Can the appointment of an arbitrator be challenged : an analysis

August 27, 2021

This article is written by Palak Nangru pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Table of Contents

Introduction

The independence, impartiality, and competence of an arbitrator are the bedrock for any arbitration. These factors are essential for ensuring that the arbitral award passed by the tribunal is fair. The award given by an arbitral tribunal can be annulled, if it is found that the arbitrator acted improperly or had a conflict of interest. Thus, to maintain the authenticity of the awards passed by an arbitral tribunal the parties are allowed to challenge the appointment of an arbitrator even after the initiation of the arbitral proceedings, provided that the party could not decipher such issues after conducting the due diligence while the appointment. In the Indian context, the appointment of an arbitrator can be challenged under Section 12 of the Arbitration and Conciliation Act, 1996.

Section 12 of the Arbitration and Conciliation Act, 1996 aims to ensure the independence and impartiality of the arbitrators in a two-fold manner. Firstly, it provides for certain circumstances that would have to be disclosed by the arbitrator upon appointment, since it may cause doubt on the independence and impartiality of the Arbitrator. Secondly, it allows the parties to challenge the appointment of the arbitrator in case of any circumstances that give rise to justifiable doubts regarding his independence or impartiality, or in case he does not possess the requisite qualifications decided by the parties. The Section also provides that a person would be deemed to be ineligible for being appointed as an arbitrator, if the subject matter of the dispute, or the nature of the relationship between the arbitrator and the parties falls within the categories specified in Seventh Schedule.

The following essay aims to explain the various grounds to challenge the appointment of an arbitrator.

Grounds for challenge

Let us look at the various grounds for challenging the appointment of an arbitration:

Absence of independence and impartiality

One of the most fundamental principles of natural justice is that the person giving the decision should act fairly and without any prejudice or bias. This principle is applicable to all judicial and quasi-judicial proceedings. This principle also forms the bedrock of any arbitration proceedings.

Russell explained the position regarding of independent arbitrator in the following passage:

“There is universal agreement amongst jurists of all countries that it is of the first importance that judicial tribunals should be honest, impartial, and disinterested. This rule applies in full force to the arbitral tribunals, subject only to this exception, that the parties who are free to choose their own tribunal may provide the act with full knowledge, choose dishonest, partial, or interested arbitrators (though this exception in its turn is subject to a statutory exception which gives parties who have so chosen a locus poenitentiae in certain circumstances). But apart from this exception, arbitrators who are in all other respects suitably qualified are disqualified by dishonesty, partiality or interest.”

When the parties decide to resolve their disputes through arbitration, they expect that the arbitral tribunal would be impartial, neutral, would not carry partisan interest of the parties, and is not biased against either of the parties. Stephan Bond had rightly expressed: “The parties would never agree to arbitration in the first place unless they had confidence that the arbitration system concerned would take every reasonable measure to ensure the independence and neutrality of the arbitral tribunal.”

The independence and impartiality of an arbitrator are important since the independence of the decision-maker is crucial in the exercise of judicial power, as well as an essential quality of an arbitrator. To ensure that an award passed by the arbitral tribunal is fair, the arbitrator must be independent and impartial.

Provisions in the Arbitration and Conciliation Act, 1996

The Fifth Schedule of the Act provides the grounds that may give rise to justifiable doubts regarding the independence or impartiality of an arbitrator. While Schedule 7 provides the grounds that would make a person ineligible for being appointed as an arbitrator. These Schedules create a dichotomy between the persons who become ineligible to be appointed as arbitrators and the persons against whom justifiable doubts pertaining to their independence or impartiality may be raised.

If an arbitrator falls within Schedule 7 of the Act, then either of the parties has the liberty to request the removal of an arbitrator by filing an application to the Court under Section 14(2) of the Act. In case there is a justifiable doubt regarding the impartiality and independence of an arbitrator due to certain disclosures made under Schedule 5, then either of the parties may challenge the appointment before the arbitral tribunal. The Arbitral Tribunal has the authority to decide upon the validity of the appointment based on the facts presented before it. If the challenge before the arbitral tribunal is not successful, then the arbitral tribunal would continue to proceed and pass an award regarding the matter. If the party is still aggrieved, then it may approach the Court for Court under Section 34 of the Act for setting aside the award based on the lack of independence and impartiality of the arbitrator.

While interpreting the 5th and 7th schedule of the Arbitration and Conciliation Act, 1996, the Supreme Court observed that “the doubts as to the independence and impartiality of the arbitrator are justifiable only if a third person would reach a conclusion that an arbitrator would be influenced by factors other than the merits of the case. This test requires taking a broad common-sensical approach to the Schedules – a fair construction neither tending to enlarge or restrict unduly.”

While dealing with challenges against the appointment of an arbitrator, the Court acts on the principle that “justice must be seen to be done”. Thus, even in situations where the arbitrator was not independent but had disposed of his duties in a bona fide manner, the Court would accept the challenge to the arbitrator’s appointment. The Court generally examines if there appears any real danger of bias or if there is only a probability or even a preponderance of probability of such bias in the matter while determining if there is any need to intervene in the appointment of a certain arbitrator.

Unilateral appointment

Party autonomy is an essential feature of any arbitration proceedings, generally, the Courts do not intervene in the specifics that have been decided by the parties regarding their arbitration proceedings. However, over the years, the Indian Courts have adopted a strict stance about the unilateral appointment of an arbitral tribunal.

The Supreme Court in the case of Perkins Eastman Architects DPC & Anr. V. HSCC (India) Ltd., looked into the principles of party autonomy and the principles of natural justice and was of the opinion that a person that has an interest in the outcome of the arbitration proceedings, cannot be entitled to appoint the sole arbitrator, even if the parties had agreed upon such mechanism for the appointment of an arbitrator in their agreement. Thus, in situations where the arbitral tribunal is solely appointed by one of the parties, the parties can challenge the appointment of the arbitrator on that ground.

Against the criteria

In arbitration agreements parties are generally free to decide the qualifications and experience of the arbitrators in the agreement. In situations where the arbitrator may not possess the qualifications and experience agreed upon in the agreement, then the parties have the liberty to challenge the appointment of the arbitrator. However, in matters where the parties failed to raise any objection against the appointment of the arbitrator during the proceedings, then the objection would’ve been deemed to be waived off by the parties.

The arbitration proceedings or the arbitral award would be deemed to be void since the arbitrator would lack jurisdiction, if the challenge to the appointment of an arbitrator, on the ground that he/ she does not have the qualifications and experience provided in the agreement, is successful. However, time is of the essence in such objections, and a party may lose its right to object if it fails to exercise its right in a timely manner. For instance, in the case of Oakland Metal Co. Ltd. v. D Benaim & Co, the Court observed that the party had lost its right to object against the appointment of an arbitrator on the basis that he was not properly qualified after the arbitral tribunal had passed an award.

It must be kept that the law does not provide for any particular qualifications to act as an arbitrator unless the parties agree upon the same in their arbitration agreement. Thus, the parties cannot file a challenge against the appointment of an arbitrator based on lack of qualifications, if the parties have not agreed upon any requisite qualifications in their arbitration agreement.

Waiver of ineligibility

A person may be ineligible to act as an arbitrator due to the provisions of the Seventh Schedule of the Act. However, the parties may agree to appoint such a person as the arbitrator under Section 12(5), provided they expressly waive off any objection against such an appointment after the dispute has arisen.

Since party autonomy is a crucial part of arbitration proceedings, the parties have the autonomy to appoint an arbitrator, despite there being a justifiable doubt regarding the independence and impartiality of the person. In situations where the parties have the liberty to agree to appoint a person disqualified under Schedule 7 as an arbitrator, the parties would not be permitted to raise a plea of bias to challenge the award under Section 34 later.

Remedy against a biased or prejudiced arbitrator

Parties who may want to challenge the arbitrator would first have to follow the procedure prescribed under Section 12 and 13 of the Act. In circumstances where the party is unsuccessful, then the party may challenge the appointment of the arbitrator before the Court after the award has been passed. On the other hand, if the party believes that it can summarily establish the bias of the arbitrator, then the party may approach the Court to challenge the appointment of the arbitrator under Section 14 of the Act, even before the award is passed.

In the case of Alcove Industries v. Oriental Structural Engineers Ltd, the Court had observed that there was no inconsistency between the remedies available to the parties under Sections 12 and 13 and Section 14 since the invocation of one remedy would not restrict the party from invoking the other remedy. The Court was of the opinion that the remedies that are provided by these Sections form one scheme in which the aggrieved party is expected to first challenge the appointment of the arbitrators under Section 12 and 13. In case the challenge fails, the aggrieved party may file a case regarding the de jure or de facto inability of the arbitrator to act without any prejudice or bias under Section 14.

Conclusion

The parties have the right to challenge the appointment of the arbitrator in the circumstances discussed above. The right of the parties to challenge the appointment of the arbitrator is essential to ensure that the principles of natural justice are upheld in arbitration proceedings.

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Can res judicata be a ground to reject a plaint under Order 7 Rule 11(d): case analysis

Bushra Tungekar

August 27, 2021

1340823 (1) — Image source-https://rb.gy/uhsvaw

This article is written by Yash Kapadia. The Hon’ble Supreme Court in Srihari Hanumandas Totala vs Hemanth Vithal Kamat & Ors. dealt with the above question at length and pronounced its judgement on 9th August 2021 while our nation’s courts have started opening up after months of lockdown.

Table of Contents

Introduction

The Hon’ble Supreme Court’s Division bench comprising Justice Shri Dr. D.Y. Chandrachud and Justice Shri M.R. Shah upheld an order passed by the Karnataka High Court dismissing an application filed under Order 7 Rule 11 of the Civil Procedure Code, 1908 (‘CPC’).

Background and facts of Srihari Hanumandas Totala v. Hemanth Vithal Kamat & Ors.

Ms. Leela Vithal Kamat was the original holder of the title of a property which is in dispute. On 16 May 1996, after Ms Leela’s death, the suit property was mutated in the name of her legal heirs i.e. the first respondent in this case and his brother.

The first respondent and his brother availed a loan from Karnataka State Finance Corporation (“KSFC”) and mortgaged the said suit property as security for the purpose of repaying the loan amount. However, as the loan taken could not be repaid by them, KSFC decided to auction the property.

The third respondent herein, being the predecessor-in-interest of the appellant, furnished the highest successful bid of Rs. 15,00,000/- after which a sale deed dated 8th August 2006 of the suit property was executed in favour of the third respondent. Undeterred by the sale deed being executed, the first respondent and his brother did not hand over the possession of the said suit property.

2007 suit filed (OS No. 103/2007)

Under those circumstances, a suit dated 13th March 2007 (“2007 suit’) for possession was filed by the third respondent who could not get possession of the suit property despite a successful bid. The first respondent, who was the second defendant, filed a written statement raising his defences. He stated through his written statement that KSFC had no authority whatsoever to keep the suit property on sale. The first respondent in this case (and second in the case we speak about) did not in any way avail a loan or had any sort of deal or transaction with KFSC. No documents were executed or signed keeping the suit property as security.

2008 suit filed (OS No. 138/2008)

Another suit was filed in 2008 (“2008 suit”), for declaration, partition, possession, and for a consequential relief of injunction. The sale deed which was executed by KSFC in favour of the third respondent was challenged on the ground that KSFC had no right to hold a sale for the said suit property.

It was prayed by him that the suit property must be divided and possession of his share must be given to him. In the plaint, it was asserted that the suit property was mortgaged with KFSc without consent of all parties and no due diligence was carried out to ascertain who the title of the property belonged to. Even then, KSFC accepted the suit property as a security for the loan availed.

The first respondent also never consented to mortgage the property. In fact, only when he appeared in the 2007 suit (OS No. 103/2007) filed by the third respondent, it was learnt that a sale deed was executed between KSFC and the third respondent.

On 26th February 2009, the trial court Judge passed a judgement that the 2007 suit (OS No. 103/2007) instituted by the third respondent and passed directions that the defendants therein (i.e. the first respondent herein and his brother) should hand over quiet, vacant and peaceful possession of the suit property to the Plaintiff.

Appeal in Karnataka High Court

The first respondent appealed against the aforesaid judgement before the High Court of Karnataka. The third respondent filed an application under Section 10 of the CPC for staying the suit proceedings of 2008 on the grounds that the issues involved in the 2008 suit were directly similar to the issues in the 2007 suit. The trial judge also held that the main issues involved in the 2007 suit filed for declaration of possession by the first respondent were directly and substantially the same. Hence, the appeal stood dismissed and the Court upheld the trial court judgement.

A suit under Order 7 Rule 11

After the Hon’ble High Court passed its judgement, the appellant who purchased the suit property filed an application under Order 7 Rule 11 of the Civil Procedure Code, 1908 by stating that there was non-payment of court fee, cause of action was not disclosed and the suit had to be rejected as it barred by res judicata because the submissions relating to the validity of the sale deed and the issue of the title were raised in the 2007 suit. The said application was also dismissed.

Revision petition

The appellant filed a revision petition before the High Court. The High Court dismissed the appeal upholding the reasoning of the Trial Court on all the three grounds raised in the Order 7 Rule 11 application.

It is pertinent to note that the High Court placed reliance on Supreme Court’s decision in Soumitra Kumar Sen v. Shyamal Kumar Sen and observed that the learned Trial Judge was of the opinion that the application filed under Order 7 Rule 11(d) on the ground of res judicata cannot be decided by perusing into the averments in the plaint.

Any plaint can be rejected under Order 7 Rule 11 only if it was not maintainable on the basis of the averments the plaint consisted of. Hence, after the High Court dismissed the appellant’s revision petition, he approached the Supreme Court to challenge the order of the High Court.

Submission by the Appellant

The Appellant stated in his appeal that the issue that concerns the title of the property stood adjudicated in favour of the third respondent in the 2007 suit and the decree for possession was upheld by the High Court. Hence, the 2008 suit frames similar issues and challenges the same sale deed is not deemed to be maintainable and is thereby barred by following the principles of res judicata.

Moreover, it was also stated that the appellant raised the issue of the sale deed executed between KSFC and the third respondent as invalid. The submission is that the original sale deed executed by KSFC is of 8 August 2006.

Issue

Whether res judicata can be the basis or ground for rejection of the plaint?

Judgement

The Hon’ble Supreme Court interpreted the law laid down in Order 7 Rule 11 and the concept of res judicata.

Order 7 Rule 11(d) of CPC states that a plaint shall be rejected “where the suit appears from the statement in the plaint to be barred by any law”. Therefore, to ascertain if a suit is barred by any law, it is the statement in a plaint that has to be analyzed and interpreted. Any Court while deciding such applications under Order 7 Rule 11(d) must be mindful only to the averments in the plaint. Whether a particular suit is barred by any law must be ascertained from the statements in a plaint and not on the foundation of any other submission before the court, including the written statement in the case.

The court further referred to Section 11 of the CPC which is pasted below:

“11. Res judicata.—No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.”

The Supreme Court further relied upon the judgement of V. Rajeshwari v. T.C. Saravanabava, wherein the Supreme Court opined on the plea of res judicata and the requisites that would be necessary in order to prove the plea. It was held in this case that it is an utmost requisite and obligatory to make reference to the issues, pleadings and the judgment of the ‘former suit’ whilst adjudicating on a plea of res judicata.

In summary, after relying on the landmark judgements like Kamala v. KT Eshwara Sa and Church of Christ Charitable Trust & Educational Charitable Society v. Ponniamman Educational Trust, the Supreme Court held that the following are the guidelines/ approach to be taken in such a scenario:

- “In order to reject a plaint on the grounds that the particular suit is barred by any law, the averments and only that in the plaint would have to be referred;

While deciding the merits of the application the defence of the Defendant shall not be taken into consideration;

“To determine whether a suit is barred by res judicata, it is necessary that (i) the ‘previous suit’ is decided, (ii) the issues in the subsequent suit were directly and substantially in issue in the former suit; (iii) the former suit was between the same parties or parties through whom they claim, litigating under the same title; and (iv) that these issues were adjudicated and finally decided by a court competent to try the subsequent suit”; and

Since an adjudication of the plea of res judicata requires consideration of the pleadings, issues and decision in the ‘previous suit’, such a plea will be beyond the scope of Order 7 Rule 11 (d), where only the statements in the plaint will have to be perused.”

The Court further stated that at the time of the 2008 suit being filed by the first respondent there was no final order or judgement passed in the 2007 suit. The issues that were raised in the 2007 suit had not been adjudicated at that time.

Hence, the plaint did not in whatsoever manner reveal any fact that would let the court conclude that it deserved to be rejected on the ground that it is barred by principles of res judicata. The lower courts were right in holding that they would have to go beyond the averments of the plaint and peruse the pleadings and judgment and decree in the 2007 suit to take the arguments raised by the appellant into consideration.

The Supreme Court opined that a court should not try any suit or issue in which the matter that is directly in issue has been directly or indirectly heard and decided in a ‘former suit’. Therefore, for the purpose of adjudicating on the issue of res judicata it is necessary that the same issue (that is already raised in the suit) has been adjudicated in the former suit.

