Using AI for legal text analysis and natural language understanding

This article is written by Easy Panda. The present article provides an in-depth study of the case Marbury vs. Madison (1803), along with the facts, issues raised, and rationale behind the judgement. The article also explains the laws involved and provides an analysis of the judgement given.

Introduction

“Judicial Review has developed as a way for individuals to challenge decisions taken by the state.” – Chris Grayling

Judicial review refers to the power of the judiciary to review and assess the validity of any law or order passed by the legislation of a country. It is a kind of idea, according to the U.S. system, that the acts of the executive and legislative bodies of the government are subjected to review and possible abrogation by the judiciary. It is a power enjoyed by the courts to declare any law as unconstitutional if it violates or is against the basic principles of the Constitution. There is no such specific section present in the constitution which particularly discusses the power of judicial review.The case of Marbury vs. Madison is the first case in world history from which the concept of this doctrine arose. It was the first Supreme court case where there was a decision made to shoot down the act of Congress as invalid and unconstitutional.

There was a famous line given by the Chief Justice John Marshall: “It is emphatically the duty of the Judicial Department to say what law is. Those who apply the rule to particular cases must, of necessity, expound and interpret the rule. If two laws conflict with each other, the Court must decide on the operation of each.”

Details of the case

Case Name: Marbury vs. Madison (1803)

Case Type: Constitution case

Equivalent citations: 5 U.S. (1 Cranch) 137; 2 L. Ed.60 (1803)

Acts involved: Constitution of United States and Judiciary Act of 1789

Important provisions: Article 1 and 3 of the US Constitution and Section 13 of the Judiciary Act of 1789

Court: US Supreme Court

Bench: Chief Justice John Marshall, along with Associate Justices William Cushing, William Paterosn, Samuel Chase, Bushrod Washington and Alfred Moore

Date of judgement: 24 February, 1803

Laws involved

Judiciary Act of 1789

Section 13 of the Judiciary Act

Section 13 of the Judiciary Act of 1789 states that the Supreme Court of the United States shall have exclusive jurisdiction over all conflicts of civil nature where the state is a party, except the cases between the state and its citizens. In cases where the conflict is between a state and citizens of other states or aliens, the state will have original jurisdiction. The Section further states that in matters involving any suit or proceeding against the ambassadors, public ministers or their domestic servants, the court will have exclusive jurisdiction over those matters too. The trial in every such case will be held by a jury. The Supreme Court will also have appellate jurisdiction from the circuit court and the courts of several states. The Supreme Court has power under this section to issue a writ of prohibition to district courts where the conflict is related to admiralty and maritime jurisdiction. Along with the writ of prohibition, the Supreme Court can issue a writ of mandamus in cases involving principals and usages of law to any court appointed or any person holding office under the authority of the United States.

United States Constitution

Article 1 of the US Constitution

Article 1 of the US Constitution talks about the outline of the legislative branch of the US government, i.e., Congress. The major part of this Article talks about the separation of power between the different branches of government, the election process of the Senators and other representatives, the lawmaking process and the power of Congress. This Article contains 10 sections. A brief overview of every Section of this Article is mentioned below.

Section 1 – it states that every legislative power will be available to the Congress, which shall comprise the Senate and House of Representatives.

Section 2 – it talks about the membership requirement for the House of Representatives. This Section prescribes minimum qualifications and their tenure.

Section 3 – this Section talks about the appointment of senators from every state and their voting rights.

Section 4 – this Section talks about the time, place and manner of holding elections for the Senators and the Representatives.

Section 5 – this Section prescribes rules for the legislative proceedings of the Senate and House of Representatives.

Section 6 – this Section talks about the privileges and benefits to which the Senators and representatives are entitled after the performance of their duties.

Section 7 – it states that every bill related to revenue shall originate in the House of Representatives. However, the Senate has the power to propose amendments to any other bill.

Section 8 – it talks about the power of Congress with respect to the imposition and collection of taxes for the welfare and defence of the nation.

Section 9 – this talks about the prohibition of Congress from legislating in certain areas, such as the importation of slaves before 1808.

Sectio 10 – this Section prohibits the State from keeping any troops, ships, etc. without the consent of Congress.

Article 3 of the US Constitution

Article 3 of the US Constitution talks about the establishment of a federal judiciary. The Article contains 3 Sections, which are discussed in brief.

Section 1 – this is the vesting clause of the Constitution, which states that the judicial power of the United States will be vested in one Supreme Court and in other lower courts, which will be established from time to time by Congress.

Section 2 – this Section talks about the jurisdiction of the court and states that the trial of the cases will be held by the jury, except in cases of impeachment.

Section 3 – this Section talks about the crime of treason, which is defined as the involvement of any person in going to war against the United States or giving aid in doing so to an enemy.

Background of case

It was written over 200 years ago that the language in the decision can be difficult to analyse for modern readers. It is also very difficult to extract its importance without knowing the circumstances under which it was decided. Auspiciously, the elemental facts of the case are interesting, at least if one likes political chicanery involving the Founding Fathers. Politics at the time of 1800 were contentious in nature.

The case of Marbury vs. Madison is a landmark in the history of American Judiciary. The case involved a dispute between the federalist leader John Adams and Democratic republican leader Thomas Jefferson. The then Chief Justice, John Marshall, presided over the case and gave a judgement that opened doors for the concept of judicial review in America and for the world.

Facts of the case

The facts of the case started in the late 1790 and early 1800s, when American political life revolved around Federalist leader John Adams and Democratic Republican leader Thomas Jefferson. The democratic republicans defeated the federalists in the Congressional and Presidential elections of November 1800 but in spite of the loss, the federalists held the position until March 1801.

With the extra time for which the Federalists held the position, they created several new judicial positions to which the Federalist President John Adams attempted to appoint his close allies. These appointments were done to influence the Democratic Republic government when they were not in power. These appointments of the so-called temporary judges sparked controversy in America.

In the meantime, Oliver Ellsworth, the Chief Justice of America, also resigned from his post due to health issues shortly after the presidential elections. John Adams saw this as an opportunity to fill the vacant position by appointing one of his allies. He asked John Jay to fill the vacant position. John Jay, who had previously served in the office of Chief Justice but had resigned from his post to become the Governor of New York in 1795, turned the position down.

Later, John Adams appointed Marshall, who was his Secretary of State to the post of Chief Justice. The Senate was quick to appoint Marshall to the post. However, even after his appointment as Chief Justice, he continued to serve as secretary of the state. The federalist Congress adopted the Circuit Courts Act on 13 February 1801. This legislation brought changes to the federal judiciary by replacing Supreme Court Justices of circuit duty and reducing the number of Supreme Court judges to five from six. It also established six new circuit courts with sixteen judges. These judges were appointed by John Adams and were quickly approved by Congress. All these events happened before Democratic Republican leader Thomas Jefferson could take over the office.

On 2nd March 1801, a day before his tenure as President, John Adams appointed William Marbury to the newly created post of justice of peace in the District of Columbia. The Senate approved his appointment the next day. Adam duly signed the document stating the commission of Marbury and fixed an official seal to the document.

Marshall’s brother James was supposed to deliver the commissions to the judges appointed under the Circuit Courts Act. However, while delivering the commissions, when he found that he could not carry every document, he left several documents, including Marbury’s commission letter.

Later, when Thomas Jefferson assumed office, he ordered his new secretary of state, James Madison, to hold up all the commissions that were not delivered. This included the commission letter from William Marbury.

On 21 December, 1801 William Marbury filed a suit in the Supreme Court, seeking a writ of mandamus to force James Madison to deliver the commission letter, stating that he had no right to withhold the appointment.

Issues raised

The following issues were raised in the case of Marbury vs. Madison, (1803)–

Is William Marbury entitled to judicial commission?
Does the law provide any remedy for William Marbury?
Was the writ of Mandamus an appropriate remedy from the Supreme Court?

Judgement of the case

After the matter went to the Supreme Court, James Madison declined to appear in court on the belief that the Court did not have any authority to ask him to give Marbury his commission. So the court only heard the arguments of Marbury, who was represented by Charles Lee, who had earlier served as an Attorney General under John Adams.

John Marshall was in charge of writing an opinion for the unanimous court. He agreed with the first two issues regarding the entitlement of judicial commission to Marbury and the provision for providing a remedy to him. The Court held that once the commission has been signed and sealed, Marbury has been appointed as a judge. The delivery is just a mere formality that is bound to be performed by James Madison. With regard to the third issue, the Court found that it has the power to issue the writ of Mandamus as it is conferred to it by the Judiciary Act of 1789. However, John Marshall opined that this grant of power exceeded the Court’s jurisdiction under Article III of the Constitution.

Rationale behind the judgement

Does William Marbury have the right to obtain a commission as a judge

The court gave the following reasoning with regard to the first issue of the entitlement of judicial commission to William Marbury. The right of entitlement of the judicial commission originated after the Circuit Court Act was passed by Congress in February 1801, which was concerned with the District of Columbia. The 11th section of this law talks about the establishment of Justices of Peace, whose judges shall be appointed by the President of the United States for a period of five years. It was clear from the affidavit provided that William Marbury was appointed as a Justice of Peace by John Adams, the then President of the United States with a seal attached to it. But he never got the commission.

In order to determine his claim for entitlement of commission, it was necessary for the court to check that he had been duly appointed to the office. Section 2 of Article II of the American Constitution deals with the power of the President to appoint ambassadors and other public ministers of the United States whose appointments are not mentioned in the Constitution.

Section 3 of Article II of the US Constitution deals with the commission of the officers of the United States. It requires the Secretary of State to keep the seal of the United States, which will make out, record and affix the seal to all civil commissions of the United States which are appointed by the President with the consent of the Senate or solely by the President. Though this clause of the Constitution has only been applied to the officers who were appointed by the President itself, its legislative power cannot be denied under any circumstances.

The above mentioned provisions talk about three distinct operations, i.e., nomination, appointment, and commission.

Now the question before the Court was whether Section 2 and Section 3 of Article II of the US Constitution would be conclusive in nature. The court gave the answer that every act of the President that shows that he has followed all the protocols does not require any further evidence. The last act of the President is signing the commission, after which he acts on the advice and consent of the Senate. The officer is appointed only after the Senate approves the nomination.

After the commission is signed, it is the duty of the Secretary to hand it over to the concerned person. This duty is guided by the law and not by the will of the President. It should be understood that the formality of affixing the seal is necessary not only for the validity of the commission but also for the completion of the appointment. The court agreed that no other formality is needed on the part of the government.

The court found that the commission contains the date and salary of the officer and is not a document that provides the transmission or acceptance of his post. When any person who is appointed to any office refuses to accept the office, a new person is appointed in the place of the person who has declined to accept the office and not in the place of the original person who had previously held the office and had created the original vacancy.

The Court finally decided that when a commission has been signed by the President and an appointment is made, the commission is said to be complete as soon as the seal of the United States has been affixed to it by the Secretary of State. This gave Marbury the right to hold the office for five years, irrespective of the opinion of the executive. The withholding of commission is an act that is deemed by the Court not warranted by law, but is a violation of the legal rights of William Marbury.

Does William Marbury have any legal recourse

The reasoning of the Court with respect to this particular issue—whether any remedy is available to William Marbury if his rights have been violated is stated further. The Court found that the basic feature of civil liberty is to claim protection from the laws whenever there has been a violation of any law. The foremost duty of any government is to provide that protection. The Court took the example of Great Britain, where the king is sued in the respectful form of a petition and he never fails to comply with the judgement of the court.

The Court also referred to the commentary of Blackstone in his third volume, where he stated two cases in which the remedy was given by a simple operation of law. He said that in every case, there is a general and undisputable rule that whenever any legal right is violated, there is a legal remedy by suit or by law to compensate for it. He goes on to say that such injuries that are cognizable by the courts of common law and do not fall under the ambit of ecclesiastical, military or maritime tribunals have a settled principle in law that they must provide a remedy.

The United States government is known as a government of laws and not of men. If the law does not provide any remedy for the infringement of vested legal rights, it will certainly lose its status. It is the duty of the court to inquire whether there is any circumstance that can prevent the injured party from getting legal benefits.

The Court found that the American Constitution has given some political power to the President, which he can use at his own discretion to perform. He is authorised to appoint certain officers who can help him in the performance of his duty. These officers act according to the orders of the President. The acts of these officers are considered to be the acts of the President. The Court, through this statement, meant to say that though the heads of the departments are political agents of the executive to execute their will, whenever a specific duty is assigned by law to them and some individual’s right is dependent on the performance of their duty, this is totally clear that the individual has a right to claim against them if he considers himself injured by their performance or non-performance of their duty.

