disbursal did not arise in view of the non-acceptance of the fresh sanction by the petitioner on justified grounds.

The variance in both the sanctions is sufficient ground to conclude that the petitioner is not at fault but it was the Bank that issued varied fresh sanctions seeking novation of the offer for all practical purposes. Thus the clause in the email dated 29.09.2015 is relevant and applicable in the present case as the in-principle sanction did not go through the Bank’s end.

The Court also stated that SLIIC Sub-Committee recommendations are non-binding in nature since they cannot be equated to RBI guidelines that hold statutory force.

Judgment

Further, the Court set aside the decision of the Bank and the Consumer Education & Protection Cell of the Reserve Bank of India to refuse the petitioner’s claim for refund of entire processing fees since the Bank sought novation of the in-principle sanction by the issuance of the fresh sanction on deviated terms. The Bank while performing its public duty which is within the domain of the State to discharge, acted de hors its own promise on the basis of which the petitioner had acted. and therefore the Bank is stopped from refusing to refund the processing fee.

Thus, the Court directed the Bank to refund the entire processing fee of Rs.14,27,850 to the petitioner within 30 days from the date. In addition to it, the Bank shall also pay the interest at the rate of 6 per cent per annum on the said amount till the date of payment of the refund.

Conclusion

Though in this case, the Calcutta High Court brought the private banks under the ambit of the writ jurisdiction, in another order by the Allahabad High Court in the case of Kailashi Devi vs Branch Manager and Another (2020), it was concluded that private financial institutions carrying out their commercial business, even though pertaining to their public duties, do not come under the definition of State under Article 12 of the Indian Constitution. Thus this creates a contradictory position with respect to the stances taken by both the courts, keeping the issue still hanging.

References

https://www.taxscan.in/rbi-is-state-under-article-12-writ-petition-maintainable-against-private-bank-discharging-public-functions-calcutta-high-court/104923/

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Conferring the unruly discretion : the NCLAT decision in Hystone Merchants

By

Oishika Banerji

-

September 8, 2021

0

This article has been written by Nikhil Kumawat pursuing the Diploma in General Corporate Practice: Transactions, Governance and Disputes from LawSikho.

Table of Contents

Introduction

The National Company Law Appellate Tribunal (“NCLAT”) in the case of Hystone Merchants Pvt Ltd v. Satabadi Investments Consultants Pvt. Ltd. has held that the Adjudicating Authority (“AA”) can refuse to admit an application that is otherwise complete in all respects under section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) if there are visible signs of fraud, collusion or malicious intent under Section 65 of the IBC. Interestingly, the NCLAT decided to reject the application on its own motion under Section 65 of the IBC, meaning thereby that the corporate debtor never averred that the application was fraudulent or motivated with malice.

Background and facts of the case

A loan of Rs 3,00,000 was sought from the Appellant- (Hystone Merchants Pvt. Ltd.) being the financial creditor of the Respondent (Shatabdi Investments Consultants Pvt. Ltd.)- being the Corporate Debtor for six months with an interest rate of 15 percent per annum on 15th February 2019. However, due to business losses, the Corporate Debtor was not able to recover and thus was unable to repay the loan.

Therefore, the Financial Creditor proceeded with an application u/s 7 of the IBC against the Corporate Debtor. The application was rejected on the finding of purported collusion by the NCLT, Kolkata bench based on an assumption regarding the financial position of the Corporate Debtor which was based on the Corporate Debtor’s financial statement for the Fiscal Year 2018-19 and the Corporate Debtor’s Master Data available on the MCA portal.

The Financial Creditor submitted that the NCLT had no discretion except to admit the Application filed u/s 7 of the code when the petition fulfills all the ingredients of Section 7 of the IBC. The Respondent- Corporate Debtor sought necessary clarification about the balance sheet, regarding the Company’s net worth being Rs 153 Cr as per the financial statement of 2018-19.

The bench, however, observed that still, in the present situation when the order was passed, the Company’s position had starkly deteriorated and the company was unable to repay the loan.

The case before the adjudicating authority

The Financial Creditor approached the Adjudicating Authority with an application under Section 7 of the IBC to recover its unsecured loan of rupees three lakhs. The Corporate Debtor (“CD”) cited the pandemic-induced recession as the reason for its failure to pay back the loan, thus not contesting the existence of default under Section 7.

The Adjudicating Authority (“AA”) considered the application to be complete in all respects. The default crossed the threshold limit as specified under Section 4 of the IBC at the appropriate time (2019). Despite this, the Adjudicating Authority, by referring to the Ministry of Corporate Affairs’ master data and financial statement of the Corporate Debtor, held that it was impossible to presume that a company with a net worth of over Rs. 153 Crore and with a Corporate Guarantee of over Rs. 482 Crore cannot pay a meager amount of Rs 3 lakhs. Thus, the Adjudicating Authority rejected the application. It is pertinent to note that the Adjudicating Authority did not allow the parties to contest the said position before dismissing the application.

An appeal in the NCLAT

The Creditor appealed against the order on the ground that the Adjudicating Authority was motivated by extraneous considerations beyond the purview of section 7(5) of the IBC. It was argued that the financial statements relied on by the Adjudicating Authority were for the financial year 2018-19, while the application was filed in the subsequent cycle of 2019-20.

The financial condition of the Corporate Debtor worsened in a year, giving rise to the default. It was also contended that Corporate Debtor invested its money in companies that were now either under liquidation or were going through the Corporate Insolvency Resolution Process, causing the impugned debt’s default.

Still, due to standard accounting practices, the Corporate Debtor was bound to depict the amounts as receivables, although there remained grim prospects of actually receiving the money.

Rejecting the arguments, the NCLAT upheld the order of the Adjudicating Authority by relying on Section 65 of the IBC. The NCLAT held that section 65 could not mean the imposition of penalties alone. The Adjudicating Authority has the inherent power to restrict the perpetuation of applications motivated by fraud or malice. The tribunal held in the case of Amit Katyal v. Meera Ahuja that “section 65 explicitly says that if any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for resolution of Insolvency or liquidation, as the case may, the Adjudicating Authority may impose a penalty”.

Analysis of the case

Critique on the anvil of Section 7 of IBC

Textually, Section 7(5)(a) imposes three conditions before admitting an application, i.e., first, the existence of default; secondly, completeness of an application under Form I and thirdly, that there are no pending disciplinary proceedings against the Resolution Professional(“RP”) proposed to be appointed.

The Adjudicating Authority in the present case was concerned with the existence of the first two conditions, while the RP’s appointment was not contested.

The law concerning Section 7(5) of the IBC has been lucidly laid down in the authoritative pronouncement of Innoventive Industries Ltd. v. ICICI Bank, where the Apex court has held that “the moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority.” Additionally, the NCLAT in Shobhnath v. Prism Industries has held that the Adjudicating Authority is merely required to see whether there is a debt and a default, and it cannot take any other irrelevant or extraneous consideration into account. Thus, in the present case, it can be safely argued that when the application fulfilled the profile under Section 7, the Adjudicating Authority, while rejecting the application, was motivated by extraneous consideration beyond Section 7, something which is impermissible. The NCLAT in the present case has also held that the word “it may” in Section 7(5)(a) itself leaves ample scope for the Adjudicating Authority to exercise its discretion before admitting or rejecting the application.

Thus, NCLAT held that there was nothing wrong with the decision of the Adjudicating Authority in declining the application. It is right to argue that a certain amount of discretion has been vested with the Adjudicating Authority under Section 7 of the IBC when seen in contrast to Section 9(5) of the IBC, which uses the word ‘shall‘. However, this difference is not conclusive for such a finding.

The NCLT ruling in India Bank v. Varun Resources Ltd though not binding on the NCLAT, can still be considered a directory tool for understanding the scope of discretion vested in the Adjudicating Authority under Section 7. The NCLT held in this case that the discretion vested in the Adjudicating Authority has to be exercised for admitting the application rather than for denying it; especially when there is ample documentary evidence for debt and default.

Based on this, it can be safely concluded that the NCLAT has erred in upholding the order of the Adjudicating Authority denying the application when there was sufficient documentary evidence indicating the existence of default.

The discretion is conferred for cases where the prerequisites of section 7 are fulfilled, and still, the Corporate Debtor agrees to settle the claim. In such cases, the discretion can be exercised to reject the application to foster greater flexibility amongst parties, which lies at the root of good bankruptcy law.

Thus, where there lies are more significant, the objective of preserving the administrative costs without disrupting the existing corporate entity, discretion can be exercised. However, the Adjudicating Authority has failed to indicate any such significant reason to reject the application in the present case. The Adjudicating Authority only indicated towards the net worth of the Corporate Debtor and its corporate guarantee, which are extraneous factors while deciding an application under Section 7, especially when there are no averments concerning such factors by either of the parties.

Misplaced reliance on Section 65 of the IBC

A prima facie reading of Section 65 indicates that to fall within the contours of the Section, there is a twofold requirement. Firstly, the application has been filed either fraudulently or with malicious intent, and secondly, it has been filed for a purpose other than resolving insolvency or liquidation. Both conditions must coexist because the second part dealing with any other purpose has been qualified by ‘fraud or malicious intent.

However, the NCLAT seems to be motivated by the second factor alone, while there is nothing in the decision that could have justified the existence of the first condition. The NCLAT concluded that the application was initiated for a purpose other than insolvency without substantiating its conclusion on the presence of fraud or malicious intent, which is a sine-qua-non for Section 65.

Apart from this, the proceedings under Section 7 are ‘summary proceedings’ i.e that the Adjudicating Authority has to decide the question of default by a short enquiry resulting in a rapid decision. Given this, it has been held by NCLAT in the case of Monotone Leasing v. PM Cold Storage that in such summary proceedings, it is difficult to determine the applicant’s intent unless shown by way of documentary evidence. In the present case, none of the parties even averred about the fraud or malicious intent, let alone the aspect of laying documentary evidence.

In the present case, the Adjudicating Authority presumed the presence of collusion (a subset of fraud) between the Creditor and Corporate Debtor without even allowing either party to defend their position.

However, in doing so, the Adjudicating Authority violated Section 424 of the Companies Act. The Section requires Adjudicating Authority to be guided by the principles of Natural Justice in all its proceedings.

Applying this vis-à-vis section 65 of IBC, it has been held by NCLAT in the case of M/S Unigreen Global Private Limited v. Punjab National Bank that prima facie opinion has to be formed before imposing a penalty under section 65. Thereafter, the Adjudicating Authority is required to accord a reasonable opportunity of hearing to the person to enable it to explain and defend its case.

