How to draft the boilerplate clauses of an agreement between a hospital and a pharmacy

August 28, 2021

This article has been written by Anushaka Sharma, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.

Introduction

Before entering into any activity with another person that involves some kind of promises or obligations, from either side, it is essential to take the precautionary route of a written agreement between the two involved parties. Deceptions and frauds in such official relations are often the result of poor choices in terms of carrying out such agreements. The involved parties often repent such decisions once things go haywire. Fortunately, this is not a dead-end problem that cannot be solved. Drafting provides the perfect solution to a set of unorganised commitments from the end of both parties, a strong assembly in the form of a legally binding agreement.

Apart from providing a structure to the obligations and duties of the parties involved in a transaction, drafting plays a huge role in furnishing accountability in cases of high priority agreements such as the ones involving businesses, multinational companies, the education industry, health care industry, etc. In this article, we are specifically going to deal with one of the very essential agreements of the healthcare industry i.e. the agreement between a hospital and a pharmacy.

Through this article, the author will be shedding light upon the importance of sound agreements in the healthcare industry. Further, narrowing it down to the agreement between a hospital and a pharmacy, the author will be discussing the purpose and drafting procedure of this agreement by explaining the essential boilerplate terms of this agreement in great detail.

Importance of agreements in the healthcare industry

Agreements as defined by Section 2(e) of the Indian Contract Act, 1872 –

“Every promise and every set of promises, forming the consideration for each other is an agreement.”

In important industries like health care, it is imperative for the parties involved to enter into a written agreement that clearly states their visions and responsibilities. Not only does it safeguard the interests of both parties but it also promotes a sense of accountability in such arrangements. Especially in the healthcare industries, where the stakes are high and often the considerations are financially higher and impactful to others, legally sound agreements play a huge role to help the parties reach their desired outcome through a hassle-free process. One of the most important requirements that need to be taken care of is to check whether the terms in the agreement are in tune with the current regulations and compliances in the specific industry.

Some often entered into agreements in the healthcare industry

Physician employment contract,
Management services arrangement,
Healthcare contract management software,
Technology licensing,
Purchased services agreements,
Employee benefits arrangements,
Supervision agreements,
Partnership agreements with other organisations,
Medical directorship arrangement, and
Recruitment of a physician….etc.

(This list is not exhaustive as the agreements entered into in the healthcare industry are wide-ranging and ever-innovative.)

Purposes of a hospital and pharmacy agreements

The role of a pharmacy in our healthcare does not need an explanation. It is the most foundational pillar of the medicinal industry. Right from strict supervision of the products (medicines) in terms of quality and compliance, enlightening doctors about the consequences of various medicines to keeping the most genuine interest of the patient at their hearts, pharmacies handle a major chunk of the work that goes into building a sound healthcare system.

Oftentimes, hospitals in order to ensure great quality of medicines, healthcare advice as well as for building better policies can turn to pharmacies to avail their services on the hospital premises.

Another very frequently faced reason is a lack of pharmacy coverage in the surrounding area of some hospitals. In such cases, to ensure safety, efficiency, and quality of services, hospitals often enter into such agreements with a particular pharmacy which can then lend its services to the same. Now that we understand the “why” behind such agreements, we can move on to the essential aspect of drafting such agreements.

Drafting of an agreement between a hospital and a pharmacy

In order to draft an accurate agreement between a hospital and a pharmacy, a sound knowledge of the essential terms of this agreement is very important. We will specifically focus on the boilerplate clauses of these agreements which can also be defined as the general clauses that are often found in such agreements, mostly towards the beginning and the end of the agreements.

Boilerplate clauses of a hospital-pharmacy agreement

Some of the most essential boilerplate clauses in this agreement are as follows-

Effective date clause

This is written right at the start of the agreement, clearly stating the name and details of the parties and the date at which the agreement was entered into.

Sample clause

This Agreement is being entered on the 27th day of July, 2021, by and between a branch of Axis Hospitals, situated in 12/4 Bandra West, Mumbai, 400050 (hereinafter referred to as Party A) and the Sunrise Pharmacy, whose principal place of business is at 23/4, Juhu, Mumbai,400049 (hereinafter referred to as Party B).

Recitals clause

The recitals clause also called the “whereas” clause is generally written after the effective date clause to give the parties a summarized overview of the purpose behind entering into the contract. It further clearly lays down the intention of each other behind entering into the agreement.

Sample clause

WHEREAS Party A has identified the lack of coverage in terms of a good pharmacy in the immediate surroundings of the hospital premises and it intends to make up for this lack by availing the services of a pharmacy that can provide a timely, safe, and excellent quality in terms of care to be provided to the patients.

WHEREAS Party B has agreed to offer its services to Party A by sending a Chief Pharmacist and its skilled staff to the premises of Party B.

WHEREAS Party A and Party B have agreed that by entering into this agreement- i) the lack of coverage in terms of pharmacy faced by Party A can be eliminated; ii) Party B can benefit in terms of remuneration as decided by the parties in this agreement.

THEREFORE, Party A and Party B will be agreeing to the following obligations listed in this agreement, hereon:

Interpretation/ definition clause

This clause is generally added in such agreements where there is scope for some technical words being misunderstood by either of the parties. In the agreement we are dealing with, that is being entered between a hospital and pharmacy, there are some terms that need a separate definition attached to them to avoid misuse or confusion later on. For example, terms like protected health information that refers to sensitive information concerning a patient is an important term that needs specification and interpretation to steer clear of any misuse/ confusion later on.

Sample clause

Definitions :

i) “PROTECTED HEALTH INFORMATION” or “PHI”- This refers to any past, present or future information regarding the mental health of any patient that is being provided to Party B by Party A.

Term

One of the most essential clauses of this agreement is the term clause which has to very clearly state the duration of the agreement between the two concerned parties.

Sample clause

Unless stated otherwise in this agreement, this agreement will be in effect for a duration of three (3) years, commencing on 27th of July 2021 and ending on 27th of July 2023.

Costs/ expense clause

This clause has the role of clearly stating the expense that will be paid to a specific party for a particular job. In the case of a hospital-pharmacy agreement, terms specifying the discharge of separate duties and obligations when it comes to payments are necessary.

Sample clause

Charges for Party A-

Party A agrees to pay Party B an initial monthly fee of Rs. 3 lacs, per annum.

Party A holds the right of billing for all the concerned departments that render services to its patients. The final consent for any decision of purchasing new services/products for any department lies with Party A.

Remedies

The remedy clause acts as a protective clause for both the parties and safeguards them against pitfalls that may come into the light, later on. In a hospital-pharmacy agreement, it becomes essential for parties to have some protective remedies, readily mentioned in the agreement, to protect their name and credibility in the healthcare industry.

Sample clause

INDEMNIFICATION-

Party A agrees to indemnify all the members working with Party B against any act, claim, demand, judgment, settlement, etc. that is a result of the negligence or actions of Party A. Any expense that is to be paid due to the above actions will not be paid by Party B.

Party B agrees to indemnify all the members working with Party A against any act, claim, demand, judgment, settlement, etc. that is a result of the negligence or actions of Party B. Any expense that is to be paid due to the above actions will not be paid by Party A.

Governing law and jurisdiction clause

This clause acts as a great safeguard against misuse or fraud by either of the parties in the agreement. As per this clause, the parties agree that a particular country’s law governs the terms of their agreement and that their agreement falls under the jurisdiction of which court in a particular country.

Sample clause

The terms of this Agreement shall be governed and construed as per the law of India. Both Party A and Party B, agree that any dispute that arises between them during the course of this agreement will fall under the jurisdiction of Indian courts of law.

Conclusion

Before we consider this as an exhaustive list of terms for an agreement between a hospital and a pharmacy, it is important for us to remember that the above-mentioned clauses are not exhaustive in nature as they are only the standard or the boilerplate clauses that should be there is an agreement between a hospital and a pharmacy. There are many more clauses that can be added to this agreement but those clauses are based on the specific background of the parties, interested in forming an agreement and other such circumstances, hence those are called the operative clauses of the agreement. The above-mentioned boilerplate clauses act as standard and essential terms of this agreement between a hospital and a pharmacy which can act as guards against any kind of fraud or dispute between the parties, along the road.

References

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An analysis on professional negligence

Diva Rai

August 28, 2021

2019.02.13-professional-negligence-1050297 — Image source - https://bit.ly/38rrSXj

This article is written by Gajjala Ramesh Bhavani, student of Alliance University, Bangalore and Vaishnavi Jetti student of DSNLU, Vishakhapatnam.

Table of Contents

Introduction

According to Winfield, “Negligence as a tort is the breach of a legal duty to take care which results in damage, undesired by the defendant to the plaintiff”.

There are three essential elements of negligence:

That the defendant owed duty of care to the plaintiff;
The defendant made a breach of that duty;
The plaintiff suffered the damage as a consequence thereof.

In order to take an action for negligence, the plaintiff has to prove these three essentials.

Negligence, in common terms, means carelessness. The most common professionals who face this type of negligence: Bankers, Manufactures, Repairers and Builders, Physicians and Surgeons, Solicitors, Counsel, Directors of Companies, Carriers, Innkeepers and Hotelkeepers. The negligence committed by these professionals is known as Professional Negligence. It becomes professional negligence when the responsibilities of a professional fail to reach a standard level. The practice of a profession or art which requires some special experience, skill, and ability by carrying a reputation for that practice to the extent is required.

Professional negligence is a very complicated area of law, it takes place when a professional breaks down to perform his responsibilities to a required standard. Before defending a claim including allegations of professional negligence, there should be a sought of legal advice in all the cases.

A failure to carry out the required standard represents a breach of contract. To claim for negligence and for breach of contract, there are some important differences especially to the one relating to the remedy that can be sought. While discussing any claim with a legal advisor this should be considered. Professional negligence may include compensation for loss incurred to the plaintiff by the defendant’s act of negligence.

In this article, the concept of professional negligence by medical practitioners, manufactures, builders, repairers, solicitors, and bankers will be explained to get a better view on the liability of each professional. The laws and cases which are related to this topic will be discussed in a detailed way.

Negligence by medical professionals

The negligence made by the surgeons or physicians is termed as medical negligence. A surgeon should not be in a belief that he will undertake a particular operation of a patient or that he will discharge a cure for that only. He should not just undertake to use the highest possible degree of skill but should undertake any operation to bring a competent, fair, and reasonable degree of skill.

While filing a suit against a doctor, the plaintiff i.eThe patient should take the responsibility of proving that the defendant was negligent and he suffered with the injury caused due to the defendant’s negligence. For the appropriate remedy to prove the doctor’s negligence, the plaintiff should provide evidence and file a civil suit for compensation as a writ petition under Article 226 of the Constitution. When a doctor is being consulted by a patient, the doctor owes him certain duties like duty of care:

in whether he can undertake the case,
in deciding what treatment to give,
in administration of the treatment.

The patient gets right to take an action against the doctor when any of these duties were breached. The preference of choosing which kind of treatment should be given is available for a doctor like which way of treatment he wants to give to the patient and such preference is also should be applicable in case of emergencies. The doctor has to bring to his task a reasonable degree of knowledge and skill and must perform with a reasonable degree of care.

In Achutrao Haribhau Khodwa V. State of Maharashtra, in a Government hospital, a towel was left inside a woman’s peritoneal cavity while she was being operated for sterilization causing peritonitis which led to her death. By applying the principle of rep ipsa loquitor, conclusion to the negligence was strained against the doctors of the hospital and they were vicariously held liable.

So, few laws were made by the Supreme Court, stating that the medical practitioner’s skill varies from one another. There may be alternative ways in which the patient will be advisable for a treatment and this is the very nature of the profession. If the doctor performs his duty with due care, and with the best of his ability caution, courts will actually be slow in assigning negligence on his part. The course of action that should be taken with regard to a doctor for treating a patient, medical opinion may differ and that he has attended on the patient with due skill, care and diligence will be noticed by the court and if the patient still does not survive or suffers a permanent ailment, the doctor cannot be held for guilty of negligence.

In Martin F D’souza V. Mohd. Ishfaq, the Supreme Court observed the entire case law and repeated the principles which were stated in Jacob Mathew’s case. In this the plaintiff complained of deafness due to the negligence of the doctor by administering overdose of Amikacin injection. Based on the evidence the negligence of the doctor will be decided. The court in addition of repeating the medical negligence principles mentioned directions which are general: whenever a complaint is filed against a hospital or a doctor by the District, State or National courts or by the criminal court, before issuing the notice to the doctor or the hospital of against whom the complaint was filed, either the Consumer forum or the criminal court should observe the matter to competent doctor or committee of doctors, specialized in the field relating to which the medical negligence in attributed, and only after that the concerned doctor or the committee should be given notice of medical negligence. Also, the doctors who are not found guilty of negligence should not be harassed. If the policeman goes against doctors and harass them, the policemen themselves face legal actions.

Criminal negligence can be charged against a physician when a patient dies from the effects of anaesthesia in an operation or in any other treatment only after proving the death was the result of gross negligence or malicious intention. Before the administration of anaesthesia or performance of an operation, the performer is expected to follow the accepted precautions. In such cases, the physician should be able to prove that he used ordinary and reasonable care in the treatment of his patient to the best of his knowledge.

For a sound mind adult, a doctor cannot lawfully operate or give them any other treatment involving the applications of physically force without their consent rather he would be liable but when a patient is incapable of giving his consent, a doctor can lawfully operate or give the required treatment concerned that is in the best interests of the patient but only if it is applicable to either to save his life or to ensure improvement or prevent deterioration in his physical or mental health. These principles were mentioned in the House of Lords in F V. Berkshire Health Authority in which a mentally handicapped woman, a patient in a mental health hospital, was having a sexual relation with a male patient in the same hospital and an application to the court was made for permitting sterilization operation which was held to be in the best interests of the patient. The sterilization operation of a minor or a mentally incompetent adult requires the sanction of a High Court judge in all cases.

Negligence by manufactures, builders and repairers

The manufacturer owes a duty of care to all the customers who are expected to use his products. In case, if the products which are dangerous like those which are defective that may cause extensive harm, then the duty can be owned to anyone who will reasonably be affected by the defect in the product. So, it means that the negligence claim is not limited by the doctrine of privity of contract, which states that to a contract only one party can sue. Only manufactures are not liable, also those who supplied or distributed products are also liable. The negligence of manufacture can be of:

1) During the process of manufacturing, lack of duty care which may result as a defective product,

2) During the product designing lacking duty of care which subjects to failure of carrying careful research out,

3) Failing in conducting the tests effectively,

4) Failing of providing danger warnings effectively,

5) Failing to recall a product or issuing warnings appropriately if any danger becomes apparent after circulation of the product.