In the present case, the power of appointing the Senate and any other officer is a political power which is exercised by the President according to his own discretion. If, by virtue of law the officer is removed by the President, then a new appointment may be immediately made and the rights of such officer is ceased. But the fact can not be changed that he possessed such rights. The question of whether a right is available or not is decided by the court. Mr. Marbury had taken an oath as a magistrate and therefore was required to act accordingly.

The court was of the opinion that the signing of the commission of Mr. Marbury as a Justice of Peace was done by the President of the United States. The seal of the United States affixed by the Secretary of State is conclusive proof of the appointment. Mr. Marbury has a legal right to the commission and the refusal to deliver such a commission is a violation of the legal right for which the law of the country provides him a remedy.

Was the Supreme Court’s writ of mandamus a proper remedy

With regard to the third issue of whether Mandamus was an appropriate remedy by the Supreme Court, the Court looked at the definition of Mandamus in the third volume of commentary by Blackstone. According to Blackstone, Mandamus is a command issued in the name of the king from the court of his bench to direct any person, corporation or lower court within his jurisdiction to do some particular kind of thing related to their official duty that is consonant to right and justice.

The Court determined the use of this writ through the case of King vs. Baker, (1994). where Lord Mansfield said that whenever there is a right to execute an office, perform a service or execute a law that is a matter of public concern or is related to profit, and the person is kept out of the possession of or is dispossessed of such right, then, due to the lack of any specific remedy, the court declares the writ of Mandamus for the fulfilment of justice. The Court further went on to say that in the absence of any specific legal remedy, the writ of Mandamus can be issued for justice and good governance.

Apart from the authorities, the Court relied on various other sources to prove the usage of this writ in various other circumstances. The Court found that in this case, Mr. Marbury was the proper person because his rights had been violated and no proper legal remedy was left to him.

The Court analysed the requirements for this case. The Court looked upon an Act passed in 1792 which directed the secretary at war to put the names of disabled soldiers on the list of pension holders. Those soldiers were required to be reported to him by the circuit courts. Though the duty imposed on the court was deemed to be unconstitutional, some of the judges executed the law in the character of commissioners. Now the question arose that the persons reported by the judges acting as commissioners are entitled to the benefits. The Congress further passed an act in 1793 after making amendments to the Act of 1792 which made the duty of secretary of war with the help of attorney general to take such steps which could be necessary for the adjudication of the Supreme Court of the United States on the validity of an appointment claimed under the Act. After this legislation was passed, the writ of Mandamus was directed to the secretary at war, commanding him to put every person on the pension list whose names were mentioned in the report made by the judges. This proved that the issuance of a writ of mandamus for the violation of any legal right is used by the highest court of the United States.

The Court was earlier in doubt whether the mandamus would be a proper remedy for Mr. Marbury for the withholding of his commission. But since the applicant was entitled to the position, the court’s uncertainty was resolved. Mr. Marbury was supposed to join the office either by obtaining the commission or a copy of it from the record.

The court found that the legislation that establishes the judicial courts of the United States gave it the power to issue the writ of Mandamus in cases where, by the principles and usage of law, any person holding the office under the authority of the United States is a public official or corporation, tribunal, any inferior courts or government. The secretary of state is a person who holds the office under the authority of the United States and if the court is not authorised to issue the writ to such an officer, it can only be because of the unconstitutionality of the law.

The distribution of power in the United States declares that the Supreme Court has original jurisdiction in all cases that involve ambassadors, other public ministers, counsels or cases where a state is a party. Except for the cases mentioned, the Supreme Court has appellate jurisdiction.

In the present case, Marbury’s case was in no way coming under the purview of an appeal from a lower court, so he had to prove to the Court that it was within the Court’s original jurisdiction. However, William Marbury was not able to prove the same and therefore, the Court was of the opinion that Congress could not give the Court powers that were not included in the Constitution. So the part of the Judiciary Act that gave the court the power to hear original suits through the writ of mandamus is unconstitutional.

Critical analysis of the case

The case of Marbury vs. Madison is one of the landmarks in the history of the American legal system. However the case can be subject to certain criticism, such as the court should first look upon the jurisdiction of the case. The court should first resolve the preliminary question of whether it has the authority to try the case. Marbury has approached the court on the basis of Section 13 of the Judiciary Act of 1789, which, according to him, granted power to the court to issue the writ of mandamus. If the court in the first instance solved this issue, the matter would not have proceeded at this extent.

The second criticism is that the Chief Justice, John Marshall, should not have adjudicated this case because he was involved in the background of the case. The Court took time to decide whether Marbury’s commission was signed and sealed before it was withdrawn to determine his vested interest. However, it was clear from the fact that Marbury’s appointment and commission were known to Chief Justice John Marshall and the commission was planned to be furnished to Marbury by his younger brother James, who had been in the office of Secretary of State.

Another criticism of the case is with respect to the process that John Marshall took to reach the conclusion that the US Supreme Court has superiority over other branches of the US government. In today’s time the American courts follow the principle of constitutional avoidance, which means that if any interpretation of a law raises concern about some constitutional problems, they look for an alternative interpretation to avoid those problems. John Marshall avoided these problems through different rulings, which delayed the proceeding. If the court had ruled that Marbury did not have any right until he was commissioned or vice versa, the court would not have reached the constitutional issues of the case.

Indian perspective on this case

The concept of judicial review in India has been accepted from the United States Constitution which is considered as one of the sources of the Constitution of India. The doctrine of judicial review provides power to the Supreme Court of India to strike down any law or provision made by the legislature of a state if it violates the basic structure of the constitution. This concept was interpreted and adopted in India for the very first time through the landmark case of Shankari Prasad vs. Union of India (1951) where the matter was heard by a six judge bench. Out of those six judges, five judges were against the amendment of the essential rights under the Indian Constitution. In this case, a challenge was made to the 1st Amendment Act (1951) on the grounds that the “Right to Property” was restricted. The Supreme Court in this case denied such an argument and held that this could not be implemented since the fundamental rights under Article 13 cannot be concise.

Whereas, in the case of Kesavananda Bharati vs. State of Kerala (1973), out of seven judges, six judges gave the majority opinion that the parliament’s flexible influence has and at all allocation of the Constitution can be amended and in this case they overruled the Golaknath case. In this case, the controversy of the Golaknath case was decided, and the court still agreed that the parliament is not restricted from amending the Constitution, but it also put an admonition of the doctrine of the basic structure. In this case, the Supreme Court held that essential rights can’t be altered by such a method, which will add to the fundamental construction of the Constitution. In this case, the court observed that the constitutional amendments are to be made by keeping the basic structure of the Constitution in mind.

In the case of Golaknath vs. State of Punjab (1967), the question was raised whether an amendment is a law and whether fundamental rights can be amended or not. The court held that the Constitution can’t be amended by the parliament just to take away the rights provided in Part III of the Indian Constitution. And this led to the passage of the 24th Amendment Act (1971), which unrestricted the parliament’s constitutional powers. Unlike the above mentioned cases, there are many more cases where the matter of judicial review was discussed in a detailed manner.

After the case of Indira Gandhi vs. Raj Narain (1975), judicial review is considered a basic structure of the constitution. However, the judicial review is subject to certain drawbacks, such as resulting in delays in the implementation of policies and weakening the trust and faith of the people in the government.

The scope of judicial review in India is limited as compared to the USA because judicial review in the USA is based on due process of the law, while Indian judicial review is based on the procedural establishment by law. The due process of the law can claim laws violative of these rights as void not only on a substantive ground of being unlawful, but also on a procedural ground of being unreasonable. Whereas Indian Supreme Court, while determining the validity of law, examines only the basis of substantial grounds, i.e., whether the law is within the powers of the authority concerned to it or not.

Conclusion

The case of Marbury vs. Madison had a lasting impact on the relationship between the US judiciary and Congress. This case was the first in history where the Supreme Court had used its power of judicial review against an act of Congress. The verdict of Marshall was widely applauded at a time when the judiciary was under constant pressure by Thomas Jefferson and his followers. Though this power was not specifically mentioned in the United States Constitution, many Federalists were in support of this concept.

Even after the newly declared power of judicial review, this concept was not used in America for a long time. However, with the passing of time, this concept gained importance and has now become one of the fundamental principles of democracy. India too adopted the concept of judicial review from America and used it for the first time in the famous case of Shankari Prasad vs. Union of India, (1951).

Frequently asked questions (FAQs)

What was the ideology of the Federalist leaders and Democratic Republican leaders?

The Federalist Party was in favour of centralisation, modernization and industrialization of power by creating a strong central government which could promote economic growth and upheld friendly relations with Great Britain instead of Revolutionary France. On the other hand, the Democratic Republican Party focused on the government as a republic of individual states and believed that the central government should not have all the power; instead, the state governments should have the power to make their own decisions.

What are the limitations of judicial review in India?

The scope of judicial review in India is very broad. However, there are certain limitations to it. The limitation is in the form of certain privileges and immunities that are given to the President, Governor and Judges of the Supreme Court and High Court unless they have performed any act in their personal capacity.

Is judicial review a fundamental right in India?

The term judicial review is nowhere mentioned in the Constitution of India. However, indirect references are made under various Articles such as Article 13, which states that any law which is inconsistent with the fundamental right will be considered void. Article 32 and Article 226 state that any individual can approach the Supreme Court and High Court, respectively, in cases of violation of their fundamental rights. Article 142 further provides that the Supreme Court has the power to give justice in cases where the law does not provide any remedy.

References

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

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

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

Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937)

By

Vanshika Kapoor

-

July 22, 2024

This article is written by Shweta Singh. This article contains an elaborate analysis of the judgement rendered by the Privy Council along with the reasoning behind it. In addition to this, it also contains the detailed facts of the case and the arguments presented by both parties, for a better understanding of the implication of the case’s decision on the issue at hand. The main issue decided by the Privy Council, pertained to the question of what constituted ancestral property under the laws applicable to Hindus.

Table of Contents

Introduction

The case of Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937) was decided on 7th May, 1937 when the defendants chose to appeal to the Privy Council. This case dealt with the law relating to ancestry estate under Hindu law. In particular, it analysed the rules regarding succession of the property inherited from the paternal side. The laws relating to inheritance, applicable to Hindus, provide that anything that was inherited from the father’s side of the family, including the father, grandfather, and great-grandfather, is referred to as ancestral property and the son is considered a descendant. The case was primarily concerned with the Mitakshara school of inheritance law in the Hindu community. This article examines the Privy Council’s decisions in light of the various arguments presented by both the parties and the relevant laws and precedents.

Facts of the case

Ganesh Prasad was an inhabitant of Banda, in the province of Agra, and owned a large and valuable property including the village in dispute. He died on 10th May, 1914 and after his death, his surviving son, Bindeshri Prasad, was officially registered as the proprietor of the estate in the revenue records. In the execution of a decree for recovering money by the creditors, against Bindeshri Prasad, the village of Kalinjar Tirhati was put up for sale and the same was sold on 20th November, 1924 though the sale was confirmed on 25th January, 1925.

Being aggrieved by this, Bindeshri Prasad then filed a suit on the ground that the sale was fraudulent. He passed away on the 25th of December, 1926 and in March, 1927 the defendant, Giri Bala, applied to be substituted in place of her late husband, as the plaintiff. The request was granted, as she was the only beneficiary of his estate. She also applied for amendment of the plaint, stating that she was entitled to the disputed village, according to the will executed by her father-in-law, Ganesh Prasad, on 5th May 1914. Her husband was entitled to a life interest in the property and therefore, after his death, she succeeded him as the absolute owner of the property. She asserted that even though the sale was effective against her husband, it should not affect her ownership rights.

The trial judge permitted the amendment on 28th May, 1927 to which the defendant (appellant in the present case) objected and this led the judge to frame an issue relating to the validity of the said amendment. The judge was later transferred, and a new judge dismissed the suit on several grounds, one of which was that the amendment transformed the nature of the suit. The High Court, however, in an appeal made by the plaintiff, rejected the argument and held that the amendment was necessary in order to address the real issues in the case between the parties. The present case was an appeal against a decree of the High Court of Judicature at Allahabad, dated 23rd January, 1933 reversing the decree of the Subordinate Judge of Banda, dated 17th January, 1929 and allowing the plaintiff’s claim for possession of the village of Kalinjar Tirhati, along with the mesne profit.