In the present case, the Adjudicating Authority formed a prima facie opinion and gave finality to it based on the net worth of the Corporate Debtor without allowing the parties to explain their respective positions. The NCLAT must have referred back the matter on this ground alone as it prejudiced the parties’ rights in presenting their case. Thus, it is difficult to discern how the NCLAT concluded that fraud or mala fide intent was present in the Creditor’s application in the absence of any documentary evidence or averment. Moreover, when there are doubts over the existence of fraud and malice, the application of section 65 itself becomes dubious.

Conclusion

The ruling in the matter enlarges the scope of the Adjudicating Authority beyond the contours of Section 7. It can become an unruly horse in the long run where the Adjudicating Authority can reject the applications despite an actual default.

As it has been compellingly argued and indeed so, it is not a rule of thumb that a company having a good net worth can generate sufficient cash flows to meet its obligations, which is further corroborated by the Bankruptcy Law Reforms Committee (BLRC) report.

As per the BLRC report, bankruptcy is often motivated by either financial failure (mismatch between payment and receivables) or business failure (insufficient revenue to meet the payment obligations), or, in some cases, by both. In the present case, however, the NCLAT, by relying on the net worth and corporate guarantees, presumed that both the failures must coexist to trigger insolvency, which is fallacious. The ruling will bring instability and uncertainty in the current bankruptcy law, which is undesirable and against the principles for which the code was brought into place. Suppose the matter is carried forward in appeal. In that case Pioneer’ Urban Land Infrastructure v. Union of India, it is expected that the Hon’ble Supreme Court will set aside this ruling based on its own previous decisions and prevent the exercise of unfettered discretion by the Adjudicating Authority while admitting an insolvency application, in line with the objective of the IBC to have minimal judicial interference.

References

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Order 1 to 21 of the Code of Civil Procedure, 1908 : learning the basics of civil procedure

By

Rachit Garg

-

September 8, 2021

0

This article is written by Oishika Banerji from Amity Law School, Kolkata. This article deals with Order 1 to 21 of the Code of Civil Procedure, 1908.

Table of Contents

Introduction

The Code of Civil Procedure,1908 governs the procedure of the Courts of Civil Judicature. A Code, as defined under Section 2 (1) of the Code of Civil Procedure, 1908, is generally a set of rules that regulates the locomotion of a case in a court. The Code of Civil Procedure, 1908 being a procedural law by nature administers civil proceedings in the Indian territory and therefore is recognized as a Code. The Code is made up of 158 sections comprising the substantive part of the Code, and 51 orders comprehending the procedural aspect of the Code. Although there are 51 orders in the Code, this article will specifically focus on the first 21 orders that lays down the basic civil procedure to be followed by a civil court in a case hearing.

Before proceeding solely with orders, it is necessary to understand the difference between order, decree, and judgment under the Code of 1908 in order to eliminate any kind of confusion.

Order: Defined under Section 2(14) of the Code of 1908, the order simply provides as to how a case will move forward in a civil court. As the provision provides, order connotes the formal expression of a Civil Court’s decision, but expressly excludes a decree.

Decree: Defined under Section 2(2) of the Civil Procedure Code, 1908, the decree is also a formal expression of an adjudication that lays down the rights of the parties in a civil case that are the plaintiff, and the defendant. A decree must have the following essential; the rights of the parties, the suit, adjudication, conclusive determination of the decided rights of the parties, and should be in writing.
Judgment: Defined under Section 2(9) of the Code of 1908, a judgment is a statement delivered by the Judge in a civil case on the basis of the order, or the decree previously passed by him, or her, to the parties involved in the case. A judgment must consist of the statement of facts, the determining points, the decision of the court, and the reason behind the court’s decision.

Order 1 to 21 of the Code of Civil Procedure, 1908

As the Code of Civil Procedure, 1908 is a very significant, and relevant civil procedural law, knowledge about the Orders stands indispensable. Along with that for preparation of any legal competitive examinations, this statute cannot be ignored. Remembering the orders often becomes difficult and therefore, along with the legal explanation, a simple interpretation has also been provided hereunder to make the civil procedure easy to be understood by individuals of both legal, and non-legal background.

Order 1: Parties to Suit

There are always two parties involved in a case. For a civil case, these two parties are referred to as the plaintiff, who is responsible for instituting the suit against the other party, and the defendant who is the other party and has to provide his defense in the civil court against the allegations made on him. This is the beginning of a civil case as have been provided under Order 1 that deals with Parties to suit. Right after the parties to suit are recognized comes the need to frame the suit as provided under Order 2.

Order 2: Frame of Suit

The plaintiff will be approaching a civil court with his suit which is familiarly known as Frame of Suits provided under Order 2 of the Code. Framing of suit signifies that a party has instituted a legal action against another party. As provided by Rule 2 of Order 2, the plaintiff is supposed to include his entire claim in the suit, which will function as a cause of action brought by the plaintiff against the defendant. The framed suit needs to be instituted before the civil court. But, who does the institution? Is it the plaintiff, or any other individual? This question is answered by Order 3 of the Code.

Order 3: Recognized agents and pleaders

Order 3 of the Code of 1908 talks about recognized agents and pleaders. For instituting the suit framed by the plaintiff before the civil court, the instituting party needs the help of a legal professional or a pleader who is expertise in the field of law. Here comes the need to hire a lawyer who takes the framed suit before the civil court on behalf of the aggrieved party, that is the plaintiff. Who all can be categorized as recognized agents, and pleaders have been given room under Rule 2, and Rule 4 of Order 3 respectively. Now it becomes the responsibility of the recognized agent, or a pleader, to institute the suit before the civil court on behalf of the disputed party, the plaintiff, which brings us to Order 4 of the Code.

Order 4: Institution of suits

For instituting the suit, a plaint needs to be presented before the court by the plaintiff. The meaning of a plaint has been explained under Order 7 of the Code of Civil Procedure, 1908. It is to be noted that for the proper institution of suit compliance with sub-rules (1), and (2) of Rule 1 of Order 4 stands mandatory. While sub-rule (1) mandates the presentation of a plaint to institute a suit before the court of law, sub-rule (2) provides that no plaint as provided in the previous rule can escape the rules provided under Order 6, and 7 of the Code.

Order 5: Issue and service of summons

After a suit is instituted by the plaintiff, there comes the need to inform the defendant about such a suit so that the latter can appear before the court, and provide his defense against the claim made by the plaintiff. To facilitate the defendant to do the required steps, the court serves summons as has been duly provided under Order 5 of the Code of 1908. The defendant is provided with a period of 30 days to appear before the court, and file a written statement. The proviso of Rule 1 of Order 5 provides that if a defendant appears before the court at the time the plaint is presented and admits whatever the plaintiff has claimed in the plaint submitted to the court, then in this case no summon shall be served to the defendant. Put simply, summon is the medium by which the court calls the defendant to present his defense against the claims made by the plaintiff in his plaint. Order 5 also includes the steps involved in serving the summons and the way they are to be delivered.

Order 6: Pleadings generally

Rule 1 of Order 6 provides the meaning of the term “pleadings” which shall mean plaint, or written statement. Although plaint, and written statement will be explained in Order 7, and 8 respectively, the current Order emphasizes the essentials of a pleading which are;

Pleadings must be stating relevant facts only. Evidence does not have significance in a pleading (Refer: Rule 2 sub-rule (1)).
To avoid wasting the court’s time, pleadings must be divided in small paragraphs, and the dates, figures, and numerical should be expressed both in figures, and words in a pleading (Refer: Rule 2 sub-rule (2), and (3)).
The pleading must be consisting of all necessary particulars in cases they are specifically required (Refer: Rule 4).
To include any new ground in the pleading which appears to be inconsistent with the previous one, amendments are a must. (Refer: Rule 7)
Pleadings must not contain any matter of fact that will be of a biased nature, favoring either of the parties to the case (Refer: Rule 13).
It is mandatory for the respective parties to provide their initials in their pleadings (Refer: Rule 14).

Order 7: Plaint

The term plaint has been taken into consideration previously while discussing the institution of suits. Order 7 particularly deals with it. The ingredients of a plaint are laid down under Rule 1 of the Order. If the requisites are not abided by, Rule 11 of the Order that deals with grounds for rejecting a plaint will come into play. While the plaintiff is going to submit his plaint, the defendant has to answer the plaintiff’s claim before the court by means of a written statement which is provided under Order 8 of the Code.

Order 8: Written statement, set-off, and counter-claim

After the summon is served to the defendant by the court under Order 5, the defendant shall submit his written statement before the court within the specified period of 30 days from the date of receiving the summon from the court. The consequence of the failure to submit the written statement within such time will allow the court to specify some other day for the defendant to submit his statement. But the new specified date must not exceed 90 days from the date of issue of summons by the court to the defendant. The most important trait of the written statement submitted by the defendant is that it must contain specific denials of the allegations made by the plaintiff and not just a general one.

Order 9: Appearance of parties and consequences of non-appearance

After pleadings by the two parties, the court will ask for appearances of the parties to proceed with the hearing of the case. Order 9 of the Code provides the same. Rule 1 of the Order specifically points out that the parties in a civil case are supposed to appear before the civil court on the date which is specified in the summons served to the defendant by the court. The interesting part of this Order is the consequences provided for the non-appearance of the parties, which has been listed down hereunder:

Rule 3 talks about the non-appearance of both parties on the specified date. In this situation, the court shall dismiss the suit.
Rule 6 talks about the situation when only the plaintiff appears before the court. Under this Rule, three scenarios have been provided which will decide the fate of the suit accordingly.
Rule 8 talks about the non-appearance of the plaintiff on the date the suit is called for hearing. In such a situation also the suit will be dismissed by the court provided the defendant has not admitted the claim made by the plaintiff against him. If otherwise, then the court shall pass a decree against the defendant on the basis of the claim admitted thereby dismissing the rest of the suit.

Order 10: Examination of Parties by the Court

After the appearance of the respective parties before the court, the court shall examine the parties of the case as provided under Order 10 of the Code of 1908. The examination of the parties is a necessity;

For the court to ascertain whether the allegations brought over by the plaintiff against the defendant are admitted by the latter or stands rejected.
For the court to direct the parties to resort to Alternative Dispute Resolution (ADR), and try to settle the dispute outside the court to avoid the lengthy proceedings of the court.

It is to be noted that Orders 11, 12, and 13 take place within the examination procedure laid down under this Order.

Order 11: Discovery and inspection

It is not enough for the court to frame issues just from hearing the parties in a case. Therefore, Order 11 which deals with discovery and inspection comes as help for the court to delve into the concerned case further, and only after acquiring sufficient knowledge about the same will the court proceed with the framing of the issues.