It may restrict effectiveness in claiming product liability as only the manufacturer can be held liable for lacking reasonable care which resulted in injuring the party. So, this party should be able to prove it and this may be expensive and difficult. In few cases, which are concerned with defects made by the manufactures, the party which got injured can rely upon res ipsa loquitur. It is difficult to avoid the liability unless the plaintiff can show how the negligence took place. The manufacturers are responsible to show how they took responsibility to provide safe products with good quality by avoiding defective goods and also the reasonable care of employees in the manufacturing process.

When the complaint is about negligence of designing the product, then the position of the party that got injured will be weaker. To impose liability for negligence of design by the manufacturers, the courts may be reluctant. Also, the injured party faces difficulty in linking the negligence of the defendant and the loss he incurred.

Building projects requires a greater number of professionals and each one plays a different role in the process where everyone is responsible for duty of care and skill. Sometimes there will be arguments between the professionals and non-professionals regarding contribution and contributory fault. Also, sometimes local authorities have involvement in the construction projects.

In Donoghue V. Stevenson case, which is also called ‘Snail in ginger beer’, where the plaintiff was given a ginger beer bottle by a friend which he took from a retailer. The plaintiff drank the bottle where the bottle contained the snail’s decomposed remains and recognized this after consuming greater part of the bottle. The bottle was dark opaque glass so that the content in it wasn’t visible. The plaintiff suffered from shock and severe gastroenteritis. The plaintiff filed a suit against the defendant and the defendant was held liable.

The repairer of an article owes a duty to any person by those who use the product lawfully to observe whether it has been carefully repaired or not. In case of distributors, the plaintiff has to show that in some way they have been careless in their handling of the particular goods.

Negligence by solicitors

A solicitor will be held liable for the outcomes of non-observance or ignorance of the rules of practice of the court. He will also be liable for the lack of requirement of care in the preparation of the cause for trial and for the mismanagement of the conduct of a cause that is usually administered to the profession of his department. A suit can be filed for damages against a solicitor on the ground that he failed to lodge and prosecute an appeal because if he would have done without negligence, then his client may get justice.

A solicitor is liable for the negligence act in case the client proves that the act resulted in the loss of the cause, like allowing a claim to be barred by limitations or struck out for failure to apply for a trial date within the prescribed period. For the negligent act of his partner or agent, the solicitor will also be held liable.

In Country Personnel (Employment Agency) Ltd V. Alan R Pulver & Co., a solicitor was held liable for negligence to his client for not alerting him as to the effect of an unusual clause in a lease while negotiating an underlease. But a Solicitor, who had acted for a testator in preparing a will, owes no duty of care to the beneficiary when he acts for the testator in a subsequent transaction relating to a property covered by the will.

Except in the most exceptional circumstances a solicitor advising a partnership has no duty to communicate his advice to all the partners as he only has to advise the partner who has the matter in hand on behalf of the firm. A solicitor does not normally owe any duty of care to his client’s counterpart but in special circumstances he may owe such a duty.

For negligence a solicitor cannot be held liable in the conduct of either criminal or civil proceedings if it involves an attack on the decision of a court of competent jurisdiction. So, a plaintiff who was convicted by a criminal court on a plea of guilty cannot sue his solicitors for damages that they were negligent in advising him to plead guilty.

Negligence by bankers

As per Section 5(b) of the Banking Regulation Act, 1949, banking means ‘the accepting, for the purpose of lending or depositing investments of money from the public and repayable on demand or otherwise and withdrawable by draft, cheque, and order or otherwise. To sum up, a banker is who: takes current and deposit accounts; pays and issues cheques; for his customers collects crossed and uncrossed cheques.

Liabilities of bankers for negligence are not at par with private individuals. The public institution’s priority in general belongs to the society. No particular individual is interested in securing it. The affairs of public institutions are managed by paid employees in whom few are only interested in their salaries. An agent who is signing a promissory note on his name, cheque or bill of exchange without indicating and later he signs as agent, or if he does not intend later to incur personal responsibility will be held liable personally except to those who had induced him to sign upon the belief that the principal only would be held liable.

The money kept in the hands of the bankers by customers of the bank for the casual purposes of the banking; they are the persons of skills and as persons worthy of trust. Their duty is to respect the payment of their customer’s cheque, to honor them to any amount not exceeding the credit balances. A failure in commissioning leads to negligence and would be liable to damages which might include for injury to the credit of the customer.

A banker if commits a negligent act will be held liable vicariously, and also the bank will be held liable if its employees are done in the course of employment. They are also liable for negligence in paying forged cheques. If the banker issues bank drafts without the authority in accordance with the customer’s instructions against valid cheques of the customer owing to the fraud of the customer’s servant, he will be liable for damages. Also, if he delivers the goods or money to a wrong person, which he received on behalf of the customer then the liability of the banker is absolute, though there is no element of negligence.

Conclusion

The concept of negligence is something which is common in everyday life. Many people incur loss or harm for the negligence committed by others. The professional should take the duty of care either to their parents or customers or clients. They should also protect the consumers from the happenings of dangerous things. Not all the professionals accept their negligence at their work and not all the plaintiffs have undergone the damages that are especially caused due to the negligence of the professionals, so to find out and provide the verdict to the justified person there should be laws for the negligence.

A doctor generally presumed to know the law and dealt with it because in general he can and ought to know it. In the matter of professional liability, the medical profession varies from other occupations because that professional operates in the field where success cannot be achieved in every case. In present day society the awareness regarding the patient’s rights increased, especially the medical practitioners are becoming unsafe as they were being held sued by a litigation suit of either criminal or civil. The other professionals also face the same kind of situation but it is greater in number in the medical field.

Also, when the professionals were held liable it helps the customer or the client or the patient by payment of their damages which were caused by the negligence of the professionals. By the existence of laws to the negligence made by the professional even they will try to work with efficiencies though in some cases they fail. In the case of counsels, in CBI V. K. Narayana Rao. The Supreme Court has clarified that in law negligence professionals like doctors, architects, lawyers, and others who are included in the category of the persons possessing certain skill. The lawyer is not expected to assure the client that under any circumstances he can win the case. He can only assure that he would exercise his special skills with reasonable competence. Thus, the professionals can be held guilty of negligence in two situations i.e., either he was not possessed with the required skill which he proclaimed to have possessed or he failed to exercise with reasonable competence in the case which he possessed.

References

‘LIABILITY OF THE LEGAL PRACTIONERS FOR PROFESSIONAL NEGLIGENCE : A CRITICAL ANALYSIS Author (s): Jeet Singh Mann Source : Journal of the Indian Law Institute , JULY-SEPTEMBER 2009 , Vol. 51, No. 3 Published by : Indian Law Institute (2009) 51 385
Ritchie JH and Davies SC, ‘Professional Negligence : A Duty of Candid Disclosure ? Doctors Should Explain In Full When Care Has Gone Wrong Professional Negligence : A Duty of Candid Disclosure ? Doctors Should Explain in Full When Care Has Gone Wrong’ (1995) 310 888
Sadusk JF, ‘Professional Liability’ (1957) 164 Journal of the American Medical Association 1688
Karunakaran M, ‘Supreme Court on Medical Negligence’ (2006) 41 Economic and Political Weekly 111 http://www.jstor.org/stable/4417666
Review VL and Review VL, ‘The Role of Negligence in Modern Tort Law Author ( s ): John G . Fleming Published by : Virginia Law Review Stable URL : Https://Www.Jstor.Org/Stable/1071415’ (1967) 53 815

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All you need to know about amenability of the Indian Constitution

Diva Rai

August 28, 2021

This article is written by Shiv N.S., student pursuing B.B.A., LL.B.(Hons.) from KSLU’S Law School, Hubballi.

Table of Contents

Introduction

The Constitution is bound to be and will prove to be defective in many respects.

“If you do not provide the appropriate outlets or safety valves for the air or the storm to pass through, the entire ship will likely be blown up.”

Without an amending provision, the Constitution is not complete. Even if the Parliament wishes to change a comma or make some significant changes, let alone changes in the Fundamental Rights, very strenuous efforts will have to be made to change. The Constitution provides that it will be ultra vires of Parliament to bring forward a Bill by which an amendment of the Constitution is sought, infringing any of the rights of individuals or groups of individuals conferred by the Constitution.

There is apprehension in the people’s minds that the people’s liberty is not safe and that as the Parliament gets more and more power, they fear that they will not be granted even that much freedom that the Britishers allowed them.

In any case, for a long time to come, it would be necessary to amend the Constitution in many particulars; as society changes, the law needs to be on the same pace. Though the Constituent Assembly has spent many months making the Constitution, there ought to be defects. Without amendments, the administration will suffer.

If not provided with amendment provisions, Parliament will resort to something much more drastic and radical. If no provision in the Constitution allows them to mould the future of this country, they will have no alternative left but to go the whole hog and reject the Constitution as a whole. In such a situation, it is the State that will suffer.

Therefore, it is better to provide channels so that any dissatisfaction with any provision in the Constitution may easily be cured. The complaints and dissatisfaction should not grow, resulting in dislocating the administration of the State.

Indispensability of amending provision in the Constitution

In the very nature of a Constitution, an appropriate provision for its modification is deemed inherent. Because a government built on the idea of popular sovereignty must be particularly sensitive to changing situations, a democratic Constitution must be particularly flexible to the evolving conditions; As the public will change, it is necessary to make new assertions possible.

The traditional idea of Federalism, which entrusts constitutional Amendment to a body other than the Legislature, as well as the rigorous specified method for such changes, were both rejected by the Constitution’s Framers. Similarly, they never desired a system like the United Kingdom, where Parliament is omnipotent and can do everything humanly imaginable.

The Indian Constitution blends the United States written Constitution’s “theory of basic law” with the United Kingdom’s “idea of parliamentary sovereignty” to grant the Parliament constituent authority subject to checks and balances.

It is unusual for countries to revise their Constitutions to change circumstances, shift social ideologies, or even political upheavals. For example, during its 74-year existence, the Soviet Union had four Constitutions (1918, 1924, 1936, and 1977). The Communist Party of the Soviet Union’s authority ended in 1991, and the Soviet Union quickly dissolved. In 1993, the newly created Russian Federation approved a new constitution due to this political turmoil.

How does the country benefit from the same Constitution?

One of the responses to such queries is that the Indian Constitution recognises the need for changes in response to changing societal requirements.

Second, there has been sufficient flexibility in the application of the Constitution in practice. In implementing the Constitution, both political practice and judicial decisions have demonstrated maturity and flexibility. Because of these elements, the Indian Constitution is a living document rather than fixed rules.

Procedure for constitutional amendments in India

Types of Amendment:

Amendment with a simple majority of the Parliament.
Amendment with a special majority of the Parliament.
Amendment with a special majority of the Parliament and ratification of half of the state legislatures.

Informal methods of Amendment:

Judicial Interpretation
Constitutional usages and conventions

Many provisions in the Constitution state that they can be changed by a simple bit of legislation passed by Parliament. In such circumstances, no specific procedure for modification is necessary. Thus, the line between an amendment and ordinary law is obfuscated; the Parliament can change both in this easy manner.

The majority of members voting in favour of a proposal is defined as a simple majority. Present and voting in each House (similar to the normal legislative process). It is not covered by Article 368.

The following are some provisions that can be amended by a simple majority:

Formation of new states and changes to existing State’s regions, borders, or names (Art.3).
Legislative Councils in states are abolished or created (Art.169).
Second Schedule: the President, Governor’s, Speaker’s, and Judge’s emoluments, allowances, and privileges.

Article 368 of the Constitution contains a provision for amending the other provisions of the Constitution. Thus, there are two methods of changing the Constitution discussed in this article, and they apply to two separate groups of articles in the Constitution. One way is to alter the Constitution with a special majority of both houses of Parliament. The other approach is more complex as it needs a special majority in Parliament and the approval of half of the state legislatures.

An amendment bill, like all other laws, is forwarded to the President for his assent. However, the President lacks the authority to send it back for reconsideration in this instance.

For Constitutional Amendment, two types of special majorities are required: first, those voting in favour of the Amendment bill must account for at least half of the House’s total strength. Second, supporters of the amendment bill must account for two-thirds of those who take part in voting. In the same way, both Houses of Parliament must pass the amended bill separately (there is no provision for a joint session). This great majority is necessary for every amendment bill.

A majority of each House’s total membership and a plurality of two-thirds of the members present and voting constitutes a special majority.

The following are some provisions that can be amended by a special majority:

Fundamental Rights
Directive Principles of State Policy

In most modern Constitutions, two principles govern the different methods for amending the Constitution. The principle of a special majority is one of them. For example, this idea is being used in the United States, South Africa, Russia, and other countries: in the United States, a two-thirds majority is necessary, but in South Africa and Russia, a three-fourths majority is required for some modifications.

The idea of people’s participation in changing the Constitution is another famous principle in many modern Constitutions. For example, people in Switzerland can even propose amendments. Russia and Italy, among other countries, are examples of countries where citizens present or ratify Constitutional amendments. Even if the opposition does not agree, the party in power can enact laws and approve the budget with a razor-thin majority.

If it intended to amend the Constitution, it would have to gain the trust of at least some opposition parties. As a result, the amending procedure’s core concept should be founded on comprehensive support among political parties and lawmakers.

The second type of special majority is when an amendment intends to change an article dealing with the partition of powers between the states and the Central Government or an article coping with representation. However, again, the States must be contacted and grant their approval.

By a special majority of Parliament and ratification by the States, those sections relating to the federal government’s structure can be changed.A great majority of Parliament and a simple majority of state legislatures must concur. The states are not required to approve the law within a specific time frame (Art. 368 is silent on the time frame to ratify the Amendment by State legislatures).

The following are some provisions that can be amended by a special majority with ratification by half of the states:

Election of the President and its manner.
The extent of the Union and State’s executive powers.
Legislative functions are divided between the Union and the states.
Any of the Seventh Schedule’s lists.
State’s representation in Parliament.
The power of Parliament to revise the Constitution and its method (Art.368 itself).