Facts leading to the execution of the will of 1914

For the purpose of understanding the relevant issue related to the existence of the will, it is important to keep in mind the facts that prove the existence of the will executed in the favour of the appellant. The brief facts leading to the execution of the will are as follows:

In 1898, Ganesh Prasad applied to the Government of his province, to take over the administration of his property. In the last four years of his life, he attempted several times to reclaim the possession of his property, without much success.
Ganesh Prasad had a son, Bindeshri Prasad, with whom he had a tense relationship because of his improper character and tendency to spend lavishly. Therefore, on the 4th of August, 1911 Ganesh Prasad made a will at Allahabad and got it registered on the next day. According to the will, he bequeathed all his property for charitable and religious purposes and nominated seven executors and trustees for the trusts. Among these executors, was Mr. Swan, the Collector of the Banda district, and a member of the Indian Civil Service at the time. Mr. Swan received a copy of the will from Ganesh Prasad and was therefore aware of the execution and contents of the will.
By this will, Ganesh Prasad not only disinherited his son, Bindeshri Prasad, but also did not provide any provision for his daughter-in-law, Giri Bala, or for any child that may be born to her in the future.
During the outbreak of the bubonic plague in Banda in 1914, Ganesh Prasad fell ill and migrated to Motihari. While residing there, he made a new will on 5th April, 1914 revoking the will of 1911. He returned to Banda and passed away on 10th May, 1914. Upon his death, Mr. Swan took into custody his valuables and important documents for the purpose of protecting them. Pursuant to the directive of Mr. Swan, Deputy Collector Pandit Ram Adhin Shukla bolted the deceased’s rooms, which had numerous locked boxes and important documents, on the afternoon of the day of his death. The next day, Shukla prepared a written report and handed it over to the Collector.
The trustees of the will that was earlier executed in 1911, having no knowledge that it was revoked, filed for probate on 3rd June, 1914 thinking it came into force after his demise. The trustees thereby deposited a certified copy of the will made in 1911, claiming that the original might be found among Ganesh Prasad’s documents.
The High Court directed the Collector of Banda to produce the original will made in 1911, but a Deputy Collector found the will made in 1914 instead. The Collector knew Ganesh Prasad’s handwriting and thus had no reason to doubt the genuineness of the will and hence, reported the same to the High Court. He ordered the Government Advocate to contest the probate of the 1911 will and to present the 1914 will in court. According to the instructions of the Collector of Banda, the original will was produced to the High Court by the Government Advocate, during the probate proceedings on 27th July, 1914. The High Court then directed that the will was to be entrusted to the custody of the Registrar until any further order in the matter.
Meanwhile, Bindeshri Prasad contested the probate of the 1911 will and sought mutation of the property, claiming ancestral rights.
In a mutation proceeding between Bindeshri Prasad and the trustees of the 1911 will, a compromise was arrived at on 5th October, 1914. These trustees affirmed that the will executed in 1914 was genuine and was signed by Ganesh Prasad. They agreed to allow Bindeshri Prasad to retain ownership of his father’s estate according to the 1914 will. They also agreed to approach the High Court and request it to strike out their probate application of the 1911 will. In exchange, Bindeshri Prasad promised to pay his father’s outstanding debts, establish a trust for a house in the estate to be used as a dharamsala, and contribute Rs. 300 per annum for the expenses of performing Ram Lila in Banda.
The probate application was dismissed on 7th November, 1914 by the High Court, and in December of the same year, the Revenue Officer sanctioned the mutation of the property in favour of Bindeshri Prasad. However, the original 1914 will was lost after the proceedings, and despite the search the will could not be recovered.

Issues raised in the case

The relevant issues that were raised in the case are as follows:

Whether the High Court’s decree should be overturned solely on the basis of a misjoinder?
Whether the will made in 1914 was valid and genuine?
Whether Giri Bala had a valid right to the village in dispute?
Whether the property provided under the will is ancestral and Ganesh Prasad’s son had an interest jointly with him?

Arguments of the parties to the case

Several arguments were presented by both parties, in support of their respective claims. In order to understand the judgement delivered by the Privy Council in this case, it is important to first delve into the arguments put forth by both the appellant and the respondent.

Arguments raised by the appellant

The defendants, who were the appellants in this matter, argued that Giri Bala, as the widow of Bindeshri Prasad, could rightfully continue the suit under the cause of action that her husband instituted before his death. However, they argued that Giri Bala could not be allowed to bring a new, different, and completely independent cause of action that arose specifically from her personal rights and capacity. The appellants argued that though she could continue to pursue the claim that her husband had initiated, she overstepped her legal bounds by seeking to amend the plaint to include her personal claim for possession founded on the will of Ganesh Prasad, which was not part of the original relief sought by her husband. Thus, according to the appellants, the claim, which she made from her personal capacity, was improper and should not be allowed in connection to her continuation of her husband’s lawsuit.

It was further argued by the appellant, that the property provided under the 1914 will, was ancestral property, and therefore, Ganesh Prasad did not have any right to dispose of the same. Consequently, the will made in 1914 should be held invalid.

Arguments raised by the respondents

The respondent on the other hand, contended that the High Court allowed for the amendment that brought an additional cause of action, and such a decision cannot be reversed or altered as per Section 99 of the Code of Civil Procedure, 1908 (hereinafter referred to as the CPC), as the misjoinder of the cause of action in question, did not affect the merit or the jurisdiction of the case. It was also argued by the respondent, that the trial was done on the basis of the amended plaint containing both the original and new causes of action. It was further pointed out that both parties had already provided all the necessary evidence with regard to the two causes of action. Therefore, on the basis of the above-mentioned facts, it was contended that it would be unjust to disregard all the time and effort spent on the trial, due to the objection regarding the amendment of the plaint.

Another argument presented by the respondent, was that the property in dispute, forming the subject matter of the will made in 1914, does not fall within the category of “ancestral property”. They relied on several court decisions to support their claim that only those properties that are inherited from fathers or other male relations in the paternal line, can be deemed to be ancestral, as provided under the original Mitakshara text. The cases referred to were Karuppai Nachiar vs. Sankarnaryanan Chetty (1903), Bishwmath Prasad Sahu vs. Ganjadhar Prasad (1917) and Raja Chelikani Venkayyamma Garu vs. Raja Chelikani Venkataramanayyamma (1902). Therefore, since the property in question was the property that Ganesh Prasad received from his maternal grandfather, it cannot be treated as ancestral property. Consequently, he had full capacity to dispose of such property by way of a will in favor of his heirs.

Judgement of the case

The Privy Council held that the trial conducted on the additional cause of action, was legal and the High Court was right in allowing the amendment of the plaint, introducing a new cause of action. It was further held that since the property that was inherited by Ganesh Prasad was from his maternal grandfather, such property cannot be treated as ancestral property. Ancestral property is a property in which a son receives an interest by birth, along with his father, and only those properties that are inherited from fathers or other male relations in the paternal line can be deemed to be ancestral, as provided under the original Mitakshara text. Therefore, it cannot be held that Ganesh Prasad had no authority to dispose of the property. The will, which he prepared in favor of his daughter-in-law, Giri Bala, cannot be questioned by his son or any other person. When her husband died, the terms of his last will and testament came into force and vested in her all the ownership rights with respect to the village of Kalinjar Tirhati and the entire property. The sale of that village, in the execution proceedings against her husband, had no impact on her title. For these reasons, their Lordships confirmed the decision of the High Court and dismissed this appeal with costs. In order to understand the decision passed in this case, it is pertinent to look into an elaborate issue-wise judgement delivered by the Privy Council.

Rationale behind the judgement

Whether the High Court’s decree should be overturned solely on the basis of a misjoinder

The Lordships referred to the contentions made by the appellant, wherein they argued that although Giri Bala could pursue the action to conclusions, based on her late husband’s cause of action, she could not frame an independent cause of action based on her own rights. They acknowledged the contention, but emphasised that the trial was done on the basis of the amended plaint containing both the original and new causes of action. It was further noted that both parties had already provided all the necessary evidence with regard to the two causes of action. By relying on such facts of the case, their Lordships concluded that it would be unjust to disregard all the time and effort spent on the trial, due to the objection regarding the amendment of the plaint. Referring to Section 99 of the CPC, the Court underlined the fact that no decree shall be reversed or substantially altered or any case remanded on appeal, by reason of misjoinder of parties or causes of action or any other irregularities concerning the procedure that do not affect the merits or the jurisdiction of the court.

It was further observed that the High Court in its decision had held that the trial of the suit on both causes of action was legal, and it was noted that the misjoinder in question did not affect the merit or the jurisdiction of the case. Thus, the question that was left to be answered was whether a decree of the High Court should be set aside because of the misjoinder of parties. While deciding upon this issue, their Lordships recognised that although the CPC did not regulate the procedures relating to appeals from India, the principle outlined under Section 99, was sound and promoted justice. Thus, it was held that the Lordships were not likely to pursue a cause of action that would prolong the case excessively. It was further held that even if the High Court was wrong in overruling the objection to the amendment and in allowing the trial on both the causes of action, the trial should not be set aside. The alleged amendment had neither affected the merit of the case, nor the jurisdiction of the court.

Whether the will made in 1914 was valid and genuine

The Lordships observed that the decision for this particular issue depended on the factum and the genuineness of the will alleged to have been executed by Giri Bala’s father-in-law, Ganesh Prasad, on 5th April 1914, which was the foundation upon which her claim was based. It was pointed out that the original will had been lost and the content of the will was verified by two certified copies, the authenticity of which was not disputed.

With reference to the facts of the case leading to the execution of the will, as provided earlier in this article, it was affirmed that the initial will, made in 1914, was lost, therefore allowing the respondent to submit secondary evidence of the contents of the will. This evidence included two certified copies- one was obtained while the original was with the Collector and the other was obtained from the High Court. While the authenticity and accuracy of these copies could not be contested, they only corroborated the contents of the document alleged to have been signed by Ganesh Prasad on 5th April, 1914. However, it was emphasised that these copies did not prove that the original will for which such copies were made, was signed by the testator.

In order to determine the execution of the will and the authenticity of the certified copies of the will, their Lordships considered these in light of the evidence adduced by the respondents. Their Lordships, while declaring the genuineness of the will, based its decision on several key pieces of evidence. Firstly, the Privy Council relied upon the testimony of the scribe, Mahabir Prasad. He, in his evidence, corroborated the fact that he made a fair copy of the will and the same was read over to Ganesh Prasad, who put his signatures thereupon and his signature was attested by two witnesses. Although these witnesses were dead, the Deputy Collector who got the original will, had also recorded statements of these witnesses and was satisfied that it was a true copy.

Secondly, the certified copies of the will showed that the original document had two of the testators’ signatures, which were similar to the signatures of the testator on the original 1911 will. Additionally, several witnesses who saw the original document immediately after it was recovered, had no difficulty in recognizing both of the testator’s signatures on it. It was observed that some of the witnesses were the trustees under the 1911 will and there was no reason to question the credibility of their testimonies. It may be worthy to note that they mentioned in their application to the High Court on 12th October, 1914 that they knew Ganesh Prasad’s handwriting and were fully satisfied that the signatures on the 1914 will were genuine. The High Court judges rejected the assertion that the trustees had ulterior intent in accepting the validity of the will and therefore, their Lordships after considering all the available evidence, concurred with this conclusion.

Lastly, Mr. Swan, the Collector of Banda, who was familiar with Ganesh Prasad’s handwriting, also recognized his signatures on the will of 1914 when the Deputy Collector sent it to him. He informed all the relevant parties about the recovery and authenticity of the document and advised them to act according to its provisions. Therefore, after reviewing the evidence, their Lordships concluded that there was no ground to discredit the motives of the trustees or the proof tendered and thus, accepted the authenticity of the will.

Whether Giri Bala had a valid right to the village in dispute

After determining the genuineness of the will, their Lordships moved forward to analysing the contents of the will, to decide whether Giri Bala had a valid right to the village in dispute. It was observed that the relationship between Ganesh Prasad and his son was strained and the same was evident and undisputed. It was because of this enmity, that Ganesh Prasad made the will in 1911, disinheriting his son and his family. However, when Ganesh Prasad fell ill, he likely reconsidered this stance and made a new will in 1914, to provide for his relatives and dependents.

As per the contents of the will made in 1914, the testator granted a life interest to his son, in order to realise the income of the property, without enabling him to dispose of the property. The will further provided that upon the death of his son, the property would go to his son’s child and in the absence of such child, it would pass on to his wife. The 1914 will also provided for maintenance for Ganesh Prasad’s mistress, Jairaj Kuar.