Order 12: Admissions

Right after discovery, and inspection by the court comes admission provided in Order 12 of the Code. After the court has sufficient knowledge about the allegations by the plaintiff and the defense presented by the defendant supported by the inspection, and discovery of new facts, or evidence associated with the case, either of the parties to the suit can admit the truth of the case by parts, or as a whole by means of pleading.

Under Rule 6 of the Order, the court can on the ground of satisfaction on the admission of facts by either of the parties, by means of pleading can pass judgment as it may think fit, without taking into consideration any other questions existing between the parties to the case. Along with such judgment, a decree shall also be provided which will bear the pronouncement date of the judgment.

Order 13: Production, impounding, and return of documents

Order 13 is the last step of examination of the parties by the court. Dealing with the production, impounding, and return of documents, Order 13 requires the parties to provide all the original copies of documentary evidence supporting their respective pleadings on, or before settling the issues. Therefore it is quite clear that the next step the court undertakes is settling the issues, and determining the fate of the suit on legal grounds, which brings us to Order 14.

Order 14: Settlement of issues

After hearing the parties in detail, and gaining sufficient knowledge about the case, the court proceeds to frame the issues as provided under Rule 1 of this Order. An issue arises out of a disagreement between the parties on certain grounds in relation to the facts of the case. Two important points to take into consideration with regards to the framing of issues are;

Non-framing of a significant issue can turn out to be detrimental, as was observed in the case of Monoranjan Paul v. Narendra Kumar Paul (1994).
The court will be framing issues in accordance with those pleadings which have been confirmed by one party whereas denied by the other, as was the opinion made in the case of Dr. Om Prakash Rawal v. Mr. Justice Amrit Lal Bahri (1994).

Order 15: Disposal of the suit at the first hearing

Framing of issues is extended over both Order 14, and 15 of the Code. The essence of Order 15 is provided in Rule 1 itself. The Rule provides that if the parties are not at issue on any question of fact, or law in relation to the case, the court will dispose of the suit at the very first hearing, and thereby pronounce the judgment.

Order 16: Summoning and attendance of witnesses

After the court has examined the parties, discovered related facts to the case, and framed issues based on the pleadings of the parties comes the need to hear out the witnesses. Here comes Order 16 of the Code that deals with summoning, and attendance of witnesses. Following the similar procedure, as the court had previously got along while calling the defendant, the court shall issue summons to the witnesses to appear before the court, and present their version to the ongoing case. Further, Order 16 A deals with the attendance of witnesses who are confined or detained in prison.

Order 17: Adjournments

As the hearing begins, enters the concept of “adjournment”. Adjournment signifies postponement of the date of hearing of the suit. The proviso of Rule 1 of Order 17 states that adjournment will not be granted more than three times in a row to a party at the time of hearing of the suit. It is also to be noted that adjournment will be granted by the court only if sufficient cause is shown for not appearing on the date of the hearing. Hearing of the suit is covered by Orders 17, 18, and 19 of the Code.

Order 18: Hearing of the suit and examination of witnesses

After the adjournment, the court fixes a date for the hearing of the suit which brings us to Order 18. In a hearing of a civil case, it is the plaintiff who has the right to begin the hearing of the suit. Under this Order, rooms for examining the witnesses called over have also been included.

Order 19: Affidavits

In order to prove the facts, or examination taking place in each hearing, the parties to the suit can file affidavits in the court. This brings us to Order 19 that talks about affidavits. Rule 3 of this Order specifies the matters only to which the affidavits shall be limited to.

Order 20: Judgment and decree

After the entire hearing procedure as explained above comes the calling for a declaration of a judgment, and decree. While decree provides the rights of the parties, the judgment is a formal expression delivered by the Judge on the basis of the decree. Every judgment must be signed as provided under Rule 3 of Order 20. Order 20 A deals with costs.

Order 21: Execution of decrees and orders

Order 21 holds significance because it deals with the execution of the decrees, and orders passed by the court. The meaning of both decree and order has been discussed previously in this article. Order 21 can be classified in 6 parts as provided hereunder:

Applications for execution and the process to be applied.
Stay of executions.
Mode of executions.
Sale of immovable property and movable property.
Adjudication of the claims and objections.
Resistance and delivery of possession

Conclusion

Order 1 to 21 of the Code of Civil Procedure, 1908 holds immense importance as it guides a person as to how, and by which path does a civil case reach its destination that is to resolve the dispute between the two parties in a suit. This article has tried to simplify the orders for quick understanding, and easy remembrance.

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Abuse of dominant position in the smart TV market : analysis of the antitrust case against Google

By

Sneha Mahawar

-

September 8, 2021

0

google — Image Source: https://rb.gy/lmacxl

This article is written by Raslin Saluja, from KIIT School of Law, Bhubaneswar. The author attempts to summarize the order given by the Competition Commission of India (CCI) in the antitrust case filed against Google.

Table of Contents

Introduction

Alphabet Inc’s Google holds a dominant position in multiple markets. This has opened many doors and lines of attacks in the form of various lawsuits against the technology giant. Google has been facing antitrust challenges in the United States for protecting its dominant position in the market for internet search and search advertising. Currently, there are three lawsuits filed against Google search where the first one is by the US Justice Department and eleven Republican State attorneys, the second one comes from a coalition of 30 states led by attorney generals of Colorado and Nebraska and the third one by a smaller group of states led by Texas. It also has a potential challenge awaiting in China.

Even in India, in the last two years, it had its own antitrust probes with the regulator Competition Commission of India (CCI). CCI has raised issues in the past with Google’s commercial flight search option, its dominant position in the search marketplace in 2018, and abuse of dominant position in the Android phone by imposing unfair conditions on device manufacturers to prevent them from using other operating systems in 2019. Recently it was also accused of abusing its dominant position in the market by following an unfair mechanism for apps listed on the play store, unfairly promoting its mobile payment application (Google Pay).

This is its fourth major antitrust challenge in India where it is accused of abuse of its dominant position in the smart television market.

Background and facts

The present case was initiated with a complaint filed by two antitrust lawyers (informants) hailing from Delhi who provided the information to CCI back in 2020 under Section 19(1)(a) of the Competition Act, 2002. It was against Google LLC, Google India Private Limited (collectively referred to as Google), Xiaomi Technology India Pvt. Ltd [opposite party (O.P 3)] & TCL India Holdings Pvt. Ltd [opposite party (O.P 4)] for contravention of various provisions of Sections 3 and 4 of the Act. The informants had also requested CCI to include other Original Equipment Manufacturers (OEMs) as a party, during the course of the investigation, if required.

It is known that Google LLC is a multinational tech company with specialised internet-related services and products whose operating system is used by the majority of smart mobile and tablet manufacturers in India. Further, Google India Private Limited is an Indian subsidiary of Google LLC. O.P 3 & 4 are stated to be leaders in the manufacturing/selling/distributing market of smart TV devices in India.

The informants being users and consumers of android smartphones and smart television devices have alleged Google for creating barriers for firms which are wanting to use/ develop modified versions of Android for smart TVs like that of Amazon Fire TV’s operating system. They referred to Case No. 39 of 2018 vide order dated 16.04.2019 passed under Section 26(1) of the Act. In that case, CCI had opined that certain clauses of the agreement entered between Google and OEMs, i.e. Mobile Application Distribution Agreement (MADA) and Android Compatibility Commitments (ACC) amounted to an abuse of dominant position by Google in violation of various provisions of Section 4 of the Act. To that end, Google was held to be in contravention of Section 4 in regard to the market for licensable operating systems for smart mobile devices in India. Based upon this previous order and various media reports and other sources in the public domain, the informants accused Google of violating Section 4 read with Section 32 of the Act and for being into anti-competitive agreements with O.P 3 & 4 violating Section 3 read with Section 32 of the Act.

However, since Google had modified these agreements in concern based on rulings by the European Union in 2019, the informants suggested considering the relevant period for contravention as 2009-2018/19.

What is a smart TV?

The ecosystem of the smart TV is an upgraded version of conventional/traditional television devices with new features that allow the users to view photos, browse the internet, stream video content available over the internet, etc. This feature is enabled/facilitated in the smart TVs with the help of an operating system that provides a user interface for using the smart TV functions. This operating system is pre-installed in the smart TV device and later cannot be changed by its users.

Among the other operating systems in the market, Android TV which is developed by Google especially for television devices is one of the most popular systems used by smart TV OEMs in India. To that end, it has been alleged that Google licenses the Android TV operating system to smart TV OEMs in a similar fashion as it licenses Android for smart mobile phones to smart mobile device OEMs.

Relevant markets in the present case

As per Section 19, for determining the relevant market, the Commission has to consider the relevant geographic as well as product market. In pursuant to that, the informants had submitted relevant market to include:

The market for licensable smart mobile operating systems in India;
The market for App Store in smart mobile devices in India; and
The market for ‘licensable smart TV device operating systems’ and the market for ‘App Store for smart TV device operating systems’ in India.

Google licenses the Android TV operating system to smart TV OEMs in a similar fashion as it licenses Android for smart mobile phones to smart mobile device OEMs. Thus, the informants excluded certain operating systems which were not available in India’s geographic market and all the non-licensable operating systems tied up to brands like Tizen (Samsung), WebOS (LG), etc since OEMs can only access operating systems that are licensable by their developers.

Google’s dominant position in the market

They alleged that Google’s market share of different smart TV OEMs after due exclusion is 75 percent or more since six out of the top ten smart TV OEMs have signed up with Android TV, establishing its dominance in the licensable operating systems for smart televisions market. In addition to that, Google is also dominant in the market for app stores for smart TV device operating systems since all Android TVs come installed with Google’s proprietary app store i.e. Play Store. This version was supported by showcasing the economic power of Google, network effects, size, and importance of competitors, vertical integration of operating system and app stores, consumer dependence, entry barriers, etc.

Restrictions imposed by Google on smart TV and smart mobile device OEMs

By entering into the agreement, Google was alleged to have imposed the following restrictions which are anti-competitive and violative of Section 4 of the Act. These are:

It has bundled its app store (Play Store) and operating system for television devices (Android TV) together which are two different products and come pre-installed with Google’s app store.
The OEMs are bound by the Android Compatibility Commitments (ACC) formerly referred to as the Anti-fragmentation Agreements (AFA) which prevent them from manufacturing/ distributing/ selling any other smart television or mobile devices which operate on a competing forked Android operating system. This denies market access to developers of those forked Android operating systems, violating Section 4(2) of the Act,
It also denies access to TVs operating on other licensable operating systems as Google’s Play Store is not available on them.
It has created a barrier to entry by restraining the OEMs which have entered into ACC/AFAs from developing their own operating system based on forked android for televisions. Thereby limiting further research and scientific/technical developments in such forked Android-based operating systems.
It has also led to supplementary obligations with no connection to licensing of the operating system or Google Mobile Service (GMS), which by virtue of the ACC, restrict freedom of action of OEMs with regard to the whole of their device portfolio (smart mobile devices, televisions, etc.) and not just the devices on which the Play Store or Android TV operating system is pre-installed.