Conclusion

The Supreme court opined that an Order 7 Rule 11 application must be decided within the four corners of the plaint and nothing beyond that. It was therefore held that the Trial and High Court were correct in rejecting the application and therefore the appeal filed before it stood dismissed.

The Supreme Court has yet again interpreted the scope of rejection under Order 7 Rule 11(d) relying on various minute aspects laid down through various judicial precedents which can be referred to in the order copy of this judgement here.

Lastly, the bench of Justice Dr. D.Y. Chandrachud and Justice M.R. Shah gave a strong negatory response in matters where the court posed a question of whether the plea of res judicata is a valid ground to reject a plaint under an Order 7 Rule 11(d) application. It is also pertinent to mention here that the Hon’ble Supreme Court granted liberty to the appellant who claimed to be the assignee of the purchaser of the suit property to put forth the issue of maintainability of the 2008 suit (filed before the Additional Civil Judge, Belgaum in OS No. 138/2008) which was directed to be decided within 3 months from the date of submission of preliminary issues.

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Evolution of the right to self-determination from the human rights perspective

Bushra Tungekar

August 27, 2021

HumanRights (1) — Image source -https://rb.gy/kjzx1c

This article is written by Raslin Saluja, from KIIT School of Law, Bhubaneswar. This article attempts to analyse and explain the changes the right to self-determination has gone through over the years.

Table of Contents

Introduction

The right to self-determination of people and of national destiny is a collective human right acknowledged under the principles of international law. The right is entitled to all the people collectively as being part of a greater community, nation or state. The strict implementation of the right is also of immense significance for maintaining and preserving peace as has been reflected by political history.

Treaties such as the Peace of Westphalia, the Congress of Vienna, the Treaty of Versailles, the League of Nations, etc. serve as proof of their inability to establish and preserve peace due to lack of recognition of the right of self-determination of people and nations. The concept is as old as that of statehood and has witnessed dramatic modification from dealing with issues of decolonization to justifying the breakup of multi-ethnic states.

Nature and scope of the right to self-determination

Simply put, it is the right claimed by people to control their destiny despite such people not achieving statehood as per international law. In the more traditional times, statehood was the only element that could confer legal personality and its related rights and duties upon the group of people.

The right to self-determination is looked upon by people who feel that they have been unjustifiably excluded from the community of states as under international law. According to the United Nations General Assembly Resolution 1514 (1960), “All people have the right to self-determination; by virtue of that right they may freely determine their political status and freely pursue their economic, social and cultural development.”

This right complements the public international law principles like that of the sovereignty of states, the equality of states, and territorial integrity, including the prohibition of force and the principle of non-intervention. As for human rights, it contains equal rights of people within the state.

There are also economic and political aspects related to self-determination and principles of non-intervention and non-interference which aim to guarantee territorial integrity. It also looked upon liberation movements, rebels, aid, and assistance or intervention among these. It could be external or internal.

External in the sense of decolonization context which requires the state to take action and form their independent recognition and aid in people’s aspiration to become independent. Internally in a way by uplifting people to pursue their economic, social, and cultural development.

However, this raises a paradox as to how is international law supposed to recognize such a right which by its own norms, lacks such international existence. This also makes us question the acquisition and recognition of statehood. Though there is no universal definition of statehood as of today, the Convention on Rights and Duties of States provides the criteria for statehood as having:

a permanent population;
a defined territory;
government; and
the capacity to enter into relations with other states.

Though this has been disputed as it implicates a challenge to the stability of the international legal community as for applying the claims of legal rights of self-determination, these non-state group seekers have to appear as a state. However, there has been strong recognition and basis of these rights as seen in decisions of the International Court of Justice, resolutions of the United Nations General Assembly, state practice, and the writings of commentators.

Thus, the right to self-determination can be framed as the right of people who do not govern themselves, whose identities and desires cannot be ascertained.

The evolution

Though the notion that people have the right to decide their own fate for livelihood, politics and territory has always been there, the right to self-determination was properly identified from the French revolution. Its inception took place in the nineteenth century merging two values of popular sovereignty and nationalist resentment.

It remained a foreign, radical principle largely witnessed through international law. During the revolutionary period in Europe and the time of Napoleon, people rather unified themselves exclusively and discretionarily which resulted in states not having a status in international laws until they were formed into a recognized state.

The late 1850s saw the emergence of exceptions in the principle of non-intervention into the state’s treatment of foreigners. The term was specifically found useful during World War I when the manipulators wanted to push their propaganda and gain an advantage over minority groups.

Early twentieth century

The term was first used publicly in 1918 by the United States President Woodrow Wilson to whom the concept is very closely identified. He urged this principle on European Concert remnants at the end of World War I.

It later became the basis of Versailles Peace Settlement in 1919. This principle was shaped by many ideas which evolved over the years to shape itself. Firstly, the idea of people being sovereign and not states’ subjects which were developed by the English, French, and American Revolutions, followed by the rule of legitimacy depends on the consent of the governed.

Secondly, state sovereignty emerged in international affairs as kingdoms became consolidated. Finally, ethnic nationalism was on the rise which outright threatened the European empires and led to their collapse in the twentieth century.

Post-war the president ordered that ethnically identifiable people would govern themselves. He himself preferred the term self-government rather than self-determination implying people have the right to select their own democratic government. His view of the ethnic minorities led to 3 main elements for the settlement that took place post-war.

A scheme where the identifiable people were accorded statehood, deciding the fate of the border areas that are disputed by plebiscite and groups that are too small to be dispersed to be able to get the benefit of either of the two options would get protection from special minorities regimes which will be supervised by the Council of the new League of Nations.

Though it was found to save the minorities, the application of these did not really reflect the acceptance of the self-determination principle as a legal obligation and failed to appear in the League of Nations covenant. Despite the criticism, the principle started to gain momentum and later was recognised as a right in international law.

End of World War I

After the end of World War I, the League of Nations was created which further created a mandate system to grant the minorities independence. Later, the League of Nations collapsed and after the end of World War II, the United Nations was created instead. When the UN was formed, the principle of self-determination had already been established internationally and was then included in the UN Charter which did not seem an obvious move as it still remained controversial at the early stages of its development.

Finally, due to the pressure of the Soviet Union, it was explicitly recognized and accepted in the UN Charter. By 1966, this right developed more and got accepted as a right under international law and started including the notion of human rights with the adoption of the two International Covenants on human rights.

Self-determination as a human right

Earlier the notion of human rights was completely ignored during the colonial times when everyone was divided by nationality from the king to his subjects. As the height of imperialism rose even in the 20th century, human rights were mercilessly violated in various regions of the world due to wars and disturbances (including the two World Wars) and the advent of dictatorial regimes with credos of class discrimination or racial discrimination. Universal acceptance towards human rights became widespread only after World Wars. In 1948, the UN General Assembly adopted the Universal Declaration of Human Rights whose preamble states:

“…recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world…”

It declared that human rights are universal rights that are to be shared by all mankind, irrespective of any differences in race, national origin, religion, and class, which is the foundation of freedom, justice and peace in the world. To add to it was the International Covenant on Human Rights adopted by the UN General Assembly in 1966 which further defined in intricate detail the substance of human rights and also stipulated the obligations of each signatory state to promote the observance of human rights. This International Covenant on Human Rights is divided into “International Covenant on Economic, Social and Cultural Rights” (A Covenant) and “International Covenant on Civil and Political Rights” (B Covenant).

The principle of self-determination is recognized as a human right though there are other references in General Assembly resolutions, it has been proclaimed only in the two legally binding documents which are the two international covenants. Although the definition of the common Article 1 lacks the answers to several questions, some areas of it have been made clear through interpretation.

According to the Human Rights Committee, it has been made clear that the violation of it cannot be raised under the First Optional Protocol. The jurisprudence that has been developed around it also clarifies that this right is of people and not minorities.

This right is emphasized to this extent because it will secure the basic rights of people as a group. As for the twenty-first century, it can derive more meaningful content by considering two other human rights. These are the protection of the cultural, religious, linguistic and ethnic identity of people and the rights of the participation of individuals and groups in the economical and political matters of the country.

However, participation goes beyond democracy and recently, the belief of a new democratic era to have arrived has reinforced the participation. The definition of self-determination today as a suggestion should be to impose a limit/price on its exercise. It means that any groups which triumph in establishing a new state for them based on the principles of ethnicity, religion, language, or culture should then be willing to allow other such people to be able to exercise their right of self-determination.

Impact of self-determination on other human rights

It is to be noted that most violations of human rights have been during times of disturbance and war. Whenever the right of self-determination is involved, it has the potential to raise violent conflicts and a destructive confusion of political goals, basic human rights norms, and humanitarian issues. For that the policymakers need to be flexible enough to reach a better understanding for the effective response of such claims, otherwise, the count of violent conflicts will arise and have a direct impact on other international human rights.

Conclusion

The concept of self-determination has gone through some political upheaval. International stability can only be achieved when there is a certainty of definition and clear application of mind. The topic of self-determination will not disappear anytime soon as a potential issue of creating serious conflict. We still need to guard the issue and prevent its use as a symbol of the purely partisan political tool by the disaffected groups as well as the governments.

The issue has an emotional aspect to it and therefore appeals by the ethnic groups will always be likely to create an atmosphere in which violence of human rights would be greater. Although it does not on its own result in secession and independence, there is a fear by representative states in permitting a broad right to self-determination.

This fear must be remedied by the international system itself in order to establish stability and integrity. Developing a procedural model might help to reflect on the issues at hand giving the people and the nation a clear indication of where they are going and allow them to pose greater confidence in the system.

References

https://unpo.org/article/4957

https://www.gmu.edu/programs/icar/ijps/vol4_1/takayuki.htm

https://www.researchgate.net/publication/329153669_The_basis_of_right_to_Self_determination

https://www.e-ir.info/2014/04/17/what-is-self-determination-using-history-to-understand-international-relations/

https://blog.ipleaders.in/right-to-self-determination-in-international-law/

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All you need to know about copyright and trademark offences

Sneha Mahawar

August 27, 2021

This article has been written by Ashutosh Singh, a student of BA.LLB(Hons) at Amity Law School, Amity University, Kolkata. The article analyses the ambiguity around offences being bailable or non-bailable under the copyright and trademark laws in India.

Introduction

Any act of a person/persons that causes infringement of the rights of others, results in harm to others and is dangerous enough that it also affects the society at large is called an offence. Section 2(n) of the Code of Criminal Procedure, 1973, defines an offence as any act or omission made punishable by any law in force at that time and that includes any act for which a complaint may be made under Section 20 of the Cattle-trespass Act, 1871. However, an offence based on nature and gravity can be classified under any of the following types:

Bailable and non-bailable offence.
Cognizable and non-cognizable offence.
Compoundable and non-compoundable offence.

The grant of bail is a matter of right in bailable non-cognizable offences. In such cases, the bail is granted by a police officer who is having custody of the accused or by the court. Some examples are:

Obstructing a public servant in discharge of his public functions.
Giving or fabricating false evidence in a judicial proceeding.

Bail is not a matter of right in a non-bailable offence. In such cases, the accused will have to apply to the court, and it will be the discretion of the court to grant/not grant the bail to that applicant. Some examples of non-bailable offence are:

Act of murder.
Act resulting in dowry death.
Attempt to murder.

On a closer look at the offences mentioned above, one wonders if copyright and trademark offences can be put in the same category as other non-bailable offences. Let us begin by understanding a few things about copyright and trademark law in India.

Copyright in India

Copyright is a legal right that is given to a creator of any original work by law. It can be for any sound recordings, cinematograph films, dramatic, musical, literary, and other artistic works, like songs, novels, books, paintings, poems, musical pieces, etc. So, having copyright prevents the unauthorized use of the original work, which includes communication to the public, reproduction, translation, and other forms of adaptation.

The Indian Copyright Act, 1957 governs the subject of copyright in India. It is intended to protect the creativity of every poet, musician, writer, painter, poet, lyricist, sculptor, etc. Given below are the rights which are conferred on the owner or author of a work under Section 57 of the Copyright Act, 1957.

The right to reproduce a work.
The right to issue and communicate copies of the work to the public.
The right to perform work in public.
The right to make a sound recording or a cinematograph film concerning a work.
The right to translate a work.
The right to adapt a work of any kind.
The author has the right to sell or rent a work even if he has already rented or given the work for sale at an earlier period in the case of computer programs.

Generally, it is said that the first owner of the copyrighted work is the author. Based on a work registered, the copyright owner may be a producer (in the case of cinematograph film and sound recording), photographer (photograph), composer, (musical work). In the case of dramatic, artistic, or literary work which is produced by an author during his/her employment, the employer is the one who reserves the right to be the first owner. But, if there is an agreement and contract then it may not be applicable.

Copyright owners have been given the freedom to assign wholly or partially the copyright to any person but subject to limitations. The copyright can be assigned by authorising an agent or in writing, by specifying the period, the payable amount of royalty, if there is any, to the author or his legal heirs. The assignment can be extended, terminated, or revised on mutual terms which are to be agreed upon by both parties. If there is no time mentioned, then it will be deemed to be 5 years from the date of assignment, which will be applicable across India.

Copyright infringement

Section 51 of the Copyright Act, 1957

Section 51 says that a work is considered to be copyright infringed when:

A person has obtained a license without the permission of the copyright owner, or Registrar of Copyright or has breached the condition of the licence which was granted or any other conditions imposed by the authority under the Act:

If the person has violated the exclusive right of the copyright owner, or
If the person has the work used for communication to the public which amounts to infringement of the copyrighted work, except if he or she is not aware or had no reasonable ground to believe that such communication to the general public does amount to infringement of the copyright, or

When a person,

Makes a sale for hire, sells or lends it for hire by way of trade display of the infringed copyright, or
It is distributed for trade which affects the owner of the copyright or
It is exhibited in public through trade, or
It is imported into India any infringed copy of work except one copy of any work, for the domestic or private use of the importer. If a cinematograph film has reproduced a dramatic, literary, artistic, or musical work it will be a copyright infringement.

What does not amount to copyright infringement

An act that involves ‘fair use’ of a work, does not amount to infringement. However, the domain of ‘fair use’ can be debated and it depends on the court’s decision in each case which varies in facts and circumstances. For example, if the copyrighted work is used for study, research, report, review, legislation, etc. without the authorization of the owner then it will still not amount to copyright infringement.

Exceptions to Infringement under Section 52 of The Copyright Act, 1957

Personal or private use, which includes research, review, or criticism of a particular work or any other work, the reporting of current affairs, and events that include reporting, or a lecture delivered in public are exceptions as mentioned in Section 52 of the Act.

Remedies for copyright infringement

Civil remedies

Civil remedies provide for a lot of things like damages, injunctions, delivery and destruction of the infringed copies, rendition of accounts and damages for conversion of the copies.

Criminal remedies

The Act also says that if there is the abetment of infringement or an intentional infringement of the copyright in a work then it would be considered a criminal act. The criminal remedies for copyright infringement include:

Punishment of imprisonment is less than 6 months but can extend to three years.
Fines which will not be less than Rs. 50,000 and which may extend to Rs. 200,000.
The search and seizure of the infringed goods include plates, which consist of moulds, blocks, negatives, duplicating equipment, transfers, or any other device used or which may intend to be used for reproducing copies of the work or printing it.
The infringing copies or plates are to be delivered to the copyright owner.

Indian law dealing with copyright

In 1957 the Indian Copyright Act was first passed, after a few amendments being made in 1983. So, keeping in mind the latest developments in technology, specifically in the field of computers and digital technologies, a new amendment Act was made which was called the Copyright (Amendment) Act, 1994. It was passed and it made the Copyright Law of India one of the toughest in the world.

The definition of “Computer Program” was also included in its ambit. It explains a lot of things clearly and simply like the user’s right to make backup copies, the copyright holder’s rights, the position on rental software’s, and the hefty punishment and fines on Copyright infringement on software. The act also says that it is illegal to make or distribute infringed copyrighted software without proper authorization from the author. The main changes in the new amendment Act were that the “Literary work” would also include “computer” and “computer program”.