Federalism says that the State’s powers must not be subject to the whims of the federal authority. The Constitution ensures this by requiring that half of the State legislatures adopt the amendment bill before it becomes effective. We can remark that more or broader polity consensus is expected for some portions of the Constitution. This clause also honours the states by allowing them to participate in the amendment process. At the same time, even in its more rigorous version, care is made to keep this system somewhat flexible; just half of the states must agree, and a simple majority of the state legislature is sufficient.

The bill is brought to the President for assent once officially approved by both Houses of Parliament and ratified by state legislatures if required.

The President must approve the Constitutional Amendment bill. He is unable to withhold his assent to the bill or return it to Parliament for reconsideration.

The bill becomes an Act once the President signs it, and the Constitution is amended as per the contents of the Act.

Limitations on amending power:

The Amendment must not alter the basic structure of the Constitution.
An Amendment relating to the federal structure of the government can be made only with a special majority and consent by half of the State legislatures.

Amenability of Fundamental Rights in India

The Supreme Court gave Parliament unlimited power to amend the Constitution in the early years of independence, as demonstrated by the decisions in Shankari Prasad (1951) and Sajjan Singh’s (1965) cases.

It is believed that this is because, throughout those early years when leading independence fighters were serving as Parliamentarians, the Apex Court had placed trust in the judgement of the then political leadership.

Years following the Constitution being revised at will to suit the interests of the existing regime, the Supreme Court ruled in Golaknath case (1967) that Parliament’s amending authority could not touch Fundamental Rights and that this power would be reserved for a Constituent Assembly.

Whether the Constitution’s Fundamental Rights can be altered under Art.368 has been a source of contention in Indian Courts. Art.13(2) of the Constitution forbids enacting any law that deprives or restricts Part III of the Constitution containing Fundamental Rights.

In Shankari Prasad Singh v. Union of India and State of Bihar

The Constitutional legitimacy of the First Amendment Act was challenged because it sought to abridge the Fundamental Rights assured by Part III of the Indian Constitution. According to the Supreme Court, Art.368 of the Constitution grants the right to alter the Constitution, including Fundamental Rights.

The Supreme Court of India considered whether an amendment to the Constitution could be viewed as a “law” within the meaning of Art. 13(2) in this case, it was held that an amendment was made under Art. 368 of the Constitution is not a ‘law’ within the meaning of Art. 13(2) and thus cannot be challenged on this basis.

Thereby the Court held that even though it abridges a Fundamental Right, an amendment is valid.

In Sajjan Singh v. State Of Rajasthan

The Constitutional Amendment Act of 1964, generally referred to as the 17th Amendment Act, was challenged. Because it curtailed the jurisdictional power of High Courts under Art. 226 but had not been accepted by legislatures of half of India’s States, as stipulated by Art. 368(2).

The Supreme Court ruled that the challenged Amendment was constitutional because it did not intend to reform Art. 226 of the Constitution and so did not trigger ratification by Indian states under the proviso Art. 368(2).

The Supreme Court upheld the decision in the Shankari Prasad’s case, ruling that the issue was appropriately adjudicated under Article 13 (2) and held that the term “amendment” refers to any change to the Constitution’s provisions.

In I.C. Golak Nath v. State of Punjab

The Supreme Court overturned its previous rulings in Shankari Prasad and Sajjan Singh, holding that an amendment was made under Art. 368 of the Constitution would be considered as a law under Art. 13(2), and no such amendment could be allowed to abrogate the Fundamental Rights enshrined in part III of the Constitution.

The Court’s concern was that, while the Acts in question may have curtailed Fundamental Rights, prior rulings had found them to be legitimate. They invoked the theory of prospective overruling to say that the Amendment would still be considered for those laws. They did, however, expressly say that, as of the date of the ruling, Parliament would not have the power to amend any provisions of Part III of the Constitution.

The 24th Constitutional Amendment Act aimed to incorporate Art. 13(4) into the Constitution to invalidate the impact of Golak Nath’s decision, stating that “Nothing in this article shall pertain to any amendment of this Constitution enacted under Art. 368”.

In Kesavananda Bharati v. State of Kerala

The case is commonly referred to as the Fundamental Rights case. Golak Nath’s case and the 24th, 25th, 26th, and 29th Constitutional Amendment Acts were challenged. It explained the Amendment’s scope. The 24th Constitutional Amendment Act, which declared that Parliament had the power to abridge any Fundamental Rights, was held valid.

While overruling its earlier judgment in the Golak Nath’s case, the Supreme Court ruled that Parliament can amend Fundamental Rights under Art. 368, such power could not be utilised to remove Fundamental Rights that form the Constitution’s foundation.

The Constitutional Bench, whose members had significant ideological differences, ruled 7-6 that the Parliament should not change the Constitution’s ‘fundamental structure’.The Court ruled that under Art. 368, which gives Parliament amending powers, something from the original Constitution must remain for the new Amendment.

The Court did not define the phrase ‘Basic Structure’ instead cited a few concepts like Federalism, Secularism, and Democracy as instances. Since then, the Court has pursued to develop this paradigm. In the case of Sajjan Singh, Justice Mudholkar was the first to propose the fundamental structure doctrine (1965).

Justice Sikri gave a superficial list, and the following components were proclaimed as basic structure: Sovereignty of the Constitution, Segregation of power, Republic and democratic form of government, Secular trait of the Constitution, Federal trait of the Constitution, Sovereignty and unification, Freedom and nobility of the individual, Welfare state, Parliamentary system.

According to the Court, the power to amend the Constitution is also implied, and the 24th Constitutional Amendment Act just made it plain and declaratory. The basic structure, however, cannot be altered.

In S.R. Bommai v. Union Of India

In this case the Supreme Court supported the President’s dismissal of the administrations following the demolition of the Babri Masjid. It is an example of its application (Separation of power between State and Central government).

The 42nd Amendment included provisions stating that the power to amend is unrestricted and that amendments are not subject to judicial scrutiny.

In Minerva Mills Ltd. v. Union of India

The legality of the Constitution’s 42nd Amendment Act of 1976 was challenged in the Supreme Court because it obliterated the Constitution’s basic structure.

The Supreme Court ruled that the Amendment was unconstitutional because it granted Parliament public authority to amend the Constitution’s provisions and stripped courts of their ability to judge any modification to the Constitution, including those affecting Fundamental Rights.

The Court further held that the power of judicial review was acknowledged as part of the Constitution’s basic structure.

In Waman Rao v. Union of India

The Supreme Court elucidated the prospective essence of the doctrine. The doctrine of basic structure would bear on to all Constitutional Amendments sanctioned after 24th April 1973 (the judgement date of the Kesavananda Bharati case).

Art.13(2) expresses, ‘The State shall not pass any legislation that deprives or restricts the rights granted by Part-III of the Constitution, and any law passed in violation of this clause shall be null and void to the degree of the breach.’

The bench had decided that the term ‘law in Art. 13 must be interpreted to refer to rules or regulations enacted under regular legislative authority, rather than amendments to the Constitution enacted with Constituent authority under Art. 368.

According to the fundamental structure doctrine, Parliament might alter any portion of the Constitution, including Fundamental Rights.

Non- Obstante clause

In R. C. Poudyal v. UOI

The Supreme Court held that regardless of a non-obstante provision, it cannot go against the basic structure of the Constitution.

In Nachane Ashwini Shivram v. State of Maharashtra

The Bombay High Court held that by such a non-obstante clause, the Courts are not excluded from reviewing the validity of Laws/Amendments.

Doctrine of Severability

In Kihoto Hollohan v. Zachillhu, the Supreme Court held that the Doctrine of Severability applies to the Constitutional Amendments.

Analysis of amendment procedure in India

There is no stipulation for a unique body to amend the Constitution, such as a Constitutional Convention (as in the United States) or a Constitutional Assembly.
The constituent power is vested in Parliament, with state legislatures only having it in a few instances.
The Parliament has the power to propose a constitutional amendment. State legislatures cannot introduce any bill or proposal to change the Constitution (unlike in the United States) except in one case: adopting a resolution urging the Parliament to create or abolish legislative councils in the states. The Parliament can either accept or condemn such a resolution or take no action on it.
There is no set time limit for state legislatures to approve or reject a proposed amendment. It is also unclear if states may revoke their approval once it has been granted.
If both Houses of Parliament are stuck over the approval of a Constitutional Amendment Bill, there is no provision for a joint session (Art.108).
The amendment procedure’s provisions are just too ambiguous. As a result, they give rise to court action.

Landmark constitutional amendments in India

First Amendment Act, 1951

Empowered the government to help the socially and economically disadvantaged.
It provided for the preservation of legislation governing the acquisition of estates.
Added 9th Schedule to prevent judicial scrutiny of land reform and other legislation contained in it.
Public order, good relations with foreign nations, and incitement to a crime were included as a new rationale for regulating freedom of speech and expression. It also made the limitations more “reasonable” and therefore justifiable.
Put forward that state trading and nationalisation of any trade or business by the State is not to be incapacitated on the ground of violation of the right to trade or business.

The Constitution (15th Amendment) Act, 1963

Permitted the High Court to issue writs to any person or authority, even exterior to its provincial jurisdiction if the cause of action arises within its territorial limits.
It raised the age of retirement for high court judges from 60 to 62 years.
It has enabled the appointment of retired high court justices as acting judges in the same Court.
It provided a compensatory allowance to judges transferring from one High Court to another.
Made it possible for a retired High Court judge to serve as an ad hoc Supreme Court judge.

The Constitution (24th Amendment) Act, 1971

Parliamentary ability to amend any part of the Constitution, including Fundamental Rights, was affirmed.
The President is required to grant his assent to any Constitutional Amendment bill.

The Constitution (42nd Amendment) Act, 1976

It was enacted amid a state of Emergency inside the country. Parliament passed it on 11th November 1976, and the President approved it on 18th December 1976.

The Amendment established beyond a shadow of a doubt Parliament’s dominance over the other branches of government; it gave Directive Principles precedence over Fundamental Rights and, for the first time, enumerated a set of 10 Fundamental Duties.
It also limited the judiciary’s power and jurisdiction and increased the Lok Sabha and Vidhan Sabha from 5 to 6 years.
Authorised the use of Central armed forces in any State to deal with law and order issues.
Bound the President to the Council of Ministers’ advice and envisaged administrative tribunals for Government service matters.
The Act also categorically stated that no Constitutional Amendment might be challenged in a court of law.

The Constitution (43rd Amendment) Act, 1978

The Constitution (42nd Amendment) Act, enacted during the Emergency, is repealed by this Act.

It restores civil rights by repealing Article 3ID, which allowed Parliament to restrict even legal trade union activity under the pretext of anti-national activity laws.
The new legislation, which has been passed by more than half of the states as per the Constitution, also returns legislative rights to the states to establish suitable provisions for anti-national actions that are in line with the Fundamental Rights.
The Act also restores the judiciary to its proper position.

The Constitution (44th Amendment) Act, 1978

The Act corrects critical constitutional flaws that were established during the Emergency. The Lok Sabha and State Legislative Assemblies terms have been lowered from six to five years, the usual period extended during the Emergency under the 42nd Amendment for political reasons.
According to the 44th Amendment to the Constitution, the property right ceases to be a fundamental right and becomes legal.
The Act also extends constitutional protection for publishing Parliamentary and State Legislature proceedings for the first time since independence, except in situations where it is proven to be “malicious”.
Another critical aspect of the Act is that any proclamation of Emergency must now be made by the President only after the Cabinet has given its written recommendation. The President will not be required to act solely on the Prime Minister’s recommendation without first engaging his Cabinet. Other protections require a two-thirds majority of both Houses of Parliament members to approve the proclamation within a month.

The Constitution (52nd Amendment) Act, 1985

The Act makes defection to a different political party after an election unlawful. Any member who switches parties after the election will be disqualified from serving in Parliament or the state legislature.

The Constitution (61st Amendment) Act, 1989

The voting age was reduced from 21 to 18.

The Constitution (86th Amendment) Act, 2002

Right to education up to the age of fourteen and early childhood care until six was guaranteed.

The Constitution (91st Amendment) Act, 2004

The Council of Ministers was limited to 15% of parliamentary members, and anti-defection laws were reinforced.

The Constitution (93rd Amendment) Act, 2006

It Established a 27% reservation in government and private higher education institutions for other backward classes.

The Constitution (99th Amendment) Act, 2014

The Amendment bring forth the formation of a National Judicial Appointments Commission.

The Constitution (101th Amendment) Act, 2017

Pioneered the Goods and Services Tax in the country from 1st July 2017.

The Constitution (102th Amendment) Act, 2018

It granted the National Commission for Backward Classes constitutional status.

The Constitution (103th Amendment) Act, 2019

It permitted a maximum of 10% Reservation for Economically Weaker Sections (E.W.S.s).

The Constitution (104th Amendment) Act, 2020

It increased the number of seats reserved for S.C.s and S.T.s in the Lok Sabha and state legislatures.

Conclusion

Overall, it may be said that Amenability is an absolute necessity to make the Constitution a more relevant document in light of changing circumstances, reality and match society’s evolving needs and ambitions. It guarantees that the constitutional framework and the current government’s policies and programmes are in harmony.

On a final note, it is resolved to adopt a Joint Parliamentary Committee that might be formed for in-depth debate and consensus-building. It also discusses forming a special committee or body (as in the United States) to consider constitutional amendments.

Amendments should be confined to parts of the Constitution that do not comprise the core philosophy.

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Understanding the interpretation of the Doctrine of Colourable Legislation by the Supreme Court of India

Oishika Banerji

August 28, 2021

This article has been written by Vikrant Shinde pursuing the Certificate Course in Advanced Supreme Court Practice: Drafting, Procedure, and Strategy from LawSikho.

Table of Contents

Introduction

The doctrine of colourability is the concept that when a legislature aims to do something that it is unable to do or is beyond its capability or authority, within the limitations of its government’s constitution, it colours the law with a concealed motive or purpose, allowing it to accomplish its original hidden goal. Legislation is termed as colourable when a legislature, having insufficient or absolutely no authority or legislative capability, enacts legislation that is so disguising that it misleadingly seems to drop within its legislative capability. It is clear that the purpose lies in the element that the legislature is unable to legislate directly; it cannot traverse outside its capability to legislate it in an indirect manner. This principle is called the Doctrine of Colourable Legislation. Through this article, the author seeks to delve into the scope and background of colourable legislation as well as its limitations through various case laws. The author has also analyzed several landmark decisions surrounding colourable legislation to understand the concept in its totality.