Thus, these agreements entered into are in the nature of those as mentioned in Section 3(4) and are causing an appreciable adverse effect on competition in contravention to Section 3(1) of the Act. These agreements between the operating systems have also refrained the smart TV OEMs from selling TVs with competing forked Android-based operating systems, thereby not allowing its competitors to enter into the market for licensable operating systems for TVs.

Google’s response

The submissions made by Google stated as follows:

It makes Android Open Source Project (AOSP) and does not deny a license to any third party under an open-source license. It is available for all and does not oblige (or entitle) licensees to preinstall any proprietary Google apps, app store, or services. This open-source project has furthered the development of other Android forks including FireOS by Amazon.
That the third party holds the power to modify, study, and distribute the Android source for anyone for free of the operating system on the basis of AOSP license. The OEMs and the operating systems are free to modify AOSP and introduce their own Android TV platforms and devices. Whereas, Android TV is Google’s variant of Android for smart television devices and is licensed as an Android TV launcher under the Television App Distribution Agreement (TADA), as well as the license of Google’s other proprietary apps.
It denied the dominance of Android TV and Play Store and stated that TADA is a separate and optional agreement on a device-by-device basis which provides the users with a set of pre-installed Google apps. OEMs can choose whether they want to install it on their devices.
OEM partners observe a minimum level of baseline compatibility for smart TV devices that run on Android TV in their ACC which facilitates competition between Android TV and other established players in the sector.
It denied the market share to be 75 percent and stated the allegations made are unsupported by evidence, incorrect factually, and based on legal misconceptions. That it is not dominant, anti-competitive, and does not require exclusivity from OEM partners or illegally tie Play Store with Android or deny access to play on other applications. There are various options and consumers are free to choose.

Commission’s prima facie observation and findings

In regard to the relevant market consideration, the Commission observed that an app store is the only place for the users to download apps. Though there are various apps that cater to the needs of the users, due to the pre-installment of major apps and limited real estate available in the disk space on smart TV hardware, the OEMs cannot pre-install all of them. Thus it is found that Google’s play store is rather a must-have app for OEMs to offer and therefore is of important consideration for users/OEMs.

The Commission then referred to the market share data of smart TV OEMs from Statista and among others found that the market share of the Android TV operating system is almost 90 percent, along with AndroidTV being used in seven (earlier six as per informants) out of top ten smart TV OEMs. This along with the network effects are sufficient parameters to assess and indicate the extent of market power that is enjoyed by Google, which thereby establishes its dominance in the market. Though it has been contested that the app store is not dominant, in the smart TV ecosystem, it makes it compulsory for the OEMs to have a Play store.

Findings on alleged abusive conduct

It was observed that though AOSP is available to any third party, it does not grant OEMs the right to distribute Google’s proprietary apps. In order to obtain access to other rights, it makes the OEMs sign an optional, non-exclusive agreement (TADA) which requires OEMs to comply with ACC, thereby imposing restrictions on OEMs. The OEMs have to preinstall the entire suite of Google apps if they want to pre-install any of Google’s proprietary apps and the device manufacturers have to commit to comply with the ACC for all devices based on Android manufactured/distributed/sold by them. In addition to that, there are more obligations that are imposed by the ACC on the OEMs restricting them from dealing with the Android Forks.

There are other commercial distribution features and permission that TADA imposes on OEMs which conclusively indicate that the license to pre-install Play Store is extensively dependent on the execution of TADA AND ACC (though optional as per Google) makes them de facto compulsory in whose absence the marketability of Android devices may get restricted. In turn, Google has indirectly reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android. Besides these obligations which restrict the freedom of hardware manufacturers are similar to contract conclusions based on acceptance of the parties. The Commission thus stated that this conduct results in contravention of Section 4(2) (a)(i), (b), (c) ,(d) & (e) of the Act.

Under Section 3(4) of the Act, the agreements entered into by Google and the operating systems include clauses of “refusal to deal” and “exclusive dealing”. These agreements have the potential to cause an appreciable adverse effect on competition since they create a wall for the developers to create a better forked android operating system that competes with the existing one, thereby contravening Section 3(1) of the Act.

Keeping in view these findings, the Commission directed the Director General (DG) to cause an investigation under Section 26(1) of the Act and submit its report within 60 days from the receipt of the order. To that Google requested for an oral hearing by way of a video conference to which the Commission granted them the liberty to make a further submission during the investigation. The Commission relied on the Supreme Court’s judgment in Competition Commission of India v. Steel Authority of India Ltd (2010) to go ahead with its decision in the prima facie case.

Google thus filed its confidential and non-confidential submissions dated 27.10.2020, 10.02.2021, and 14.04.2021, while the DG continued with the conduct of investigation as per the order given on 22-06-2021.

Conclusion

Google has been facing criticism from the public and small local start-ups for enforcement of policies and company charges which prevent their expansion and growth in the market. The present case seems like an extension of the other pending investigations going on against Google. Since in the absence of market share data, the CCI rather referred to using the market share of the Android TV operating system as a proxy, it will be interesting to see the results of this novel approach.

References

https://www.mondaq.com/india/antitrust-eu-competition-/1095664/cci-orders-another-investigation-against-google-

https://indianexpress.com/article/business/companies/antitrust-case-against-google-for-abusing-position-in-smart-tv-market-6709022/

https://techcrunch.com/2021/06/22/india-orders-antitrust-investigation-against-google-over-alleged-abuse-of-androids-dominance-in-smart-tv-market/

https://www.ceoinsightsindia.com/news/google-in-trouble-over-abuse-in-smart-tvs-market-faces-antitrust-case-in-india-nwid-3712.html

https://inc42.com/buzz/google-faces-new-antitrust-case-over-abuse-in-smart-tv-market/

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Hate speeches in the news : an inefficient regulatory framework

By

Sneha Mahawar

-

September 8, 2021

0

This article is written by Vanya Verma from O.P. Jindal Global University. This article focuses upon hate speech, laws governing hate speech, and how to combat hate speech.

Table of Contents

Introduction

Online forums are frequently seen in isolation, although they are simply reflections of society. In recent years, polarising information and hateful material have grown on the Internet in India. Opinions that would previously have been suppressed for fear of societal repercussions have now found a safe haven on the internet. A wide range of radical statements can be found on the internet. Today’s social media is a beehive of toxic and vicious debates. Combating hate speech and fake news has become a major concern for governments around the world. But this isn’t just a technology problem; it’s a societal one as well.

In Christchurch, New Zealand, in 2019, a terrorist opened fire in two mosques, killing at least 49 worshippers and injuring dozens more. Following such terrorist incidents, a fresh debate erupted about how governments and civic society can combat hate speech on the internet. The perpetrator live-streamed the incident on Facebook. In fact, the entire incident seems to have been planned for the age of social media. Before it took place, a post on the anonymous message board 4chan, a particularly lawless forum that often features racist and extremist posts, seemed to preview the horror. The message connected users to a Facebook page that aired a live video of the attack and linked to an 87-page manifesto full of anti-immigrant and anti-Muslim views. The attack was also announced via Twitter posts. The video was eventually taken down by Facebook and Twitter, but not before it had been viewed by the majority of the people.

About hate speeches

The reality is that hate speech is not specified in any of the laws of the country; instead, only restrictions for utilising particular forms of speech and expressions are stated. Hate speech is defined as “an incitement to hatred particularly towards a group of persons characterised in terms of race, ethnicity, gender, sexual orientation, religious belief, and the like” in the Law Commission of India’s 267th Report.

To put it another way, hate speech is defined as “any written or spoken statement, sign, or visible depiction within a person’s hearing or sight with the intent to provoke fear or alarm, or incitement to violence.” Hate speech, according to the Blacks Law Dictionary, is “speech that has no other meaning than to convey hatred towards any group, such as a specific race, especially in circumstances when the communication is likely to cause violence.”

Hate speeches in India

In India, fake news and hate propaganda are mostly about a person’s caste, gender, or religion, all of which are sensitive themes for most of us. Furthermore, the regulations addressing these issues are insufficient and are dispersed throughout numerous acts and rules under the Indian Penal Code, the Information Technology Act, and the Criminal Procedure Code. The present legislation must be harmonised and unified. Moreover, there is a need to amend the draft intermediary guidelines rules to tackle modern forms of hate content that proliferate on the Internet.

In India, the propagation of rumours about child traffickers using the popular messaging network WhatsApp resulted in a rash of lynchings in rural areas in 2018. More recently, during the campaign for the Delhi legislative assembly elections, an official electoral rally used hate slogans to entice crowds. However, in the days after the demonstration, a young man turned these comments into reality by shooting demonstrators at Jamia Millia Islamia University, demonstrating once again how hate speech has serious effects.

The Shreya Singhal case (2015) provided instructions on how hate content should be regulated, and the government should follow this direction, in which users report hate content to an intermediary, and platforms subsequently remove it after the due procedure. As the current legislative method disregards due process, it is vulnerable to misuse by the government. While security is critical, privacy is a constitutionally protected right, and the government must strike a balance between the two moving ahead.

We have now reached a point where members of the ruling party are resorting to hate rhetoric in order to gain support. Hatred, anger, and lies are frequently used to manipulate people’s emotions and influence them. However, as we can see from these examples, such speech has and will have consequences. As a result, it is critical for the government to recognise the dangers of hate speech and to guarantee that appropriate regulations are in place to address the problem. Though the government’s suggested interim rules are a step in the right direction, there is still more to be desired in terms of a comprehensive framework to address the issue while protecting citizens’ rights.

When the right to freedom of speech and expression was first introduced in the Constituent Assembly, there were calls for restrictions, which led to the Constitution (First Amendment) Act of 1951 and the Constitution (Sixteenth Amendment) Act of 1963, which added various grounds for imposing restrictions under Article 19(2) of the Constitution.