Offences under the Copyright Act, 1957

Offence	Original Act, 1957	1984 Amendment	1994 amendment
Section 63: Infringing or abetting the infringement of the copyright in a work/any other right conferred by the Act, knowingly.	Imprisonment for a maximum term of one year, and/or fine.	Imprisonment for a minimum term of six months and a maximum of 3 years, and/or fine from Rs. 50,000 to Rs. 2,00,000.	Discretion about the punishment was vested with the court to impose a less severe sentence/fine for adequate and special reasons which were to be mentioned in the judgment.
Section 63A: Repeated Conviction under Section 63.	Original Act did not have this.	Minimum sentence and/or fine was increased to 1 year and Rs. 1 lakh respectively in cases of subsequent convictions. Discretion about the punishment was vested with the court to impose a less severe sentence/fine for adequate and special reasons which were to be mentioned in the judgment.	Like it did in the case of the first conviction, it qualified the said discretion of the court about the punishment which was vested with the court to impose a less severe sentence/fine for adequate and special reasons which were to be mentioned in the judgment. However, in the case of subsequent convictions, it would be exercised only when the infringement had not been made for gain in the course of trade or business.
Section 63B: Specific to Computer Programme (or software) in common parlance.	Original Act did not have this.	Imprisonment for a minimum term of 7 days and maximum period of 3 years, and/or fine from Rs. 50,000 to Rs. 2,00,000.	Discretion has been vested with the court to not impose any sentence and to levy a maximum fine of Rs. 50,000/- when the infringement had not been made for gain in the course of trade or business.
Section 64: Power to seize infringing copies.	Seizure by a Police officer not lower than the rank of Sub-Inspector with or without warrant provided cognizance has been taken by Magistrate under Section 63.	A seizure can be done even before cognizance, though the requirement of mere ‘appears to be infringing’ has been escalated to ‘satisfaction of infringement’.
Section 65: Making or possessing plates.	Imprisonment extending to a maximum term of one year, and/or fine.	Imprisonment for a maximum period of 2 years and fine.

Statutory ambiguity over the criminal classification of copyright infringement

If a violation of intellectual property rights is proved under Sections 51 and 52 of the Copyright Act, then it will be a Copyright infringement. What would not constitute a copyright infringement is given under Section 52 of the Copyright Act. So, to understand copyright infringement and its legal implications, we must also understand the limitations, rights, and legal consequences. The punishment for the offence is given in Section 63 of the Act, 1957. There are several statutes, which specify offences and mention them as non-bailable, cognizable, or bailable, etc like the Money Laundering Act of 2002 or the Trademarks Act of 1999. But no such specifications are given of the offence of copyright infringement in the Copyright Act, which therefore leaves the interpretation of the same open to the courts. So, when the specific classification is not there then, the provisions of the Code of Criminal Procedure, 1973 (CrPC) are required to be made as it provides the classification for the offence which are cognizable or non-cognizable, irrespective of the statute under which the offence might be committed.

It would be pertinent to refer also to the provision of Section 64 of the Copyright Act which empowers a police officer, not below the rank of Sub-Inspector to seize/confiscate the copies of any work which are infringing and observed that if the offence had been cognizable and non-bailable, why was there a necessity to specifically authorize the police officer with the power of seizure.

Classification of the offences in Part II of First Schedule of the Criminal Procedure Code, 1973 in cases of offences under other laws, is as follows:

Category of offence	Penalty for offence	Cognizability	Bailability
I	Punishable with death, Imprisonment for life, Imprisonment for more than 7 years.	Yes	No
II	Punishable with imprisonment for 3 years and upwards but not more than 7 years.	Yes	No
II	Punishable with imprisonment for less than 3 years or with a fine only.	No	Yes

According to Section 63 of the Copyright Act, 1957, imprisonment for a minimum term of six months and a maximum of 3 years, and/or fine from Rs. 50,000 to Rs. 2,00,000 is given for offences of copyright in India. The catch seems to be in the expression “ up to a maximum of 3 years”. If the punishment is up to 3 years then according to the classification of the offences in the First Schedule of the Criminal Procedure Code, 1973, the offence becomes cognizable and non-bailable. If the penalty for the offence is less than 3 years then the offence may be considered non-cognizable and bailable.

Judicial trends of various courts in the classification of the offence

There have been fluctuating views about the classification of the offence of copyright infringement by different courts. While some courts have recognized that this particular offence is cognizable and non-bailable, others have seen it as non-cognizable and bailable.

Bailable and non-cognizable

Amarnath Vyas v. State of Andhra Pradesh (2006)

A single-judge bench of the High Court of Andhra Pradesh in the case of Amarnath Vyas v. State of Andhra Pradesh (2006) relied on the judgment of the apex court and said in its order of December 2006, in Rajeev Chaudhry v. State (2001), that there was no provision in the Act which made the said offence a non-bailable one. The court further added that “punishment for a term which may extend to three years” is not similar to “punishment for three years and upwards” and consequently classified the offence under Section 63 of the Act as bailable and non-cognizable. This was expressed because the offence would be covered by the third category of offences.

State Govt. of NCT of Delhi v. Naresh Kumar Garg (2013)

The classification under Section 63 of the Copyright Act has remained unclear. This issue has been raised in this case by the Rajasthan H.C which referred it to a larger bench. Referring to the Avinash Bhosale case, (2007), in this case, held that the offences under Section 63 of the Copyright Act were non-cognizable and boilable and allowed the petition.

Non-bailable and Cognizable

Abdul Sathar v. Nodal Officer & Anr. (2007)

A Single Judge Bench of the Kerala High Court in the case of Abdul Sathar v. Nodal Officer & Anr. (Anti-Piracy Cell, Kerala Crime Branch Office) (2007) had a similar viewpoint as in the case Jithendra Prasad Singh v. The State of Assam. It was observed in both the cases that the language used in Section 63 of the Copyright Act, 1957 in category Part II of the First Schedule of the Code of Criminal Procedure, 1973 clearly says that the offences under the said provision which is punishable with an imprisonment of 3 years, with fine, will fall within the second category of offences which will therefore classify them as cognizable and non-bailable.

Suresh Kumar v. the Sub Inspector of Police (2007)

The Kerala High Court in Suresh Kumar v. The Sub Inspector of Police (2007), decided on the question of whether copyright infringement is a cognizable offence, where an arrest can be made without a warrant. The court held that Section 63 of the Copyright Act, 1957, is punishable with imprisonment for 3 years, and under these circumstances, the offence has to be held to be cognizable.

In today’s age of information and technology, there is a very thin line between infringement and original creativity which may at times get blurred progressively. The debate on the cognizability of the offences under the Copyright Act is never-ending and until it is settled, the uncertainty over the rights of parties, procedure of investigation, and rights of the accused, will continue to remain the same. Therefore, it is important that the Supreme Court provides some clarity on the issue and settles it once and for all.

Jitendra Prasad Singh v. the State of Assam (2002)

The question raised in this case, of the Guwahati High Court, was whether the offence was punishable under Section 63 of the Copyright Act, 1957 is a bailable offence?

While considering the above question, the court said that it is very important to note that the alleged offence by the petitioner was covered by Section 63 of the said Act and it was punishable with imprisonment for a term, which could extend up to three years. By Part II, contained in Schedule 1 to CrPC, an offence under the other special law, if punishable with imprisonment for less than three years or with a fine only, is non-cognizable, but bailable. However, if the offence is punishable with imprisonment for three years and upward but not more than seven years, the same shall be non-bailable. The confusion and debate revolve around the expression ‘punishable with imprisonment for a term, which may extend up to three years’. Different courts have interpreted this differently. This is distinctly different from the expression ‘if punishable with imprisonment for less than three years’. This means that the imprisonment can be for a term as long as three years, or the offence is punishable with imprisonment for a period, which is less than three years. Viewed from this angle, the offence under Section 63 of the said Act is a non-bailable offence. The provisions of Section 438, CrPC. can, therefore, be applied, if need be.

Trademark

Trademark is one of the elements of Intellectual Property Right and it is represented by the symbol ® (registered trademark), ™ (trademark) distinctive sign, or an indicator which are used by business organizations, individuals, or other legal entities. A trademark is also used to identify a product or service by the consumers so that they can distinguish one company’s products or services from the other. The trademark examples are usually a word, name, logo, phrase, design, symbol, image, or a combination of all these elements. There are also non-conventional trademarks that consist of a mark that does not fall into this standard category. A trademark is also used with services rather than of products, it may also be called a service mark.

Trademark infringement

A trademark infringement is an unauthorized usage of a mark that is deceptively similar or identical to a registered trademark. Deceptively similar means when a consumer looks at a mark, it is likely to confuse him/her for the origin of goods or services of another product.

A trademark infringement takes place when a trademark used by an individual or organization/company, is similar to the registered trademark of another organization/company. The popular ways a trademark test is conducted for testing infringement are:

Close similarity to a mark and the associated products and/or services to a prior registered trademark and its related products and/or services.
The use of a logo/mark should have a high chance of creating a similarity confusion with a registered trademark among the customers.

There are primarily three types of common trademark infringements as mentioned below:

Application of a false trademark is a process of manufacturing, packaging, or processing any kind of product or service with an unauthorized trademark.
Distributing products with false trademarks is the process of dealing with or selling any product or service that has a false or an unauthorized trademark.
False claim of trademark registration claiming a falsely registered trademark.

Laws and rules governing trademark in India

There is a lot of enthusiasm in the Indian judiciary regarding the protection of trademarks, which has extended its protection under the trademark laws to domain names which can be seen in the landmark cases of Tata Sons Ltd. v. Manu Kosuri & Ors (2001), as well as Yahoo Inc. v. Akash Arora (1999).

India has been a common-law country for a long time and it not only follows a codified law but also common law principles. It provides for both infringement and passing off actions against the violation of the trademark. Section 135 of the Trademarks Act, 1999 recognizes both infringements and passing off actions.

The Trademarks Act, 1999 protects trademarks in India. The newly enacted Trade Marks Rules 2017 and the said Act form a widespread governing regime. The Trade Marks Office (TMO), has also issued guidelines like the Trade Mark Manual which govern several aspects of trademark law.

The Trademark Act gives the rules which deal with the protection, registration, and penalties that are against trademark infringement. A trademark is given a global status of intellectual property. There are many organizations all around the world which undertake the task to protect intellectual properties like trademarks.

Treaties and conventions to which India is a signatory to and which has been adopted into our national law, are:

WIPO Madrid Agreement concerning, International Registration of Marks 1891 (Madrid Agreement).
WIPO Protocol Relating to the Madrid Agreement concerning, International Registration of Marks 1989 (Madrid Protocol).
TRIPS Convention.

Remedies under Trademark Act, 1999

The Indian Trademark Law caters to civil, criminal, as well as administrative remedies for action against infringement, dilution, passing off of a trademark.

Civil remedies

Under the Trademarks Act, 1999, a lawsuit may be initiated for passing off or for infringement depending on whether the trademark is registered, pending registration, or unregistered. In civil remedies, it is very cumbersome and troublesome to determine the damages based on potential losses or actual losses suffered and hence the owners don’t take so much trouble and are ready to forfeit their claim. But to remedy that, the Indian courts have now started imposing financial penalties in the form of damages to ensure that intellectual property rights are not violated. Some of the civil remedies are:

Interlocutory/ Temporary/ Ad-interim Injunction

An unrestricted relief that is offered to the Plaintiff, barring action by a party to a lawsuit until the clearance of the suit. It is preventing one person from doing a particular activity or task through the judicial process. Mareva Injunction is again a kind of interim injunction that is granted to restrain the defendant from disposing of their assets until the trial ends or the judgment is delivered.

Anton Piller Order

When this remedy is passed, it permits the plaintiff to enter the premises of the defendant and inspect relevant documents and articles and take or remove copies of them for safe custody. This is permitted to ensure that relevant documents and infringing articles are not cleared or destroyed by the defendant.

John Doe Order

It is an order issued by a court to search and seize against unnamed or unknown defendants, that is why the name John Doe. Damages are granted to the plaintiff to compensate for losses suffered because of the acts of the defendant.

Accounts of profit

When the defendant is asked to hand over to the plaintiff the actual amounts of profits made due to the infringing activities then it is called accounts of profit remedy.

Civil remedies against trademark infringement should be very effective but awarding heavy punitive damages only is not enough. The challenge here is how to make the recovery of the damages from the infringing party. The courts in India have become more lenient and grant large damages but they seldom address the latter problem of recovering the sum from the other side and this doesn’t give strength to the remedy offered.

Criminal Remedies

Under Chapter XII which deals with offences and penalties, the Trade Marks Act, 1999 also provides for criminal remedies against infringement and passing off. The relevant sections are Section 103 and 104. For the effective implementation of the provisions relating to infringement and/or passing off of the trademark the Trade Marks Act, 1999 like the Copyright Act 1957 provides for search and seizure powers of the police under Section 115. However, Section 115(4) of the Trade Marks Act, 1999, has provision for invoking the powers of police, for search and seizure, but only after obtaining the opinion of the Registrar of Trademarks to ascertain the similarity between the infringing mark and the mark of the complainant which has to be complied with before the police can carry out the search and seizure.

Anant Tukaram Teke And Others v. the State Of Maharashtra, 2018

In this case, the complainant (Vishal s/o. Vilasrao Kulkarni) is a businessman who sells tea by packing it in polythene packets. The tea has a registered trademark. The complainant asserts that the applicants (Anant Tukaram Teke And Others) are also in similar business and the pack of their tea is spuriously similar to the pack of the complainant. The complainant contends that he has earned a certain reputation by being in business for the last 35 years, and the customers who were purchasing tea from the complainant are being duped because of the applicant’s deceptive packaging similarity on the packet to that of the complainant. It is contended that due to such activity of the applicants the sale of the complainant has gone down. Here the provision of Section 110 needs to be kept in mind as the accused is having a certificate under the Copyright Act, 1957. The police based on the F.I.R and powers were given by Section 115(3) and Section 115(4) of the Act, took cognizance of certain offences and used the powers of a police officer for search and seizure. The division bench held that the provision of subsection 4 of Section 115 of the Act is mandatory in nature He submitted that in the present case the opinion of the Registrar was not obtained at the time of conducting the search and seizure.

Protection under Trademark Act

Section 103 and 104 provide for imprisonment which is not less than 6 months that may extend up to 3 years and a fine of not less than Rs. 50,000 which is extended to Rs 2 lakh where there is a false application being made of trademark and selling of the goods to which a false trademark is applied. Section 115 (4) of the Act talks about the power and process of search and seizure which the police have and can search and seize, any product which calls for action against infringement of the trademark. The following sections can be invoked for a remedy under Trade Marks Act, 1999:

Section 103

Any person who has falsified a trademark or falsely applied to a good or service of any trademark will be punished with an imprisonment of not less than 6 months but which may extend up to 3 years and with a fine, not less than Rs. 50,000, which may extend up to Rs. 2,00,000.

Section 104

If any person who has helped an accused in providing, selling, or hiring services of the goods or has such goods for sale or by any other way, the person will be punished with an imprisonment of not less than 6 months, which may extend up to 3 years and with a fine that cannot be less than Rs 50,000, which may extend up to Rs. 2,00,000.

Section 105

According to this Section, any person who has committed any offence which is provided under Section 103 or 104, shall be punished for the second and every subsequent offence, with imprisonment of that cannot be less than 1 year but may extend up to 3 years with a fine cannot be less than Rs. 1,00,000 which may extend up to Rs. 2,00,000. For filing the suit for trademark infringement, the period of limitation is of three years from the date of infringement.

Sanyo Electric Co v. the State of Delhi, (2010)

In the case of Sanyo Electric Co v. State of Delhi (2010), an order was passed by a magistrate regarding a search warrant which was related to a trademark Infringement. This order of the magistrate was challenged, alleging that it violates the requirement of Section 115(4) of the Trademark Act which says that a search warrant shall not be executed until an opinion by the registrar has been obtained by the investigating officer. The High Court of Delhi took the decision that the search warrant which was issued by the court under Section 93 of the Code(CrPC) can be executed without the requirement of the proviso mentioned in Section 115(4) of the Trademark Act. Therefore, depending on the factual substance of a particular case the court may or may not seek the opinion of the registrar.

Exceptions to trademark infringement

The doctrine of ‘fair use’ is given under Section 30 of the Trade Marks Act, 1999 which lays down the following broad conditions:

Use with honest practices in commercial or industrial matters.
Use of a mark not in such a way as to take unfair advantage or be harmful to the distinctive character or reputation of the trademark.

Fair use of a trademark by any party, other than the owner, maybe broadly categorized into:

Descriptive fair use

It relates to the use of a registered trademark in a manner that is descriptive concerning the goods or services which show the quality, quantity, intended purpose, geographical origin, value, the time of production, and other characteristics of the goods or services, under Section 30(2)(a) of the Trademark Act. For example, the WD-40 Company uses the term “inhibitor” which was found to be a descriptive fair use of the registered mark.

Nominative fair use

It relates to the use of a registered trademark by any person who has adapted the goods to form part of or to be an accessory, provided it is reasonably necessary to indicate that the goods adapted are compatible with the goods which are sold under the trademark, under Section 30 (2)(d) of the Act. For example, one can refer to the professional basketball team from Chicago, but it is easier and simpler to understand when people say Chicago Bulls. Here, a trademark is used only to describe a thing rather than to identify it by its source. It does not imply any endorsement or sponsorship.

Indian Courts have reinforced the defence of nominative fair use as an exception to trademark infringement by saying that it has limitations in its applicability and is aimed at protecting the rights and interests of the brand owner.