Background and scope of colourable legislation

The Doctrine of Colourable Legislation is founded on the Latin maxim “Quando aliquid prohibetur ex directo, prohibetur et per obliquum” which states that whatever is unable to be done directly, cannot also be done indirectly. The principle is applicable in the cases to decide problems of the capability to enact a law when a legislature exceeds its conferred authority and legislates upon anything indirectly which it is unable to do in a direct manner.

The circumstances where on the surface of the legislation, the subject- matter of the proposed legislation appears to come within the power of the legislature, but the resulting effect or purpose of the matter actually falls outside the purview and authority of the legislature. So in a way, the doctrine limits the overstretching or the exploitation of the allowed constitutional authority in a hidden manner. This is why the doctrine is also popularly known as “Fraud on the Constitution”. The scope of the doctrine is well-explained by the Supreme Court in the matter of K.C Gajapati Narayan Deo vs. State of Orissa 1953 AIR 375, 1954 SCR 1, the court stated:

“If the constitution of a State allocates the legislative controls among diverse bodies, which have to act within their respective domains marked by the constitution in certain legislative entries, or if there are restrictions on the legislative power in the shape of Fundamental Rights, the query arises as to whether the Legislature in a specific case has or has not, in the respect to the subject-matter of the law or in the method of enacting it, transgressed the limits of its constitutional authorities. Such transgressions may be patent, manifest or direct, but it may also be masked, covert or indirect, or and it is to this latter class of cases that the expression- colourable legislation has been applicable in judicial pronouncements.”

The Court further held, “The idea taken by the expression is that although seemingly, a legislature in passing a statute supposed to act within the borders of its authorities, yet in substance and in truth it contravened these authorities, the contravention being covert by what appears, on proper inspection, to be mere pretence or disguise.” The principle of the expression is that only the ingredient of an enactment is factual and not just its form. In case the issue of the enactment is outside the legislative purview of the legislature, then the law made in the disguise of that form cannot spare it from being condemned. The legislature ought not overstep the constitutional provisions by applying indirect methods to do so, otherwise, it renders in violation of Constitutional powers granted to them.

The background of the evolution of the doctrine of colourable legislation is in the colonial era when self-governance had inflated its existence in main parts of the British Empire and the Commonwealth. The legislative issues then were separated between the Central and Provincial divisions and to retain a tab on the powers allowed to these units, any enactment was confirmed against the doctrine of colourable legislation. The doctrine found its way to India from there that made use of the Canadian and Australian legal instances to accept the standard of this doctrine.

While deliberating on legislative competence and the scope of the courts to check colourable legislation in the constituent assembly of India, Alladi Krishnaswami Ayyar said; “It is an accepted principle of Constitutional Law that when a Legislature, be it the Parliament at the Centre or a Provincial Legislature, is invested with a power to pass a law in regard to a particular subject matter under the provisions of the Constitution, it is not for the Court to sit in judgment over the Act of the Legislature. Of course, if the legislature is a colourable device, a contrivance to outstep the limits of the legislative power or to use the language of private law, is a fraudulent exercise of the power, the Court may pronounce the legislation to be invalid or ultra vires.”

Limitations of the Doctrine

A principle was established in the case of Ram Krishna Dalmia vs. Shri Justice S.R. Tendolkar & Ors., stating:

“That there is always an assumption in favor of the constitutionality of an enactment and the onus is upon him who assaults it to show that there has been a clear contravention of the constitutional doctrines.” which shows that the particularly conferred authority to the legislature defines its capability and with this arises its authority to legislate even on supplementary and additional matters. Therefore, for the application of this principle, the contravention by the legislature of its constitutional authority should be ancillary, hidden, or masked and not too direct, obvious, or apparent.

So, clearly, not all acts of the legislation shall be subject to the applicability of the doctrine of colourable legislation, there are limitations to its applicability as follows:

It is inapplicable in cases where the authority of the legislature is not fettered by the constitutional provisions.
It does not apply to cases of subordinate legislation.
The intention of the legislature while determining an enactment is not relevant to determining its validity.
There shall always be a presumption of constitutional validity in favor of the enactment.

Landmark judgments under the Doctrine of Colourable Legislation

i) Janapada Sabha Chhindwara v. Central Provinces Syndicate Ltd.

In this case, the question of the validity of impugned legislation was challenged, to which the Supreme Court observed that with the modification brought to the Act, the legislature has tried to set aside or override the decision of the court that is barred under Constitutional outline. Article 141 of the Constitution that obviously places the authority of the Supreme Court for all its order to be obligatory on all Indian courts evidently implies that the legislature in no capacity can say that the affirmation made by the court was void, vague, or flawed either as a precedent or between the parties.

ii) State of Tamil Nadu v. M. Rayappa Gounder

In this case, the State of Tamil Nadu enforced to reevaluate a few of the theatre owners who were held to have evaded the

entertainment tax. When the matter was heard by the High Court, it was ascertained that the particular legislation Madras Entertainment Tax Act 1939 did not let the government consider reassessment, and the Act was declared unconstitutional. The state govt. preferred an appeal before the Supreme Court to which the court pronounced that the effect of this provision was to override the HC decision and it was not envisioned to change the law retrospectively.

iii) State of Bihar v. Kameshwar Singh

This is the single landmark case where the stature has been declared evidently void on the ground of being colourable legislation. The petitioner, in this case, had challenged the rationality of the Bihar Land Reforms Act 1950 on the ground that the act was apparently intended to place the principle of compensation but in fact, it had failed to lay down any such doctrine. This was purported as the hidden effort to deprive the petition of his right to benefit. The court also upheld the unconstitutionality of the Act.

iv) Shri Prithvi Cotton Mills v. Broach Borough Municipality

“Granted legislative competence, it is not adequate to affirm just that the verdict of the court shall not be binding for that is equivalent to retreating the decision in application of judicial power which the legislature ceases to hold or exercise. A Court’s decision is always binding unless the circumstance on which it is based is so basically changed that the verdict could.”

The above-mentioned matters put forward that the expressly conferred authorities to the legislature to legislate on any question are comprehensive of incidental and ancillary authorities in regards to the suitable enforcement of that law. Therefore, there is also a requirement for the doctrine of colourable legislation to regulate legislative accountability with regard to crucial alterations in the legislative roles.

Conclusion

The Constitution of India has brought about well-founded dissemination of powers between Parliament and State Legislatures and every one of them is obligated to act within its confined sphere. The question of legislature competency often ascends when they seek to transgress the limits enforced by the Constitution but these contraventions are sometimes direct or patent. The Doctrine acts as a fundamental device of the Judiciary to monitor the legislative authorities endowed on the Union and State Governments and determine the validity of the legislation in question.

References

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Investigation under Section 11C of the SEBI Act

Bushra Tungekar

August 28, 2021

SEBI: Franklin Templeton mutual fund case — Image source-https://rb.gy/bmaydb

This article is written by Daksh Ghai, from Symbiosis Law School, Noida. The article provides a brief overview of the functions and powers of SEBI and the provisions under Section 11C of the SEBI Act.

About SEBI

On April 12, 1988, the Securities and Exchange Board of India (SEBI) was established as a non-statutory body by an administrative resolution of the Government to deal with all aspects involved in the development and regulation of the securities market, as well as investor protection, and to make recommendations to the government on all of these issues. An ordinance promulgated on January 30, 1992, granted SEBI statutory status and powers.

On February 21, 1992, SEBI was established as a statutory body. On April 4, 1992, the Ordinance was repealed and SEBI was accorded with statutory powers with the passing of the SEBI Act, 1992 by the Indian parliament. It was put in place to increase transparency in the Indian investment market.

Aside from its head office in Mumbai, the organisation has regional offices throughout the nation, which include New Delhi, Ahmedabad, Kolkata, and Chennai. It is tasked with regulating the functioning of the Indian capital market. The regulatory body focuses on regulating and monitoring the Indian securities market to protect investors’ interests. It aims to instil a stable investment process by developing various laws and regulations as well as developing investment-related directives.

Why was SEBI established?

SEBI was established to keep an eye out for unfair practices and to protect investors from them. The organisation was established to meet the needs of the three groups listed below:

Issuers: SEBI works to provide investors with a marketplace where they can raise funds equitably and smoothly.
Intermediaries: SEBI provides a platform to the intermediaries and strives to provide intermediaries with a professional and competitive market.
Investors: SEBI helps safeguard the investors and provides them with accurate information regarding the companies relevant for investment in public domains and helps the investors take informed investment decisions and makes the market transactions safe.

Powers of SEBI

Quasi-judicial powers

SEBI has the authority to issue judgments in cases of securities market fraud and unethical practices. If it finds someone breaking the rules, the regulatory body has the power to apply rules, pass judgments, and pursue legal action against the offender.

Quasi-executive powers

SEBI has the authority to inspect the books of accounts and other important documents to detect or collect evidence of violations. The aforementioned authority makes it easier to maintain transparency, accountability, and fairness in the securities market.

Quasi-legislative powers

The authoritative body has been entrusted with the power to develop appropriate rules and regulations to protect the interests of investors. Listing obligations, insider trading prohibitions, and essential disclosure requirements are common examples of such policies. The body establishes such rules and regulations to eliminate securities market wrongdoings.

SEBI Act

The Act gave SEBI the power to regulate capital markets, not just to observe but also to enforce the guidelines and twin goals of the SEBI Act, namely, the protection of investors’ interests and the orderly evolution of capital markets. The SEBI Act regulates the following areas:

Members of the SEBI Board of Directors, their composition, and their actions.
The Board’s Roles and Responsibilities are outlined in the Act
SEBI’s funding sources, which include donations from the Union Government.
Sanctions and legal channels are governed by these rules.

Provisions under section 11C of the Act

Section 11C of the Act talks about investigation. Investigations are conducted to gather proof of alleged securities market violations such as price tampering, artificial market formation, insider trading, public issue related irregularities, and other misconduct, as well as to identify the individuals or entities responsible for these irregularities and violations.

SEBI’s investigative powers are broad, and even before an inquiry is started, it can result in severe civil and criminal penalties. Over the years, SEBI has stepped up its investigating efforts.

When can the board start an investigation?

The board under Section 11C(1) can direct an individual to investigate the affairs of such intermediary or anyone affiliated with the securities market at any time by writing an order if the board has grounds to believe that securities transactions are being handled in a way that is harmful to shareholders or the securities market, or if any intermediary or person associated with the securities market has violated any of the provisions of this Act.

Duties of such intermediary or persons to comply with the authorities

Under Section 11C(2), 11C(3), all books, registers, other documents and records of, or relating to the company must be preserved and produced to the Investigating Authority, or any person authorised by it on its behalf, by every director, officer, employee of the firm, or anyone affiliated with the securities market.

The Investigating Authority will have the right to retain the records with them for a period of six months and can call for the records again from the intermediaries mentioned under Section 12 if the Investigating Agency needs the documents again.

Impounding of documents

If the investigative authority has substantial grounds to believe that the intermediary in possession of the document can change, destroy, or hide the records from the authority. The Investigating Authority can then apply to the magistrate/court for an order impounding the documents, and the investigation authority is allowed to keep the confiscated documents with them until the investigation is completed.

Exemption

Unless a company engages in insider trading or market manipulation, a magistrate, judge, or court cannot order the seizure of books and other documents of a listed public company or a public company (other than the intermediaries listed under section 12) that intends to get its securities listed on any recognised stock exchange.

Examination on oath

Under Section 11C, a company’s management, director, employee, or intermediary can be questioned under oath by the investigation agency. The investigating agency may take notes on the examination and have the person examined sign it so that it can be used against them as evidence. It necessitates the person’s personal appearance before the investigative agency.

Punishments under the section

If a company’s management, director, employee, or intermediary fails to deliver reports, information, or documentation that he is required to be produced or fails to participate personally before an investigation agency or sign examination notes, he will have to face imprisonment for up to one year, or a fine of up to rupees one crore, or both, as well as a fine of up to five lakhs per day during which the failure continues.

Legal representation during an investigation under the Act

While ‘Courts’ and ‘Tribunals’ have a clear ‘judicial’ character to them and hence leave little debate about the application of legal representation, regulators frequently exercise quasi-legislative, quasi-executive, and quasi-judicial authorities. As a result, the conditions surrounding the right to legal representation before regulators are complex.

In Lafarge Umiam Mining Pvt Ltd v. Union of India (2014), the Supreme Court noted the distinction between a ‘Regulator’ and a ‘Court’ or ‘Tribunal,’ saying: “The distinction between a regulator and a court must be borne in mind.” The court/tribunal is essentially an authority that responds to a matter that has been brought to its attention. A regulator, on the other hand, is a constructive entity with the authority to enact statutory legislation and norms.

SEBI has not developed a standard or sanctioned legal representation at the investigative level. The SEBI rulebook or standards for conducting investigations have remained secretive and confidential. In the absence of an explicit judgement under securities regulations, administrative tribunals and statutes can be used as precedents.

In Kothari Industrial (1995), the Karnataka High Court considered whether the Chief Coffee Marketing Officer, before whom proceedings were begun, constituted a “Court, Tribunal, or Authority,” and therefore whether an individual has the power to nominate an attorney before such proceedings. The Karnataka High Court held that when a person is “legally authorised to take evidence” due to a contract rather than a statute, as was the case with the Chief Marketing Officer, the proceedings before this officer are not like those before a Court, and thus there is no right for a litigant to be represented by an Advocate.

In the case of Kothari Industrial, it was held that the right to legal representation cannot be exercised during a “preliminary” stage of an inquiry proceeding, there is a growing trend of decisions that have allowed legal representation and the presence of an advocate during such preliminary stages of proceedings with some safeguards.

In Mitesh Manubhai Sheth v. Secretary, Government of India and Others (1997), the Gujarat High Court found in favour of the broker’s right to be represented by a lawyer. The court decided that having a lawyer present is beneficial not only to the criminal but also to the tribunal or inquiry committee in reaching a just and suitable verdict. It is now generally accepted that, in a matter involving a judicial, quasi-judicial, or even administrative decision that affects a person’s legal rights, the party affected should be allowed to be defended by a lawyer if the facts of the case merit it.