Legislations governing hate speeches

Apart from the Constitution, there are other legislation and self-regulatory measures in place to prevent hate speech, such as:

The Indian Penal Code, 1860: Section 124A; Section 153A; Section 153B; Section 153 C; Section 295A; Section 298; Section 505(1) and (2).
The Code of Criminal Procedure, 1973: Section 95; Section 107; Section 144.
The Representation of the People Act, 1951: Section 8; Section 123(3); 123(3A) and Section 125.
The Protection of Civil Rights Act, 1955: Section 7
The Religious Institutions (Prevention of Misuse) Act, 1988: Section 3(g)
Cable Television Network Regulation Act of 1995: Sections 5 and 6 prohibit the transmission or retransmission of a programme via a cable network in violation of the authorised programme code or advertisement code. These codes are defined under Rules 6 and 7 of the Cable Television Network Rules of 1994, respectively.
Cinematograph Act of 1952: Sections 4, 5B, and 7 authorise the Board of Film Certification to prohibit and control film screenings.

Though the above-mentioned statutes do not explicitly address concerns of hate speech, the Supreme Court has construed the Constitution in such a way that these provisions are limited to the reasonable constraints of Article 19(2) of the Constitution. As a result, in order to maintain peace and public order in our country, the definition of hate speech has been expanded. Despite the numerous provisions in our laws, opposing questions have been raised about them: first, they are insufficient, and second, they limit freedom of expression. Two different cases from the Hon’ble Supreme Court illustrate this confusing confutation-

Pravasi Bhalai Sangathan v. Union of India (2014): In this case, the petitioners found the existing hate speech legislation to be insufficient and requested that the State should implement stricter regulations and take immediate action against those who promote hate speech. However, the Court stated that enforcing existing rules would significantly reduce the problem of hate speech. The Law Commission of India needed to take a closer look at the issue of hate speech. As a result, in March 2017, the Commission, after considering the laws and different statements on hate speech, submitted its Report No.267 to the Government of India for consideration.
Union of India v. Subramaniam Swamy (2021): Arguments were made in this case about the reasonableness of the restrictions on free speech imposed by Sections 499 and 500 IPC in light of settled doctrine that says restrictions should be precisely tailored and not excessive, arbitrary, or disproportionate. Subramanian Swamy suggested that six provisions of the Indian Penal Code, 1860, should be declared unconstitutional for violating Article 19(1)(a) of the Constitution.

As a result, it is clear that there are mixed feelings in our society concerning the concept of hate speech, and the lack of a specific platform to apply it as ineffectual. The perpetrators get away with challenging the laws as being too restrictive, while the victims of hatred want tighter measures for their safety and prosperity.

Judicial interpretation on hate speeches

In S. Rangarajan Etc vs. P. Jagjivan Ram (1989), the Court stated that freedom of expression cannot be suppressed unless the situation created is dangerous to the community/public interest and that this risk must not be remote, speculative, or improbable. With the expression in question, there should be a close and direct link.
In Arup Bhuyan vs. State of Assam (2011), the Court ruled that single conduct could not be punished unless the perpetrator used violence or incited others to use violence.
In Shreya Singhal v. Union of India (2015) concerns were raised about Section 66A of the Information Technology Act, 2000, which relates to the fundamental right of free speech and expression guaranteed by Article 19(1)(a) of the Constitution, in which the Court distinguished between discussion, advocacy, and incitement, holding that the first two were the essence of Article 19(1)(a) of the Constitution.

The judicial rulings show that India has a speech-protective system, which means that the words people choose to express themselves are critically heard and then reacted to if they violate public decency. Although the courts may be wary of imposing constraints on Article 19 because of the potential for it to be badly abused by the state. Despite countless precedents on the subject, identifying a certain sort of words or expressions that have the potential to incite violence in the country remains a difficult assignment.

Recent cases

Countries all across the world have begun to recognise the problem of hate speech and fake news and how it impacts society’s functioning. In this aspect, Germany and France have some of the strictest policies. In Germany, the NetzDG, or Network Enforcement Act, maintains strict prohibitions against hate speech, including the propagation of pro-Nazi ideology. It establishes rigorous takedown deadlines but also allows for extensions in the event that further facts are required to assess the accuracy of the material. The majority of complaints received in Germany, similar to India, were connected to hate speech or political extremism.

In France, on the other hand, digital platforms are required to reveal the name of the author and the amount paid by the author in the case that content is sponsored. In terms of fake news, France has legislation from 1881 that sets the criteria for determining whether the news is fraudulent and being broadcast on a big scale intentionally. In this case, a legal injunction is issued to prevent the spread of such information. These countries are among the most forward-thinking when it comes to content control. This level of efficiency must be achieved while protecting the freedoms of all parties involved, from individuals to social media businesses. It is evident that the ramifications of the narrative that develops on internet platforms have real-life consequences more frequently than not.

There have been numerous instances of hate speech not only in India but around the world, with Facebook, the social media giant, revealing alarming statistics in its Transparency Report, revealing that it took down 3 million hateful posts from its platform, and YouTube, which allows free sharing of video content on its site, removing 25,000 videos in a single month.

In 2017, the #notinmyname (Not In My Name) protest was launched on social media, with major public figures supporting the response to many cases of mob lynching and religious violence. The Supreme Court requested a response from the Uttar Pradesh government in 2018 regarding the hate speech case against Yogi Adityanath, who gave a speech as a BJP lawmaker from Gorakhpur in 2007 that sparked riots.

When JNU student leader Umar Khalid was attacked in 2018, former Jammu and Kashmir Chief Minister Omar Abdullah described the attacks as a hate campaign carried out through social and mainstream media. In 2018, Tamil Nadu police detained a folk musician for singing a song critical of Prime Minister Narendra Modi at a protest assembly.

Republic TV was fined £20,000 for running a program on its UK station that implied that all Pakistanis, including “their scientists, physicians, leaders, legislators, and even their sportspeople,” were terrorists. Ofcom discovered that during a 35-minute conversation between Goswami and guests, Goswami referred to Pakistani scientists as “thieves” and Pakistanis as “beggars.” The conversation began with India’s recent Chandrayaan-2 space mission but quickly went to the country’s supposed supremacy over its neighbour and old foe Pakistan. According to the commission, the show violated UK broadcasting regulations because it “spread, incited, promoted, and justified such prejudice for Pakistani people among viewers.”

Sudarshan TV aired the controversial episode ‘Bindas Bol,’ which was aimed at “exposing” the “infiltration of Muslims in Indian bureaucracy.” The Supreme Court banned the remaining episodes of a show about Muslims “infiltrating” the central government’s civil service from airing on a private television station. The apex Court called the show “insidious” and “rabid.”

During the ongoing Lok Sabha election campaigning, the Supreme Court gave the Election Commission of India (ECI) just 24 hours to clarify its lawyer’s claims that the poll authority is mainly impotent and toothless to act against religious and hate speeches by candidates. The government (MeitY) has drafted the Information Technology [Intermediaries Guidelines (Amendment) Rules] 2018, which spells out the vigilance that intermediaries must have when carrying out their responsibilities. Similarly, there have been countless incidents of hate speech in which some people have gotten justice while others remain unsolved.

Way forward

As people being victims of hate speech are afraid to visit public venues or engage in debates. This results in a shift in their behaviour; hate speech’s intangible impacts on people are the most insidious and detrimental to their right to live in dignity.

As a result, the following actions should be taken to address such issues:

The most effective technique to lessen animosity is through education. Our educational system has a significant role in creating and comprehending compassion for others.
Not only the government but also private citizens must participate in awareness campaigns and activities aimed at maintaining amicable relationships.
Though there are numerous laws prohibiting hate speech, tougher penalties are required since religious sentiments and beliefs are extremely valuable to individuals.
The fight against hate speech is not a one-sided battle. It should be considered on a larger scale, such as in the United Nations. This threat should be addressed by every responsible country, a regional body, and other international and regional actors.
Hate speech cases can be dealt with through alternative dispute resolution, which suggests a change away from the lengthy judicial procedures and toward the settlement of disputes between parties by negotiation, mediation, arbitration, and/or conciliation.

Conclusion

Subjects like hate speech become a complex issue to deal with in a country like India, where there is a large population of people from many origins and cultures, and it is difficult to distinguish between free and hate speech. When restricting talks, several issues must be addressed, including the number of strong opinions, offensiveness to certain communities, and the impact on the ideals of dignity, liberty, and equality. There are laws against such crimes, but there is still a lot of work to be done. For a flourishing India, we must all collaborate and communicate effectively in order to make our country a safe and healthy place to live.

References

https://www.hindustantimes.com/analysis/it-is-time-to-regulate-hate-speech-on-social-media/story-x2JfnAcZ4mh404CM2wQLpO.html

https://www.legalserviceindia.com/legal/article-1056-hate-speech-in-india.html

https://ili.ac.in/pdf/csi.pdf

https://www.latestlaws.com/wp-content/uploads/2018/05/NLUD-Report-on-Hate-Speech-Laws-in-India.pdf

https://www.theguardian.com/media/2020/dec/23/indian-news-channel-fined-in-uk-for-hate-speech-about-pakistan

https://www.newsbytesapp.com/news/india/sc-restrains-sudarshan-tv-from-airing-upsc-jihad/story

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

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

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Competition law and sustainability : the way forward

By

Oishika Banerji

-

September 8, 2021

0

This article has been written by Vartika Shakya pursuing the Certificate course in competition law from LawSikho.

Table of Contents

Introduction

Economics can be a beneficial tool for observing the market players and determining whether the actions of such market players are anti-competitive or are benefitting the market by providing sustainability. Further, examining the economics of the market structure and sustainability also helps in figuring out how sustainability can be evaluated within the framework used under competition law. Further, it also helps in deciding whether the initiatives by the private organizations and government are proficiently providing sustainability or not. The objective of the Competition law is to promote healthy competition for accelerating growth through innovation and increasing economic efficiencies but at the same time regulating all the anti-competitive practices, thus increasing consumer welfare by providing better products at a reasonable price.

There are three ways by which this objective is achieved:

Prohibiting anticompetitive agreements and practices that cause Appreciable Adverse effect (AAEC) in the market;
Preventing abuse of dominant position in the market;
By regulating mergers and acquisitions.

Competition is undeniably beneficial to every market player, be it a new or an already existing player in the market. Having competition in the market gives market players stronger incentives and multiple techniques for better productivity and gives consumers multiple substitutable choices with reasonable prices. This allows organizations to provide cost savings to the consumers and offer good products with multiple good choices at a low price.

While the competition policy objectives have been widely accepted and recognized, the ground reality is different regarding the application and practice of competition law creating questions about its efficacy. In jurisdictions like the United States who have experience in antitrust laws for almost a century, there have been several contradictory judgments in the same. Even though, later there have been well-advised judgments that showed a better understanding of market economics, a clear demarcation of monopolies still remains a big challenge.