Statutory ambiguity over the criminal classification of trademark infringement

The ambiguity Under Chapter XII which deals with offences and penalties of the Trade Marks Act, 1999 also provides for criminal remedies against infringement and passing off. The relevant sections are Section 103 and 104. For the effective implementation of the provisions relating to infringement and/or passing off of the trademark, the Trade Marks Act, 1999 like the Copyright Act 1957 provides for search and seizure powers of the police under Section 115. However, Section 115(4) of the Trade Marks Act, 1999, has provision for invoking the powers of police, for search and seizure, but only after obtaining the opinion of the Registrar of Trademarks to ascertain the similarity between the infringing mark and the mark of the complainant which has to be complied with before the police can carry out the search and seizure. The offences under the Copyright Act, 1957 and the Trade Marks Act, 1999 are classified as cognizable and non-bailable offences though the same is not provided for in the said Acts as specified in the First Schedule table II of the Code of Criminal Procedure, 1973. The First Schedule table II-Classification of offences (other laws) provides that any offence which is punishable with imprisonment for up to 3 years is a cognizable, non-bailable offense and it is triable by the Magistrate of First Class. Here lies the ambiguity. If the offence is punishable by less than 3 years then is the offence still cognizable and non-bailable?

Piyush Subashbhai Ranipa v. the State of Maharashtra

In this case, Piyush Subashbhai Ranipa v. the State of Maharashtra (2021), in an anticipatory bail application, the Bombay High Court’s learned single judge, rejected the anticipatory bail to the applicant (Piyush Subhashbhai Ranipa) for the various offences punishable for 3 years under Indian Penal Code 1860, the Trademarks Act 1999 and the Copyright Act 1957. An anticipatory bail application was filed by Piyush Subhashbhai Ranipa the accused in this case before the Maharashtra HC because he apprehended arrest in a case of copyright infringement and faking of trademark of the complainant company named Jain Irrigation System.

The HC maintained that the act of the accused also amounted to offence under Section 420 and of the IPC and in this view of the matter, custodial interrogation of the applicant was necessary and hence relief of anticipatory bail could be granted. Justice Sarang V. Kotwal, (2020)l held that the collective offences under Section 63 of the Copyright Act and Section 103 of the Trade Marks Act are non-bailable and cognizable.

Conclusion

The quintessential aim of copyright law is to encourage creativity while enabling access to these creative works to all. With the recent judgement, in this case, Piyush Subashbhai Ranipa v. the State of Maharashtra, (2021), in an anticipatory bail application, the threat of a police arrest and the denial of bail as a right, is discouraging and would indulge in self-censorship by creators for fear that they might end up serving jail time for their actions. Moreover, this would also discourage creative activities which may come under the exceptions to the copyright law and trademark law in India. The ascertaining of whether the said activity comes under an exception or not can happen only at a later stage of a trial. Until such time the threat of being jailed under a cognizable, non-bailable offence will loom large like a hanging sword on the head. For a country like India the majority of the population is still ignorant of the functioning of intellectual property legislation and in such a scenario, the threat of jail and the police having unrestrained power to arrest individuals without a warrant then chance are that it could potentially be used as a weapon for harassment with no remedy of bail for the victims. In today’s age of information and technology, there is a very thin line between infringement and original creativity which may at times get blurred progressively. The debate on the recognizability of the offences under the Copyright Act is never-ending and until it is settled, the uncertainty over the rights of parties, procedure of investigation, and rights of the accused will continue to remain the same. Therefore, it is important that the Supreme Court provides some clarity on the issue and settles it once and for all.

References

https://www.mondaq.com/india/trademark/1048532/offences-under-the-copyright-act-and-the-trade-marks-act-are-non-bailable-holds-bombay-high-court

https://www.khuranaandkhurana.com/2021/04/21/offences-under-copyright-act-and-trade-marks-act-bailable-or-not/

https://www.manupatrafast.com/NewsletterArchives/listing/ILU%20RSP/2015/Sep/TerraLex%20Connections%20-%20Whether%20Infringement%20of%20Copyright%20Is%20a%20Cognizable%20Offence_.pdf

https://suranaandsurana.com/2021/03/12/are-offences-under-section-63-of-the-copyright-act-section-103-of-the-trade-marks-act-bailable-or-non-bailable/

https://www.rkdewan.com/articledetails.php?artid=114

https://www.mondaq.com/india/trademark/947094/infringement-of-copyright-is-a-bailable-offence-vis-vis-section-63-of-the-copyright-act-1957

https://www.casemine.com/search/in/section%2B63%2Bcopyright%2Bact%2Bbailable

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Effect of tax benefits on M&A being withdrawn

Oishika Banerji

August 27, 2021

mergersandacquisitions-ef12384a42704419beaf9c960c5f1354 — Image source: https://blog.ipleaders.in/structure-merger-acquisition/

This article is written by Anupam Bhaduri pursuing a Diploma in Mergers and Acquisitions, Institutional Finance and Investment Laws (PE and VC Transactions) from LawSikho.

Table of Contents

Introduction

The taxation regime of a country plays an important role in deciding the M&A landscape of that country. This was most notably observed when Japan became a global leader in a short span of two years. Among other factors, the amendments introduced to the taxation schemes played a monumental role in shaping up Japan as the world leader.

The Finance Bill, 2021 passed by both houses of the Parliament has made some serious changes in the tax regime surrounding the Indian M&A landscape. This article exhaustively deals with the changes that are proposed to come into effect hereon.

Developments proposed by the Finance Bill, 2021

The Finance Bill, 2021, as proposed by the Lok Sabha introduces direct and indirect taxes and regulatory changes in the budget.

Key changes

Goodwill shall no longer be considered as a depreciable asset and companies cannot make further claims for tax depreciation even against goodwill that have been purchased. The Bill states that any amount that has been paid in lieu of the goodwill can be reflected as the cost of acquisition. However, any depreciation that has been obtained in the past years shall be deducted from the cost of acquisition.
To date, slump sale was considered non-taxable based on judicial precedents. However, they have now been incorporated under taxable schemes as well.
The Board of Advance Rulings shall replace the Authority of Advance Rulings. The Authority of Advance Rulings was set up to ascertain the income tax liability of non-residents avoiding expenses incurred due to long-drawn litigation.
Faceless appeals shall also be allowed to ICAT.
Earlier, the reopening of tax assessments had a limit of 4-6 years. The new Finance Bill reduces this to 3 years.
The double taxation avoidance agreements specify provisions in relation to benefit of lower taxes. This has now been extended to foreign institutional investors subject to the condition that other requirements laid down are met.
Special purpose vehicles made dividend payments to are exempted from tax withholding. The dividend payments however have to be made to real estate investment trusts and infrastructure investment trusts.

Regulatory updates

Any foreign investment made in India whether directly or indirectly by countries that share a border with India will require to have government approval for the same.
FDI limit in the insurance sector has been increased from 49 to 74% (subject to meeting certain conditions).

Corporate tax rates

With reference to domestic trades made in India, the taxation rates are stipulated at 30% with an incurable surcharge of a maximum of 12%. A further cess of 4% can be levied bringing the effective tax rate to 34.94%. However, the domestic companies with a turnover of less than INR 4 billion are provided with a concessionary tax rate of 29.12%. However, there are scenarios when the tax computed on the book of profits is deemed lower than the normal tax computations. In such cases, the rate of taxation is determined as the minimum alternative tax, and 21.55% is charged on the book of profits. This Finance Bill aims to reduce the minimum alternative tax rate to 17.47%.

The tax rates for domestic companies are also being brought down to 25.17%. This concessional rate is optional and can be availed from FY 19-20 only if the company is willing to let go of exemptions due to holidays and other tax benefits granted. Also, new manufacturing companies will have a concessional rate of 17.16 percent and shall be exempted from MAT.

Detailed analysis of changes made

Goodwill

In order to ascertain the impact of the depreciation due to acquiring goodwill being removed, it is important we understand how goodwill is valued. Primarily, goodwill comes into existence when the total consideration paid for an acquisition is higher than the fair value of the assets acquired. Goodwill arises mostly in cases of slump sales. Up until now, the tax laws in India allowed a depreciation against intangible assets like patents, copyrights, business rights, and licenses to name a few. The past judicial precedents thus held that companies would be allowed to claim a depreciation allowance on the goodwill for the overvaluation of assets.

The Finance Bill, 2021 introduced the following amendments in the Income Tax Act:

Section 2(11) which defines a block of assets shall henceforth exclude goodwill of any business or profession from the definition.
Section 32(1) has been amended to exclude the depreciation that was allowed on goodwill. Explanation 3 of the aforementioned Section 32(1) will no longer treat goodwill as an intangible asset.
Section 50 shall witness the introduction of a new proviso where the CBDT shall lay out a procedure to compute the written down value of the block of assets and any short-term capital gain arising from the same if goodwill was claimed as a ground for depreciation previously.
The Finance Bill further clarifies, through the amendments in Section 43(6)(c)that the WDV shall be reduced by the determined cost of the goodwill. This shall be achieved through:

Depreciation allowed on the goodwill before the assessment year 1988-89.
The depreciation value attached to the goodwill after the assessment year 1988-89 as if it were the only asset in the block of assets.

However, it is important to note that in such situations, depreciation claimed against the goodwill and the subsequent reduction determined itself cannot surpass the written down value of the asset block.

Slump Sale taxation amendments

To date, various courts opined that a sale consisting of a lump sum exchange of consideration without the individual valuation of assets is the sole criterion for the deal to be ascertained as a slump sale. The Finance Bill, 2021 proposes to amend Section 2(42)(c) to include all forms of transfer stipulated under the provisions of Section 2(47) to be included under the ambit of slump sale.

The amendment of Section 50B(2) now adds a mechanism to compute the fair market value of the capital assets on the date of transfer. This FMV shall be considered as the full value of the consideration that is to be taxed.

The language of the amendment and the repercussion of the same is a lot like the GAAR provisions that were introduced earlier in 2017. With this amendment in place, capital gains calculated for the seller under Section 50(B) shall be done on the determined FMV on the date of transfer, irrespective of the actual consideration received.

From the buyer’s perspective, the capital gains shall be taxed on the amount paid. If consideration paid is less than the FMV, it shall be treated as a capital reserve and this shall not be taxable under either Section 56(2)(x) or Section 50(B). However, if the buyer has paid more than the fair market value as consideration, the excess amount shall be deemed to be goodwill. No depreciation can be availed on the goodwill as per the new amendment and the goodwill, in this case, shall be written under the bracket of capital assets. The capital gains from this would only arise at the instance of subsequent transfer.

Recomputation of last year’s book of profits

The Finance Bill, 2021 has introduced a new subsection (2D) to the already existing Section 115JB. This comes as a means to provide some relief to the taxpayers who have been affected by the Advance Pricing Agreement. The new amendment brings into force the procedure where the Assessing Officer shall be recomputing the book of profits of past years if an increase in income of the assessee is noticed due to APA. However, certain restrictions have been imposed. They are:

No recomputing shall be made available if the assessee has already used up their MAT credit.
The assessment for recomputing shall be made through an application and such request shall be entertained only if the past years are beginning on or before the 2020-2021 assessment year. Furthermore, no claim for interests on the refund on account of a reduction in the amount of tax payable shall be entertained.

Stamp duty exemptions to restructuring

The biggest boost to M&A deals comes in the form of addressing restructuring of public sector companies as tax neutral. The amendment also stipulates that restructuring shall now be considered as a demerger under the provisions of Section 2(19AA) of the Indian Stamps Act, 1899.

No stamp duty shall be levied under the provisions of this Act subject to the fulfillment of the following conditions.

A transfer of business and or right in immovable property is made.
The transfer here must be made by a Government company or its subsidiaries, to another government company, whether owned by Central or State.
The restructuring of the companies allowed shall be any scheme of arrangement along with demergers, disinvestment, or strategic sale.
Further, stamp duties shall be exempted in case of the Government company going through a winding-up, striking off, closing, liquidation, or shut down.

Conclusion

The Finance Bill, 2021 brings in a plethora of changes in income tax computations and determining stamp duty. In the truest sense of the term, the amendments made will garner mixed reactions. Speaking of the government companies alone, the individual companies will derive massive benefits from the changes made in the Indian Stamp Act. However, for the private sector, there will be discontentment over the removal of tax depreciation being removed goodwill and the effect being retrospective. Further, the ire over the taxation regimen to be implemented over slump sales will further make the Indian demographic conscious of M&A deals. While the Indian economy is trying to recover from the bane of COVID-19 by implementing a linear taxation scheme, smaller to medium size companies shall find some respite through the concessional taxation rates and the APA redressal. Also, it must also be noted that an effort to boost FDI in the insurance sector could further open gates for new opportunities. Encouraging FDI is the need of the hour and the Finance Bill delivers on that front.

References

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

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Mistrials : why and how has this concept emerged

Sneha Mahawar

August 27, 2021

Mistrial — Image Source: https://rb.gy/jtrri8

This article has been written by Sneha Jaiswal, currently pursuing BA LLB (Hons.) from Christ (Deemed to be University) Delhi NCR. This article shows one of the different facets of verdicts that are on Mistrials awarded by the Honorable courts. It also tries to analyze the term “mistrial” with some detail.

Table of Contents

Introduction

There are several cases when a jury is unable to reach a verdict, neither the courts grant relief nor they acquit. What they do in those trials is to declare it as a Mistrial. This article will help you to understand the term “mistrial” and the nitty-gritty of it. Also, it will answer the most common unanswered question which is, do defendants in such cases always face a retrial.

Mistrials history – an overview

A mistrial is a trial that is an incomplete trial. However, it is paused and announced invalid, normally before a decision is made. In law, a mistrial happens when a trial is dropped without a judgment. In other words, a mistrial is a trial that is ended by a judge on the grounds that no decision can be reached or because of mistakes in law that have been made to make a fair trial impossible. When a trial is terminated, the previous proceedings are rendered null and void. Subsequently, a fresh trial is ordered on comparable accusations with the same defendants. The new trial would begin from the beginning, with earlier testimony or conclusions not necessarily relevant in the new court proceedings. A mistrial is usually declared when the jury is unable to reach a decision despite numerous attempts; this is known as a ‘hung jury’.

Reasons for mistrials

Mistrials may happen for a variety of reasons.

For instance, if the judge determines that a hung jury will not be able to overcome its differences through further deliberation, he or she may declare a mistrial. Differences here means the opinion of judges which clashes during court proceedings due to which a mistrial occurs. Hung juries, on the other hand, aren’t the only reason for a mistrial.
Other than a hung jury, a judge can declare a mistrial for a variety of reasons, including lack of jurisdiction, faulty jury selection, or a deadlock.
A mistrial can also be caused by unusual circumstances, such as the death or illness of a crucial lawyer or juror.
Extraordinary circumstances, such as the death or illness of a necessary lawyer or juror may also result in a mistrial.
A mistrial can also occur when the prosecutor makes a basic error that is so adverse to the defendant that it cannot be mitigated by appropriate jury instructions, such as inappropriate remarks made during the prosecution’s summation. Despite the fact that a mistrial occurs when a trial is halted owing to a hung jury. Nonetheless, a hung jury does not always result in a mistrial.

The emergence of the concept of a mistrial – conditions that lead to a mistrial

A mistrial is a trial that can’t be finished or whose outcome has no lawful worth, usually because a legal mistake has been made. A judge may dismiss a case before a decision is rendered; this is known as a mistrial in legal parlance. There are some conditions in which courts declare mistrial:-

Since the court decides that it lacks jurisdiction over a case, a judge may declare a mistrial.
Evidence being admitted improperly, or fresh evidence being discovered that could genuinely influence the outcome of the trial.
Misconduct by a party, a legal hearer, or an outside entertainer if it prevents the due process from being followed.
A hung jury can’t arrive at a decision with the necessary level of unanimity.
If the jury can reach a decision on certain charges but not on others in a criminal preliminary, the defendant may be retried on the charges that resulted in the deadlock, at the prosecution’s discretion.
Disqualification of a juror after the jury has been empanelled if no alternative juror is present and the litigants refuse to proceed with the remaining jurors, or if the remaining jurors do not reach the required number of jurors for a trial.
The sickness or demise of a juror or lawyer.
A motion for a mistrial may be submitted by any party; on rare occasions, the sitting judge may declare one on his or her own motion.

Comparing clause of double jeopardy with the concept of a mistrial

The double jeopardy clause prevents the government from prosecuting a person more than once for a similar offence. When a mistrial is declared, however, double jeopardy usually does not apply. Double jeopardy will not be applicable if the mistrial was declared owing to a hung jury or if the defence agreed or urged it.
However, there are some instances where double jeopardy applies, and the case will be dismissed from further proceedings. For instance, if the mistrial was pronounced over the objection of the defendant, or due to prosecutorial misconduct, or for no good cause, the state likely will not get an opportunity.
In the event a mistrial is declared, the case may be retried at the discretion of the offending party or prosecution, as long as double jeopardy does not prevent them from doing so. A mistrial in a criminal prosecution may forestall retrial under the double jeopardy provision, which precludes an individual from being tried twice for the same offence, except if needed by the interests of justice and relying upon which party moved for the mistrial.
In the event of a mistrial, there is no double jeopardy. This is why a person is only subject to double jeopardy if they have already been convicted of a crime. Once convicted, the person cannot be tried for the same crime. A mistrial, on the other hand, does not result in a conviction. As a result, the person can be tried again in the cases of a mistrial.
Typically, there is no restriction to a retrial if the defendant agrees or requests a mistrial. If the court grants a mistrial without the defendant’s consent or over his objection, a retrial may be called off in those circumstances. It’s essential to bring up that most judges proclaim a mistrial solely after careful consideration and in instances of absolute necessity.