Their Lordships found that the contents of the will were reasonable and noted that when the will was recovered from the deceased’s house in 1914, no one suggested that it was forged. Furthermore, those who had claimed that the 1914 will was forged during the pendency of this case, had not given any evidence in proof of such a claim, and therefore, their Lordships agreed with the High Court, that the validity of the will should be upheld in favour of Giri Bala since she held a valid right to the village in dispute.

Whether the property provided under the will is ancestral and Ganesh Prasad’s son had an interest jointly with him

The Lordships of the Privy Council noted that Ganesh Prasad inherited the property under a deed of gift from his maternal grandfather, Jadu Ram. Therefore, the question that came up before the Privy Council was whether this property was considered ancestral, giving his son an interest in it by birth. It was mentioned that there exist different opinions of the Indian judiciary on this issue and they referred to cases such as Karuppai Nachiar vs. Sankarnaryanan Cketty (1903), Ham Partap And Ors. vs Jamna Prasad And Ors. (1907), and Bishwmath Prasad Sahu vs. Ganjadhar Prasad (1917), to support their observations. Acknowledging the practical relevance of this matter, their Lordships underlined that this question must not remain uncertain.

It was noted, that according to the counsel representing the appellant, property, thus inherited by a daughter’s son, from his maternal grandfather, is ancestral property. He formulated his argument on the basis of the term “ancestral property”, as defined in the judgment of Raja Chelikani Venkayyamma Garu vs. Raja Chelikani Venkataramanayyamma (1902). In this case, the grandsons, who were the sons of a daughter, took property from their maternal grandfather and held it jointly with a right of survivorship. Their Lordships observed that the crucial legal issue in this case was whether the property was passed with the right of survivorship or without it. It was decided that the property was governed by the rule of survivorship and the widow’s contention was denied. They received the estate at the same time and by the same title and held it in the same way as the other joint property. Their Lordships clarified that in this particular case, the meaning given to the term “ancestral property”, was the natural one, which signifies property inherited from an ancestor, and not the technical one, as provided under the Hindu laws, where a son receives an interest in it, by birth, together with his father. This particular matter was never argued in this case, nor was it decided by the Privy Council.

It was further observed that the judgement delivered in a later case of Atar Singh vs. Thakar Singh (1908), was relevant to the particular issue at hand. In this case, it was held that unless the property is inherited “by descent from a lineal male ancestor in the male line”, the property cannot be treated as ancestral property under Hindu law. However, this case was with reference to property that arrived from the male collateral and was not inherited from the maternal grandfather and was also in line with the customs of Punjab. It was also pointed out that it was not argued that the custom of Punjab was diverse from the Hindu law in relation to the matter that was presented before their Lordship in that case.

According to the principles laid down under Hindu law, ancestral property means the property that is inherited by a man from his father, or father’s father, or father’s father’s father. It automatically devolves on his male descendants, by inheritance, and they take it as a coparcenary property, with the right of survivorship. However, the question under appeal in the present matter, is whether a son receives a similar interest in property inherited by the father from the father’s maternal grandfather.

Vijnanesvara, the author of Mitakshara, has restricted the rights by birth, to paternal or grand-paternal properties. Colebrooke translated the Mitakshara text and he defined “ancestral property” in the context of grand-paternal property and not maternal. It is pertinent to note here that Vijnanesvara’s use of the word “pitamaha”, which is the original Sanskrit term, exclusively means “father’s father” and does not include maternal male ancestors. Further chapters in Mitakshara, state that it is the paternal grandfather’s property, wherein a son receives a birthright interest, coextensive with the father. When Colebrooke used the term “ancestral estate”, what he was actually trying to refer to, was a grand-paternal estate. Therefore, the ancestral estate under Hindu law, wherein a son receives an interest by birth, only refers to the property that descends from the male ancestors through the male lineage.

The term “ancestor” in its ordinary sense, encompassed the ascendants from both, the mother’s and the father’s side. However, under Hindu law, the “ancestral” property, wherein a son gets an interest by birth, along with his father, only refers to those properties that are inherited from fathers or other male relations in the paternal line, as provided under the original Mitakshara text. Their Lordships therefore concluded that confusion had stemmed from using the term “ancestral” in a general or literal sense.

Therefore, with regard to the above-mentioned interpretation of the term “ancestral property”, their Lordships held that since the property that was inherited by Ganesh Prasad was from his maternal grandfather, such property cannot be treated as ancestral property. Hence, it cannot be held that Ganesh Prasad had no authority to dispose of the property. The will, which he prepared in favor of his daughter-in-law, Giri Bala, cannot be questioned by his son or anybody else. When her husband died, the terms of his last will and testament came into force and vested in her all the ownership rights in the village of Kalinjar Tirhati and the entire property. The sale of that village, in the execution proceedings against her husband, had no impact on her title.

Aftermath of the judgement

After the Privy Council had delivered its judgment in this case, it set a precedent that has been followed in numerous subsequent cases before various courts.

In the case of Dr. Muhd. Suhail vs. Chancellor, University of Allahabad and other (1994), the Allahabad High Court referred to this case of Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937), in deciding the issue regarding the validity of the constitution of the selection committee and whether the irregularity in its constitution had any effect on the selection made by such committee under Section 66 of the Uttar Pradesh State University Act, 1973. The court observed that Section 66 of the Act had to be read along with Section 99 of the Code of Civil Procedure, as both the provisions are in pari materia (upon the same subject matter). It was in this context, that the court referred to the case of Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937) and observed that the object of Section 99 of the Code of Civil Procedure, is that a mere defect or irregularities would not be a ground for reversing or varying a decree in appeal. In other words, this Section accepts a mere defect or irregularity, but does not vitiate material illegality.

In the case of CIT vs. Ram Rakshpal, Ashok Kumar (1968), the question before the Allahabad High Court was whether the income generated from the use of the property, that had come upon the son, after the death of the father, should be assessed as part of the income of a Hindu undivided family (HUF) or as separate property of the son. The court, while referring to the case of Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937), reaffirmed the well-established rule of Hindu law, that property inherited by a man from any of the three direct antecedents in the paternal line, that is, father, grandfather, or great grandfather, is known as ancestral property for his male descendants. His son acquired a shared interest in this property from birth. This property is also held in coparcenary with his male heirs and the rule of survivorship applies to this property.

Conclusion

The case of Muhammad Husain Khan vs. Babu Kishva Nandan Sahai (1937) is relevant, as it resolved the confusion pertaining to the issue of what constituted ancestral property under the laws applicable to Hindus. The Privy Council in this case, for the purpose of conclusively deciding on this particular issue, analysed the translated text relating to the Mitakshara School of Law. After thorough analyses of the text, the Privy Council put rest to this confusion and held that ancestral property included only those properties that had been inherited from the male relation on the paternal side of the family. Consequently, any property that had been inherited from the male relations of the material side, was not an ancestral property and therefore, could be disposed of in the personal capacity by the one upon whom it has been bestowed. This is a key decision with respect to Hindu succession and inheritance laws.

Frequently Asked Questions (FAQs)

What is Section 99 of the Code of Civil Procedure, 1908?

According to Section 99 of the Code of Civil Procedure, a decree should not be reversed, varied, or remanded on the grounds of any error, defect, or irregularity in the proceedings of the case, if such error, defect, or irregularity does not affect the merits of the case or the jurisdiction of the court. This section strives to ensure that any procedural or formal issues do not override otherwise legal and proper decisions. However, as per the proviso to this Section, the provision of Section 99(1) does not apply if a necessary party is not included in the case. A necessary party is someone who should be included in the case because their presence is essential for resolving the controversy. Therefore, if any necessary party to the case is not included, it can be challenged or altered on the basis of the same. In a nutshell, the provision of Section 99, affirms that minor mistakes in the procedures do not affect the integrity of the judicial decision, while at the same time, ensuring that all the important parties participate in the case.

What is a will and which law is the execution of a will in India, governed under?

A will is a legal document that has been written and signed by a person to determine how their property and other assets should be disposed of after their death. In India, wills are legally binding. It is to be noted that they can be drafted in any format. They do not necessarily need to be drafted on stamp paper and may be typed or even handwritten. However, a handwritten will is often preferred, because it is less likely to be challenged in a court of law. Wills in India, are governed by the Indian Succession Act, 1925. Under the provisions of this Act, a will can be made by any person who is of sound mind and is not a minor.

What is the meaning of inheritance and which law in India deals with the inheritance of property among Hindus?

Inheritance can be described as a process whereby land, wealth, and homes are transferred from one generation to another, in order to retain the family ownership of such assets. The Hindu law of inheritance outlines the processes by which assets are transferred among Hindu families. In India, it is governed by the Hindu Succession Act, 1956. Section 2 of this Act outlines the applicability of the Act. It stipulates that the Act applies to anyone who follows Hinduism or its variation (including Virashaiva, Lingayat, Brahmo, Prarthna, or Arya Samaj), Buddhism, Sikhism, and Jainism. It extends to any person who is not a Muslim, Christian, Parsi, or Jew, unless such a person can establish that he is not bound by Hindu law or custom.

What is an ancestral property and how is it different from a self-acquired property?

The term “ancestor” in its ordinary sense, encompasses the ascendants from both, the mother’s and the father’s side. However, under Hindu law, with respect to the ancestral property where a son gets an interest by birth along with his father, only such properties that are inherited from fathers or other male relations in the paternal line are considered. On the other hand, self-acquired property is one that has been purchased by a person with his own means. There can exist a situation wherein a self-acquired property turns into an ancestral property and vice versa. A part of an ancestral property becomes self-acquired, if it is partitioned and distributed amongst the members of a joint Hindu family. On the other hand, a self-acquired property turns into ancestral property, when no partition takes place for successive generations..

What is a Hindu undivided family (HUF)?

A Hindu undivided family (HUF) is a different legal personality under Hindu law. It encompasses every direct descendant of a common ancestor and their wives. The HUF functions as one legal entity, with joint ownership of property and a common source of income.

What is the meaning of coparcener and who is the coparcener as per Hindu law?

Under the Indian law governing property, a coparcener refers to a person who has a right to ancestral property from the moment of their birth. Earlier, such rights were only granted to male members of the Hindu undivided family. However, with the Hindu Succession (Amendment) Act, 2005, daughters were given the same property rights as coparceners. Now, men, as well as women HUF members, can be coparceners.

How did a coparcener’s status change under Hindu law?

A significant change in the rights of coparceners in Hindu undivided families (HUFs), was introduced by the Hindu Succession (Amendment) Act, 2005. Earlier, the rule was that only the sons would have the rights of coparceners, and daughters were deprived of their right to receive ancestral property by birthright. This amendment has effectively responded to and redressed this historical gender bias, in favour of daughters, by giving them the same rights as a coparcener. With this amendment, daughters whether married or unmarried, were given the same legal rights to ancestral property, as sons. They are recognized as coparceners by birth, which allows them to exercise their rights over the family’s ancestral property. This significant change ensures a more inclusive and equitable legal framework within HUFs, aligning with modern principles of gender justice and equality. In order to effectively deal with any HUF, it becomes necessary to have an adequate understanding of the concept related to coparceners or their legal status and rights. During the partition of property in a coparcenary, the legal systems provide a framework for the manner in which the share is to be distributed among the coparceners, such that every person who is entitled to it, receives an equal share. The changes initiated by the Hindu Succession (Amendment) Act, 2005 can be seen as a progressive move towards gender equality. By granting the same property rights to daughters, as sons, the amendment helps to achieve a much more fair and balanced approach towards representation within the coparcenary system. This progressive legal change not only empowers women but also makes joint family systems stronger, by ensuring justice in the distribution of ancestral property.

References

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

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

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

Making of the Indian Constitution

By

Sneha Mahawar

-

July 22, 2024

This article is written by Oishika Banerji and further updated by Naincy Mishra. The article provides a detailed analysis of the making of the Indian Constitution and the work involved in its formulation. It deals with the sources of the Constitution, various committees involved in its making, numerous debates and discussions and finally the salient features of the Constitution.