Sustainability and competition

Sustainability has been an important issue of international organizations, states, etc. but more increasingly, private businesses. However, from a competition agency’s viewpoint, the aim to achieve sustainability might be a preferred option. Still, businesses have the capability to affect sustainability and the competition in the market equally despite having competition laws to keep a check.

This debate of sustainability vis-a-vis competition has placed competition agencies in a very difficult position. On one hand, they’re supposed to promote sustainability and show that it cannot be used as a method for cartelization or any other anti-competitive conduct. At the same time, it might become difficult to follow sustainability and competition together. A case to explain this situation is the Consumer-Detergents Cartel of the European Union wherein the application of an environmental initiative related to laundry detergents led to cartelization that resulted in price-increase. Further, the market players want to avoid the feeling that their goals are solely dependent on one-thing.

While interpreting the inter-relationship between sustainability and competition law a more in-depth look at this concept of sustainability is needed. Nowadays, ‘sustainability’ and ‘sustainable development’ are often used interchangeably. The term sustainability is a frequently applied term in science and means a capacity to sustain something for an indefinite period of time. The meaning of sustainable development is different and still connected. The definition of sustainable development which attracted major consensus arises from the report of Brundtland of the World Commission on Environment and Development which defined it as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. Therefore, after that report, sustainable development was understood as a universal goal to be achieved which had a concept of eco-development.

In the 1980s, the social objects of the society were combined because of the after-effects that war and poverty had on the environment. In 1987, the Brundtland report named “Our Common Future” by the World Commission on Environment and Development recognized the issues related to the development of economics, environment and social aspects which were correlated. The focus was given to the root cause of those problems instead of just the problems. Therefore, focusing on the fact that poverty is the major cause behind all the global problems.

Therefore, the focus was given on:

Reinvigorating growth;
Changing the standard of growth;
Meeting basic needs;
Securing a sustainable population level;
Resource Base;
Restructuring technology and managing risk;
Including environment and economics together for any decision;
Focusing on International economic relations.

Later, the focus was shifted towards contributions to sustainable development by private organizations. Thus, the three pillars that constituted and still are the concept of sustainability are environment, economy, and society.

The interplay between competition law and sustainability

Since sustainability has become a broad issue and consumers have become aware and started promoting it, many organizations have started verifying that their supply chains are environmentally and ethically responsible, from sourcing to production, through distribution and packaging, to disposal. Most of the time, these organizations can achieve these goals on their own without any help. For example, when there is fierce competition in the market for different products, organizations can compete better by providing sustainability, making it a parameter for competition. However, companies/organizations cannot work independently at all time; a joint initiative is required for a huge impact and a bigger change. The combined efforts in the market will also have fewer disadvantages. It is due to the combined efforts of competitors that will be able to elevate issues under global competition laws. Sometimes, these rules create issues for competitors; however, not every agreement can create issues under competition/antitrust laws. Further, in reality, there’s a possibility that sustainability projects are going to increase costs, even in a competitive environment, these might be passed down the supply chain i.e it will lead to consumers paying more for the sustainable products. Solely focusing on these sustainable projects will create trouble for competitors.

Some of the issues that will arise are:

⮚ Standard setting and Benchmarking for more sustainable outcome

Standards can benefit in the supply chain by covering the payment to the manufacturing methods and can even use recycling methods; these benefits will prevent them from antitrust issues. However, companies have to make sure that it’s not affecting others. By acquiring a voluntary standard that companies are free to exceed might result in reducing the risks under the competition laws.

Further, the fact that engaging in sustainability projects often requires sharing of information between companies, arising other related risks. For example Companies might work with smaller organizations for passing on these initiatives with an even better supply chain continuing with sustainable products under the ambit of ‘ecolabel’.

⮚ Scope-creep and stepping into illegal territory

The major drawback of these sustainability initiatives is that a lot of companies will be getting into cartelization under the garb of sustainability initiatives as disguise and will face heavy charges by the competition regulating authorities. However, the chances to get caught are very rare. Further, another backlash is that the long term nature projects end up with the discussion which is not related to sustainability initiatives rather price discussions or new cost standards for profit. Therefore, there is a need to have proper compliance related to all these issues in order to safeguard the nature of the projects.

⮚ The tricky category

A big challenge for companies will be in deciding as to how the projects should be executed, that they don’t result in cartelization by increasing prices etc. when companies are only working towards positive societal benefits. This will be a difficult job as with every step companies will be required to weigh pros and cons, until they’ve reached an assurance point that the project results will be positive.

Since there are no specific parameters for this category, the assessment will always be done on the basis of jurisdiction and facts, however, there are certain points stated below that can help in reducing risks:

To be sure that the responsible people for corporate sustainability initiatives are already keeping a tab with the antitrust agencies in order to avoid future problems. Proper training to organizations in order to remind them of the original idea behind the projects and also to avoid competition risks.
To make sure that competition is still alive and the projects are not affecting the other market players and the standards are set properly.
Try to keep a tab and check on the benefits related to the projects as to how it is benefitting organizations.
To make sure that there is a compliance program in all the projects which will safeguard the shared information and will keep an eye on the initiative to avoid unforeseen risks and scope creep.
Considering the pros and cons of approaching a Government body and/or Competition law agency for the inspection of a contemplated project.

Conclusion

To sum up whatever has been stated above, the bottom line is that there are high chances that sustainability initiatives involving competitors can certainly raise antitrust issues. However, it’s only possible when competition law doesn’t hinder the way of a legitimate goal, rather encourages and facilitates them based on their ability to innovate and embrace wider responsibilities contributing to a sustainable future.

References

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Proposed amendments to the Consumer Protection (E-commerce) Rules, 2020

By

Sneha Mahawar

-

September 8, 2021

0

Analysis of class action suit under Consumer Protection Act — Image source: https://rb.gy/6lq1h7

This article is written by Harsh Gupta from the School of law, HILSR, Jamia Hamdard. This is an exhaustive article which deals with new proposed amendments to Consumer Protection Rules, 2020.

Table of Contents

Introduction

E-commerce simply refers to a process wherein commercial transactions such as buying and selling are taking place online. This particular method of purchasing or selling goods online is effectively called e-commerce. Over the past few years, e-commerce has gained popularity in both developed and developing countries throughout the world, and it has grown at an exponential pace. Thus, it is becoming incredibly pertinent and extremely important for the Governments to regulate this particular industry, and as of now, we do not have a common rule across all the countries. But concerning e-commerce, the United Nations General Assembly set up the United Nations Commission on International Trade and Law (UNCITAL). The United Nations Commission on International Trade and Law was set up by United Nations General Assembly in 1996 and the authority has come up with certain model law concerning e-commerce, i.e, Model E-commerce Law in the year 1996 itself and this model allows various member countries to have their law to regulate e-commerce. Based on the model, the Indian Government has introduced the Information Technology Act, 2000 and Consumer Protection Act, 1986.

Consumer protection law, e-commerce rules & recent amendments

Consumer Protection Law in the Indian economy is considered as ‘Magna-Carta’, which protects the buyers in the market. It was introduced in 1986 and has been amended recently. So currently which is applicable is Consumer Protection (Amendment) Act, 2019 and under this act, there are two very important sections-

Section 94 allows the various governments at the central level or it allows the Central Government to come out with the rules to protect customers in the e-commerce sector.

Section 101 allows the government to notify rules of the provision to protect the interest of the customers under the e-commerce segment.

After this, the government of India in the year July 2020 came out with particular e-commerce guidelines but because of various complaints received against e-commerce companies, to plug certain loopholes in rules, the GOI has proposed an amendment to the rules which it had earlier proposed in the year 2020.

Reasons for new proposal to amend E-commerce Rules, 2020

The governments’ purpose for the proposal of new guidelines

In India, the e-commerce sector has ballooned in terms of market value. As per the latest report, the e-commerce sector accounts for around 80 billion dollars worth of market value. As per various estimations, this particular value is going to increase in the coming days and as per various surveys, it has been shown that by 2024, the total number of buyers through e-commerce is going to be 200 million and because of the penetration of the internet connection in case of the Indian market, the number of buyers or the number of consumers through e-commerce is only going to increase. The government has now enacted rules to regulate this practice

Ministry of Consumer Affairs(MCA) proposed amendments to Consumer Protection (E-COMMERCE) Rules, 2020, The rules which were notified under the Consumer Protection Act, 2019 that aims to protect the interests of consumers and encourage free and fair competition in the market. Proposed amendments aim to bring more transparency to e-commerce platforms and further strengthen the regulatory regime.

Competition Commission of India (CCI) investigated the working of few companies and found abuse of market dominance and also companies were giving preferential treatment to sellers in which they hold indirect stakes. Deep discounting practices were prevalent in the e-commerce sector which has led to complaints from offline retailers. The amendment was needed to tackle the growing concerns of preferential treatment as certain e-commerce entities are engaged in limited consumers’ choices.

Significance of proposal

In addition to ensuring compliance with the Consumer Protection Rules, 2020, it would strengthen the grievance redressal mechanism.
This proposal comes amid an investigation by the Competition Commission of India (CCI) into alleged abuse of market dominance by large e-commerce platforms and their provision of preferential treatment to sellers.

Certain guidelines were issued against e-commerce companies are as follows:

Display of ‘country of origin’ on products is mandatory.
Display the total amount of the goods and services on offer.
Mention when products are due to expire.
Provide details about returns, refunds, exchanges, warranties, and guarantees, as well as delivery and shipment.
There must be no unfair profiteering from manipulating prices.
Cancellation charges are not applicable.
Describe the various payment options available.
Information about the ‘sellers’ offering goods and services.
Violations to attract penalty actions under Consumer Protection Act, 2019.

Proposed amendments

Flash sales

When an e-commerce entity offers significant discounts or promotions on products for a very short period, it is known as flash sales. Brands attract potential customers via e-mails, social media campaigns, push notifications, and SMS. The content used for this purpose enables the shoppers to immediately find out the amount of discount.

Aim of flash sale

The main aim of the flash sale is to get customers to impulse buy, increase short-term sales and surplus stocks. Conventional e-commerce flash sales are not banned. Only specific flash sales or back-to-back sales that limit customer choice, increase prices and prevents consumer a level playing field is not allowed.