Case law related to investigation under the SEBI Act

Mahesh Kumar Patel v. Adjudicating Officer (2005)

Facts

In this case, SEBI initiated an investigation in 2004 into the unexpected spike in the price of Sword and Shield Pharma Ltd. (SSPL), within a short span of time. On June 25, July 19, August 9, and August 23, summonses/letters were issued to Mahesh Kumar Patel, the appellant in connection with the investigation under section 11C of the SEBI statute. The appellant did not show up for his hearing with the Investigating Authority. Adjudication procedures were started in response to the claimed non-compliance with SEBI’s summons

Issue

The appellant alleged that he did not fall “within the ambit, scope, and jurisdiction of SEBI” because he was not a registered intermediary with SEBI.

In response to SEBI’s summonses/letters, the appellant claimed that Aarushi Consultancy, of which he was the Proprietor and had received similar letters from SEBI in the same matter, and he had already submitted the information required by SEBI, and thus he did not and was not required to submit any other information.

Judgement

The appellant is a participant in the securities market, as he is the sole proprietor of Aarushi Consultancy and is also a frequent trader in the stock market, as shown by his own Demat account. So his contention that he didn’t fall under the jurisdiction was wrong and SEBI, under the section 11C (3), had the power to call an intermediary or any person associated with the securities market to provide information to the investing authority and as a person involved in the securities market, he was expected to provide all information to the Investigating Authority that was required or considered necessary for the Investigating Authority’s investigation.

He was not able to prove that the information he was asked for was the same as what Aarushi Consultancy needed. The appellant’s primary presumption was that whatever Aarushi Consultancy had supplied would suffice for the summons he had received.

By failing to respond to the summons and failing to appear before the Investigating Authority, he denied the Investigating Authority the opportunity to obtain clarifications or additional information from him, which he would have been able to provide as the proprietor of Aarushi Consultancy and which could not have been conveyed through Aarushi Consultancy’s written submissions.

Conclusion

SEBI’s investigations over the last few years have had a positive influence on the financial market. The investigations, together with continuous surveillance methods, have reduced the number of claimed market manipulations and price rigging cases.

Following the conclusion of the investigation, a variety of administrative and punitive proceedings were taken under the SEBI Act and the different SEBI Rules and Regulations. Money penalties, warnings, suspension of activities and cancellation of registration, restricting dealing in equities and access to the equity market, asking trustees and key persons of mutual funds to resign for failing to protect the interests of investors, and so on are examples of these actions.

References

The Right to Legal Representation during SEBI Investigation

THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

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Laws related to conservatorship in India

Bushra Tungekar

August 28, 2021

guardianship (1) — Image source-https://rb.gy/vgf2jx

This article is written by Anushka Singhal, a student of Symbiosis Law School, Noida. In this article, she discusses the laws related to conservatorship in India.

Table of Contents

Introduction

‘Conservatorship’ is defined as the legal status of a person appointed by a court to protect the interests of a person who is not able to take care of himself. This person can be a minor and also a disabled person. In India, the laws regarding conservatorship are governed by the personal laws of various religions as well as by a secular law called the Guardians and Wards Act, 1890. The guardianship of mentally disabled persons is governed by the National Trusts Act, 1999 and also the Personal Disabilities Act, 2016. ‘Conservatorship’ is used in US law and India we call it ‘guardianship’.

The Guardians and Wards Act, 1890

Under Section 4(2) of the Guardians and Wards Act, a guardian is defined as a person who is appointed to take care of the minor or his property or both. In Navin Singh v. Jyoti Parashar (2004), the Court held that the word minor is quite comprehensive and includes all kinds of minors. Section 7 of the Act gives the power to the court to appoint a guardian. A guardian can be appointed when the court feels that there is a need to appoint a minor in the interest of his person or his property. The court can also remove the guardian appointed when it deems fit to the court in the interest of the minor. There have been several cases wherein the court provided guardianship keeping in mind a plethora of factors

Cases

Jitendra Kumar Sharma v. State

Facts- In this case, Jitendra Sharma and Poonam Sharma eloped together. The whole family was against their love. The family of Poonam alleged that Jitendra had kidnapped their daughter. Questions were raised on the validity of marriage as Jitendra was 18 years old and Poonam was 16 years old. Also, there were questions regarding Jitendra kidnapping Poonam.

Judgment- In this case, the court held that combining the provisions of the 1890 Act and the Hindu Minority and Guardianship Act, 1956 the natural guardian of a married girl is her husband.

Gaurav Nagpal v. Sumedha

Facts- This was a custody case. The mother and father were at odds with each other and there was a question regarding who should be given the custody of the child.

Judgment– The court held that the right of a father as a natural guardian can be rejected in the welfare of the child. The court also held that human angles along with legal angles should be considered in such situations. The welfare of the child is of paramount importance.

Keshav R Thakur v. Succhibai

It was an interesting case in the sense that the court said that the custody can be given to the parents, and instead, awarded it to a person who was taking care of the child for a longer period. However, in this particular case, the court held that the custody was to be given to the mother for the overall benefit of the child.

Guardianship under Hindu laws

The Hindu law lays down the rules for guardianship in the case of a Hindu, Sikh, Jain, or Buddhist minor. According to Section 4 (b) of the Hindu Minority and Guardianship Act 1956, a minor is defined as a person who has not completed the age of 18 years and is intellectually imperfect to look after himself. It states that guardians can be of three types-

Natural guardians,
Testamentary Guardians,
Guardians appointed by the courts.

Three persons i.e. the father, mother, and husband are considered to be the natural guardians under Hindu law. There is no concept of joint guardianship and either of the three as per the situation can be declared as guardians. The proviso to Section 6(a) says that the natural guardian of a child below the age of 5 years is the mother. Also for an illegitimate child, the mother is the guardian even if the father is alive.

This provision is different from the basic rule, that a father is the natural guardian of a minor. Section 9(1) of the Act gives the power to the parents to appoint a guardian i.e. a testamentary guardian after the death of either of them. It is interesting to note here that a mother can appoint a guardian after her death and Such a person will be the testamentary guardian even if the father is alive.

However, if a father dies and the mother is alive, she will automatically become the natural guardian and the guardian named by the father cannot become the testamentary guardian. A testamentary guardian may accept or disown the rights of a guardian conferred upon. A de-facto guardian is the one who without any authority of law takes a deep interest in the care of the minor as well as his property.

The de-facto guardianship is neither listed in any Hindu text nor it is denied. Also, the Hindu Minority and Guardianship Act is supplementary to and not in derogation to the Guardians and Wards Act. Also, this law lays down via Section 13 that the welfare of a minor child should be of paramount importance and the court can even deny any natural guardianship and testamentary guardianship if it thinks that the guardianship is not in the welfare of the child.

Powers of a guardian

A guardian is endowed with numerous powers to ensure that the interest of the minor is ensured. The Hindu Guardianship and Adoption Act lay down the powers of a statutory guardian and a testamentary guardian. According to Section 8 of the Act, a natural guardian has the power to do all the necessary acts of the minor but he is prohibited from doing certain acts i.e.

He cannot mortgage, sale or do any alteration with any immovable property of the minor.
He cannot mortgage the property of the minor beyond a term of five years or beyond a term of one year when he is about to become a major.
He cannot dispose of any immovable property of the minor. If there is a dire necessity then the guardian can, with the prior permission of the court, dispose of the minor’s property.

Section 9 of the same Act deals with the powers of a testamentary guardian. A testamentary guardian has the same powers as the natural guardian after the death of the father or mother i.e the natural guardian as the case may be. It is also laid down under Section 11, a de-facto guardian cannot deal with a minor’s property.

Guardianship under Muslim Laws

In Muslim law, guardianship is of three types-

Guardianship of the person.
Guardianship of the property.
Guardianship of Marriage.

For guardianship of a person, a father has a dominant right over the minor even if the mother is alive. There are different provisions under the Hanafi Law and the Shia law. Under Shia law, the mother is deemed to be a guardian or hizanat for up to the age of 2 years in the case of a boy child, and up to the age of 7 years in the case of a girl child.

The Hanafi law extends this timeline. Under this law, the guardianship of a mother extends up to 7 years for a male child, and for a female child, it extends up to her age of puberty. It is also laid down even if the parents are divorced, then the mother continues to be the guardian until she remarries.

And it is also laid down that whenever there is a conflict between the personal law and the Guardianship and Wards Act, the latter would prevail. Under the guardianship of property, three types of guardians are recognized-

Legal guardians,
Guardians appointed by court and,
De-facto guardians.

The contention that only the father is a natural guardian under the Muslim law has been negatived by the case of Md. Khalid v. Zeenat Pravin,(1988) and Abdul Kalam v. Akhtari Bibi(1987). It was held that a father can be denied custody if it is not in the favour of the child. There is also the provision of testamentary guardianship in the Muslim Law and a father may appoint a testamentary guardian in the case of Sunni Muslims.

Among the Shias, the testamentary guardianship is valid only if the grandfather of the minor is not alive. Also, there is a difference in the opinion between the Shia and Sunni Muslims when it comes to a non-Muslim mother being appointed as a testamentary guardian.

Guardianship under Christian and Parsi Laws

The guardianship under the Christian law is laid down by the Guardianship and Wards Act 1890 and there is no separate provision laid down for conservatorship for the followers of Christianity and Zoroastrianism. Thus both these religions have to go by the procedure as laid down by the secular act.

National Trust Act

The National Trust Act 1999 or to be precise the ‘National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities’ looks after the guardianship of people with cerebral palsy, autism, and other mental incapabilities. Section 14 of the National Trust Act says that the parent, relative, or an organization can voluntarily apply for guardianship with the local committee established under the national trust act. The guardian appointed under this provision has to take care of the mentally retarded person as well as his property.

The Rights of Person with Disabilities Act 2016 lays down the provisions for involuntary guardianship. Under Section 13 of the said Act, if the district collector feels that a mentally disabled person is not able to take care of himself, then he can appoint a legal guardian for that person. The guardian appointed under this Section may be given plenary guardianship i.e. full authority over the decisions of such person or he may be given limited guardianship i.e. both the guardian and the mentally ill person would take all the decisions with mutual consent.

Duties of a guardian

Guardianship and Wards Act

When a person is given guardianship of a minor, he is endowed with certain responsibilities. The Guardianship and Wards Act lays down some of the duties of a guardian. According to Section 24, if a guardian is appointed for the care of the minor, he has to look after the health, education, and other necessities of the minor. If a guardian is appointed for a property, then under Section 25, he must look after the minor’s property in the same manner as he would have taken care of his property.

The Hindu Guardianship and Adoption act

It does not explicitly lay down the duties of a guardian but Section 13 says that the welfare of the minor is of paramount interest and if a guardian is not working for the same, he can be removed.

Termination of guardianship

Hindu Guardianship and Adoption Act

Under Hindu law, a guardian can be removed if the court feels that he is not dealing in the welfare of the minor and this can be done through section 13 of the Hindu Guardianship and Adoption Act.

Under Section 39 of the Guardianship and Wards act 1860, a guardian can be removed by the court by taking suo-moto cognizance or on application by any other person, if the court feels there is –

Abuse,
Persistent failure to perform his duties
Incapacity,
Ill-treatment or neglect of the minor
The conviction of the guardian,
Disregard of the provisions laid down by the Guardians and Wards Act,
Entertainment of conflictual interest against the interest of the minor,
Shifting of the guardian from the jurisdiction under which he is appointed as a guardian.
Bankruptcy or insolvency of a guardian.

The same provisions apply to the Muslim law as well as to the Parsi and Christian law when it comes to the removal of a guardian.

Under this Act, the provisions of cessation of guardianship are also provided. Under Section 41, the authority of a guardian of a person ceases to exist upon-

The death, removal, or discharge
Court of ward taking the responsibility
The minor attaining majority
In the case of a female, by marriage.

The power of a guardian of the property also ceases in the same manner.

Conclusion

Conservatorship is a very sensitive subject and thus while appointing a guardian, the interests of the minor should be of paramount interest. A guardian plays an important role in bringing up the minor and therefore steps regarding guardianship should be followed properly. Different laws have different provisions but the motive is the same i.e. the welfare of the minor.

References

Muslim law, Syed Khalid Rashid, 6th edition, Eastern Book Company (EBC)
www.indiankanoon.org

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Evolutionary review of Arbitration and Conciliation (Amendment) Act, 2021

Sneha Mahawar

August 28, 2021

This article is written by Niharika Agrawal, pursuing B.B.A.L.L.B from IFIM Law School. This article reviews the Arbitration and Conciliation (Amendment) Act, 2021.

Table of Contents

Introduction

Arbitration is one of the alternatives for dispute resolution rather than going to court. This process is settled by the neutral adjudicator and his decision or award is final and binding upon the parties. Arbitration awards have limited rights of review and appeal. These alternative dispute resolutions are friendly in nature. It is time and cost-efficient, flexible, neutral, confidential, and autonomous.

In India, the first arbitration regulation procedure was enacted under the Arbitration Act, 1889. Later it was improvised in the year 1940 as Arbitration Act, 1940, with various laws that comprise procedural aspects of different alternative dispute resolution methods. Further, with an intention of lawmakers to make the process of arbitration a friendly regime, the principal Act of 1996 was enacted under the title the Arbitration and Conciliation Act, 1996. With the change in the legal system and progress of arbitration, the Arbitration and Conciliation (Amendment) Bill, 2021 was passed by the Parliament in March 2021. The Amendment Act includes the provision for domestic and international arbitration and the laws for conciliation proceedings. It replaces the Arbitration and Conciliation (Amendment) Ordinance, 2020. This article analyses the positive and negative impacts of the amendment made by the Act.

Amendment Act of 2021

The amending acts of 1996, in the subsequent years 2015 and 2019, showed the legislators’ intentions to enhance India as an arbitration-friendly and pro-arbitration environment. There are two major amendments made by the Arbitration and Conciliation (Amendment) Act, 2021.

Automatic stay on award

The first major change was the provision under Section 36(3) of the principal act of 1996. This Section was added to put a stay on the arbitral award if it satisfies two essential conditions:

When there is prima facie evidence that the case is based on the arbitration agreement or contract which is the basis of the award, and
The award was connected with fraud and corruption.
In these two conditions, the award can be unconditionally and automatically upheld until and unless it is challenged under Section 34 of the principal act.

Before the commencement of the Amendment Act, the principal Act of 1996 stated under Section 34 (2) (b)(ii) that an arbitral award could be set aside if the courts are satisfied that such award is induced with fraud or corruption, which also meant conflict with the public policy of the country. This Act stipulated that the parties to the arbitration could approach the court by filing an application challenging such award under Section 34, which includes, inter alia, proof of the invalidity of the arbitration agreement. However, Section 36(2) of the act does not allow to set aside an award unless the court deems fit to do so. Also, in the 2015 Amendment Act, it was clarified that an arbitral award would not automatically be stayed just because an application is sent to the court to set aside the arbitral award.