Table of Contents

Introduction

India, the largest democracy, stands proud with the lengthiest Constitution in this world comprising 448 Articles in 25 Parts and 12 Schedules. The story that exists behind the formation of the Constitution of India has a great significance in the Indian history. In 1934, the establishment of a Constituent Assembly for making the India constitution was the brainchild of Mr. M.N. Roy, a key figure in the Indian Communist movement. However, the idea gained traction when the Indian National Congress advocated for it in 1935. Though this demand was initially accepted by the British Government in 1940, the draft proposal which was sent over with Sir Stafford Cripps did not receive a warm welcome from the Muslim League. Finally, it was the Cabinet Mission that put forth the idea of the Constituent Assembly marking the beginning of the formulation of the Indian Constitution, thereby creating history.

The supreme law of democratic India was drafted by the Indian Constituent Assembly. The Assembly precisely took two years, eleven months, and eighteen days to complete the historic duty of drafting the Indian Constitution. During this period, the Assembly held eleven sessions spread over 165 days, among which 114 days were spent solely on consideration of the Draft Constitution. Finally, the Constitution was adopted on 26th November 1949, with effect from 26th January 1950 being celebrated as the ‘Republic Day of India’. In this article, the author tries to shed light on all the significant events that led up to the framing of the Indian Constitution, considered the mother of all laws in India.

Need for the Indian Constitution

The idea of making a constitution for India did not emerge in one day. It took several years of thinking and deliberation of the nation-makers. The leaders from the different parts of the country had their own way of reforming the society against various kinds of societal conditions that they were exposed to. They were also motivated by the various reformative ideologies that had started in the international arena, such as the idea of socialism due to the Russian revolution, the idea of ‘liberty, equality and fraternity’ from the French revolution, the practice of parliamentary democracy persisting in Britain, etc. However, rather than simply imitating these ideologies in the Indian context, the leaders questioned whether they will be suited to India considering the wide diversity of people and their different ways of lives.

The need for making the Indian Constitution has stemmed from various historical, social, and political factors. Some of the reasons are set out as follows:-

End of British colonial rule- India was under British colonial rule for nearly 200 years. When the national independence movement started gaining momentum, the need for a constitution became necessary to establish a new governance framework that was not dictated by the colonial powers.
Unity in diversity- India is a vast country with diverse cultures, religions, languages, and traditions. A constitution was needed to provide a common legal framework that could accommodate this vast diversity while simultaneously ensuring unity and harmony among its people.
Protection of fundamental rights- One of the primary objectives of the Indian Constitution was to safeguard the fundamental rights of its citizens. These rights include the right to equality, freedom of speech and expression, right to life and liberty, etc. A constitution was essential to enshrine these rights and protect them from any arbitrary encroachment by the state.
Establishment of a democracy- India chose to be a democratic republic after gaining independence. Thus, to establish the principles of democracy, including free and fair elections, separation of powers, rule of law, and checks and balances among the branches of government, a constitution was necessary.
Social justice and equality- It is undeniable that Indian society has always been plagued by centuries of social discrimination based on caste, gender, and religion. The constitution was aimed at promoting social justice and equality by outlawing discrimination, promoting affirmative action through reservations for marginalised communities, and ensuring equal opportunities for all citizens.
Governance framework- The constitution provides the framework for governance by defining the structure of the government, its powers, functions, and responsibilities. It establishes the institutions of government, such as the legislature, executive, and judiciary, and delineates their roles and relationships.
Adoption of a federal system- India opted for a federal system of government where the powers are divided between the central government and the states. The Indian Constitution delineates this division of powers between the centre and states, as well as the mechanisms for resolving any disputes between them.
International recognition- A constitution was necessary for India to be recognized as a sovereign nation in the international community and provide a legal basis for it to enter into treaties, agreements, and diplomatic relations with other countries.
Historical context- The struggle for independence from British rule was also a struggle for self-determination and self-governance. Drafting a constitution was a crucial step in realising the aspirations of the Indian people for freedom, equality, and justice.

In essence, the Indian Constitution was needed to lay down the foundational principles and values of the newly independent nation and to provide a roadmap for its governance, development, and progress.

Sources of the Indian Constitution

The Indian Constitution was drafted in the mid-20th century and thus, various constitutional processes as well as constitutions across the nations were taken into consideration. This is one of the reasons why various features of our constitution have been incorporated after taking inspiration from different constitutions and then modifying them to suit the conditions of Indian society. While the structural part of our Indian Constitution is largely based on the Government of India Act 1935, its philosophical, political and other parts have been derived from the constitutions of other countries.

Government of India Act, 1935

The GOI Act 1935 was the longest and most detailed Act passed during the British regime, having 321 sections and 10 schedules. This legislation had taken its content majorly from four sources – the reports of the Simon Commission (1930), discussions and deliberations during the Third Round Table Conference (1932), the White Paper of 1933 and the reports of the Joint Select Committees. Feature taken from this Act are as follows:-

Division of powers – This Act provided for division of powers between the centre and units in the form of three lists – Federal list for the centre (this has taken the form of Union list presently), Provincial list for the provinces (today, this is known as the State list) and the Concurrent list (the Concurrent list is also provided under the present constitution). In the present constitution, the lists are given under the VII Schedule and the power to make laws on these subject matters is derived from Article 246.
Provincial autonomy – The GOI Act 1935 abolished the system of dyarchy in provinces and, in its place, introduced ‘provincial autonomy’, which meant that the provinces were permitted to act as autonomous units of administration in their defined territories. It also introduced responsible government in the provinces, where the Governor acts on the aid and advice of ministers responsible for the provincial legislature. Presently, Article 163 can be referred for this purpose.
Bicameralism – The Act introduced bicameralism in six out of 11 provinces, which meant there was legislative council (the upper house) as well as a legislative assembly (the lower house) in those states. Presently, in India, 6 states, namely Andhra Pradesh, Maharashtra, Karnataka, Orissa, Telangana, Bihar, and Uttar Pradesh, have bicameral legislature. The constitutional provision providing for bicameralism is Article 168.

Constitution of other countries

The Constituent Assembly has taken various features from the Constitutions of various countries. A detailed explanation of the journey of inclusion of these features has been given in the later part of the article.

British Constitution

Parliamentary form of government
Rule of Law
Legislative procedure
Single Citizenship
Cabinet system
Prerogative writs
Parliamentary privileges
Bicameralism

US Constitution

Fundamental rights
Independence of the judiciary
Judicial review
Impeachment of the president
Removal of the judges of Supreme Court and High Court
The post of Vice-President

Irish Constitution

Directive Principles of State Policy (DPSPs)
Nomination of members to the Rajya Sabha (Upper House)
Method of election of the president

Canadian Constitution

Federation with a strong Centre
Vesting of residuary powers in the Centre
Appointment of state governors by the Centre
Advisory jurisdiction of the Supreme Court

Australian Constitution

Concurrent list
Freedom of trade, commerce and intercourse
Joint-sitting of the two Houses of Parliament

Weimar Constitution

Suspension of the Fundamental Rights during an emergency

Soviet Constitution

Fundamental duties
Ideals of justice (social, economic and political) in the Preamble

French Constitution

Republic
Ideals of liberty, equality and fraternity in the Preamble

South African Constitution

Procedure for amendment in the Indian Constitution
Election of members of Rajya Sabha

Japanese Constitution

Procedure Established by law

Makers of the Indian Constitution

The idea of a Constituent Assembly was proposed by the Cabinet Mission, and the composition of the Assembly was accordingly made in line with the Cabinet Mission scheme. The scheme suggested a combination of elected and nominated members for the Assembly. The elections held in 1946 resulted in the Indian National Congress (INC) winning 208 seats, while the Muslim League secured 73 seats and 15 seats went to the independents. However, the decision of the Princely States to abstain from participating in the Constituent Assembly left 93 seats vacant. It is noteworthy that despite not being directly elected by the Indian people, the Constituent Assembly included representatives from various segments of society, including Hindus, Muslims, Sikhs, Parsis, Anglo-Indians, Indian Christians, SCs/STs, backward classes, and women from all these communities.

Structure

The structure of the Constituent Assembly was:

292 members who were elected through the Provincial Legislative Assemblies (PLAs);
The Indian Princely States were represented by 93 members; and
The Chief Commissioners’ Provinces were represented by 4 members.

Thus, accordingly, the total membership of the Constituent Assembly was intended to be 389. However, the implementation of the Mountbatten Plan on June 3, 1947, resulted in the partition of India, leading to the creation of a separate Constituent Assembly for the newly formed Pakistan. This meant that representatives from certain provinces could no longer be part of the Indian Constituent Assembly, resulting in a reduction of the membership to 299 members.

Criticism surrounding the Constituent Assembly

There were several criticisms that the Constituent Assembly had to face during its existence, which have been listed hereunder;

The Constituent Assembly was a time-consuming effort: While drawing a comparison with the framers of the American Constitution (1789), the critics stated that the makers of the Indian Constitution had taken a longer time period than what should have been taken.
The Constituent Assembly was neither a representative body nor a sovereign one: The critics pointed out that the Assembly could not be called a representative body as the members were not elected by means of ‘Universal Adult Franchise’ (UAF) and as the roots of the formation of the Assembly lie with the British Government, the body was not a sovereign one.
The Constituent Assembly was dominated by members of the Congress Party: A British-Constitutional expert recognized by the name of Granville Austin pointed out that the Constituent Assembly of India was a one-party body, thereby charging the Assembly to be governed only by the members of the Congress.
The Constituent Assembly was a Hindu-dominated body: Critics had majorly pointed out that the Constituent Assembly represented only the Hindus of the nation, leaving behind the rest of the religions.

Working of the Constituent Assembly

On December 9, 1946, the Constituent Assembly convened for the first time at the Constitution Hall of the Indian Parliament in New Delhi. The front row of the Hall boasted notable figures such as Pt. Jawaharlal Nehru, Maulana Abul Kalam Azad, Sardar Vallabhbhai Patel, Acharya J.B. Kripalani, Dr. Rajendra Prasad, Smt. Sarojini Naidu, Shri Hare-Krushna Mahatab, Pandit Govind Ballabh Pant, Dr. B.R. Ambedkar, Shri Sarat Chandra Bose, Shri C. Rajagopalachari and Shri M. Asaf Ali. The auspicious occasion significantly noticed the absence of the Muslim League as they wanted a separate nation for the Muslims. Dr. Sachchidananda Sinha, the oldest member of the Constituent Assembly, assumed the temporary chairmanship of the meeting, which was attended by 211 members. Subsequently, Dr. Rajendra Prasad was elected as the President of the Constituent Assembly. Following this, H.C. Mukherjee and V.T. Krishnamachari were elected as Vice-Presidents, thus establishing two Vice-Presidents for the Assembly.

The working of the Constituent Assembly proceeded on the basis of the Objective Resolution that was laid before the Assembly on 13th December 1946, by Pandit Jawaharlal Nehru and was adopted by the Constituent Assembly on the date of 22 January 1947. The Objective Resolution listed eight principles that were the guiding light for framing the constitutional structure of India with fundamental elements of independence, and sovereignty. The foremost aspect affirmed by the said Resolution was that the government’s authority would come from the nation’s people. This ensured justice (socio-economic and political), equality before the law and various freedoms for the citizens. Moreover, to eliminate the prolonged discrimination that prevailed in Indian society, the Resolution also provided for adequate protection to individuals belonging to the backward classes, tribal areas, and minority groups. Further, with an aim to uphold global peace and promote human welfare, the Objective Resolution advocated for safeguarding the sovereignty and integrity of the nation at all costs. The Indian Independence Act, 1947, introduced some important changes in the working of the Constituent Assembly and they are worth mentioning here for the purposes of our discussion:-

The Assembly became a fully functioning sovereign body, and by means of the Act of 1947, any law made under the umbrella of the British Parliament with regards to India could be scrapped, altered, or modified.
The Assembly was majorly vested with two functions;

Make a Constitution for the free nation; and
Enacting laws for the country and its people to be governed by.

3. The total strength of the Assembly was fixed at 299, which was inclusive of the strength of the

Indian provinces (229), and
Princely States (70).

The Assembly functioned in many other ways beyond enacting laws and framing the Indian Constitution, such as;

Adoption of the national flag, national song, and national anthem on 22nd July 1947, and 24th January 1950 respectively.
In May 1949, the Assembly had ratified India’s membership of the Commonwealth.
The Assembly on 24th January 1950, elected Dr. Rajendra Prasad as its first President.

Finally, it was on 29 August 1947, a Drafting Committee under the chairmanship of Dr. B.R. Ambedkar was formulated by the Constituent Assembly to prepare a Draft Constitution for India. Repeated debates, discussions, arguments, scrapping of clauses, and addition of clauses took place whenever the Committee used to meet and all were worth it when the Constitution of India was adopted by the country on 26 November, 1949 with 284 members signing the same. After that, the Assembly ceased to exist from the 26th day of January, 1950 when the Constitution began to be applicable and a new Parliament was formed in 1952.