Possibilities in the aftermath of a mistrial

One of the three things will happen when a mistrial is declared. The prosecution may choose either to dismiss the charges, enter into a plea bargain or agreement, or schedule a future criminal trial on the same allegations. If a new trial is held, the previous trial transcript should be thoroughly examined. As a result, the lawyers are able to uncover additional problems in preparation for a retrial. Most cases will be retried at a later date, depending on what caused the mistrial. This could be advantageous to the defence. Because prosecutors must prove their case beyond a reasonable doubt, a mistrial may lead prosecutors to reconsider their case based on the evidence presented by the defense.
What occurs once a mistrial is declared can include the following: On the same charge, a new criminal trial has been scheduled. The trial process is effectively restarted. Because the first trial was declared a mistrial, the second trial is not considered an unfair “double jeopardy.” Alternatively, the prosecutor can dismiss the charge or charges and close the case. A plea bargain to a lesser charge or even a dismissal may be used to resolve some cases. The prosecutor and the defence can reach an agreement on a plea bargain. Normally, such agreements are established before the start of a trial. If that did not happen in the instance, but the subsequent mistrial revealed prosecutorial difficulties, a plea bargain to settle the matter in favour became more possible.
If the trial ends in a mistrial, the attorney can fight to resolve the case in favour without the need for another trial. In any event, the parties need a knowledgeable and experienced criminal defence lawyer to handle their case from the start, they can contact a defence attorney who can fight to avoid a charge or charges reduced or even dismissed. Alternatively, it can be fought in order to obtain a favourable plea bargain agreement to avoid a trial. If a trial is held, the right to due process can be protected by demonstrating that the prosecutor cannot prove their guilt beyond a reasonable doubt.

Issues with a mistrial

Going through a second trial can cause problems for both parties involved. For both the plaintiff and the respondent, a retrial is in some ways an opportunity for both the plaintiff and the respondent to try the case knowing what the other side will focus on during trial and the legal and factual arguments they will assert. The prosecutor has the option of considering how to proceed once a mistrial is declared due to a hung jury. The prosecutor may choose to dismiss the charges brought against the defendant in some instances.
In certain circumstances, once a mistrial has been declared, a plea bargain may be arranged. If neither of these things happens, the mistrial will result in the defendant being tried on all of the same allegations in a new trial at a later date.
This can take away the element of surprise. This, on the other hand, allows both sides to conduct additional research and develop their evidence and arguments in support of their own case as well as in response to the other’s case.
Normally, trial judges will not issue an order of mistrial unless the matter is sufficiently detrimental that the defendant will not be able to obtain a fair trial. The judge has complete authority over whether to grant or refuse a motion for a mistrial. Judges frequently refuse the order and grant the jury “curative guidelines”. However, asking for curative instructions, which essentially tells the jury to dismiss what they just heard, might be harmful because the instruction might exaggerate illegal and prejudicial remarks.

Facets of a mistrial

For the parties engaged in the case, mistrials can be extremely traumatic. When a trial begins, people anticipate that there will be a conclusion at the end or a ray of hope for them to get relief at the end of the trial. In fact, a mistrial places the case in uncertainty until choices regarding how and when to proceed are determined. Mistrials create issues for both the prosecution and the defence.
Also, not exclusively going through another trial means bringing in witnesses and experts once again but also additional wastage of financial resources. For both sides, a retrial implies that each knows the information that the other side will present. Subsequently, each side has a better chance to rebut. Few opportunities to unveil a surprise on the other side are available at this point. Both parties have additional time to support their sides.
While a mistrial obstructs a guilty verdict, it is additionally not an assertion of innocence. Yet, the declaration can provide a defendant with several opportunities that the defence can take advantage of.
First, the prosecution should decide whether to reestablish the charges against the defendant and look for a new trial. If the mistrial happened after the jury couldn’t arrive at a decision, the defence counsel might have the option to persuade the prosecutor that the evidence is adequate to retry the defendant. Second, when a defendant receives another trial, a new jury is chosen and the whole proceeding begins once again. This implies that anything which biased the defendant will be executed from the jury’s wisdom. Furthermore, this gives the defence an opportunity as a new beginning to the case.
Finally, a mistrial draws out the trial process, which may support the defendant. For example, witnesses’ memories blur after some time and evidence can get destroyed or lost. Hence, usually, extra time may give some benefit to a defendant.

Mistrials and India – a concept not so new

A mistrial is a concept that is not so new for India. The term mistrial is often used by judges while hearing proceedings in the courtroom. There are numerous cases that discuss mistrial with the concept of retrial.

Munna Lal v. Prakash Dev (1951)

In the case of Munna Lal v. Prakash Dev (1951), there was some sort of dispute regarding the fixation of standard rent. The document presented as a piece of evidence was totally irrelevant to the facts with regard to the fixation of standard rent. In the present case, the judge, in his opinion, said that there had been a mistrial in the sense. He, therefore, quashed all the proceedings and remand the case for retrial.

D. Muralidharan v. State (2017)

In the case of D. Muralidharan v. State (2017), the petitioner was seeking relief against the order passed by the learned chief metropolitan magistrate for the offence under Section 417 and Section 420 of the Indian Penal Code, 1860, 1860, and Section 4 of Dowry Prohibition Act, 1961. One of the reliefs sought by the petitioner was to dismiss the case as a mistrial under the ground of prosecutorial conduct. Later, the petition was dismissed on the ground that the court was not inclined to accept the petition at the premature level. Thus, the concept of a mistrial is not so new for India. The term mistrial is often used by judges while hearing proceedings in the courtroom.

Conclusion

Try not to lose hope when the parties are caught in the web of a mistrial or when they are facing a mistrial in their cases. On the other hand, try to take it as an opportunity to have resulted in their favour with proper preparation that may include research and the evidence to support their own argument as well as in response to the opposing side’s case. Thus, re-strategize with the good defence attorney to seek the desired result in the case of a mistrial.

References

https://versustexas.com/blog/mistrial/

https://www.britannica.com/topic/mistrial

https://legal-dictionary.thefreedictionary.com/mistrial

https://www.houstoncriminalattorney.us/articles/mistrial-criminal-law/

https://www.law.cornell.edu/constitution-conan/amendment-5/reprosecution-following-mistrial

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

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

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Social and legal aspects of divorce in India

Diganth Raj Sehgal

August 27, 2021

Divorce — Image source: https://rb.gy/efeyvl

This article is written by Srishti Sinha, a student at the Institute of Law, Nirma University. This article deals with the social and legal aspects of divorce in India.

Introduction

The term “divorce” is something that does not require any introduction. Divorce is often termed as the difficult and painful dissolution of a marriage but it is a pretty regular occurrence these days, for better or worse. It has affected almost everyone, whether they have experienced it as a spouse or a kid, or know someone who has experienced it as a spouse or a child. The repercussions of divorce are well-known, but the intricacies of the divorce process are less well-known.

The first thing about divorce is that it is very common and nothing to be ashamed of. In foreign countries, divorce is such a common process that it is nearly impossible to predict who will take divorce in the current future or who is taking divorce today. The second thing to keep in mind about divorce is that it is a long-established and venerable institution. Divorces have been happening for as long as humans have been marrying. The ease with which a divorce may be acquired, the social stigma associated with divorce, and the degree of influence religious and governmental forces have over divorce have all changed dramatically through time and between countries. Further, the term “divorce” is not awful, it has arisen due to marital conflicts, and therefore, considering it a social stigma is wrong. It is just a process of separation when two people are not happy with each other.

Social aspects of divorce in India

In Indian culture, marriage is a holy institution, and divorce is considered taboo. Although the situation is improving as the younger generation is becoming more independent, the term “divorce” is still frowned upon. As a result, dealing with divorce in India necessitates a great level of emotional stability and endurance on both spouses’ parts.

Divorce in India is still not as common as it is in the West. In India, one out of every 100 couples seeks a divorce, whereas, in the United States, half of all marriages result in divorce. Despite the fact that India’s divorce rate is lower than that of Western countries, the number of divorce cases is steadily increasing as a result of different social and economic changes. Also, talking from a legal point of view, divorce is not a major issue because everyone has the right to live their life freely and according to their choice.

In modern Indian society, a woman’s role is not confined to that of a housekeeper. Women of the new generation have achieved economic parity with males. As women become more economically independent and autonomous, the concept of “compromise in marriage” is rapidly diminishing. Modern Indian men and women do not believe in marital compromise in the same manner that our forefathers did. But it is our patriarchal society that exaggerates the issue of divorce. As a result, women are the ones that suffer the most. They become the target of either harsh criticism or unfathomable sympathy. Women who have been divorced are conditioned to feel that they are weak and incapable of surviving in the harsh world without the help of a man. The culture rejects their requests for a second marriage or partnership. They are referred to as “damaged goods” and other derogatory words. Men, on the other hand, continue to live in a calm setting following their divorce. They are still considered bachelors regardless of their age. This does not imply that women are the only ones who suffer. Men, too, are affected. However, as compared to women, their ratio is smaller.

Marriage and divorce are unavoidable parts of life. While marriage helps you to adjust to a new partner and family, divorce trains you to become mentally stronger and more self-reliant. Divorce can be granted for a variety of reasons, including adultery, cruelty, desertion, religious conversion, mental illness, and venereal infections. In the past, divorce law was skewed heavily in favour of women. This implies that patriarchal views and notions have an impact on the law. However, with the law’s revision, the law now treats men and women equally.

Impact of divorce on mental health

Marriage dissolution isn’t usually a joyous occasion. Divorce is frequently accompanied by disappointment, the loss of dreams, and lowered expectations. Divorce also brings with it a slew of legal, financial, parental, emotional, and practical concerns that force the afflicted spouse to drastically alter their duties and routines, which can take years to recover from. Divorce has been identified as a risk factor for mental health disorders and has been linked to negative mental health outcomes. Divorce, in particular, has a detrimental impact on a family’s financial stability, social environment, academic/employment performance, as well as the family’s psychological and physical well-being.

Divorce exacerbates addictions and depressions, which are the most common mental diseases. Addictions are usually linked to a lack of personal responsibility, which can lead to the other spouse taking on too much duty. Because their primary goal is to satisfy their addiction need, an addicted individual finds it difficult to be intimate in their relationships. Addicted people also have a tendency to blame the world or other people for their unhappy marriage, including their partner.

Impact of divorce on children

Divorce has a significant impact on the parent-child connection. Usually, it is seen that children, as well as custodial parents, do not have that connection which a child and parent should have. Due to a lack of understanding and connection, both the parties are in tension. Furthermore, divorce necessitates a clear definition of child rights in the current environment, as well as how they must be represented in a divorce case.

Children are unquestionably distressed by divorce. Outside of the family, a child faces a lot of issues and problems fitting in with a traditional society due to the stigmatisation of divorce. It is usually observed that children who see their parents’ divorce have lower educational prospects than children who grow up in intact families because they cannot cope with their surrounding family environment. The physiological behaviour of the child is the most evident influence within the family. In the post-divorce period, there are also children who are left with a guilty conscience that because of them their parents got divorced, especially if they are regular witnesses to the parents’ feuds.

Furthermore, step-families are frequently problematic, as children struggle to adjust to their new step-parent and extended step-family. Children learn how to interact with others by observing how their parents interact with one another. Divorce instils in them an unspoken distrust of their partners. Divorce also raises the likelihood of young people fleeing their families due to conflict with a parent.

Legal aspect of divorce in India

Divorce is one of life’s most devastating events for any couple. Furthermore, if the divorce is disputed in India, it can be a lengthy and costly process. Even couples who agree to divorce must show that they have been separated for at least a year before the courts would hear their case.

Divorce rules in India, like other personal problems, are linked to religion. The Hindu Marriage Act of 1955 governs the dissolution of marriage among Hindus, Buddhists, Sikhs, and Jains, the Dissolution of Muslim Marriages Act of 1939 governs Muslims, the Parsi Marriage and Divorce Act of 1936 governs Parsis, and the Indian Divorce Act of 1869 governs Christians. On the other hand, the Special Marriage Act of 1954 governs all civil and inter-community marriages.

Valid Marriage

For an application and proceedings of divorce, the main criteria are to have a valid marriage. If any criteria of a valid marriage are missed at the time of marriage then, the application for divorce will be rejected.

Conditions required for a valid Hindu marriage

According to Section 2(3) of the Hindu Marriage Act, both parties must be Hindus. If one of them is a Hindu and the other is a non-Hindu, or if both are non-Hindus, the marriage will be governed by different legislation, such as the Special Marriage Act. The basic requirements for a legitimate marriage are outlined under Section 5 of the Hindu Marriage Act and are discussed below:

The first criterion states that neither partner should have a live spouse at the moment of marriage, effectively prohibiting bigamy. Under Section 494 of the Indian Penal Code, 1860, bigamy is also a crime punishable by up to seven years in prison, a fine, or both. If a married person remarries under this Act, the second marriage will be nullified. The apex court declared in decisions like Bhogadi Kannababu & Ors. v. Vuggina Pydamma & Ors. (2006), M.M. Malhotra v. Union of India (2006) and Yamunabai Anantrao Adhav A v. Ranantrao Shivram Adhav & Anr. (1988) that the second marriage would be null and void while the previous marriage was still valid.
The parties to the marriage shall not be of unsound mind; or have a mental disease that makes them unfit for giving consent for marriage or childbearing; or have had recurrent episodes of insanity or epilepsy. Marriage to a person who is mentally ill is void.
At the time of marriage, the bridegroom must be 21 years old and the bride must be 18 years old.
The fourth criterion is that none of the spouses in the marriage shall be in forbidden degrees. Section 3(g) of the Hindu Marriage Act defines the term “degrees of prohibited relationship.” A marriage that takes place in violation of this criterion is null and void. This condition has an exception: if any religion’s custom or usage allows it, the marriage will not be ruled void. Further, the Punjab and Haryana High Court held in Shakuntala Devi v. Amar Nath (1981) that two people can marry within the prohibited connection if there is proof of established tradition, which must be very old and beyond human memory.
Last but not least, the partners must not be Sapindas (a person viewed in connection to one or more of his three or six closest male ancestors or descendants) of one another; otherwise, the marriage is null and void. The same exception applies to this condition: if any custom or usage permits it, the marriage will be recognized as valid.

Conditions required for a valid Muslim marriage

Mahmood, J. identified the nature of Muslim marriage as a civil transaction rather than a sacrament in the landmark case of Abdul Kadir v. Salima and Anr. (1886). Based on his observations, we may deduce that the goal of Muslim marriage is to legalise male-female sexual relationships as well as child propagation. As a result, a legally binding contract is required for Muslim marriage. The fundamentals of a Muslim marriage are extremely similar to the fundamentals of a Civil Contract which includes:

Proposal and Acceptance: In a Muslim marriage, the proposal is known as ‘ijab’, and the acceptance is known as ‘qubul’. A proposal should be presented by or on behalf of one party and the other party should accept it. Proposal and acceptance should take place at the same time for a lawful Muslim marriage.
Competent parties: The party should be major, of sound mind, and must be Muslim. The age at which a person achieves puberty is regarded as the age of puberty for the purposes of Muslim marriage. According to Hedaya, female puberty begins at the age of 9 years while male puberty begins at the age of 12 but in the landmark case of Muhammad Ibrahim v. Atkia Begum & Anr. (1912), the Privy Council ruled that a girl has reached puberty under Muslim law if she has reached the age of 15 years or has reached puberty at a younger age. A Muslim boy is subject to the same rules. In the absence of evidence to the contrary, a Muslim is regarded as having reached puberty at the age of 15 years.
Free consent: A legitimate marriage requires the parties’ voluntary consent. If permission is obtained by coercion, deception, or a mistake of fact, it is deemed invalid, and the marriage is declared null. In the case of Sayad Mohiuddin Sayad Nasiruddin v. Khatijabibi (1939), the court concluded that marriage is illegal if it is performed without the spouses’ free agreement.
Mahr: It refers to the amount of money or other property that a bridegroom must offer to the bride in exchange for her hand in marriage. Its purpose is to provide financial stability to the bride both during and after the marriage. The Allahabad High Court ruled in the case of Nasra Begum v. Rizwan Ali (1979) that the right to mahr existed before cohabitation. The court also decided that if the woman is a minor, her guardians can refuse to deliver her to her husband until the dower is paid and that if she is in her husband’s possession, she can be returned.
Marriage is not permitted under restricted areas like marriage within blood relation, two wives in a relation, re-marriage within a divorced couple, etc.