After the enactment of the Amendment Act, it was clarified that the arbitral award can be set aside even during the pendency of the application if the court is satisfied that an award passed in an arbitration agreement or a contract was affected by fraud and corruption. There is a fear that the party may misuse the delay of enforcement of an arbitral award as per their benefit.

The provision of Section 36(3) is effective from 23rd October 2015, the same date on which the Arbitration and Conciliation (Amendment) Act, 2015 was enforced. It has the retrospective effect and applies to all the cases arising out of arbitral proceedings, regardless of court proceedings before or after the commencement of the Amendment Act of 2015.

Expanding the scope for qualification of arbitrators

Under this area, two amendments were made. As they are interlinked, they can be dealt with together. In the Arbitration and Conciliation (Amendment) Act, 2019, Section 43J was added to the principal Act which provided certain eligibility criteria, qualifications, norms, and standards for the accreditation of arbitrators. This Act also includes the Eighth Schedule that comprises an exhaustive list of qualifications necessary to be possessed for an arbitrator. This list includes an advocate, a Chartered Accountant, Company Secretary, an officer with an engineering degree, a person with educational qualification at degree level with 10 years of experience in scientific or technical streams, etc. everything except professional qualifications of an arbitrator. It also provided some general norms for the arbitrator to accreditation. These norms are as follows:

An arbitrator should have a fair general reputation and integrity and should apply objectives to settle the dispute.
There should not be any conflict of interest, that is the arbitrator must be impartial and neutral to both the parties in the arbitration and should avoid entering into any financial business or other relationship that leads to impartiality or might create a situation of partiality or bias amongst the parties.
There should be any potential conflict by an arbitrator.
The arbitrator shall have the capacity to suggest, recommend or state the reason and enforce an arbitral award in any dispute which comes before him for adjudication.

The recent Amendment Act of 2021 has replaced Section 43J and removed the Eighth Schedule with the following statement that “the qualification, experience, and norms for arbitrator’s accreditation shall be specified by the regulations” made by the Arbitration Council of India. However, the details of these regulations are still not specified.

The previous qualifications and norms were quite broader. It has restricted the capacity of qualified foreign lawyers to practice arbitration in India. After the enforcement of the Amendment Act, parties are allowed to appoint arbitrators without any parameters of qualification. This has also provided the Law Commission with the freedom to take into consideration the appointment of the foreign expertise in arbitration as per the UNCITRAL Model law provisions. Several members from Lok Sabha have appreciated this amendment as it may bring famous foreign arbitrators to India, and make India a global arbitration center. These amendments have made the arbitration process friendly and flexible like other countries such as France.

Drawbacks in the Amendment Bill, 2021

Restriction in the enforcement of awards

As per the changes made under the Act, the court needs to prove prima facie that there was no fraud or corruption in the arbitration agreement or the contract in providing the arbitral award, for disposing of Section 36 of the Act. Such findings would anyway be subject to the application under Section 34. Hence this amendment does not mitigate the challenge of proceedings for the final disposal which may take up to six years. This Act of unconditional stay was also criticized by many experts. They also opined that unconditional stay may hinder India’s goal to establish a pro-arbitration policy.

If the case is under adjudication before the court as per Section 36(2) of the Act, the party needs to file a fresh agreement with regards to new ground. This may take time in further submissions and additional expenses. Thus, such an amendment may have an impact on the enforcement of arbitral awards and may also affect India’s ease of doing business.

Judicial interventions

The whole aim of arbitration is to avoid court proceedings and ensure smooth dispute resolution. With the introduction of new grounds for enforcing the award, if the parties are not satisfied with the awards, they may make all the attempts to contend that their contract or award is connected with fraud and corruption. Hence, the amendment may increase judicial intervention as the court would be overburdened by the applications for the arbitral awards induced by fraud and corruption.

Uncertain terminology

As observed above, the term “regulations” is not yet defined clearly. What are these regulations? Who is responsible for framing them? When will it be enforced? These are some of the unanswered questions. Another issue that was observed is that the amending act does not deal with the complexities and has failed to explain the scope of “fraud and corruption” that would lead to an unconditional stay on arbitral awards. In this scenario, the legislators have sought certain clarity from the judiciary on specific points:

Courts’ ability to examine new evidence.
The scope of fraud and corruption.
The degree to which conclusions in the awards can be examined.
The effects of failure to raise such allegations before the arbitral tribunal or in court proceedings.

Invalidates the Amendment Act of 2015

The basic motive behind enacting the Amendment Act of 2015 was based on the judgment of the Supreme Court in the case of National Aluminum Company (2003). It was held that the jurisprudence of automatic stay keeps the parties in the same position as in court, which fails in an alternative dispute resolution system. In the Amendment Act of 2021, the court requires to prove, prima facie, the evidence of fraud and corruption, to entitle unconditional stay. This will eliminate all the distinct competing interests that would differ from case to case in putting the stay on enforcement of arbitral awards. Thus, the Amendment Act of 2021 reintroduced the intervention of the judicial authority resulting in paper awards.

Tools for aggravation

The Amendment Act of 2021 encourages the parties to claim fraud and corruption in every hearing of the arbitral award. This may increase the cost, trouble, and time in resolving the disagreement. It may also increase the dread of innocent parties. They may lose the confidence of choosing arbitration as a form of dispute resolution, as in the end, they have to face the court’s proceedings to get relief. Many commercial parties hesitate to commence or continue their business in India due to a lack of alternative dispute resolution mechanisms, as, in the future, they will, fortunately, or unfortunately, have to face the court for redressal.

Conclusion

The Arbitration and Conciliation Act, 2021 was made with the good intentions of the legislators to make the Indian arbitration center a friendly regime. This aim has been successful to a large extent. The amended provisions have reduced the cases of the arbitral award which are interlinked to fraud and corruption. This has helped the parties to escape from being affected by the negative impact of the arbitral awards. Another step to remove the Eighth Schedule may help the country to establish a global arbitration center in India by appointing competent foreign arbitrators.

However, there are some flaws in this legislation also. The addition of Section 36(3) has increased the working of the courts to analyze the prima facie element of fraud and corruption in the arbitral awards.

Eliminating the eighth schedule of the principal Act of 2019 has widened the scope for appointing foreign arbitrators and arbitrators of various other fields without any qualifications. This may lead to the appointment of incompetent arbitrators and may also affect the Indian arbitrators due to the easy appointment of foreign arbitrators. It will also increase the work of the parties, councils, and Indian courts to repeatedly verify the arbitrator’s competency.

References

https://www.indialawjournal.org/evolutionary-review-of-arbitration-and-conciliation.php

https://www.mondaq.com/india/arbitration-dispute-resolution/1048504/the-arbitration-and-conciliation-amendment-act-2021

https://www.barandbench.com/apprentice-lawyer/impact-of-the-arbitration-and-conciliation-amendment-act-2021-on-indias-pro-arbitration-outlook

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All you need to know about .IN Domain name dispute resolution policy

Oishika Banerji

August 28, 2021

Dispute-resolution-ClydeCo-0594_800_450_90_s_c1_c_c — Image source: https://blog.ipleaders.in/the-difference-between-adjudication-and-other-forms-of-dispute-resolution/

This article has been written by Nishant Gulyani pursuing the Diploma IPR, Media and Entertainment Laws from LawSikho.

Table of Contents

Introduction

In this era of the digital revolution, every business, whether big or small, has to build its presence online through social media and websites. According to WIPO (World intellectual property organization), the number of cases involving a similar domain name has gone through the roof in 2020 as a direct result of businesses going online due to the COVID-19 pandemic. A majority of these are cybersquatters,i.e., people who register a large number of domain names similar to well-known brands with the intention of extorting money from them in exchange for the domain name. With work from home becoming the new normal and businesses going online, it has become inevitable that a business shall face this issue. So the only possible solution is for people and businesses to be educated about the policies and rules formulated by the .IN Registry to tackle these illegal practices.

The INDRP has been adopted by the .IN registry/NIXI (National Internet eXchange of India) to resolve disputes arising out of domain names that use the .in code like amazon.in. This article will explore the concept of an INDRP complaint when one should file it, how should one file it, and on what grounds can one file the complaint. The INDRP Rules of Procedure as laid down by the Registry to govern the proceedings have also been discussed in detail in this article.

What is the INDRP?

Following the acceptance of the internet as a tool to promote and sell goods and services, there has been a steady and rapid increase in the number of domain name disputes in the country. To regulate these disputes, the .IN registry formulated a policy named the INDRP in 2006.

The INDRP was drafted in accordance with international guidelines (of the WIPO) and the provisions of the Information technology Act, 2000. The INDRP governs disputes regarding domain names containing the .IN or .Bharat code at the end, such as amazon.in, ssrana.in or apple.in . (Give an example of a .Bharat code as well ?)

What is an INDRP Complaint?

An INDRP complaint refers to a complaint filed under the INDRP policy against an infringing domain name containing the .in code at the end.

For example, if you have a website and you have a trademark ‘aston martin‘ and even a domain name registered with that mark, i.e. astonmartin.com and someone else registered the domain name astonmartin.in or astinmartin.in , then you can file an INDRP Complaint either for the cancellation of the infringing domain name or for its transfer to your name.

In simpler terms, if someone registers a domain name that is identical or confusingly similar to your mark with a mala fide intention and without any legitimate interest in the name, you should file an INDRP Complaint.

Grounds on which you can file an INDRP Complaint

Paragraph 4 of the INDRP policy/Rules provides the ground for filing an INDRP Complaint:

The registered domain name should be identical/confusingly similar to your mark (trademark or service mark) or the name in which you have rights.
There shall be no legitimate interest or rights of the Registrant in the registered domain name. The INDRP (Paragraph 6) provides examples of what can be termed as the Registrant’s legitimate interests and rights:

The Registrant is engaged in the bonafide distribution of goods and services under the domain name or a name identical/similar to the domain name. For example, if you are the owner of a car brand, you launched a car under the name carrier and registered it as a trademark. Mr. Gupta, on the other hand, is selling toiletries through his website under the registered domain name CARRIER.IN. Now you can’t restrict Mr. Gupta from selling his goods under a domain name identical/confusingly similar to your mark, as he is engaged in the bonafide distribution of goods and services.
Internet users identify the Registrant with the disputed domain name, whether he owns no rights relating to the mark under the Trademark Act.
There is no intention on the Registrant’s part to divert any customers or ride on the goodwill associated with the Complainant’s Mark. He/she is using the domain name for a lawful non-commercial or fair purpose.

3. The domain name should have been registered by the registrant in bad faith. The INDRP (Paragraph 7) provides examples of what can be termed as bad faith:

If the Registrant has registered the domain name for the sole purpose of selling, renting, or transferring it back to its original owner, i.e. the Complainant.
The Registrant registers the domain name before the owner of the mark in order to prevent the original owner (Compliant) from registering that domain name.
If the registrant has been using the domain name to attract innocent internet users to the name and reputation of the Complainant by causing confusion as to any affiliation or sponsorship between the Registrant and the Complainant. For example, if you are the owner of APPLE and someone registers a domain name APPLEESTORE.IN and on its website provides links to its competitor’s goods and services, i.e. provides details and links to the mobile phones of Samsung and OnePlus. It will be considered as registering and using it in bad faith.

What happens after filing the complaint?

After filing the complaint, the registry will:

Review your complaint–

The registry will check whether all the requirements under the rules of procedure are met in the complaint. If yes, then the complaint is moved forward to the next stage. If no, then the complaint is forwarded back to the complainant to remove any discrepancies present in the document and submit it again.

2. Appointment of an Arbitrator–

Within 5 days of receiving the complaint, the registry appoints an arbitrator from its list of registered arbitrators.

3. Passing an award–

The arbitrator, after hearing both the parties, passes an award no later than 60 days from the commencement of proceedings. He can seek a 30-day extension, but can only do so in exceptional cases.

4. Communication of decision–

After the award is passed by an arbitrator, it is the duty of the registry to forward the decision of the arbitrator to both parties within 5 working days.

Rules and procedures to be followed under INDRP

The .IN Dispute Resolution Policy (INDRP) has been published by the .IN registry. It was drafted in accordance with WIPO guidelines and necessary provisions of the Information Technology Act 2000.

All parties to a dispute must study the following two documents carefully:

.IN Dispute Resolution Policy (INDRP)– It provides different grounds for the filing of an INDRP complaint and contains illustrations establishing those grounds and the remedies available to the parties.
Rules of Procedure for the INDRP– These rules outline how to file a complaint, reply to a complaint, along with the fees, communications, and other procedures that will be followed. Some of the important rules are:

The Procedure of Dispute Resolution Under the INDRP;

The complainant shall file his complaint and supporting documents with NIXI in an online form.
A power of attorney shall be submitted with the complaint either by the aggrieved party or its authorized representative.
The complaint should not be more than 5000 words (excluding supporting documents/evidence).
The supporting documents/evidence shall not exceed 100 pages in total.
Within 5 days of receiving the complaint, the registry shall appoint an arbitrator from its list of registered arbitrators.
Personal hearings are conducted only at the request of either party or both parties. The personal hearing includes video conferencing and teleconferencing.
There can’t be more than 2 hearings.
After an award is passed by the arbitrator, it is the duty of the registry to forward the decision of the arbitrator to both parties within 5 working days.

The INDRP Rules of Procedure can be accessed from here.

Case laws

Maruti Suzuki ltd. vs Nitin Bhamri, INDRP/136 (May 2, 2010)

Facts – The respondent registered a domain name ‘marutisuzukieeco.co.in’ similar to the trademark of the complainant, MARUTI SUZUKI.

Issue – The Complainant (Maruti Suzuki) argued that, due to the deceptive similarity of the disputed domain name with the Complainant’s MARUTI SUZUKI mark, it would cause confusion in the minds of innocent internet users and will divert customers from the Complainant’s website.

Regulations/Provisions – The complainant satisfied all the 3 grounds for the filing of a complaint (i.e., identical/confusing similarity, bad faith, and no legitimate rights or interest) as stated in Paragraph 4 of the INDRP policy and provided evidence of its more than 100 registered trademarks all over the world.

Held – It was observed by the Arbitrator that slight character changes made by the Respondent to the Complainant’s mark ‘Maruti Suzuki’ are insufficient to avoid confusing similarity.