Search manipulation

Rule 5(14)(c) prohibits e-commerce entities from manipulating search results or indexes related to the search query of the user. The practice of manipulating search results or fixing them to suit a company’s commercial interests has been punished by competition authorities in the past. As discussed in the CCI’s market study, search rankings play a significant role in influencing consumer choices. There is the possibility of platforms competing in their marketplaces manipulating search results to give prominence to their products or services, causing platform neutrality to be compromised. In this regard, it is a step in the right direction, as the Department of Consumer Affairs (DCA’s) objectives can be furthered by making it clear how search rankings are determined on e-commerce platforms.

If any concern is raised concerning cancellation charges, concerning cancellation a violation of rule 5(14)(c) as to any marketplace e-commerce entity, a systematic and resource-intensive investigation must be carried out, as it will assess the search ranking algorithm. Transparency in the ranking algorithm is one way to prevent this. Transparency, however, should not come at the expense of sellers or service providers being able to game the system. Thus, a balanced approach is needed.

A study of private label brands using data collected by marketplaces

E-commerce marketplaces are increasingly participating on their platforms through various methods, including Private Label Brands (“Private Labels”). By creating private labels, companies can distribute goods manufactured by others under their brand names. With the market study, the CCI has taken note of the competition concerns that arise from the conflict of interest between the platform acting both as a marketplace and as a seller through private labels. In such situations, the platform has been observed to have the tendency and incentive to control the marketplace in favour of their private labels, as it has a natural tendency and incentive to do so.

Rule 5(14)(d) attempts to address this same concern. In it, it prohibits the use of the name or brand of a marketplace e-commerce entity for the sale or promotion of goods or services in a way that suggests the goods or services are associated with the entity. In the event of a violation of that requirement, Private Labels will lose all indication of their relationship to the platform through which they are being sold.

Moreover, the position contemplated by rules 5(14)(f) and 6(6)(a) should also be considered. Under the provisions, marketplace e-commerce entities are prohibited from using information collected through their platforms to benefit:

All goods bearing a brand or name similar to the entity’s name (Rule 5(14)(f));
Entities with a relationship to the related party (Rule 6(6)(a)).

The provisions of Rule 5(14)(f) will only apply if the practice entails an unfair trade practice, as defined in section 2(47) of the Consumer Protection Act, 2019 and impacts the interests of consumers. The use of the information for an unfair advantage falls under Rule 6(6)(a).

Following rule 5(14)(d), AmazonBasics products will have to be rebranded in such a way that the products’ association with Amazon cannot be discernible by the average consumer. A product name that is substantially rebranded so that it does not bear a name or brand that is common with that of the entity would not be covered by rule 5(14)(f). Amazon will be able to use marketplace collected information for the sale of the rebranded product, even if that constitutes an unfair trade practice that interferes with the interests of consumers. It is noteworthy that, back in November 2020, the European Commission formed a prima facie view that Amazon was using data associated with marketplace merchants or service providers in connection with its private labels to avoid the normal risks of retail competition.

Alternatively, Amazon will not be able to use marketplace collected information for the benefit of its related parties or associated entities following rule 6(6)(a). Consider, for example, the case of Cloudtail India Pvt. Since Cloudtail (“Cloudtail”) is a related party, according to Rule 6(6)(b), it is not even allowed to sell directly to consumers. As a result, rule 6(6)(a) would only apply to entities like Cloudtail who sell goods on Amazon through a third party.

Other amendments

The other amendments are as follow-

Additionally, firms engaged in e-commerce are expected to establish adequate redress mechanisms and appoint a chief compliance officer.
A resident grievance officer will also be appointed by these companies, who will be a company employee and a citizen of India who will act as the nodal point of contact for law enforcement agencies.
To combat concerns about preferential treatment, the new rules propose to ensure that no related party can use consumer information (from the online platform) for an ‘unfair advantage’.
Mis-selling (selling goods/services by intentionally misrepresenting information) is now prohibited by law.
E-commerce entities must be registered with the Department for Promotion of Industry and Internal Trade (DPIIT) to ensure their authenticity.
The companies will also have to identify goods based on their country of origin and provide a filter mechanism for customers at a pre-purchase stage.
To provide a “fair opportunity” for domestic sellers, they will also need to offer alternatives to these imported goods. Concerning cancellation charges.

Conclusion

Along with the provisions discussed above, the Draft Rules also aim to prevent e-commerce companies from abusing their dominant position in a market (Rule 5(17)). Section 4 of the Consumer Protection Act, 2019 sufficiently addresses the concept of abuse of dominance, which applies to all enterprises. If a dominant e-commerce entity engages in abusive conduct, the draft rules are likely to add a redundant provision to the same effect. A violation of the E-Commerce Rules will almost certainly be looked into by the Central Consumer Protection Authority (“CCPA”), while a violation of the Consumer Protection Act, 2019 will most likely be investigated by the Consumer Council of India. The text suggests that abuse of dominance by an e-commerce entity might result in jurisdictional strafing between the CCPA and CCI. The Consumer Protection Act, 2019, however, contains Section 19(2), which enables the CCPA to refer a matter to any other regulator if it is satisfied it should be dealt with by another regulator under any other law currently in force (such as the CCI). Making a preliminary inquiry would indeed extend the investigation timeline; however, it is better than leaving such significant matters to be clarified by the courts of law at a later date.

Having taken into account the contemporaneous developments regarding e-commerce competition concerns when it drafted the Amendment Rules, it will be interesting to see how they further improve upon them once they have received the comments from all stakeholders.

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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The ambit of rape cases with respect to the case of State of Maharashtra v. Mahadu Dagdu Shinde

By

Diganth Raj Sehgal

-

September 8, 2021

0

rape-attack-woman-rape-victim-shut — Image source - https://bit.ly/3lOwLQ1

This article is written by Ms. Somya Jain, from the Vivekananda Institute of Professional Studies. The article analyses the judgment of the State of Maharashtra v. Mahadu Dagdu Shinde with respect to the scope of rape cases. It specifies the ambit of evidence to be considered by the court while dealing with such cases.

Table of Contents

Introduction

From time immemorial, women have been treated as chattels of their male counterparts. Their rights have been curtailed to a large extent and the underlying social stigmas prevalent in the society have deteriorated the status of women. As per the traditional orthodox patriarchal society, women should be prohibited from indulging in any activity that pleases them while male counterparts were allowed to keep more than one wife. With the advancement in time, though the legislature ensured that greater rights should be provided to females to uplift their community yet even today women suffer from the evils of rape under the hands of males. The cases of rape have been on a constant rise and the brutality against women seem to have no end.

The judiciary has tried to bring about a positive change in society by time and again expanding the definition and interpretation regarding the concept of rape. Keeping aside the existing taboos and social stigmas in society, the judiciary has taken the initiative to act as a guard of the rights of women as far as relevant and protect them from unnecessary harassment. Similarly, in a recent case of the State of Maharashtra v. Mahadu Dagdu Shinde (2021), the Bombay High Court has taken an expanded view on the rights of women. It has attempted to break the stereotypical views of society and has tried to establish an acceptable approach towards women that needs to be normalised in the present day scenario.

Backdrop of the case

The present case is filed as an appeal before the Aurangabad bench in the High Court of Bombay. Initially, the case was delivered by the learned Additional Sessions Judge, Kopargaon, in Sessions Case No. 19 of 2010. In the said case, the accused was acquitted of the charges of having committed an offence punishable under Section 376 and Section 506 of the Indian Penal Code.

An overview of the factual matrix

The facts of the case are:

Prior to the date of the incident 25 March 2010, the wife of the accused along with her son went to Vadner for a religious function.
On the date of the incident, at around 10:30 am, the accused, who was the prosecutrix’s cousin father-in-law, grabbed her from behind while she was pouring water for herself from a jar.
While questioning this act of the accused, he told her not to worry and pushed her on the floor. He then committed the act of rape. The prosecutrix was on her third day of the menstrual cycle.
According to the prosecutrix, she was partially paralysed which prevented her from fighting the accused. As a result of which the accused took advantage of her.
After committing the offence, the accused threatened the prosecutrix that if she narrated this incident with anyone she would be dead. The prosecutrix was frightened. Later, when the mother-in-law and the father-in-law of the prosecutrix arrived, she narrated the incident to them.
Following this, her husband who was living with his second wife in Pune also arrived. Later a police complaint was lodged against the accused charging him for committing the offence of rape and criminal intimidation under Section 376 and 506 of the IPC.

Analysis of the evidence

It is pertinent to understand and analyse the evidence which was appreciated by the court. To interpret the ambit of considerations in rape cases, the evidence forms an essential part. Therefore, the entire judgment revolves around the facts and circumstances in addition to the evidence. Some of the interpretations of evidence given by the courts are:

As per the claims of the prosecutrix, she suffered from injuries on her head and on her back. According to her, there was a bump on her head. Furthermore, she claimed that the bangles that she was wearing were broken due to which there was swelling on the right hand and abrasions on the wrist. But on close scrutiny, the medical officer declared that there were no such injuries either on the head or on the back as claimed by the prosecutrix. She clarified further that no such injuries or abrasions were visible on the hands of the prosecutrix which would have normally happened with the breaking of the bangles. The Court thereafter upheld that the version of the prosecutrix of having suffered from head or back injury or for that matter abrasions on her hand was false with regards to contradictory medical evidence.
The prosecutrix also claimed that due to the forceful and offensive sexual intercourse she had suffered an injury on her private part which resulted in administering 3 to 4 stitches. As per the medical examination, no such injury was found on her private part and as such no stitches were administered. The Court observed that her claim regarding the injury on her private part was false and found no basis for the same.
It was also claimed that the prosecutrix kicked and slapped the accused while the offensive act was being committed. However, the said claim found no basis in the medical report. The Court observed that as there was no declaration of hand imprint that would prove the claim of the prosecutrix slapping the accused. Further, had she kicked the accused with her legs, he would have suffered injuries on his body or private part, but no such abrasions could be discovered.
Apart from the above observations, the Court also considered the statement mentioned in the medical report that no semen stains were found on the petticoat or the private part of the prosecutrix.

Judgment of the Court

The Aurangabad bench of the Bombay High Court headed by Justice Ravindra V Ghuge and Justice BU Debadwar while defining the offence of rape under Section 376 of IPC declared that if the prosecutrix has opposed sexual intercourse by any person, her disinclination or her refusal will be tantamount to the male counterpart offending her physically and such intercourse committed against the will and the desire of the prosecutrix, would constitute an offence punishable under Section 376 of the IPC.