Conditions required for a valid Parsi marriage

In Parsi law, valid marriage conditions are outlined in Section 3 of the Parsi Marriage and Divorce Act, 1936. For the validity of a Parsi marriage, the following conditions are mandatory:

If both contracting parties are related to each other in any degree of consanguinity, i.e. people descended from the same ancestors, the marriage will be invalid.
A marriage that is not solemnized by a priest in the presence of two Parsi witnesses is not legal in Parsi law. Further, it was established in the case of Parshottam v. Meherbai (1888) that Ashirvad, which means blessing, is required to prove the legality of a marriage. In addition, the court determined that it refers to an exhortation or prayer recited by the couples before the marital inspections.
If the male is under the age of 21 and the female is under the age of 18, a marriage will not be considered.
If the marriage is not lawful for the reasons stated above, every child born to the couple who would have been legitimate if the marriage had been valid is legitimate.

Conditions required for a valid Christian marriage

The Indian Christian Marriage Act of 1872, issued during the British Empire, controls Indian Christian marriages. According to the Act, Section 60 states the following conditions which must be met for a marriage to be valid:

The bridegroom’s age cannot be less than twenty-one years old, and the bride’s age cannot be less than eighteen years old;
The consent of both parties to the marriage must be given voluntarily and should not be obtained by distorting facts, coercion, or undue influence;
At the time of the marriage, neither partner should have a living spouse;
The marriage must be performed in the presence of at least two reliable witnesses and a person licensed to provide a certificate of marriage.

Another prerequisite for validity is set forth in Section 88 of the Act, which states that nothing in the Act shall legitimise any marriage that either party’s personal law prohibits them from entering. For example, an inter-caste marriage between a Christian and a person of another faith will be void if the other person’s personal law prohibits marriage with a Christian. Later, the Madras High Court clarified in Gnanasoundari v. Nallathambi and others (1945) that Section 88 of the Act covers bans based on blood connections and affinity.

Divorce petitions

Now, if the marriage is valid, considering all the conditions mentioned above, and there’s a dispute between the parties after marriage, a couple can get a divorce if both spouses agree, or either spouse can apply for a divorce without the other’s approval.

Divorce with mutual consent

The courts will consider a divorce with mutual consent if both the husband and wife agree to divorce. However, in order for the petition to be allowed, the couple must have been separated for at least a year or two years (depending on the relevant laws) and be able to demonstrate that they are unable to live together. Even though neither husband nor wife wants it, they often consent to a no-fault divorce since it is less expensive and less stressful than a contested divorce. Custody, support, and property rights for children could all be jointly agreed upon.

The Hindu Marriage Act of 1955, the Special Marriage Act of 1954, and the Indian Divorce Act of 1869, all provide for divorce by mutual consent. The provisions of mutual consent divorce are specified in Section 13B of the Hindu Marriage Act, Section 28 of the Special Marriage Act, and Section 10A of the Indian Divorce Act.

For the petition of dissolution of marriage, the petition should be presented to the court and the couple only needs to prove that they have not been living as a husband and wife for a period of one year or more and they are not able to live together in future. Keep in mind that living apart does not always imply living in different places. The Supreme Court of India held the same in the case of Sureshta Devi v. Om Prakash (1991), stating that living apart does not always entail living in distinct areas. The parties can live together but not as husband and wife. Further, before giving divorce, the couples are provided with a period of 6 to 18 months, called a cooling-off period, to settle their disputes and give their relationship a second chance.

However, in Devinder Singh Narula v. Meenakshi Nangia (2012), it was determined that such an amount of time does not need to be maintained and that if the situation requires it, the marriage must be dissolved even before the six-month period has expired. In another case, Rajiv Chhikara vs. Sandhya Mathu (2016), the Delhi High Court’s Division Bench ruled that reneging on a settlement is equivalent to mental abuse. According to the court, the parties had been living separately since 2009 and their relationship was beyond repair. In such a case, if one spouse insists on maintaining the marriage link, it is equivalent to subjecting the other to a severe mental cruelty condition.

Muslims can get divorced by mutual consent in two ways: khula divorce and mubarat divorce.

Khula: In this type of divorce, the wife considers asking her husband for a divorce based on mutual consent. In the case of Mrs. Sabah Adnan v. Adnan Sami Khan (2010), it was held that khula is a recognized form of divorce.
Mubarat: In Mubarat, the husband and wife agree to divorce each other. When one party makes an offer, and the spouse agrees, the divorce is final.

Divorce without mutual consent

In marital ties, there are some rights and responsibilities of each partner. All of the Acts specify the reasons for filing for divorce. The Hindu Marriage Act of 1955, the Special Marriage Act of 1954, the Indian Divorce Act of 1869, and the Dissolution of Muslim Marriages Act of 1939, all allow a husband or wife to submit a divorce petition. There are various grounds on which a petition can be filed in the context of a contested divorce. It’s not like a husband or wife can just ask for a divorce without giving a cause.

There are 9 grounds mentioned under Section 13(1) of the Hindu Marriage Act, 1955 on which either the husband or the wife could sue for divorce. The following grounds are mentioned below:

Adultery

Adultery is the first ground. A divorce petition can be filed if the husband or wife has sexual relations with someone other than their spouse. It must be demonstrated that the period during which the spouse was living an adulterous life was so closely related to the filing of the petition in terms of time that the petitioner had a reasonable belief that the respondent was living in adultery at the time the petition was submitted. In the case of Dastane v. Dastane (1975), the Supreme Court declared that if personal connections are involved, particularly those between a husband and wife, there is no need for proof beyond a reasonable doubt.

Cruelty

Cruelty has now been made a reason for divorce and judicial separation under the Marriage Laws (Amendment) Act, 1976. Before that modification, it could only be used as a basis for judicial separation, not divorce but this was upheld in the decision by the Supreme Court in the case of Dastane v. Dastane (1975). The term “cruelty” is used here to refer to both mental and physical abuse. Further, the Supreme Court ruled in the case of Mayadevi v. Jagdish Prasad (2007) that any sort of mental abuse suffered by either spouse, not just the woman, but also the man, can lead to divorce on grounds of cruelty.

Desertion

The Marriage Laws (Amendment) Act, 1976 introduced desertion as a basis for divorce to Section 13. It was previously exclusively a basis for judicial separation. Desertion is now a legal basis for judicial separation and divorce. It refers to leaving the marriage house and abandoning one’s spouse. If a husband or woman abandons his or her spouse for two years or more, it is grounds for divorce.

Conversion

A Hindu marriage can be dissolved by a divorce decision if the respondent has converted to another religion and no longer considers himself a Hindu. As a result, the party who continues to be Hindu has the right to divorce under this law.

In Sarla Mudgal v. Union of India (1995), the Court held that a Hindu husband’s second marriage following his conversion to Islam is void because it violates fairness, justice, and good conscience, and thus falls under Section 494 of the Indian Penal Code. Another case of Khambatta v. Khambatta (1933) is in which a Muslim married a Christian woman in the Christian form. The wife converts to Islam, and the husband gets a talaq divorce. The Court ruled that the divorce was lawful under these circumstances.

Unsoundness of mind

It becomes a ground for divorce if the spouse suffers from an incurable mental disease to the point where it is reasonable not to expect to live with him or her. The phrase “mental disorder” is defined as “mental sickness, arrested or incomplete development of the mind, psychopathic condition, or any other disorder or impairment of the mind, including schizophrenia” in the first explanation of Section 13. In cases like Anima Roy v. Prabadh Mohan Roy (1969), Kartik Chandra v. Manju Rani (1973), C.J. Joy v. Shilly (1995) and Kollam Padmalatha v. Kollam Chandrasekhar (2000), the court maintains that the person must be able to comprehend the marriage contract and the duties and responsibilities that it entails.

Virulent and incurable disease

Divorce is also possible due to an incurable form of leprosy and venereal illness. When it is undisputed that the respondent has had leprosy, the petitioner has the burden of proving that the disease is virulent and incurable.

Presumption of death

A divorce may be granted if the respondent has not been known to be alive for a period of seven years or more by people who would have naturally heard of it if that party had been alive. Further, it was established in the case of Nirmoo v. Nikkaram (1968) that if a person presumes his or her spouse’s death and marries another person without getting a divorce decree, the spouse might contest the legitimacy of the second marriage after his return.

Judicial Separation

If the partners who were living separately under the decision of judicial separation have not cohabitated for a year or more can apply for divorce. Further, the birth of a child as a result of a single act of sexual intercourse does not imply that the couple will resume their relationship.

Restitution of conjugal rights

A divorce petition can be filed if the husband or wife gets a decree of conjugal rights and there is no restitution of conjugal rights for a period of one year or longer. In the case of Shanti Nigam v. R.C. Nigam (1971), it was decided that if a wife wants to work and feels that for the upkeep of the family that she should also work and she would go to her husband whenever it is possible for her to do so, the husband could also come to her at his own convenience. In such a situation it cannot be said that she has withdrawn herself from the society of her husband.

Irretrievable breakdown of Marriage

In pursuant to the cases, Miss Joden Diengdeh v. S.S. Chopra (1985) and Navin Kohli v. Neelu Kohli (2006), recommendation to insert “irretrievable breakdown of Marriage” as a ground of divorce, the Law Commission of India undertook a study of the subject and, after reviewing existing legislation and various Supreme Court and High Court judgments on the subject, recommended that irretrievable breakdown of marriage be included as a ground for grant of divorce in its 217th Report on “Irretrievable Breakdown of Marriage – another Ground for Divorce” submitted on March 30, 2009.

Speaking of the Muslim community, men in the Muslim community can divorce at any time without having to file a petition. However, Muslim women can only divorce for certain reasons listed in Section 2 of the Dissolution of Muslim Marriage Act. Following are the conditions under which the petition of divorce can be filed:

If the husband’s whereabouts have been unknown for four years or more;
When the husband fails to provide maintenance to the wife for a period of two years;
The husband is imprisoned for at least 7 years;
When a spouse has not met his marital obligations for three years;
Husband’s impotence at the time of marriage, and if it persists;
Mental ill-health;
Husband’s communicable sickness;
If the wife was married before the age of 15 and repudiates the marriage before the age of 18; and
Husband’s cruelty.

Under Section 10 of the Indian Divorce Act, Christians can apply for a divorce in the following cases:

Adultery;
Conversion from Christianity to a different faith;
For at least two years, the person had an incurable mental illness;
For two years, the person was infected with communicable sickness;
Presumption of death if the spouse’s whereabouts have been unknown for seven years or longer;
When one of the partners willfully refuses to complete the marriage;
If no recovery of conjugal rights occurs within two years of the date on which the decision was issued;
2 or more years of desertion;
Cruelty;
If the husband is guilty of rape, sodomy, or bestiality, the wife can file for divorce.

Conclusion

In the Western world, divorce may be a common occurrence. One of the most vocal opponents of this family issue is the eastern world. Divorce is still a taboo subject in society today. A couple may marry in a beautiful wedding and appear to be the happiest people on the planet, but what happens next is unclear. They might either live a life of fairytales or experience the greatest nightmares. If the situation becomes worse, the couple will file for divorce.

Divorce is not governed by a single rule; instead, each religion has its own set of laws that govern marriage and divorce. A husband or wife can submit one of two types of divorce petitions. If they agree to divorce, a divorce petition by mutual consent is filed. If one of the parties to the marriage wants to file a divorce petition, it is referred to as a contested divorce, and there are grounds such as cruelty, adultery, communicable disease, mental disorder, and so on, on which the petition can be filed in court by either the husband or wife.

References

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How to draft boilerplate clauses for a lease agreement of hospital and medical college

Abanti Bose

August 27, 2021

Private-hospitals — Image Source: https://bit.ly/3k5NYmj

This article is written by Manasi Sheth pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from Lawsikho.

Table of Contents

Introduction

The first known use of the word ‘Boilerplate’ was in the year 1893, the meaning of which as per Merriam Webster is either a ‘standardised text’ or ‘formulaic or hackneyed language’. According to the Cambridge dictionary, it is something ordinary or unimaginative, a text which can be copied and used in either legal documents or in computer programs, with very little to no changes.

Boilerplate clauses in legal documents are standard, miscellaneous, or general clauses that are generally found at the bottom of almost all legal documents. They are very generalised causes that provide for either an uncertain, unforeseen future or which law will govern the entire agreement or how in case of disputes those disputes will be settled. They are considered to be secondary to the main clauses such as payments, terms or obligations and are rarely negotiated by the contracting parties. Not often thought about, they are generally just copy-pasted by people preparing the documents but a recent pandemic has shown us that even though these clauses are considered secondary, they should not be considered unimportant. Let us further see, what are some of the common boilerplate clauses and how can we draft one for a hospital.

Commonly used boilerplate clauses in an agreement

This is a non-exhaustive list of some of the commonly used boilerplate clauses in agreement:

Entire Agreement Clause,
Other Non-Performance Clause,
Arbitration Clause,
Remedy/Dispute Resolution Clause,
Survival of Reps and Warranties Clause,
Merger Clause,
Multiple Agreements Clause,
No-third Party Beneficiaries Clause,
Waiver/ Non-Waiver Clause,
Assignment Clause,
Notice Clause,
Waiver Clause,
Force Majeure Clause,
Severability Clause,
Governing Law and Jurisdiction Clause,
Non-Reliance/Reliance Clause,
Health and Safety Clause,
Time of the essence Clause,
No Partnership or agency Clause,
Language Clause,
Counterparts Clause,
Testimonium Clause.

Advantages of a lease agreement between a hospital and a medical college

Entering into a lease agreement can be advantageous for both a hospital and a medical college. If we look at it from the medical college’s point of view, it can be beneficial for the students to learn from professional doctors, they can also apply for internships at hospitals within their college campus. If the agreement between the two allows, then the medical college can easily procure dead bodies from the hospital morgue which could help the students learn the live operating techniques in their college. The college can also invite practising doctors to give special lectures to the college.

If you look at it from the hospital’s point of view then the doctors can give internship programs to deserving students and then reserve them as resident doctors after their graduation, they can also increase their customer base through word of mouth from the students.

Many doctors consider teaching medical students as the new way of staying current in the medical field. So even doctors sought to teach hospitals to practice in an environment best committed in class-care and learning.

So, a teaching hospital becomes a mutually beneficial agreement for both the hospital and the medical college, it will promote a culture of learning and growth in the medical field, such hospitals affiliated with medical colleges usually find themselves having access to cutting-edge treatments and technologies and research opportunities for career advancement. Thus, a lease agreement between a hospital and a medical college can be mutually beneficial for both.

Is it necessary to include boilerplate clauses?

As such, there is no legal requirement to include boilerplate clauses in a commercial agreement. Contracts can fare well even without them but recently after this pandemic, advocates and lawyers are truly understanding the real value of the inclusion of boilerplate clauses and also, they provide to the contracting parties certainties about the future.

Which all clauses to include in an agreement depends on what type of agreement you are trying to draft. Boilerplate clauses are standard and normally you can just keep on using the same matter with certain word changes making sure the words are suitable for the agreement and draft them accordingly.

How to draft boilerplate clauses for the lease agreement of a hospital and medical college?

Though these boilerplate clauses find themselves placed at the bottom of a contract, they certainly cannot be ignored. Without these boilerplate clauses, the parties will have to spend time and drain resources on where to settle the dispute or they may waste time in working out if the content discussed over email should be included or not or maybe a supplier will not be able to get out of his obligation even if he cannot fulfil them because of an act of God. Though the operative clauses in an agreement are the most important clauses, these boilerplate clauses should not be taken lightly and the drafter should keep in mind simply not copy-paste material from the internet or past agreements but to modify them as per the requirements of the contract they are drafting. Here’s a list of a few boilerplate clauses used for a lease agreement and how to draft some of them.

1. Other non-performance clause

Adding in other non-performance clauses will oblige the lessee to fulfil all other terms which are set forth in the lease agreement. Non-Performance will provide for what will happen in case of default by both parties to the agreement. So, it is necessary to include as what will be considered as default, what is the basic course of action which should be followed first, mentioning the time frame within which the performance is to be delivered and then the second course of action shall provide for penalty for such default. This will clear the set of performances for both the hospital and the medical college and also help out further in case of non-performance by either. For better understanding let’s try drafting this clause:

Other non-performance clause:

The Lessee’s failure to perform, keep or fulfil any covenants, undertakings, obligations, conditions, representations or warranties or failure to comply with any other terms of this Agreement is “Default: and becomes an “Event of Default” if the Lessee fails to cure the Default within 30 days after receipt of notice of Default from the Lessor. Without prejudice to the generality of the aforesaid, the following shall constitute a Default (and failure to cure the default within the period aforesaid shall constitute an Event of Default), viz.:

any act or omission on the part of the Licensee that may structurally damage the Leased Premises,
non-payment of statutory taxes including GST or any other tax/levy, by whatever name canned,
any criminal liability arising as a result of the use of the Leased Premises by the Lessee,
any structural alteration made post the Commencement Date to the said Leased Premises, without prior approval of the Lessor,
any act by which any other person is permitted to occupy or use any part of the Leased Premises or to carry on any activity therefrom, other than as permitted or authorized hereunder,
any transfer of stake in the Lessee by any arrangement other than in the manner and to the extent permitted and authorized hereunder,
conducts activities not permissible as per government policy from the Leased Premises.