Committees of the Constituent Assembly

To avoid any kind of mismanagement and take into account the load of work to be dusted off, the Constituent Assembly formulated different committees working in specific areas of constitution-making.

Major committees

There were eight major committees, namely;

The Union Powers Committee – presided over by Pandit Jawaharlal Nehru. This committee was given the responsibility to define the subjects over which the Union executive and legislature has power.
The Union Constitution Committee – presided over by Pandit Jawaharlal Nehru. It was made to write the Constitution of India.
The Provincial Constitution Committee – presided over by Sardar Vallabhbhai Patel. This committee was set up to discuss and provide for a model Provincial Constitution, which would determine the system and form of government at the provincial level.
Drafting Committee – presided over by Dr. B.R. Ambedkar. It was entrusted with the responsibility of drafting a new constitution for India based on the reports submitted by the other committees of the constituent assembly.
Advisory Committee on Fundamental Rights, Minorities and Tribal and Excluded Areas – presided over by Sardar Vallabhhai Patel. This Committee had the following five sub-committees:

Fundamental Rights Sub-Committee with J.B. Kripalani as the Chairman.
Minorities Sub-Committee with H.C. Mukherjee as the Chairman.
North-East Frontier Tribal Areas and Assam Excluded & Partially Excluded Areas Sub-Committee with Gopinath Bardoloi as the Chairman.
Excluded and Partially Excluded Areas (Other than those in Assam) Sub-Committee with A.V. Thakkar as the Chairman.
North-West Frontier Tribal Areas Sub-Committee.

Rules of Procedure Committee – presided over by Dr. Rajendra Prasad. The committee was responsible for framing all the rules of the Constituent Assembly, including those for admission and resignation of members, conduct of business in the Assembly and its various committees, and fixing salaries and allowances of all persons involved in the Assembly’s functioning.
States Committee (Committee for Negotiating with States) – presided over by Pandit Jawaharlal Nehru.
The Steering Committee – presided over by Dr. Rajendra Prasad.

Minor committees

The remaining 13 committees were considered minor committees:-

Finance and Staff Committee – chaired by Dr. Rajendra Prasad.
Credentials Committee – chaired by Alladi Krishnaswami Ayyar.
House Committee – chaired by B. Pattabhi Sitaramayya.
Order of Business Committee – Dr. K.M. Munshi.
Ad-hoc Committee on the National Flag – chaired by Dr. Rajendra Prasad.
Committee on the Functions of the Constituent Assembly – chaired by G.V. Mavlankar.
Ad-hoc Committee on the Supreme Court – chaired by S. Varadachari (Note: He was not a member of the Assembly).
Committee on Provinces of the Chief Commissioners – chaired by B. Pattabhi Sitaramayya.
Expert Committee to Examine the Draft Constitution – chaired by Nalini Ranjan Sarkar (Note: He was not a member of the Assembly).
Linguistic Provinces Commission – chaired by S.K. Dhar (Note: He was not a member of the Assembly).
Special Committee to Examine the Draft Constitution – chaired by Jawaharlal Nehru
Press Gallery Committee – chaired by Usha Nath Sen
Ad-hoc Committee on Citizenship – S. Varadachari (Note: He was not a member of the Assembly).

The Drafting Committee of the Constituent Assembly

Among all the committees mentioned above, a special mention of the Drafting Committee headed by Dr. B.R. Ambedkar is required. Set up on 29th August 1947, the Drafting Committee was vested with the main task of drafting the Constitution of India after taking into account proposals from different committees. This Committee comprised seven members of the Assembly namely;

Dr. B. R Ambedkar as the Chairman of the Committee;
Dr. K M Munshi
Syed Mohammad Saadullah
N Madhava Rau (Note: He replaced B.L. Mitter, who had resigned due to ill health)
N Gopalaswamy Ayyangar
Alladi Krishnaswamy Ayyar
T T Krishnamachari (Note: He replaced D.P. Khaitan, who died in 1948)

The Committee took a period of not beyond six months to prepare its first draft (published in February 1948), which was subjected to changes by suggestions, public comments, and various criticisms, and thereafter the second draft was released in October 1948.

Women and the Constituent Assembly

One notable aspect of the Constituent Assembly was the significant involvement of women in shaping the Indian Constitution. Among its members were 15 women who made valuable contributions to the formation of independent India’s Constitution in their own ways. The distinctive contributions of each of these 15 individuals have been given as follows:-

Shrimati Ammu Swaminathan asserted that the foundation of the Indian Constitution lies upon two robust pillars: the Fundamental Rights and the Directive Principles of State Policy. She expressed the opinion that the Constitution, being highly extensive and bulky, contained numerous minute details that are better suited to be handled by the Government and the Legislature, rather than within its text.
Shrimati Annie Mascarene had noteworthy perspectives on the provincial elections. Her tribute to Sardar Patel for his role in unifying India also received applause in the Assembly.
Begum Aizaz Rasul expressed the view that the Ministry, being a stable body, should not be subject to the whims and fancies of any specific party or the legislature to which it was accountable. Additionally, her acknowledgement of the commendable efforts by Dr. B. R. Ambedkar in safeguarding minority rights during the drafting of the Indian Constitution is also noteworthy.
Shrimati Dakshayani Velayudan, representing the Madras Constituency, consistently voiced her concerns about the welfare of the Harijan community in the Assembly. She staunchly opposed the idea of a separate electorate for them and condemned forced labour and the practice of untouchability in a majority of her speeches.
Shrimati G. Durgabai advocated for the appointment of Judges of the Provincial High Courts, arguing that this responsibility should solely rest with the Governor and his council of Ministers. Additionally, her views on the prohibition of the Devadasi system, the protection of children from exploitation, and the necessity of limitations on individual freedoms were also commendable.
Shrimati Hansa Mehta emphasised the critical importance of ensuring social, economic, and political justice for women in India, considering the long-standing oppression they have faced in the country.
Shrimati Purnima Banerji put forth her perspective on the State’s control over religious instruction in schools, advocating for a balanced approach. She also emphasised that ‘secularism’ in its true sense could only be attained when the citizens of the nation are united.
Shrimati Renuka Ray belonging to the West Bengal Constituency, focused majorly on equality of status and justice for women.
Shrimati Sarojini Naidu had sought an inclusive Constituent Assembly of India.
Shrimati Sucheta Kripalani had uplifted the environment of the Constituent Assembly by singing the verses of the national song and the national anthem of India.
Shrimati Vijayalakshmi Pandit aimed for the centrality of new Asia in the Post-Raj World Order.
Rajkumari Amrit Kaur was the first woman of independent India to join the Cabinet as the Health Minister. She founded the Indian Council for Child Welfare, followed by the All India Institute of Medical Sciences (AIIMS) and Lady Irwin College in Delhi.
Shrimati Malati Chowdhury laid emphasis on the role of education in the growth and development of a nation.
Shrimati Leela Ray played a significant role in both pre and post-independent India. She is responsible for founding the Jatiya Mahila Sanghati and Dacca Mahila Satyagraha Sangha, which worked towards women’s empowerment and the anti-salt tax movement, respectively.
Shrimati Kamla Chaudhri significantly worked towards women’s education and empowerment.

Debates and discussions

The discussions and deliberations of the Constituent Assembly on various provisions of the constitution provide an interesting insight into the mental processes of the persons who were entrusted with the task of drafting the Indian Constitution.

Union of states

A unique question that arose amongst the makers was whether the future state of India should be described as a Union or a Federation. It is important to note that throughout the independence journey of the country, the INC has always laid emphasis on the unity and integrity of India with a strong centre. For once, the leaders accepted the Cabinet Mission Plan, which suggested a weak central government with the aim of securing the cooperation of the Muslim League; however, due to partition, the acceptance was anyway non-fruitful. Thus, while the Assembly was initially inclined to describe the future of India as a Federation, the final view was in favour of the word ‘Union’. Dr. Ambedkar opined that this was done to clarify that (i) the Indian Union is not the result of any agreement among the states and (ii) the component states have no freedom to secede from it.

Power to admit/establish new states

With respect to the power of the central government to admit new states into the Union or to establish new states, it was the West Bengal Legislative Assembly that expressed the view that no state legislature could be expected to agree to any proposal that affected its areas adversely. Thus, it was suggested that placing a restriction (obtaining the consent of the state whose boundary was to be affected) on the introduction of a bill would not be desirable. Thus, Article 3 has taken the form in which it is placed today. Importantly, Section 290 of the GOI Act 1935 is the predecessor of this provision, wherein the British government was empowered to alter the provincial boundaries in British India.

Fundamental rights

While the Cabinet Mission Plan of 1946 provided for the setting up of an Advisory Committee for reporting on fundamental rights, it was in the 1947 Objective Resolution that the Assembly solemnly pledged itself to draft an Indian constitution guaranteeing and securing the various rights and freedoms. With respect to Article 14, B.N. Rau pointed out in his explanatory note that the first part of Article 14, mentioning “equality before the law,” was adopted from the Weimar constitution but its scope was widened to apply to the citizens as well. And the second part relating to “equal protection of the law” was based upon the 14th Amendment to the US Constitution.

Article 15 was, again, moved after prolonged discussion and various amendments. Importantly, clause 3 of the provision was inserted after B.N. Rau had a discussion with Justice Frankfurt in Washington, who emphasised that legal provisions might occasionally be made for women, e.g., to prohibit their employment for specific periods before and after childbirth. With respect to Article 17, it was suggested that with the word ‘untouchability’, the word ‘unapproachability’ should be added, but the suggestion was not accepted. Interestingly, Article 17 in its present form was accepted amidst the shouts of ‘Mahatma Gandhi ki Jai’ in the Assembly.

For Article 19, it is important to note that presently it does not expressly contain freedom to press. However, in the initial draft of the provision prepared by Munshi and Ambedkar, there was express reference to freedom of press, right to secrecy of correspondence, right to reside and settle in any part of the country, right to acquire property, etc. More importantly, in a letter addressed to B.N. Rau, Mr. Alladi K. Ayyar urged that fundamental rights must be subjected to public order, security and safety. Ayyar also opposed the right to secrecy of correspondence on the grounds that it would have serious effect on the provisions of the Indian Evidence Act, 1872 and would further give all private correspondence the rank of a state paper. He was of the view that the provisions of the Indian Post Office Act, 1898 were quite adequate. In fact, apprehensions were also raised by members of the north-east region and other tribal areas that the right to acquire property might be taken undue advantage of by some persons to the detriment of the tribal people.

It is worth noting that while dealing with the criticism that there were so many exceptions in the draft Article, Dr. Ambedkar referred to the decision of the US Supreme Court in the case of Gitlow v. New York (1925), wherein it was held that the freedom of speech and the Press does not lead to conferring an absolute right to speak or publish whatever one may choose without responsibility, nor does it give an unrestricted and unbridled licence providing immunity for every possible use of language and preventing the punishment of those abusing this freedom.

Thakur Das Bhargava had suggested the insertion of the word ‘reasonable’ before the word ‘restriction’ in order to “put the soul in an otherwise lifeless article”. According to him, this would prevent the executive and the legislature from playing with the people’s rights and would empower the courts of the country to determine whether a particular Act was in the public interest and whether the restrictions that are imposed were reasonable. As evident today, this suggestion was accepted by Ambedkar.

Munshi’s draft with respect to the present Article 21 stated that no person shall be deprived of his life, liberty or property without ‘due process of law’. Pannikar urged that the right to life and liberty should be treated as an absolutely sacred subject only to public order and tranquillity. The right to property should be granted, subject to legislation. This suggestion was supported by Munshi, Ambedkar and Rajagopalachari, and the word ‘property’ was accordingly deleted. The word ‘personal’ was added to the word ‘liberty’ as it was felt that ‘liberty’ could be construed widely so as to cover liberty of contract, among other things.

In the provision, there was considerable controversy with respect to the term ‘due process’. Generally, this expression was understood in terms of its interpretation by the US Supreme Court. In the last analysis, the words ‘due process’ meant what the courts said they meant. In a discussion with B.N. Rau with Justice Frankfurt during Rau’s US visit, he was told that the power of review implied in the ‘due process’ clause – (i) was undemocratic as it provided the power of vetoing legislation to a few judges, and (ii) it also attempted to threw an unfair burden on the judiciary. Thereafter, the drafting committee replaced the expression ‘without due process of law’ with ‘except according to procedure established by law’. These words were borrowed from Article 31 of the Japanese constitution.