The Arbitrator held that by registering the disputed domain name, the respondent has intentionally attempted to attract Internet users to the respondent’s website or other online locations by creating the likelihood of confusion with the complainant’s trade name or trademark as to the source, sponsorship, affiliation, or endorsement of the respondent’s website or online location.

Analysis- It is a clear-cut case of cybersquatting where the respondent surrendered the domain name following an INDRP Complaint by the Complainant. The disputed domain name incorporates the complainant’s mark in its entirety, which lands us to only one possible conclusion: the respondent wanted to capitalize on the goodwill of the complainant’s Maruti Suzuki Mark. Here, the fact that the respondent was unaware of the complainant’s famous and well-known Maruti Suzuki mark is inconceivable.

Tata Motors Limited v. Amit Badyani, INDRP/1020 (October 16, 2018)

Facts – The respondent registered the domain name HARRIER.IN similar to the Complainant’s Harrier Mark.

Issue – The Complainant (Tata Motors) argued that the respondent was using the mark to utilize the goodwill of the Complainant and capitalize on the confusion caused to customers due to the similarity of his domain name with the Complainant’s mark.

Regulations/Provisions– As per the grounds mentioned in paragraph 4 of the INDRP, the complainant has to establish that the Respondent has been using an identical domain name in bad faith with no legitimate interest in the name. According to paragraph 6 of the INDRP, if the Respondent has been using the domain name for a bonafide offering of goods and services under the domain name and is known by internet users by that name (i.e. HARRIER.IN) then it can be said to have a legitimate interest and rights in the disputed domain name.

Held– It was held by the Arbitrator that the Respondent was engaged in the bonafide distribution of goods and services related to computer software under the name HARRIER before receiving the dispute notice and had registered the domain name HARRIER.IN much prior to the Complainant. The complaint was dismissed.

Analysis- Proving identical or confusing similarity of a domain name with your mark is insufficient to take down the disputed domain name. Two other grounds mentioned in the paragraph of the INDRP policy also need to be proved, i.e., bad faith and no legitimate interest in the name. If an individual is carrying on his genuine business and providing goods and services through the disputed domain name, it can’t be said that he is operating under bad faith or without any legitimate interest in the domain name.

Discussing international perspective

This practice of registering a domain name identical/confusingly similar to a well-known brand in the market happens all over the world, and even in some countries like China, this is the business of many individuals, i.e. they register domains in bulk and then try to extort money from the brand owners by demanding a large amount of money in return for the domain name.

Each country has its own policy. Like India has an INDRP policy to tackle domain name disputes containing .IN or .Bharat codes in the domain name, China also has a China Internet Network Information Center Dispute Resolution policy (.CN Policy) governing domain name disputes with .CN and 中国 code. The complainant has to prove that the disputed domain name is identical or similar to his mark or name and has been registered or used in a bad faith with no legitimate interest. (Article 8 of .CN Policy)

Basically, all these National Domain Dispute Resolution policies have been adopted following the footsteps of the UDRP (Uniform Dispute Resolution Policy), and that is the reason for the similarity in their provisions. If the domain name contains a top-level domain code such as .COM, .ORG, or .EDU, then the complaint has to be filed under the UDRP with the WIPO Arbitration Center.

The key differences between INDRP and UDRP

The INDRP appoints a single arbitrator to oversee the arbitration proceedings, whereas the UDRP allows for an administrative panel of one to three panelists.
Under INDRP, paragraph 4, you need to prove that the disputed domain name has been registered OR is being used in bad faith, but under UDRP, paragraph 4(a), you need to prove that the domain name has been registered AND is being used in bad faith.
A party to an INDRP process may request a personal hearing with the arbitrator to present arguments to prove the merits of its case; the UDRP does not have such a provision.

The UDRP and .CN Policy is also almost similar as the three grounds listed under Article 8 of the .CN policy is similar to the grounds listed under 4(a) of the UDRP.

The key differences between .CN Policy and UDRP

Under.CN policy is sufficient to prove either registration or use of the name in bad faith, but under the UDRP a complainant needs to prove both, i.e., the registration and the use of the disputed domain name in bad faith.
Under .CN policy, a complaint can be filed against a disputed domain name similar/identical to a mark or any ‘name’ in which the complainant has rights, while under UDRP, a complaint can be filed against a disputed domain name similar/identical to only the trademark of the complainant.

Loopholes in current policy and the need to amend it

Under paragraph 3(c) of the INDRP, a single complaint is filed against a single disputed domain only, and if someone is using your mark on four disputed domain names, you need to file four different complaints.

For example, if you are the owner of ASTON MARTIN and someone is using the domain names ASTINMARTIN.CO.IN, ASTINIMARTIN.IN, ASTINMARTINSTORE.IN, and ASTINMARTINCLOTHING.IN, then you need to file four different complaints against four disputed domain names, which will definitely be a costly process for you. Moreover, your complaint will be assigned to four different arbitrators.

Consequences of this loophole

It becomes a very expensive process to file several complaints against an entity using several disputed domain names, as it costs around INR 14000 to file a single INDRP Complaint.
When different complaints are filed to protect the same trademark, a separate arbitrator is appointed to deal with each complaint, which may lead to the passing of inconsistent and conflicting decisions.

Need for amendment

There is an immediate need to amend this paragraph and bring it in compliance with the UDRP, which allows for the filing of a single complaint against an entity using several domain names identical/confusingly similar to your mark or name.

Conclusion

With the ever-changing digital world, businesses have moved online, and so have disputes and crimes. In order to tackle these online disputes, we need to be aware of the procedures and rules associated with them.

A domain name complaint can be filed with the .IN Registry/NIXI under the grounds mentioned in paragraph 4 of the INDRP policy, i.e. bad faith, identical/confusingly similar mark, and no legitimate interest in the mark. While registering your business online with a .COM domain, you should also register other domains, such as .IN domain for the name of your business, to avoid disputes in the future. Website service providers like GoDaddy or WordPress provide registration of a domain name on a first come first serve basis, and anyone can seek a domain name registration similar to your trademark or domain name to ride on your goodwill, So it is your responsibility to be aware of such malpractices and take measures to tackle them as stated in the article above.

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COVID-19 and NRI taxation : An analysis in light of the case of Gaurav Baid v. UOI

Sneha Mahawar

August 28, 2021

Taxation — Image Source - https://rb.gy/ghfkal

This article is written by Anushka Singhal, a student of Symbiosis Law School, Noida. Through this article, she explains the concept of tax residency in the light of the judgment of Gaurav Baid v. UOI. She discusses the relevant provisions under the Income Tax Act and also tries to explain the repercussions of the judgment on the NRIs.

Table of Contents

Introduction

COVID-19 was an unprecedented situation. Nobody expected it and thus, nobody was prepared. The legal industry was also not left untouched by its effects. Several issues related to force majeure, taxation, adoption, insurance claims, etc. arose. The issue regarding taxation of NRIs during COVID-19 was one such issue that the Court dealt with. The Central Board of Direct Taxation (CBDT) provided some respite to the Non-residential Indian (NRI) taxpayers but it was not enough and then the Supreme Court had to interfere. Let us study this whole scenario in light of the judgment of Gaurav Baid v. Union of India, (2021).

Provisions regarding payment of taxes based on residence

Section 6 of the Income Tax Act, 1961 lays down the provisions for residence for the payment of taxes. It lays down provisions for a resident, non-resident, and non-ordinarily resident.

Resident

If the person is in India in that year for a period of 182 days in totality, or, if he has been living in India for a term of 365 days in the immediately preceding four years and for a minimum of 60 days in the current financial year, he qualifies as a resident.

Non-ordinarily resident

A person is said to be ‘non-ordinarily resident’ in India for any previous year if he is a non-resident for 9 out of ten years preceding that taxable year or who has lived in India for a period less than 729 days for the preceding seven years.

Non-resident

An individual living in India for less than 182 days in a fiscal year will be a Non-Resident Indian. Once the classification is done, the tax is obtained from them. For the resident Indians, the domestic residence rules determine the tax and for the non-resident Indians, the tax is calculated based on their income in India. Section 5 of the Income Tax Act lays down the provisions for the source rule. Section 5 (2) lays down that the income of a non-resident Indian for a previous year is that which is received in India or which is received on behalf of that person. It is also the income that is accrued by that NRI in India in that particular year.

Recently through the Finance Bill, 2020-2021, the exception provided in clause (b) of Explanation 1 of sub-section (1) to Section 6 was amended and now the period of 184 days for visiting India in that year (for the purpose of taxation) has been decreased to 120 days. This amendment has become effective from April 2021 and will apply for assessment from the year 2021-22. This amendment will only apply in those cases where the income is more than 15 lakhs, otherwise, the older provisions would apply. Thus, the following table can be referred to while deciding the taxation depending upon the resident-

S.No.	Description	Resident and Ordinarily Resident and taxation	Resident and Not Ordinarily Resident and taxation	Non-resident and taxation
	Income received or deemed to be received in India	Yes	Yes	Yes
	Income which accrues or arises or is deemed to accrue or arise in India	Yes	Yes	Yes
	Income that accrues or arises outside of India from- -Business set up in India -Other income	Yes Yes	Yes No	No No

COVID-19 and its impact on NRI taxation

Due to the Coronavirus, a lockdown was announced on 24th March 2020. Everyone got stuck wherever they were. The same happened with NRIs and they got stuck in India and were forced to stay here beyond their estimated limits. This led to fear amongst them as now they had to pay higher taxes as they were staying in India. The Central government acknowledged their fear and issued a notification that provided tax relief to such stranded NRI’s. The Central Board of Direct Taxes issued the following notification for the NRI’s who came to visit India on or before 22nd March 2020-

If the NRIs have been unable to leave India on or before 31st March, then the period between 22nd March and 31st March would not be considered in the 182 days.
If they were quarantined in India during or after March and thus were unable to leave, the duration of this stay would not be counted in the 182 days.
If they have been evacuated from India on or before 31st March then the period between 22-31st March would not be counted in the taxation period.

This circular sought to provide some relief to these non-resident Indians. However, another lockdown happened in the financial year (FY) 2020-2021 and again the NRI’s were in hot soup. But this time, no circular was issued by the CBDT clarifying the status of taxation by such NRI’s. Therefore, a plea was filed by the petitioner Gaurav Baid seeking clarification from the Apex Court.

Gaurav Baid v. Union of India (2021)

This petition was filed by Gaurav Baid, an Indian residing in UAE. He had come to visit India but was later stranded here due to the suspension of international flights. His time limit of 182 days was exceeded. Against this backdrop he filed a writ petition in the Supreme Court, asking for relief from paying taxes during his duration of overstay in India. He brought the CBDT’s March 2020 circular to the attention of the Court and asked for similar relief in the present situation. The Supreme Court asked the petitioner to approach CBDT within three days of the present writ. It further ordered CBDT to solve the petitioner’s problem within 3 weeks and then the Court dismissed the case.

Impact of Gaurav Baid’s case

In pursuance of the orders of the Hon’ble Supreme Court, CBDT passed a notification for the NRIs who got stranded in India during the FY 2020-21. Following are the provisions laid down by the notification-

A short stay would not qualify a non-resident Indian or a resident but not ordinarily resident Indian to become an Indian Resident.
The circular said that as the provisions for residency for taxation are similar in other countries like the US and France, the relief should be provided in all jurisdictions and not just in India. In short, it discussed the consequences of such relief.
The CBDT held that the tie-breaker rule shall be applicable in such a case. The tie-breaker rule is laid down in the Double Taxation Avoidance Agreements (DTAA) and is used to decide which residency shall be applicable in a given case for the purpose of taxation.
It also talked about the employment income and said that it would be applicable under ‘DTAA’.
It said that NRI’s would be able to avail the benefit of rule no. 128 of the Income Tax Rules, 1962 in case they have paid taxes in other jurisdictions.
It notified that in case of double taxation, an NRI may approach the Principal Chief Commissioner of tax who will then decide if any specific reliefs have to be provided.

Thus, the CBDT passed this circular in light of the judgment of Gaurav Baid and provided relief to the NRI’s ensuring that no one should be taxed twice. CBDT concluded by stating that, “there does not appear a possibility of the double taxation of the income the Previous Year, 2020-2021”.

An analysis of CBDT’s notification

The notification had several loopholes and did not provide the remedy that the petitioner Gaurav Baid was looking for. The notification specifically applies to the employed NRI’s and also for the taxation under the DTAA agreement. This would not provide respite to the whole NRI class and would only benefit certain strata. Also, the judgment does not throw light on the plight of such persons who have shifted to a new jurisdiction within the past two or three years. This would lead to a problem for such people who might have been stranded during the lockdown in FY 2020-21 and were not able to return. They will not be able to qualify as a resident or a non-ordinary resident.

The circular stated that the unsatisfied people, that is, those who have been taxed twice can approach the Principal Chief Commissioner of Tax. This may lead to ambiguity and subjectivity comes into play. The Commissioner can get burdened with cases and the applicants may have to wait for a very long period. The circular fails to consider those cases where an unintended business might be set up in India owing to the overstay. Under Section 9, an income can accrue in India due to an overstay and the CBDT’s notification is mute on the same. A person stranded in India may qualify as a ‘resident’ but not ‘ordinarily resident’ and still have to pay exorbitant taxes in comparison to ordinary residents. Further, the circular expects that all stranded NRI’s might be able to travel back to the countries in which they were residing under the air bubble agreement. But it fails to reconsider the consequences for the countries for which there is no air bubble agreement. Also, some people might not want to travel due to the threat of infection. There are challenges from the perspective of Place of Effective Management (POEM) and Business Connection (BC) / Permanent Establishment (PE) that might act as the bone of contention. Therefore, the circular by CBDT gives some relief but is not at par with the expectations of the non-resident Indians.

Conclusion

This judgment acted as a trigger and forced the CBDT to pass a notification. The lackadaisical Central Board of Direct Taxation was forced to pass a notification. The notification has not been received happily by many and the loopholes are making people unsatisfied. On top of it, the Central Government has also passed a new amendment. It would be interesting to see the cases that will arise due to this circular. We need a concrete set of rules to deal with such a situation. The third wave is expected soon which again might lead to NRIs stranded in the country and this tax issue arising. Only either proper legislation or a proper judicial pronouncement can save things from being dicey.