2. Remedies clause

Adding a remedies clause will provide for what recourse the parties should take in case of default by either party. If such a clause is not added then in the event of default there will be chaos and confusion but providing a clear recourse as to what the parties are supposed to do in case of default will give them a clear headway.

Recourse by the lessor:

Upon an Event of Default, the Lessor may take any or all of the following actions: (i) initiate proceedings, including actions for specific performance, injunctive relief, declaratory relief, and any other relief or remedy, and (ii) forthwith and without being liable to grant any further time or opportunity to rectify or repair the breach terminate this Agreement.

2. Non-exclusive remedies and rights:

Each remedy and right in this Agreement is in addition to and not in substitution for any other remedy or right under the applicable law.

3. Survival clause

The survival clause shall provide for clauses that are to survive even after the termination of the entire agreement. Even if the entire agreement comes to an end, the clauses mentioned in the survival clause shall survive the agreement. Like;

Survival clause:

The terms of the Remedies clause shall survive Termination.

4. Handover clause

Handover clause provides for a peaceful handover of all furniture, fixtures, benches, laboratory items, etc by the lessor and keys, and possession by the lessee on the expiry of the term of the lease and before such handover the lessee shall clear all his debts and dues and after the handover, such lease shall stand to be revoked. The clause should also mention the course of action in case of any problems during the handover.

5. Dishonour of cheques

Just like most boilerplate clauses, it is not necessary for the lease agreement to contain this clause but think about it, how beneficial this clause will be to the lessor in case either of the cheques given by the lessee dishonours and results in his loss. The penalty interest rate set out in the agreement will provide for in case either of the cheques of the lessee dishonours.

6. General indemnity

The indemnity clause is generally to keep indemnifying the lessor against any damages caused by the lessee to the leased premises, you can also include a clause to indemnify the lessee in case the lessor fails to oblige his responsibilities towards the lessee.

7. Time is of the essence

A clause stating that the parties shall perform all their obligations due within the agreed time span. This will indeed ensure timely discharge of duties so that the other party does not suffer for the same. For example,

Time is of the essence clause:

The parties agree and acknowledge that time is of the essence for the performance by the Parties of each and all of its obligations under this Agreement.

The Lessee agrees and confirms to hand over TDS Certificates (within the time as per applicable law) and payment of all amounts and TDS by the Lessee to Lessor, or to the service providers and statutory authorities relating to the Leased Premises and inter alia as stated in this Agreement.

8. No waiver clause

If any party fails to ensure any one or more instances, covenants or conditions it shall not amount to waiver. The agreement shall remain valid and waiver of any sort shall be given only by written consent executed by the parties. Such a clause shall protect the interest of the agreement in case of waiver of one or more terms.

No waiver clause:

The failure of any Party to enforce in any one or more instances, the performance of any of the terms covenants or conditions of this Agreement shall not be construed (or pleaded) as a waiver or relinquishment of any right or claim granted or arising hereunder or of the future performance of any such term, covenant or condition, and such failure shall in no way affect the validity of this Agreement or the rights and obligations of the Parties hereto. The Parties acknowledge that a waiver of any term or provision hereof may only be given by a written instrument executed by any Party hereto.

9. No partnership or agency

A clause stating that the lease agreement should not be considered as the creation of a partnership or agency and that neither party shall have authority to represent the other or make commitments on behalf of the other.

No partnership or agency clause:

This Agreement shall not constitute or imply any partnership, joint venture, agency, fiduciary relationship or relationship between the Parties other than expressly provided by this Agreement. Neither Party shall have nor represent that it has any authority to make any commitment on behalf of the other Party.

10. Termination of all previous agreements, arrangements and understanding

A clause stating that on the execution of agreement all other previous understanding, agreements, arrangements between the parties shall be terminated and that this agreement shall be the final and only agreement between them. This will ensure uniformity and avoid confusion between the parties as to which document to refer for which clause.

Termination of all previous agreements, arrangements, understandings clause:

This Agreement constitutes the entire arrangement between the Parties relating to the subject matter hereof and all previous agreements, arrangements, understandings between the parties are hereby superseded and shall not survive the execution of this Agreement.

11. Non-compete clause

A non-compete clause in a lease agreement is also referred to as an exclusive use clause and refers to a lease provision that prevents leasing the development premises to a direct competitor or to a tenant operating the same kind of business. A non-compete clause shall protect the hospital and the medical college from any competition on the leased property because two hospitals and medical colleges on the same property wouldn’t make sense, would it? And why would anyone be willing to pay a large sum of consideration where there is so much competition.

12. Force majeure clause

Force majeure clauses should include all or any acts or events beyond the control of either party and list out a few of them but never limit them to it, keep the scope of events wide open with the inclusion of words like ‘including but not limited to’. Such a clause shall protect the parties in case of unfavourable situations.

The clause should also contain what are the obligations of both the parties in case of such force majeure events and what action is to be taken.

Force majeure clause:

The parties shall not be liable or affected in relation to this Agreement for any event or act which is outside or beyond the control of either party including without limitation, war, warlike conditions, hostilities, mobilization, blockade, embargo, riot, looting, strike, lockout, epidemic, floods, earthquake, fire, government orders beyond the control of the parties, etc. (“Force Majeure”).
If at any time during the term of this Agreement the Leased Premises and/or the said Building are destroyed and/or damaged, either wholly or partially, by force majeure (and not attributable to any act of the Lessee or any person/s claiming through or under it) whereby either party hereto is prevented from using the Building/Leased Premises and/or any part thereof, the Lessors shall endeavour to restore the Leased Premises and/or the said Building at its own cost and expenses, within a period of 180 days. In such an event during the period of restoration, the obligations of the parties shall be suspended. In the event the Leased Premises and/or the said Building cannot be restored within a period of 180 days as aforesaid, then in that event, either party shall have an option to terminate this Agreement by giving 15 Working Days written notice, and thereafter neither party will have any claim against the other save and except as provided herein. However, the interest-free refundable security deposit shall be refunded to the Licensee in accordance with the terms set out in the Security Deposit clause of this Agreement.

13. Partial invalidity or severability

Including this clause in the agreement shall severe any clause which is prohibited, unenforceable by the law, illegal only to the extent of that clause and shall protect the other clauses of the agreement from becoming invalid. So, such a severability clause shall protect the entire agreement from becoming invalid in case of events.

Partial invalidity or severability clause:

Any provision of this Agreement which is prohibited, unenforceable or is declared or found to be illegal, or void shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provisions or the remaining provisions of this Agreement If any such invalidity substantially affects or alters the commercial basis of this Agreement, the Parties shall negotiate in good faith to amend and modify the provisions and terms of this Agreement as may be necessary or desirable in the circumstances to achieve, as closely as possible, the same economic or commercial effect as the original provisions and terms of this Agreement.

14. Notice clause

Notice clause should contain either a proper registered address, email address of the parties where notices if any shall be served to the parties. Any change in address shall have to be notified if not the notice will be considered as served.

Address for notice:

All notices and other communications in connection with this Agreement must be given in writing by an officer of the Party serving such notice or other communication and must be left at the address of the addressee specified below or sent by a reputed courier to the address of the addressee or sent by e-mail (in the event of an email a confirmation copy being sent by registered post) to the e-mail address of the addressee which is specified below or by hand delivery to the address of the addressee specified below or if the addressee notifies of another address or e-mail address then to such address or e-mail address:

*Mention the postal address and email address of both the Parties*

15. Arbitration and dispute resolution clause

In case of any dispute arising in connection with this agreement, this clause will entitle the parties to approach arbitration. This clause should also mention the time period within which the arbitrator is to be appointed, the number of arbitrators to be appointed, place of arbitration, the language of arbitration, who shall bear the cost of arbitration and what if the dispute cannot be resolved through arbitration.

Arbitration and dispute resolution clause:

Any dispute arising out of or in connection with this contract in the interpretation, application or performance of this Agreement shall be submitted for resolution or adjudication for final and binding arbitration to a sole arbitrator who shall be nominated and appointed by the parties on mutual understanding. Such reference to arbitration will not entitle or enable the Lessee to withhold the Fee and any payments due and payable to the Lessor and/or to refrain from complying with any of its obligations under this Agreement and on complying with the terms and conditions contained in this Agreement, the Lessee shall be free to operate its business from the Leased Premises. If a sole arbitrator is not appointed by the Parties within a period of 30 days, then both Parties shall appoint one arbitrator each, and the two arbitrators so appointed will appoint the third arbitrator.
The arbitration will be governed by the Arbitration and Conciliation Act, 1996 including any statutory amendments or re-enactments thereof for the time being in force and rules made thereunder.
The seat of arbitration shall be Mumbai. The arbitration proceedings will be conducted in English.
The costs of arbitration will be initially paid jointly by Parties hereto in equal shares; the arbitrator will be entitled to determine by the Award as to who will finally bear the costs and in what proportion.
The Award of the arbitrator shall be binding on both Parties.
If the sole arbitrator appointed by the parties refuses to act or is incapable of acting, then the parties shall be entitled to appoint a new arbitrator; the substituted arbitrator will have like powers to act on the reference and make an Award as if he had been appointed in accordance with the terms of this Agreement.

16. Stamp duty and registration charges

This clause shall spell out who is responsible for the payment of Stamp duty and Registration charges related to the agreement.

Stamp duty and registration charges clause:

Stamp duty and registration charges payable on these presents or on any other document/writing executed or to be executed in pursuance hereof shall be borne and paid by the Licensee alone.

17. Alterations to the agreement

Any alterations to the agreement can be added as an addendum to the agreement instead of making a new agreement every time there are any changes or alterations to be made in the agreement. This clause will cut short the hassle of creating a new agreement each time any changes are added to the agreement.

18. Governing law and jurisdiction

This clause is very important in terms when any dispute arises between the parties, this clause states which law governs this agreement. For example, if the agreement is executed in Mumbai and the property is situated in Mumbai then, Mumbai High Court shall have jurisdiction over the same. In the case of M/s Dhanrajamal Gobindram v/s M/s Shamji Kalidas and Co., AIR 1961 SC 1285, (1962) 64 BOMLR 169, 1961 3 SCR 1029 it was the intention of the parties which showed in the agreement that was considered as jurisdiction.

19. Entire agreement cause

The entire agreement clause means that this is the entire agreement and shall prevent either party from relying on any previous agreements, negotiations, or discussions that have not been set out in the agreement.

Conclusion

While these boilerplate clauses are standard in most contracts, they serve an important purpose in clarifying the relationships between the parties that is not mentioned in the operative part of the contract. Though these clauses can be confused with being the same they are not one size fits all kinds of clauses and most will be tempted to do just. These clauses should be carefully worded and drafted as per the needs of the Agreement so that the rights and obligations of both the hospital and the medical college do not overlap with each other.

References

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

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Protective discrimination under the Indian Constitution

Diganth Raj Sehgal

August 27, 2021

uk-discrimination-cases-1200-627 — Image source: https://bit.ly/38mq4OS

This article is written by Anannya Sinha, pursuing BBA-LLB from Symbiosis Law School, Noida. In this article, she talks about protective discrimination that is practised in India and the need for this discrimination.

Table of Contents

Background and meaning of protective discrimination

India has had a long past of oppression and suppression. Certain communities have always been discriminated against, whether it be in the puranic times, the era of monarchy or British rule. These communities were exploited for long and their sufferings have been silenced by the influential non-discriminated people of the society. They were so underprivileged that they lost all financial authority and were forced to live a life of poverty for generations after generations.

The makers of the Indian Constitution dreamt of a society where everyone is treated as equal and no one is exploited based on their colour, caste, sex or race. This dream still remains a dream for many. Thus, the makers of the Constitution applied their judicial mind for an affirmative action that would potentially accomplish the desired object. It was the idea of protective discrimination that added a new dimension to a great socio-economic manoeuvre.

The policy of protective discrimination is a way to ensure social justice in society. The scheduled castes, scheduled tribes, other backward classes, and women are the most exploited and discriminated groups in Indian society, and the Constitution hence aims at making their lives better by providing them with some special privileges.

These actions are justifiably enshrined in the Constitution of India as “Protective Discrimination”. Protective Discrimination as an idea has been practised by many civilized nations including developed nations like the USA because of their dark history of racial discrimination.

In India, these special provisions for the downtrodden and exploited are provided as reservations or quotas in educational institutions, jobs, and parliamentary privileges and it commands the legislatures to legislate special provisions for their overall advancement.

Need for protective discrimination for backward classes in India

The Supreme Court in Marri Chandra Sekhar Rao v. Dean Seth G.S Medical College (1990) held that equality must be a living reality for the people. Those who are unequal in status and opportunity cannot be treated by identical standards.

To add to the problem, Indian society discriminates against some communities most prominently based on the institution called the caste system. The caste system is a deep-rooted social problem that dates back centuries ago. Even though the Constitution prohibits discrimination against these groups but, the legal position apart, the caste system is still the order of the day and this is the sad undeniable truth. Lower castes have to serve the upper castes without having any say and grievance redressal mechanism. This inhumane and barbaric condition perpetuated for centuries, till “we the people” realised the malady impelling the legal mechanism to make laws, suggest amendments and make the lives of these people better and try to bring them to the same pedestal that all of us stand on.

Previous protective discrimination laws and provisions in India

Some of the constitutional provisions which aim at positive discrimination are:

Article 17: Abolition of “untouchability” and making its practice in any form a punishable offence.
Article 46: Promotion of educational and economic interests.
Article 16 and 335: Preferential treatment in matters of employment in public services.
Articles 330 and 332: Reservation of seats in the Lok Sabha and State Assemblies.

Two Constitutional Amendments have been incorporated into Article 16(4). The 77th Amendment to the Constitution has taken effect, allowing Scheduled Castes and Scheduled Tribes to be given preference in promotions. As a result, Parliament has erased the premise that an appointment does not imply promotion, as defined by the Supreme Court in Indira Sawhney, by modifying the Constitution. The 81st Constitutional Amendment also brought changes in Article 16(4)(B), which states that “Nothing in this article shall prevent the State from considering any unfilled vacancies of a year which are reserved for being filled up in that year in accordance with any provision for reservation made under clause(4).”

Article 16(6) was introduced by the Constitution (One Hundred and Third Amendment) Act, 2019, which states that “No government authority or any other person or authority shall prohibit the state from making any laws related to the reservations of economically weaker sections; The laws made for their reservation should not exceed ten percent.”

The Karachi Resolution’s socio-economic provisions influenced the Constituent Assembly’s writing of Part IV of the Indian Constitution, the Directive Principles of State Policy. The Congress believed that to overcome mass exploitation, political freedom must also involve actual economic freedom for the starving millions.

Article 15(3) of the Constitution allows the state to make special laws for women and children and Article 15(4) allows the state to make laws and provisions for the socially and economically backward classes for their improvement. Article 15(5) enables the state to make reservations in educational institutions.

Further, Articles 15 and 16 deal with reservations for these economically and socially backward classes for their upliftment.

Article 336 provides for the protection of rights of the Anglo-Indian Community in appointments in various sectors including railways, postal services, and customs.

Reservation and protective discrimination – is it a permanent right granted to the backward classes?

Who can disagree that working for the government is both a luxury and an opportunity for any underprivileged individual to advance economically and socially? Apparently, in light of this crucial element, the demands of members of the scheduled castes, among others, will be considered compatible with the maintenance of administrative efficiency, in the making of appointments to services and posts concerning the activities of the union or a state, according to Article 335 of our Constitution.

The Supreme Court in All India Anna Dravida Munnetra v. Union Of India (2020) refused to accept a series of petitions demanding the implementation of a 50% reservation for “Other Backward Classes (OBCs)” in state-funded seats in the all-India quota for UG and PG medical courses in TamilNadu, stating that “reservation is not a fundamental right.” The Apex Court has held multiple times this year in a series of decisions that reservation is not a fundamental right.

Hence, the right to receive reservation in government offices, educational institutions and various other organisations is at the discretion of the law-making bodies and not a permanent right that people from the socially and economically backward sections of the society can demand.

Creamy layer concept

In Indian politics, the term “creamy layer” refers to some members of a backward class who are highly progressed socially, economically, and educationally. They are the most forward-thinking members of that backward class, as forward-thinking as any other forward-thinking members. The word was first used in the Indra Sawhney case (1992) to refer to the reservation of jobs for certain groups in 1992.