During discussion of Article 25 to 28 concerning freedom of religion, reference was given to the judgement of Justice Latham of Australia in Jevovah’s Witnesses case given in the context of Article 160 of the Australian constitution wherein it was stated that at all times in human history, there have been religions having sanctioned practices regarded by a large number of people as essentially evil and wicked. The result was that providing complete protection to all religious beliefs might lead to the disappearance of organised society. Ayyar was, hence, of the view that a rider should be added that nothing in the provision would prevent the state from undertaking any measure of social reform.

With respect to Article 32 providing for writs, K.M. Munshi was of the view that if they were not given in the new constitution of the country, then people would be subjecting themselves to the loss of their valuable rights before the constitutionality of a government Act was tested in a suit after years of litigation. Thus, without an expeditious machinery of enforcement, the Union and State governments might probably lapse into a programme very detrimental to our freedom.

Directive Principles of State Policy

The view that certain rights should be incorporated in the constitution which were to be non-justiciable had supporters such as Sapru and B.N. Rau as well as critics such as T.T. Krishnamachari and Munshi. The assembly had the 1937 Irish constitution before it, which made a distinction between fundamental rights and the directive principles of social policy. In our constituent assembly, those who wanted the directive principles to be justiciable insisted that there must be a time limit within which all directive principles must become justiciable; otherwise, they would be no more than pious sentiments and wishes and so much window dressing for the social revolution. Finally, the principles were incorporated with considerable support. Ambedkar said in his speech that though these principles had no legal force behind them, he was not prepared to admit that they had no sort of binding force, nor were they simply useless because of them being non-justiciable in nature.

Form of government

It was deep in the makers’ minds that the future Indian government should be a democratic type of government. They deliberated over three existing models — the American Presidential system, the British Cabinet government, and the Swiss elected executive. Eventually, they opted for a modified version of the British Cabinet system. This decision included the appointment of a President as the constitutional head of state, elected indirectly for a five-year term. The choice of the British system was also influenced by India’s prolonged association with Britain. Munshi expressed the view that a parliamentary system yields a more robust government as the members of the legislature and executive overlap and the heads of government exert control over the legislature.

Enactment and enforcement of the Indian Constitution

The Constitution was adopted on November 26, 1949, containing a Preamble, 395 Articles, and 8 Schedules after three sets of readings of the Draft that was prepared by the Drafting Committee, and published in October 1948. The motion on Draft Constitution was declared to be passed on November 26, 1949, thereby receiving the signatures of the members along with the President. This day is famously known as the ‘Law Day’ or the ‘Constitution Day’. It is to be noted that the Preamble succeeded the Constitution in enactment. Among the 395 Articles, some of the Articles like Articles 5 to 9, Articles 379, 392, and 393, came into force on 26th November, 1949 itself. The rest of the Articles were enforced on Republic Day, which is 26th January 1950. As the Constitution of India commenced, the Indian Independence Act, 1947, and the Government of India Act, 1935, ceased to exist. At present, our Constitution is decorated with 448 Articles, 25 Parts, and 12 Schedules.

Key features of the Constitution

Modern constitution

Since the Indian Constitution was drafted in the mid-20th century, the makers had the advantage of taking into cognizance the various constitutional processes as well as several constitutions across various countries of the world. This is one of the reasons why various features of our constitution have been incorporated after taking inspiration from different constitutions and then modifying them to suit the conditions of Indian society. While largely the structural part of our Indian Constitution is based on the GOI Act 1935, its philosophical, political and other parts have been derived from the constitutions of other countries, as already discussed above.

Lengthiest written constitution

The Indian Constitution is the lengthiest written constitution in the world, giving comprehensive details on its provisions. The elephant size of the constitution is owing to several reasons, such as –

Geographical factors – India is the seventh largest country in the world and it consists of people of very diverse socio-religious backgrounds. To remove mutual distrust among them, the makers felt it necessary to include detailed provisions on fundamental rights and safeguards for minorities, SCs, STs, and other backward classes.
Historical factors – The GOI Act 1935, on which our constitution is based, is itself very bulky. The inclusion of newer provisions has added to its bulkiness.
Organisation and structure of centre as well as states – The constitution deals with the organisation and structure of the Central government as well as the state governments. It has detailed norms with respect to the centre-state relationship, the principle of collective responsibility of the government, parliamentary procedure, etc.
The dominance of legal luminaries in the Constituent Assembly – This also contributed to the detailing of the provisions in the constitution.

Blend of rigidity and flexibility

Like any other constitution in the world, the Indian Constitution also provides for an amending power to the Parliament so that it can adjust itself according to the changing needs and circumstances of society and the nation. This amending power has been provided under Article 368 of the Indian Constitution, which includes amendment by way of addition, variation or repealing any provision of the constitution as per the established procedure for the same. Since its adoption in 1950, the Indian Constitution has undergone several amendments every now and then.

Preamble

To clarify, regarding the makers of the constitution, the sources of the constitution, the ultimate sanction behind it and its goals and objectives, a ‘Preamble’ has been added to the constitution. It contains the enacting clause that brought the constitution into force and declares the rights and freedoms intended to be secured for the citizens. It also declares the basic type of government and polity (“Sovereign Socialist Secular Democratic Republic”) that is sought to be established in the country.

In Kesavananda Bharati v. State of Kerala (1973), it was laid down that the Preamble is a part of the Constitution and the Constitution must be read and interpreted in light of the grand and noble vision expressed in the Preamble.

Socialist State

While initially the word ‘socialist’ wasn’t in the constitution, it was added to the Preamble by the 42nd Constitutional Amendment Act of 1976, and thus, India’s commitment to this ideal has been made explicit. It is important to note that the meaning of socialism in the Indian context is far from the insistence on state ownership as a matter of policy. India has always favoured a mixed economy where both the public and private sectors co-exist side by side. The Supreme Court of India has used this concept along with the DPSP to assess and evaluate economic legislation. According to the Supreme Court in DS Nakara v. UOI (1983), the principal aim of socialism is to eliminate inequality of income, status and standards of life, and to provide a decent standard of life to working people.

Welfare state

Imbibed with a modern outlook to a large extent, the Indian Constitution embodies a distinct governmental philosophy, clearly declaring that India will be organised as a social welfare state. A welfare state is a state that renders social service to the people and promotes their general welfare. The idea of India as a welfare state can be evidently observed in the constitutional Preamble as well. In fact, to strengthen this concept, the makers have incorporated the DPSPs, which lay down the economic, social and political goals of the Indian constitutional system. While these DPSPs are of non-justiciable nature, the government is obliged to achieve and maximise social welfare and basic social values such as employment, health, education, employment, etc.

Secular state

India is a multi-religious country and thus, to prevent prejudice and ensure non-discrimination to any group on behalf of its religion, India fosters the concept of secularism. While the concept always existed in Indian constitutional jurisprudence, it was made explicit by the 42nd Constitutional Amendment Act (1976), which added the word ‘secular’ to the Preamble. Ensuring secularism by the state means that the state does not declare, recognize, favour or identify itself with any official religion; rather, it treats all religions equally. Moreover, the state guarantees several fundamental rights in the form of freedom of worship and religion while also outlawing any discrimination on the grounds of religion. It is worth noting that, as per the Kesavananda Bharati case, secularism is a basic feature of the constitution.

Responsible government

To strengthen the idea of a democratic state, the Indian Constitution seeks to establish a parliamentary form of government at both national and state levels. In a parliamentary form of government, the executive is responsible for an elected legislature. The demand for a responsible government has been made by the Congress since the beginning of the 20th century and the term finally appeared for the first time in the Government of India Act 1919 (also known as the Montague-Chelmsford Reforms Act). However, at that time, the concept was understood more in terms of a larger representation in the government by the people of India.

The parliamentary form of government in India at the centre level means the executive power, though formally vested in the President, is in effect exercised by the Council of Ministers headed by the Prime Minister and responsible for the Lok Sabha. An almost similar pattern is applicable to the states.

Fundamental rights

One of the quintessential features of the Indian constitution is that it guarantees to the people certain basic human rights and freedoms, for example, equality of law and equal protection of laws; the right against discrimination, untouchability or exploitation; freedom of speech and expression; worship and religion; assembly and association; trade or business; etc.; the right against double jeopardy and ex post facto laws. These are inalienable-justiciable rights, however, with certain reasonable restrictions in the interests of social control. They are provided in Part III of the constitution, specifically from Article 12 to Article 35. Moreover, the constitution provides an effective machinery for the enforcement of these rights under Article 32 (writ jurisdiction of the Supreme Court) and Article 226 (writ jurisdiction of the High Courts).

With respect to fundamental rights, the Supreme Court has been of the view that they should be interpreted broadly and liberally and not narrowly. This is evident in the approach of the Hon’ble Apex Court, as it has come up with a wide range of new rights, such as the right to privacy, the right to have a partner of one’s choice, etc., within the ambit of the fundamental rights given in Part III of the Constitution.

Directive Principles of State Policy

Ascribed by Dr. BR Ambedkar as the “novel feature of the Indian Constitution,” the Directive Principles of State Policy (DPSPs) are a set of principles incorporated in the constitution with a view to achieving amelioration of the socio-economic conditions of the people. This has come out in consonance with the idea of perceiving India as a welfare state and it is obligatory for the state authorities to apply them in their law-making. The DPSPs are enshrined in Part IV of the Constitution (Article 36-51). Since they are non-justiciable in nature, they can’t be enforced in a court of law for their violation. In the case of Minerva Mills v. Union of India (1980), it was held that the Indian Constitution is founded on the bedrock of the balance between the DPSPs and the fundamental rights.

Fundamental duties

Just like there are moral obligations on the State to act according to the DPSPs, the constitution also provides for certain duties to be followed by the citizens of the country in order to serve as a reminder that the enjoyment of their rights goes hand in hand with the consciousness of the duties that the citizens owe to the country, society as well as the fellow-citizens. While the fundamental duties were not initially in the constitution, they were added by the 42nd Constitutional Amendment Act (1976) in the form of Article 51A under Part IVA. In toto, there are eleven fundamental duties of the citizens, such as abiding to the constitution and respecting its ideals and institutions, cherishing the ideals that inspired our national freedom struggle, upholding the sovereignty, unity and integrity of the country, etc.

Elections

India takes pride in adopting Universal Adult Suffrage (UAS) as the basis of electing representatives to the Lok Sabha and the state legislative assemblies. Adopting UAS was in itself a bold step on the part of the constitution makers, as India was a country with a largely illiterate population and introducing any property-based or educational qualification would have deprived them of the basic democratic principles.

To ensure free, fair and impartial elections, the constitution also provides for an autonomous Election Commission (Article 324) to supervise and conduct elections to the Parliament and the State Legislatures.

Integrated and independent Judiciary

A well-ordered and well-regulated judicial machinery is another key feature of the country, wherein the Supreme Court is at the apex, below it are the high courts at the state levels, and lastly, the subordinate courts, i.e., district courts and other lower courts. Unlike in the USA, where a dual system of courts exists, India has a single unified judiciary exercising jurisdiction over all the matters that arise under any law, whether enacted by the Parliament or the state legislatures. The most important role of the judiciary is to protect the fundamental rights of the people from any undue encroachment. The Supreme Court itself is regarded as the “guardian of the fundamental rights of the people.”

Some provisions to ensure the independence of the judiciary are as follows – security of the judges’ tenures, fixed service conditions, prohibition with respect to the discussion on their conduct in the legislatures, contempt power, separation of the executive from judiciary, etc.

It is worth noting that initially, a Supreme Court was set up by the Regulating Act of 1773 in Calcutta. Further, two Supreme Courts were set up at Madras and Bombay in 1800 and 1823, respectively. However, the India High Courts Act 1861, which was enacted to create High Courts for various provinces abolished all three Supreme Courts as well as the Sadar Adalats in Presidency towns. Subsequently, the Federal Court of India was created under the GOI Act 1935, which had the jurisdiction to work out the disputes between provinces and federal states and hear appeals against the judgments from the High Courts. Finally, the Supreme Court of India, as it is in its present form, came into existence on 26 January 1950, when the Indian Constitution came into force.