References

https://www.ibfd.org/sites/ibfd.org/files/content/pdf/aptb_2014_06_in_2.pdf

http://www.nlujlawreview.in/dissection-of-the-cbdts-approach-towards-stranded-persons-during-the-pandemic/

https://www.indialawoffices.com/legal-articles/nri-tax-residency-status-in-pandemic-times

https://www.nishithdesai.com/fileadmin/user_upload/pdfs/NDA%20In%20The%20Media/News%20Articles/CBDT_Circular_on_Forced_Stay_in_India_-_No_real_relief.pdf

https://lawsuperior.com/tax-on-nris-in-the-time-of-covid-an-analysis-of-the-judicial-outlook/

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Legal remedies available against online bullying

Diganth Raj Sehgal

August 28, 2021

R (2) — Image Source: https://bit.ly/3zoHbw1

This article is written by Daisy Jain, pursuing B.COM.LLB (Hons) from the Institute of Law, Nirma University. This is an exhaustive article which deals with the legal remedies available against online bullying.

Introduction

The development of technology has resulted in the relocation of many significant real-world activities to the digital world. Increasing reliance on the internet for projects, school, work, colleges, and social purposes also functions as a forum for venting one’s anguish and hostility, which would otherwise be impossible to do in a more formal environment. The virtual space is inundated with traffic, necessitating the adoption of legislation to regulate and rigor the online growing threat that is unleashing chaos and destruction on the lives of children and teenagers. The internet and cyberspace can, without a question, be used for findings and creative endeavors, but the probability of using the internet for illegal activities cannot be ignored or dismissed. Bullies can harass their helpless prey with little or no liability and without fear of repercussions because they have access to the internet on their mobile devices 24 hours a day and seven days a week.

Bullying, no matter what kind it is, has the effect of bringing people down. It can occur at any time and from any location, including school, college, work, home, and even over the internet, to name a few examples. A distinction should be made between bullying that occurs in front of you and bullying that occurs online, as you have less control and no way to run away from online bullying, whereas you do have an option to evade bullying that occurs in front of you in the physical world.

Cyberbullying or online bullying

In the broad definition of cybercrime, cyberbullying or cyberharassment is also identified as online bullying. As a result, it is critical to comprehend what constitutes cyberbullying and harassment to prevent it from happening to someone else. Bullying can be defined as an act “actively sought to harm or harass (someone considered to be resilient)”. As a result, any individual or group of individuals who attempt to harm, manipulate, harass, or intimidate another is referred to as bullying the latter.

‘Cyberbullying’, according to cybercrime experts, is defined as “a hostile, deliberate act or an omission that is performed out by a particular person or group utilizing electronic forms of contact against a sufferer who is unable to safeguard himself or herself, repetitively and overtime.” When an individual or group of people bully or intimidate any other individual through the use of digital technologies, whether on the internet or in another virtual realm, this is referred to as cyberbullying or cyber harassment. Sharing personal photos and videos without permission, phishing groups, spam groups, or a particular person, making fake accounts, body shaming, making memes and videos of people making mistakes, especially celebrities, and so on are examples of this. Such conduct or actions are most commonly seen on social networking platforms such as Youtube, Instagram, Twitter, Facebook, and others, as well as through SMS, Instant Messages (IM) services such as iMessage, FB Messenger, WhatsApp, and others, as well as via e-mail, discussion groups, and even gaming sites, among other places.

Cyberbullying can occur for a variety of reasons, including enmity, envy, the feeling of insecurity, and a variety of other reasons. It takes place on social media sites in various forms such as messages or e-mail, by making comments on someone’s post or video on social media sites in a pessimistic or aggressive way, which injures the feelings of an individual about whom they are written. It can also occur when someone degrades, writes, or posts something hurtful, which can be in the form of sound, video, or text. Cyberbullying is the term used to describe the act of posting such information on the internet.

Different types of cyberbullying

Different methods are used by bullies to trouble people by their negative thoughts in different situations. Cyberbullying, like social media, is a varied and prevalent phenomenon with many different forms and manifestations. It is, therefore, necessary to understand the different types of cyberbullying to empower parents and adolescents to report cyberbullying and take preventative measures against cyberbullying. Cyberbullying can take place in a variety of ways, including:

Exclusion

Exclusion is the intentional act of abandoning somebody out of something. Exclusion is common in in-person bullying instances, but it can also be used to attack and bully a victim over the internet. It is possible that your child will be excluded from or refused entry into social gatherings, even though they see other mates being welcomed, or that they will be excluded from message posts or chats that constitute friends in common.

Harassment

Although cyberbullying is a wide definition that encompasses many kinds of behavior, harassment is generally defined as an ongoing structure of hurtful or endangering online messages sent to cause injury to another person.

Outing/doxing

An outing also referred to as doxing, is the act of publicly disclosing sensitive or private data about someone without their permission with the intent of embarrassment or humiliation of that person. From the dissemination of private pictures or documents of public figures to the sharing of a person’s saved private chats in an online private group, this can take many different forms. The crucial factor is the victim’s refusal to give consent.

Trickery

Trickery is related to an outing, but with the addition of deceit as a component. In this scenario, the bully will make friends with their victim to entice them into a fictitious sense of confidence. Once a bully has acquired the trust of their attacker, they will take advantage of that trust by disclosing the victim’s secret information and personal data to third parties.

Cyberstalking

It is a primarily serious form of cyberbullying that can escalate to the point of threatening physical harm to the individual who is the victim of the harassment. Stalking can involve a variety of tactics such as surveillance, false accusations, and dangers, and is frequently complemented by offline stalking. If found guilty, the offender will face legal consequences such as restraining orders, probation, and possibly even jail time if convicted.

Fraping

A bully may use your child’s social networking accounts to post unsuitable content under their name, which is known as fraping. When friends post hilarious messages on each other’s social media profiles, it can be considered harmless, but it has the potential to be extremely harmful. For example, a bully posting racial insults through someone else’s profile to tarnish their public image is considered harassment.

Masquerading

A bully uses masquerading when he or she creates an entirely fictitious profile or identity for the sole purpose of cyberbullying another person. This could include creating a fictitious email account and social media profile, as well as selecting a novel identity and photos to deceive the victim. In these situations, the bully is usually someone who the victim is familiar with and trusts.

Dissing

Dissing is the act of a bully disseminating inhumane details about any person through public posts or personal messages to either spoil any person’s public image or their interpersonal relationships with other people. Typically, in these circumstances, the bully and the victim have a personal relationship with one another, either as a casual familiarity or as a friendship.

Trolling

Trolling is when a bully goes out of his or her way to deliberately frustrate others by posting incendiary remarks on social media platforms. Although trolling is not always considered a form of cyberbullying, when done with deceptive and detrimental intent, it can be used as a weapon for cyberbullying. Bullies who are more detached from their victims and who do not have a close connection with them are the ones who commonly troll.

Flaming

When someone engages in online bullying, they either post about it or explicitly send personal attacks and vulgarities to the victim(s). The act of flaming is almost equivalent to trolling, but it is usually a more direct attack on a victim with the intent of provoking them into an online battle.

Legal remedies

Even though there is no particular law that criminalizes cyber-bullying in India, some sections of the Information Technology Act, 2000, as well as the Indian Penal Code, 1860, deal with these issues and can be considered to fall within the broad definition of cyber-bullying.

Legal remedy under Information Technology Act, 2000

The Information Technology Act was enacted solely to deal with issues relating to e-commerce, as is apparent from its preamble. However, it has been construed by the courts to deal with issues relating to cyberbullying, cyberstalking, and other forms of cyber harassment. Chapter 11 of the Information Technology Amendment Act, 2000, includes offences where there is no specific definition of the crime of cyberbullying in this chapter. Although the act provides legal remedies against the same under Sections 66 and 67, they are not always effective. Some of the most important provisions of the IT Act that deal with cyberbullying are as follows:

Section 66A of the Information Technology Act, 2000, deals with the transfer of offensive messages through communication services, etc. This Section provided genuine victims of cyber harassment with a possible chance to acquire instant relief against subject matter that may be demeaning or harmful. Its repeal has left police authorities powerless in the face of the growing threat of cyberbullying, which is on the rise.
Section 66C defines the punishment for identity theft.
Section 66D of the IT Act deals with personation and the use of a computer resource to cheat.
Section 66E of the IT Act deals with the punishment for violating someone’s privacy.
Section 67 deals address the punishment for publishing or transferring obscene material via electronic means.
Section 67A deals with the punishment for publishing or transferring material comprising sexually explicit acts, images, or other content through electronic means.
Section 67B deals with the punishment for publishing or transferring material comprising sexually explicit acts, images, or other content which portrays children through electronic means.

Legal remedy under Indian Penal Code, 1860

According to the Indian Penal Code, remedies were available in the event of defamatory conduct or an act that was offensive to the modesty of women. The Act was amended in 2013, and new offences were added, including cyberstalking, which was made a criminal offence. The following sections of the Indian Penal Code (IPC) deals with cyberbullying in one way or another:

Section 292, which deals with the printing of inappropriate matter or matter for blackmail, states that the matter must be harmful to morality or measured to injure a person and that the perpetrator will be imprisoned for a maximum of two years, as well as be subjected to a fine.
According to Section 354A, making or insisting sexually colored remarks, as well as being guilty of the crime of sexual harassment, as well as displaying pornography against the will of the women, are all subjected to punishment.
Section 354C provides that a cyberbully can be prosecuted for taking photographs and can be held liable under this Section and other sections if he distributes or publishes the photographs.
As per Section 354D, if a woman is stalked or attempted to be stalked by another person, such person can be held liable for three years for the first attempt and a maximum of five years for any later attempts.
Section 499 addresses defamation, which is defined as, when a person, through verbal words or signs, creates or publishes something with the intent of harming the public image of another person. Defamation can be committed through electronic means as well and Section 500 talks about the punishment for defamation.
Section 503 talks about the offence, where the person sends threatening messages through the mail.
According to Section 507, criminal intimidation through any unidentified communication or means is prohibited, and the offender will be liable for up to two years in prison if he or she is found guilty.
According to Section 509 of the Indian Penal Code, offenders who intend to disrespect the modesty of a woman by words or gestures, which can also be done through electronic means, by invading the privacy of the woman, will be punished with imprisonment for one year or a fine or both.

Procedure to follow when you are bullied online

A cybercrime of online bullying can be reported to the cybercrime units in any city, regardless of where it occurred.

Cyber Cells: Cyber Cells were created to help aggrieved persons of cybercrime get compensation. These units are part of a criminal investigation unit and are tasked with investigating Internet-related criminal activities. The person can register an FIR at the nearest police station if your home does not have a cyber cell. If anyone is helpless to file an FIR for any cause, that individual can still contact the judicial magistrate or commissioner in his city. Regardless of jurisdiction, every police station is required to file an FIR.
Online grievance redressal: When it comes to handling female victims, the police are the most well-known law administration body in India. Even if they have instant access to a police station, women are hesitant to report an event for fear of being questioned and subjected to more suffering. As a consequence, crimes against women remain to go unpunished, and women have to bear the burden of online bullying. Women who do not wish to come forward can submit a complaint with the National Commission for Women. The Commission contacts the police and requests that the investigation be hastened. In the case of major crimes, the Commission can appoint an investigative committee to look into the situation and undertake a field investigation, gather evidence, question witnesses, call the accused, and get police records, etc. At present, there is a centralized cybercrime reporting portal that is governed by the Ministry of Home Affairs.
Report to CERT: Under the Information Technology Amendment Act of 2008, the Indian Computer Emergency Response Team (CERT-IN) has been established as the national regulatory authority for dealing with computer safety concerns. They give guidance on cyber incident protocol, protection, reporting, and reaction, among other things.
Report to the websites: Most social media platforms that allow users to create accounts include a reporting feature. Under the IT (Intermediary Guidelines) Rules, 2011, these websites must respond within 36 hours to remove information connected to infringing content. For the sake of investigation, the intermediary must keep such information and related documents for at least 90 days. Any objectionable content that is kept, saved, or disseminated on the aggrieved person’s computer system can be brought to the intermediary’s attention in writing or via email signed with an electronic signature.

Case laws

Cyberbullying for the first time was addressed as an issue by the Supreme Court in the landmark case of Vishaka vs.State of Rajasthan (1997). In this case, the Supreme Court issued policies and procedures to safeguard women from sexual harassment when it came to coping with the issue of bullying. In India, the provision that protected cyberbullying, Section 66A of the Information Technology Act, 2000, was struck down in the case of Shreya Singhal vs. Union of India, 2015.

In the case of Shibani Barik v. the State of Odisha (2020), the Court observed that cyberbullying was on the rise through Tik Tok and it emphasized the importance of strict regulation to protect the youngsters and children from being bullied. The above-quoted decision perfectly summarizes the flaws in the current legislative framework. The pressing issues pertaining to cybercrimes either necessitate a significant overhaul of the Information Technology Act, 2000, in order to keep up with recent trends in online predator behavior, victim specific requirements, and technological developments, or the formation of new provisions that would deal specifically with cyber offences, the method for enforcing them, the collection of evidence, and the punishment thereafter.

Concerning the government’s responsibility to regulate the misappropriation of Tik Tok, the Court found that: “the effective government has social accountability to impose reasonable burdensome regulations on the companies that are proliferating such applications, and the appropriate government should do so. In some cases, such as Sections 66E, 67, and 67A, which specify punishment for breach of privacy, publication, and circulation of what the Act calls “obscene” or “seductive” content, the Information Technology Act by other laws in force can be effective in bringing such offenders to justice, but this is woefully inadequate. India lacks a specialized law to address crimes like cyberbullying, although the Information Technology Act, 2000 imposes a responsibility on such companies to remove content and exercise caution before posting any content.”

Conclusion

Indian laws are proficient and well-drafted when it comes to punishing traditional offences that take place in the physical territory. Some laws to punish offences committed in cyberspace have been carefully drafted to achieve the goals of justice. The important feature of cyberspace is that, in contrast to physical space, it is constantly expanding and developing. Because of the same reason, it is still difficult to predict how crimes will manifest themselves; cyberbullying is one example of such a crime. It can take many distinct structures and be prosecuted under various regulations of current legislation, but doing so will have an impact on the development of cyber laws in India in the long run. There is a need to define different laws for cyber-crime offences because the mode, implications, gravity, and likely targets are all different from those of traditional criminal offences. Cyberbullying is one of the offences that have the potential to develop into something more serious in the future and should be acknowledged as soon as possible.

References

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