The classification for differentiating the creamy layer from that of the rest of the community is the family income. This classification is valid and applicable for the OBC community only. Those from scheduled castes (SCs) and scheduled tribes (STs) are exempted from this classification, and always receive the benefits of reservation, regardless of family income.

This has always been an issue of debate. People who do not obtain such reservations, as well as many others, believe that even the ST-SC community should be included in the creamy layer policy before receiving any additional benefits such as reservations. What they fail to consider is the constant stereotype and mental agony that accompanies them to date because of the prevailing casteism in Indian society. This only pertained to reservations in promotion; the rest remained unchanged. The federal government filed a new appeal at the Supreme Court in December 2019.

Important case laws related to protective discrimination

In Mohan Kumar Singhania v. Union of India (1991), the Supreme Court explained that Article 16(4) is an enabling article that gives the state freedom to make any provision or reservation for any backward class of citizens that is not adequately represented in the state’s service. The state government takes the total population of the backward class and their representation in state services, does the appropriate calculations, and then makes the reservation and provides the percentage of reservation for the posts, which must be carefully adhered to.

In Triloki Nath v. J & K State (II) Shah (1973), the bench stated that ‘a test primarily based on caste, community, race, religion, sex, descent, place of birth, or residency cannot be used to determine whether a section represents a class for the purposes of Article 16 (4) since it would directly violate the Constitution.’

In A. Peeriakaruppan, etc. v. State of Tamil Nadu (1970), the Supreme Court stated that ‘A caste has traditionally been considered a social group. If an entire caste or community is socially, economically, or educationally backward at any given period, that caste or group is considered a backward class. This is because they form a class, not because they are members of that caste or group.

In the case of Jagdish Negi v. State of U.P (1997), it was stated that backwardness is not a one-time occurrence. It can’t go on indefinitely, and the government has the right to examine the issue at any point.

Conclusion

The Constitution of India, through various laws and provisions, aims at eliminating disparities between different sections of the society and providing equality of status and opportunity to all. In India, there is a growing discussion about positive discrimination. A democracy, on the other hand, is not restricted by logic or ethics because it is fundamentally a social creation. A nation cannot flourish if a significant portion of its population falls behind in the development race and, as a result, is unable to benefit from the equality of opportunity granted to all Indian citizens as a fundamental right.

The long-disputed challenge of preserving the rights of both historically oppressed and socially and economically disadvantaged individuals, as well as the privileged section, has long been debated. Because of its hierarchical hierarchy and brutal caste system, India has a grim history of oppression and violence. Even though the country and we Indians have been independent for seventy-four years and even as we Indians enter the age of liberalization and globalization, the social system and mindset of the masses have remained the same.

Understanding the very nature of the society, there should be different laws, applying differently in different places and circumstances. Application of the same laws parallel to everyone irrespective of socio-economic differences may result in violation of the spirit of the right to equality.

Henceforth, protective discrimination, as a constitutional tenet for protection and preservation of the rights of scheduled castes, scheduled tribes, and other backward classes of citizens as well as women, is highly recommended in our society. Let us hope that the authorities in charge rise to the occasion and ensure an accelerated intake of these people into government services and posts by closing all loopholes.

References

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Analysis of the HIPAA Privacy and Security Rule under the US Cyber Law

Abanti Bose

August 27, 2021

HIPAA_1996.5c64885117c19 (1) — Image Source: https://rb.gy/gaswps

This article is written by Sanjana Rao, pursuing Diploma in Cyber Law, FinTech Regulations, and Technology Contracts from LawSikho.

Introduction

HIPAA commonly misspelt as HIPPO and misunderstood as regulation with a solitary purpose to burden and scam healthcare professionals are actually revolutionary legislation that regulates all aspects of the US Healthcare system, to keep up with digitalisation in the field of medicine. HIPAA stands for Health Insurance Portability and Accountability Act.

Passed in 1996, HIPAA is a comprehensive law of the United States, which merged the requirements of several other statutes, including the Public Health Service Act, the Employee Retirement Income Security Act, and the Health Information Technology for Economic and Clinical Health (HITECH) Act. It aims at improving the efficiency and effectiveness of the US healthcare system by giving patients more control over how their personal data is processed and stored, while also pushing healthcare organisations to adopt and shift to secure digital technology. It also contains a number of provisions pertaining to transferring health insurance policies between businesses and medical account tax rules. However, HIPAA serves as a floor law, which means that states can layer additional regulations and restrictions on top of it.

Objectives and purpose of HIPAA

To enhance the portability of health insurance of citizens while switching jobs. Hence, P in HIPAA stands for “Portability”.
To safeguard patient data, protect patients’ and health plan members’ privacy, and grant individuals control over their own healthcare information.
Another objective of the HIPAA Privacy Rule was to make it easy for anyone to get access to their health information for a low, cost-based price. Individuals can obtain a copy of their own medical information to examine or share with others. They can check their records and call for rectification of errors.
To ensure that electronically protected health information (ePHI) is appropriately protected, that access to ePHI is regulated, and that an auditable trail of PHI activity is kept.
To notify individuals or concerned entities when there is a breach of data.
To ensure interest on life insurance loans is taxed, group health insurance requirements are enforced, and to clarify that amount that individuals can put into a pre-tax medical savings account which is standardised.

It is imperative to know that HIPAA covers only the Personal Health Information of individuals. It applies only to covered entities as mentioned in the legislation and like most laws, has exceptions as in when health information can be disclosed without individual authentication. Data that is not individually identifiable is not covered and any health data an individual holds is not subjected to HIPAA. It is also worth mentioning that Health tracking apps do not come under the purview of HIPPA.

Important terms in the Act

Any data that may be used to identify, contact, or locate a specific person, whether alone or in combination with other widely available sources, is considered personally identifiable information (PII).In short, is any individually identifiable health information. Examples include the phone number, address social security, health records, payment history and so on.

Protected Health Information

Protected Health Information (PHI) comprises eighteen “Individually Identifiable Health Information” that, alone or in combination, could reveal a patient’s name, medical history, or payment history.

HIPAA defines “protected health information” as individually identifiable health information that is:

Transmitted by electronic media;
Maintained in electronic media; or
Transmitted or maintained in any other form or medium.

Covered entities under the HIPAA

Any entity or individuals who come under the ambit of HIPAA are called “covered entities”. They include:

Health plans

Individual and group health insurance plans that provide or pay for medical care are considered covered entities. Health insurers, health maintenance organisations (HMOs), Medicare, Medicaid, Medicare+Choice, and Medicare supplement insurers, and long-term care insurers are all examples of health plans (excluding nursing home fixed-indemnity policies). Employer-sponsored group health plans, government and church-sponsored health plans, and multiemployer health plans are also included.

Health care providers

This includes doctors, psychologists, nurses, dentists, nursing homes provided they transmit any electronic data in conjunction with a transaction for which HHS has established a standard.

Health care clearinghouses

Organisations who convert nonstandard health information received from another entity into a standard (i.e., standard electronic format or data content) or vice versa. Clearinghouses can assist in the consolidation of numerous workflows into a single platform and services.

Business associates

Any contractor or service provider to a covered entity. Services like claims processing, data analysis, data utilization and billing of PHI undertaken by any organisation for any of the above entities, would fall under this category. Business associate agreements should be entered into between the organizations.

Five main components of HIPAA Regulations

HIPAA regulations focus on five main components:

Privacy Rule: This sets limitations and conditions on the uses and disclosures of PHI on covered entities. It also covers various rights to patients over their health records.
Security Rule: This is one of the most extensive rules which establishes a national set of security standards for protecting health information. It also provides technical and technical safeguards that covered entities must put in place to safeguard PHI.
Enforcement Rule: This is a newer part of HITECH in 2009. It strengthens civil and criminal enforcement of HIPAA rules significantly by increasing monetary penalties for violations.
Breach Notification Rule: This requires HIPAA covered entities and their business associates to notify the required parties when any sort of a breach occurs within a reasonable time.

Privacy and Security Rules of HIPAA

This article aims to focus on Privacy and Security Rules of HIPAA:

Privacy Rule

Enacted in 2002, the Privacy Rule aimed at safeguarding patient healthcare information confidentiality. Healthcare plans, healthcare clearinghouses, and Business Associates with access to Protected Health Information are all covered by the HIPAA Privacy Rule.

The Privacy Rule’s main purpose is to ensure that people’s health information is appropriately protected while permitting the flow of health data needed to provide and promote high-quality care and protect the public’s health and well-being. The Rule achieves to strike a balance between allowing vital uses of data while also preserving the privacy of persons seeking care and healing by establishing rules of disclosure for PH like mandatory, permissive and authorized disclosures.

Purpose and features of the Privacy Rule

Photographs and videos containing any individually identifiable health information, along with PHI saved electronically come under the HIPAA Privacy Rule. This means that if a healthcare provider takes a photograph of a patient’s wound, and the patient’s identity can be recognised by any distinguishing feature – the patient’s identity can be determined and would be regarded as PHI.
Minimum necessary rule: This guideline states that PHI must only be disclosed to the extent necessary for the indicated purpose. In the healthcare setting, when it may be necessary for a healthcare provider to access a patient’s complete medical history, there are exceptions to the rule. However, even when the patient has provided their consent for their medical records to be made available for research, marketing, or fundraising purposes, non-routine disclosure requests must be assessed on a case-by-case basis. Without a patient’s specific written authorization, a covered entity may disclose PHI to aid treatment, payment, or health care operations (TPO) under the HIPAA Privacy Rule.
The Privacy and Security Rules of HIPAA require covered institutions to notify individuals of PHI usage. In addition, covered entities must maintain track of PHI releases and record their privacy policies and procedures. They are required to appoint a Privacy Officer and a point of contact for concerns, as well as train all members of their workplace on PHI practises. An individual who believes that HIPAA Privacy Rules are not being followed can file a complaint with the Department of Health and Human Services’ Office for Civil Rights (OCR). The reporting information must be included in the organization’s Notice of Privacy Practices, which is given to patients or posted in a prominent location such as a doctor’s waiting room.
The HIPAA Privacy Rule protects a large amount of “Individually Identifiable Health Information.” Individually identifiable health information, which is frequently accessed by insurance providers and clearinghouses for billing purposes, comprises not only names, addresses, dates of birth, and Social Security numbers, but also credit card information and vehicle registration numbers.
PHI can only be released to a third party with the patient’s permission unless it is related to the individual’s treatment, payment or healthcare-related operations. (apart from exceptions of law enforcement or public health-related activities). The HIPAA Privacy and Security Rules are one of the most crucial components of the law. Healthcare organisations must be extremely cautious in their attempts to preserve patient PHI.

Security Rule

The HIPAA Security Rule includes security measures for privacy, integrity, and availability of patients’ electronic protected health information (ePHI). Covered entities are expected to adopt reasonable and suitable security policies in order to comply with the Security Rule along with accessing the security concerns in the entity’s environment and developing appropriate solutions. What is reasonable and appropriate depends on the size, complexity, and resources of the organization. To keep ePHI safe in an ever-changing environment, one is required to examine and update procedures on a regular basis. The HIPAA Security Rule leaves it up to entities to determine what measures are required for their particular company.

All covered entities must do the following to comply with the HIPAA Security Rule:

Ensure that all electronically protected health information is kept private, secure, and accessible.
Detects and protects against any risks to the information’s security.
Protect against potential unauthorised uses or disclosures.
Certify compliance at the workplace.

However, the HIPAA Security Rule leaves it up to entities to determine what measures are required for their particular company.

Enforcement of Security Rule

The Department of Health and Human Services (HHS) has authorized the Center for Medicare and Medicaid Services (CMS) national authority to enforce the HIPAA Security Rule.

The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 holds both covered companies and business partners liable to the Department of Health and Human Services (HHS) and individuals for properly securing confidential patient information.

Components of the Security Rule

The HIPAA Security Rule was introduced in 1998, but the compliance swung into effect in 2005. The HIPAA Security Rule regulates the protection of electronically protected health information (PHI).

Three types of safeguards are required by the HIPAA Security Rule.

Technical safeguards

HIPAA-compliant organisations must develop policies and processes to ensure that electronically protected health information (ePHI) is protected when it is used, stored, or transmitted. Firewalls, encryption, and data backup are examples of technical safeguards. It is further classified into:

Access: Sensitive and confidential information can only be accessed by authorised personnel. Covered entities and business associates should consider whether they have reasonable and appropriate access policies, controlled physical access to workstations, data, media, and equipment, and reasonable and appropriate technical access controls, such as secure passwords when evaluating their access controls.
Audit: within the information systems, refers to actions for documenting and examining activities relating to ePHI.
Authentication: The identity of the company or individual seeking access to the protected data must be verified.
Integrity: requires rules and procedures to prevent data from being tampered with or destroyed without authorization.

Administrative safeguards

Administrative safeguards include procedures and policies which aid in protection against a breach in data. They decide on documentation procedures, roles and duties, training needs, and data maintenance rules, among other things. These safeguards necessitate the appointment of an ePHI privacy officer and security officer, as well as the definition of how to control the workforce. Risk analysis as a part of security management activity is one of the mandates of this safeguard. Administrative precautions account for more than half of HIPAA’s Security Rule.

The case of Cedar Springs Hospital in Colorado Springs is an example of crucial administrative precautions. As part of a survey, the hospital gave a storage device containing unencrypted PHI to a representative from the Colorado Department of Public Health and Environment in late 2020. Unfortunately, the officer misplaced the device, placing the information at risk of being misused. Because the data was not encrypted, the hospital was required to file a notification report.

Physical safeguards

Physical safeguards for computer equipment include things like doors, walls, locks, and guards. Access to hardware and data centres where electronic protected health records are kept or transmitted is restricted by physical measures. Ensuring signing in of visitors, verification of their ID’S, guarding of restricted areas is a part of physical safety measures. Another example of a physical safeguard for encryption keys is the use of biometrics.

How is HIPAA Privacy Rule different from HIPAA Security Rule?

Although the HIPAA Privacy and Security standards operate together to protect sensitive patient data, they are distinct and serve different goals. The Privacy Rule establishes the criteria for who may have access to PHI, while the Security Rule establishes the criteria for ensuring that only those who should have access to EPHI do so.

The HIPAA Privacy Rule is all about the individual and their right to determine how their personal information is utilised. Medical organisations can use sensitive information for essential activities including operations, treatment, and payment. Aside from that, the information must be kept private. The Privacy Rule assures that all kinds of Protected Health Information (PHI), including physical copies, electronic copies, and information conveyed orally, are protected and kept private.
The Privacy Rule covers all types of protected health information held by patients, whether electronic, written, or oral. The Security Rule, on the other hand, only applies to electronically protected health information that is created, received, stored or transmitted. Regular risk assessments and having policies in place to maintain the security of electronic data are some of the specific parts of the Security Rule. These policies should cover password management, change auditing, email handling, among other topics.

Significant case laws

Project Nightingale case

A business associate agreement was entered into between Ascension wherein Ascension wanted to migrate its healthcare data onto the Google cloud. This agreement, which was initially thought to be a breach of HIPAA, was concluded to be full HIPAA compliant and the relationship between the parties was found to be common and legal.

Maryland Hospitals case

Under HIPAA, two hospitals in Prince George’s County, Maryland, infringed on the rights of 41 patients to access their medical records. Patients can seek copies of their medical records under HIPAA, and healthcare providers must comply within 60 days without charging a fee. Each hospital refused in this case, culminating in a $3 million settlement as the first OCR penalty for Privacy Rule breaches. Their punishment was made worse by their refusal to cooperate, resulting in the maximum penalty for “willful neglect”.

Walgreens Pharmacists case

A Walgreens pharmacist broke the HIPAA statute in 2014 when she provided sensitive medical information about a customer who had previously dated her husband. This case shows that firms can now be held liable for their workers’ acts. This ended in a 1.4 million dollar award settlement.

CHSPSC case

In April 2014, admin credentials were hacked to gain access to the systems of CHSPSC LLC, a Tennessee-based management business that offers services to various Community Health Systems subsidiary hospital operator corporations and other affiliates. The hackers got access to the ePHI of 6,121,158 people. OCR conducted an investigation and discovered widespread noncompliance with the HIPAA Security Rule. CHSPSC had not conducted a comprehensive risk analysis, had not conducted information system activity checks, and had insufficient access restrictions and security incident response processes in place. It took CHSPSC two months to respond after the FBI informed them of the cyberattack. CHSPSC LLC paid a $2,300,000 penalty and adopted a corrective action plan to address all areas of noncompliance.

Conclusion

The HIPAA Privacy and Security Rules are one of the most crucial components of the law. Healthcare organisations must be extremely cautious in their attempts to preserve patient PHI. However, in spite of being comprehensive in nature, it is not completely devoid of shortcomings. This federal law has failed to regard the rising use of social media in healthcare, as well as the increased use of telemedicine and other innovative services. And its enforcement is another case of “easier said than done”. A revision of HIPAA, considering the current and probable changes in medicine and technology, would make it one of the most beneficial and powerful legislations of the US.

References

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