However, the Court contemplated the other essential requirements that form the basis of appreciating a rape case with regards to the evidence produced. In the present case, the Court remarked that the prosecution failed to establish the guilt of the accused. According to the claims of the prosecutrix, no injuries or abrasions were seen on either the victim or the accused, no semen stains were discovered and further, the medical reports stand in contradiction to the claims of the prosecution. After considering the admissible evidence, the Court concluded that there were no legitimate grounds on which the accused could be punished. Further, the Court stated that apart from the strenuous submissions made by the prosecution about the abrasions and the injuries suffered even though they were proved to be false, they failed to convince the bench that despite the absence of abrasions and injury the evidence proves to be against the accused thereby, strong enough to convict him.

The Court declared that the fact of the victim being previously habituated to sexual intercourse with someone else is immaterial while considering the medical evidence or the case as a whole. At last, the Court held that due to the failure on the part of the prosecution to prove the guilt of the accused and the prevalence of law on record which denies conviction on the basis of suspicion, the decision of the Additional Session Judge is upheld and the accused is acquitted.

Interpreting the scope of evidence to be contemplated while dealing with rape cases

The present matter has highlighted the scope of considering evidence with respect to rape cases. It has covered several legal aspects which form the basis of jurisprudential principle followed by the Indian courts from time immemorial. Some of these principles are discussed as follows:

Voluntary sexual intercourse with someone else

One of the most controversial observations made by the Court was that a rape victim having voluntary sexual intercourse with someone else is immaterial in deciding a rape case. As per the medical report of the prosecutrix, there was a statement that stated though the prosecutrix was deserted by her husband years ago, she was habituated to sexual intercourse. The Court declared that the above statement will be considered immaterial in the case. It was further noted that the disinclination of a woman to indulge in sexual intercourse would be tantamount to the male counterpart who is offending her physically and that would be covered under Section 376 IPC. Voluntary sexual intercourse of a woman with someone else cannot be equated to her character or rather her willingness to indulge in sexual intercourse.

As per the Criminal Law (Amendment) Act 2013, Section 53A was added in the Indian Evidence Act. Section 53A states that the evidence of the character of the victim and of such person’s previous sexual experience with any persons shall not be relevant on the issue of such consent or the quality of consent. Initially, the courts observed that while considering the medical examination of the victim, many a time they observed the usage of the phrase “habitual to sexual intercourse” which would then be related to the consent of the victim to have sexual intercourse with the accused. The usage of this phrase was derogatory in all terms and could not be supported by the legislators. With the insertion of this Section, the presumption accommodated with previous sexual intercourse and habituation of the same has been declared irrelevant while considering any rape case.

In the case of Abdul Sattar v. State of Uttar Pradesh & Anr. (2019), the Supreme Court bench headed by CJI SA Bobde observed that the Allahabad High Court took into consideration the medical examination reports of the victim which stated that the prosecutrix sustained no internal or external injury and further that she was habituated to sexual intercourse. Refraining from accepting the same, the Court upheld that the fact of the victim being habitual to sexual intercourse is no valid ground and hence should be abstained from the purview of the case.

In another case of Jai Bhagwan v. State (Govt. of N.C.T. Delhi) (2018), the Supreme Court upheld that women have the right to refuse to submit herself to sexual intercourse even if she is habituated to sexual intercourse. Further, the Court declared that if presumptions that the prosecutrix is of easy virtue is formed, no inference of her holding a “loose character” be established. The fact that someone’s character is judged on her being habituated to sexual intercourse is against the rights of women and should be forbidden under all circumstances.

A strong suspicion is no ground for conviction

Courts have reiterated in various judicial pronouncements the essentials for proving the guilt of the accused. For guilt to be proved a complete chain of events must be cogently placed. Even a slight doubt or a strong suspicion cannot be considered for convicting an accused. The courts are required to entertain the conviction of the accused where the prosecution has left no other hypothesis of guilt other than that of the accused. There should not be any human possibility left that would point towards the innocence of the accused. Further, suspicion should not be treated as substantive evidence and thereby the courts cannot base their judgment on mere suspicion no matter how strong it may stand. Suspicion, therefore, is disregarded by the courts as it creates an apprehension or conjecture of the innocence of the accused in the minds of the judges.

In the case of Sujit Biswas v. State of Assam (2013), the Apex Court observed that suspicion, however, grave it may be, cannot take the place of proof, as there is a large difference between something that ‘may be’ proved, and something that ‘will be proved’. It divides vague conjectures from sure conclusions. Accordingly, vague interpretations without any cogent and unimpeachable evidence while convicting an accused if considered by the judiciary, will lead to miscarriage of justice. It is substantial for any court to ensure complete and comprehensive appreciation of the facts and circumstances, in addition to analysis of the evidence brought on record.

The accused is innocent until proven guilty beyond reasonable doubt

The first and the foremost principle in criminal jurisprudence is that the accused is always presumed to be innocent until he is proven guilty of the said offence. When an accused is presented before a court, a common opinion framed in the minds of the people is that the accused is guilty. Such vague interpretations of society should be discerned by the courts. Therefore, the judiciary has established the practice of treating an accused innocent until his guilt is proven and that too beyond a reasonable doubt.

The concept of ‘innocent until guilty’ has been practised for a long time in India now. Though the principle finds no place in the Indian Constitution, it can be construed from Article 20(3) of the Indian Constitution, which provides the right to the accused against self-incrimination. If an accused is forced to give a statement against himself, it would prove to be ghastly for keeping both the parties on an equal footing. Further, Section 101 and 102 of the Indian Evidence Act provides that it is not the accused who has to prove his innocence, rather, it is the prosecution who needs to establish the guilt of the accused.

In case the appellate court wished to arrive at a contradictory finding then it must satisfy itself that the trial court committed a patent error in delivering a finding of acquittal and there is not even an iota of doubt in the mind of the appellate court that the accused alone and no one else has committed the crime and this is proved beyond any reasonable doubt.

Delving into the concept of ‘proof beyond a reasonable doubt’, the Supreme Court has time and again explained what would be regarded as reasonable and its underlying scope. In the case of State of Madhya Pradesh v. Dharkole @ Govind Singh and others (2004), the Court reiterated that doubts will be regarded as reasonable when they are free from any speculation. Further, reasonable doubt should not be trivial, imaginary or merely possible doubt, rather, it must be based on reason and common sense of the prudential person. Reasonable doubt must be interpreted from the evidence produced before the court and not from vague apprehensions.

However, it has to be understood that the benefit of the doubt given to the accused should be perused in accordance with the caution not extending to a miscarriage of justice. The thread of reasonable doubt should not be stretched without any basis and thereby embracing even a hunch or hesitancy as being reasonable.

Judicial pronouncements considered by the Court

While dealing with the matter, the court considered some judicial pronouncements which were settled on the issue at hand. Supporting the present case, these judgments form a part of the critical analysis of the matter. Some of the judgements referred to by the court are:

Shivaji Sahebrao Bobade & Anr. vs. State of Maharashtra

Justice V.R Krishna Iyer, in the case of Shivaji Sahebrao Bobade and another v. State of Maharashtra (1973), held that in desperation to apply the principle of innocence of the accused, the criminal justice should not be diluted. The courts should adopt a pragmatic approach while dealing with such cases. The golden thread to be used while deciding appeal matters of acquittal of the accused must be the examination of reasons on which the acquittal was based and must establish compelling reasons for interfering in the decision of the lower court. Once the appellate court is satisfied after close scrutiny that the judgment of the trial court judge is unreasonable and requires the interference of the court, then only the court should convict a guilty person. it is a court’s duty to convict a guilty person when the guilt is established beyond a reasonable doubt, no less than it is its duty to acquit the accused when such guilt is not so established. One cannot hide under the garb of doubts of him being an accused which are not reasonable in essence. This would negatively affect the faith of the people in the judiciary. Therefore, the presumption of innocence must be construed under criminal justice based on potent and realism.

Chandran @ Surendran and Anr. vs. State of Kerala

The Court in the case of Chandran @ Surendran and Anr. vs. State of Kerala (1991), while circumscribing the area of circumstantial evidence, observed that there was a lack of confidence which could be instilled in the courts by the presence of strong evidence. The Court in the present case, while inferring the guilt of the accused, kept itself limited to circumstantial evidence as no direct evidence was available. The Court declared that such circumstantial evidence should be of definite tendency pointing towards the guilt of the accused and it must unerringly lead to the conclusion that the offence was committed by the accused and none else. Further, the Court stated that while construing the evidence, a careful, meticulous and cautious approach should be adopted by the courts.

State of Odisha vs. Banabihari Mohapatra and Anr.

In the recent case of State of Odisha vs. Banabihari Mohapatra and Anr. (2021), the Supreme Court emphasised the role played by suspicion while construing any criminal appeal. According to the Court, suspicion, however strong it may be, cannot be substituted with substantial evidence. Suspicion can never take the place of proof and the court cannot base its order of conviction on the basis of suspicion. A conviction cannot be imparted merely on the grounds of suspicion. The prosecution has to prove the guilt of the accused beyond a reasonable doubt, without which he cannot be charged with any offence. Placing a strong foot on the law, the court added that there were a plethora of judicial pronouncements which settled the issue thereby stating that suspicion, however strong, cannot take the place of proof. An accused is presumed to be innocent unless proven guilty beyond a reasonable doubt.

Language of the Court

Apart from the above observations, the Court also observed that the language used by the Additional Session Judge was of “great concern”. The usage of a particular word throughout the judgment in a repeated manner has been greatly criticised by the Court. Accordingly, the word used corresponds to slang language and should be prohibited while delivering the judgment in toto. The Court further observed that such words are derogatory and utterly disrespectful to women. It was also noted by the Court that though the Marathi version of the evidence of the prosecutrix specified certain Marathi words used by her, yet the Hon’ble Trial Court repetitively used objectionable words, while recording the English version of her testimony.

Conclusion

The standpoint of the considerations undertaken in rape cases is somewhat similar to that of other criminal cases. In addition to proving the guilt of the accused beyond any reasonable doubt, the rights of the women should be given substantial acknowledgement. With the commencement of the Amendment Act 2013, the laws favouring the female counterpart have been strengthened further to ensure their protection and security. One such positive change was to not consider the previous sexual relations or her being habituated to sexual intercourse while analysing the case. It is the right of women to refuse to indulge in sexual relations with anyone and if her disinclination is not observed by a particular individual, he will be punished for the offence of rape under Section 376. Apart from this, the courts must ensure that the accused is guilty beyond any reasonable doubt. Suspicion no matter how strong it may be, must not be replaced with substantive evidence and should not be entertained in convicting the accused. Therefore, the slightest doubt of the accused not being guilty of the offence would unveil the applicability of the principle of innocence until proven guilty beyond any reasonable doubt.

References

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