Federal system with unitary bias

The Indian Constitution establishes a dual polity, i.e., a two-tier government system with the central government at one level and the state government at another. Under this, the constitution provides for the division of powers, the supremacy of a written constitution, independent judiciary and bicameralism. However, within the federal framework, the constitution also provides for some provisions with respect to centralisation, which means, that the central government owns a larger domain of action and thus plays a more powerful role than the states. Some unitary or non-federal features of the constitution are as follows – a single constitution provisioning for single citizenship, an independent judiciary, all India services, the appointment of the state governors by the centre, emergency provisions, etc. Due to these reasons, Prof. KC Wheare describes India as a ‘quasi-federal state’ that is federal in form but unitary in spirit.

It is worth noting that instead of the word ‘federation’, the makers have used the word ‘union of states’ under Article 1 of the constitution to indicate that (i) the Indian Union is not the result of any agreement among the states and (ii) the component states have no freedom to secede from it.

Single citizenship

One of the main unitary features of the Indian Constitution is that it provides for only a single citizenship, unlike in countries such as the USA, where each person is a citizen of the USA as well as of the state to which he belongs. In India, on the other hand, all the citizens enjoy the same political and civil rights with respect to citizenship all across the country, regardless of the very state where they were born or are residing. Part II (Article 5-11) of the Constitution has provisions related to the citizenship of India. Moreover, detailed provisions have been made under the Citizenship Act of 1955.

Emergency provisions

To enable the President of the country to effectively meet any abnormal situation, the Indian Constitution has provided elaborate emergency provisions under Part XVIII from Article 352 to Article 360. The main rationale for incorporating these provisions in the constitution is to safeguard the sovereignty, unity, integrity and security of the country, the democratic political framework and the constitution itself. One of the characteristic features during an emergency is that all the power and the states are under the control of the central government. Thus, this changes the federal structure of the country into a unitary one without any proper formal amendment of the constitution. There are three types of emergency under the Indian Constitution:-

National emergency under Article 352 – It is declared on the grounds of war or external aggression or armed rebellion. It is important to note that earlier, the term ‘internal disturbance’ was used in place of the term ‘armed rebellion’. The substitution of the terms was brought about by the 44th Constitutional Amendment Act (1978). In the case of Minerva Mills Ltd. v. Union of India (1980), the Hon’ble Supreme Court has held that the national emergency can be challenged in court on the ground of malafide or that the declaration of the emergency was based on wholly irrelevant and extraneous facts.
State emergency under Articles 356 and 365 – This is also known as the President’s Rule. While Article 356 provides for a state emergency on grounds of failure of the constitutional machinery within the state, Article 365 provides for the declaration of an emergency when there is a failure to comply with the directions of the centre.
Financial emergency under Article 360 – This is declared on the ground of a threat to the financial stability or credit of the country.

Significance of Indian Constitution

Supreme law of the nation

The constitution functions as the legal foundation upon which all the laws and regulations of a country are based. It holds the highest authority in governing the country by providing consistency and coherence in the legal system. It outlines the framework for governance, defines the rights and duties of citizens, and establishes the structure and powers of various government institutions.

Rule of law

The Indian Constitution shows its significance by upholding the principle of the rule of law, which means that no individual, including government officials, is above the law. It ensures that the laws are applied equally to all citizens and institutions, regardless of their status or position. This principle promotes fairness, justice, and accountability within the legal system, preventing arbitrary use of power and safeguarding the rights of individuals.

Protection of fundamental rights

The Indian Constitution guarantees the protection of fundamental rights, which are essential liberties and freedoms granted to all citizens. These rights include the right to equality, freedom of speech and expression, the right to life and personal liberty, cultural and educational rights, and the right to constitutional remedies. The Constitution ensures that these rights are not infringed upon by the state or any individual, and citizens can seek redressal if their rights are violated.

Stability and continuity in governance

The Indian Constitution provides a framework for stability and continuity in governance by establishing a system of democratic governance with checks and balances. It outlines the structure and powers of various organs of the government, i.e., the executive, legislature, and judiciary, and specifies their roles and responsibilities. Additionally, the Constitution sets out procedures for the election and appointment of government officials, ensuring smooth transitions of power and preventing abrupt disruptions in governance. In fact, there are also peaceful mechanisms, such as the power of judicial review, to resolve conflicts and disagreements.

National unity

Since India is a multi-diverse country, the Indian Constitution plays a very important role in promoting national unity by providing a common framework that binds together the diverse population of India. It acknowledges and respects the country’s rich cultural, linguistic, and religious diversity while emphasising the importance of unity and integration through the principles of equality, social justice, and secularism.

Criticism of the Indian Constitution

Borrowed constitution

Since the Indian Constitution has been made after taking inspiration from various foreign models, critics argue that this reliance has resulted in a document that contains nothing new or original and lacks sufficient adaptation to India’s unique socio-cultural and political context.

Carbon copy of 1935 GOI Act

According to critics, many provisions of the Indian Constitution closely resemble those of the Government of India Act, 1935, which was enacted by the British colonial government. This is seen as evidence of a failure to break away from colonial influences and assert India’s sovereignty in the drafting of the foundational legal document of the country.

Un-Gandhian constitution

Critics argue that the Constitution, with its emphasis on parliamentary democracy, centralised governance, and modern legal frameworks, does not adequately reflect Gandhi’s vision of decentralisation and grassroots democracy, based on principles such as non-violence, village self-governance (Gram Swaraj), and economic self-sufficiency (Sarvodaya). Failure to prioritise Gandhian ideals, as per them, perpetuates inequalities and undermines community empowerment.

Very lengthy in size

Critics argue that the Constitution is too bulky and too detailed, containing some unnecessary provisions as well. They would rather advocate for a streamlined and more concise constitution to enhance transparency, efficiency, and accessibility in governance.

Use of complex “lawyers’ language”

Critics often argue that the dense legalistic terminology and intricate phrasing make the Constitution challenging for ordinary citizens to comprehend their rights and obligations as outlined therein. This complexity also hampers effective communication between citizens and the legal system, which leads to a lack of awareness and participation in the democratic process.

Changes brought to the Indian Constitution

Any law can be most effectively worked out if it can be modified so as to adapt to the changing needs and circumstances of societal needs. Similar is the case with the constitutions all over the world, which act as the most important basis to formulate law in the countries. While some constitutions are rigid, which lay down principles of permanent value and are amended only after thorough deliberations, others are flexible, in which amendments can be effected rather easily. For example, the British Constitution can be amended by any ordinary Act of Parliament.

Similarly, the Indian Constitution also provides for an amending power for the Parliament so that it can adjust itself according to the changing needs and circumstances of society and the nation. This amending power has been provided under Article 368 of the Indian Constitution, which includes amendment by way of addition, variation or repealing any provision of the constitution as per the established procedure for the same. Since its adoption in 1950, the Indian Constitution has undergone several amendments every now and then.

The procedure of amendment of Constitution

In India, different types of provisions of the constitution are dealt with differently with respect to their amendability. Three classes of amendments can be found in the Indian Constitution:-

The constitutional provisions, which are comparatively less significant, can be amended by a simple legislative process, just as they are adopted while passing any other ordinary legislation in Parliament. For these provisions, the Parliament has been empowered to make laws making such provisions as are different from what these Articles provide for. Thus, they are not subject to the special procedure laid down under Article 368. For example-

Admitting a new State under Article 2 of the Indian Constitution can be effected by consequent amendments in Schedules I and IV, which provide for the definition of territory and allocation of seats in Rajya Sabha amongst states, respectively.
Parliament, under Article 11 of the Indian Constitution, has the power to make any provision for the acquisition and termination of citizenship in spite of Articles 5 to 10.

2. Some vital provisions which can be amended only by following the procedure (rule of special majority) as prescribed under Article 368 of the constitution:-

Introduce a bill of a constitutional amendment in either House of Parliament
The bill must be passed by each house by a majority of its total membership, and a majority of at least two-thirds of the members of that House present and voting
The President must give assent to the bill

3. Some constitutional provisions that are related to the federal character, often regarded as ‘entrenched provisions’, can be amended by the same process as laid down under Article 368, with little change in the process before being presented to the President for his assent, the bill has to be ratified also by the legislatures of at least one-half of the States by resolutions. This has been provided under clause (2) of Section 368 itself. For example-

Manner of election of the President of India under Articles 54 and 55.
The extent of executive power of the Union and States under Articles 73 and 162, respectively.

Till now, there have been 106 Constitutional Amendments Acts passed in Parliament bringing out changes in various provisions of the Indian Constitution.

Judicial interpretation

It is important to note that the power of Parliament under Article 368 to amend the constitution is not unlimited and there are judicial safeguards against the same. One of the most important safeguards is that the Parliament cannot amend the constitutional provisions that form part of the ‘basic structure’ of the constitution. In this regard, various judicial pronouncements of the Supreme Court of India highlight what constitutes the basic structure and why they must not be amended by the Parliament.

The doctrine of basic structure can be understood as a legal principle recognized by the Supreme Court of India that identifies the core principles and values of the constitution that cannot be modified by the Parliament by way of its amending power under Article 368 of the constitution. This doctrine was established in the landmark case of Kesavananda Bharati v. State of Kerala (1973) on 24 April 1973. In this 13-judge bench decision, the Hon’ble Supreme Court concluded that the Parliament does not possess the authority to alter the essential structure or framework of the Constitution. The doctrine of basic structure serves as a crucial safeguard against arbitrary amendments and helps to preserve the essence of the Constitution.

Some important opinions delivered by the judges in this case are as follows:

The power to amend the constitution is to be found in Article 368 itself. In this regard, the ruling of the court in I.C. Golak Nath v. State of Punjab (1967) was thereby overruled.
There is a distinction between an ordinary law and a constitutional law. The constitution makers didn’t use the expression ‘law’ in Article 13 so as to include ‘constitutional law’ as that would mean conferring power to Article 368 to abridge the fundamental right or any other part of the constitution.
The amending power of Parliament can’t be exercised in such a manner as to destroy the fundamental or basic features of the Constitution. Thus, any constitutional amendment that is in violation of the basic structure of the constitution is ultra vires.

Basic Structure of the Indian Constitution

From the several judicial pronouncements, the basic features or elements of the basic structure of the Indian Constitution can be laid down as follows:-

Supremacy of the Constitution
Sovereign, democratic and republican nature of the constitution
Separation of power between different organs of the government, i.e., the legislature, the executive and the judiciary
Federal character of the constitution
Secular nature of the constitution
Unity and integrity of the country
Rule of law
Judicial review
Independence of the judiciary
Parliamentary system
Welfare state (socio-economic justice)
Effective access to justice
Freedom as well as the dignity of the individual
Harmony and balance between fundamental rights and directive principles
Principles underlying the fundamental rights
Principle of equality
Powers of the Supreme Court under Articles 32 (writ jurisdiction), 136 (jurisdiction with respect to special leave petition), 141 (binding nature of law declared by the Supreme Court on all other courts), and 142 (enforcement of decrees and orders of the Supreme Court)
Powers of the High Court under Articles 226 (writ jurisdiction) and 227 (power of superintendence over all courts)
Free and fair elections
Limited power of the Parliament to amend the constitution

Conclusion

As we come to the end of this article, it is worth mentioning that in spite of various criticisms put forth on the functioning of the Constituent Assembly, one cannot ignore that today, if India is living and breathing in the air of sovereignty, democracy, and freedom, along with the rights and duties vested on both the citizens and the states of the nation, it is because of the relentless efforts by notable personalities who have come together to gift India its biggest asset, or as we call it, the Constitution of India.

Frequently Asked Questions (FAQs)

What is a Constitution?

A constitution is the basic law of a nation that sets out its governmental structure and governance. The Republic of San Marino is believed to have the oldest Constitution in the world, coming into effect on 8 October 1600.

When was the Indian Constitution adopted?

The Indian Constitution was adopted on 26 November 1949.

When is ‘Law Day’ celebrated?

Law Day, or Constitution Day (“Samvidhan Diwas”), is celebrated on 26 November as the Indian Constitution was adopted on 26 November 1949.

Why was 26 January chosen as the day of enforcing the Constitution if the Constitution was already completed?

While the Indian Constitution was adopted on 26 November 1949, it came into force on the date of 26 January 1950 because 26 January 1930 was the date decided for “Poorna Swaraj” by the leaders of the Indian National Congress (INC) in its Lahore session in December 1929, presided over by Dr. Jawaharlal Nehru.

Is the Indian Constitution a carbon copy of the GOI Act of 1935?

Though many features of the Indian Constitution have been derived from the Government of India Act 1935, it would be wrong to say that it is a carbon copy of the said Act because the constitution makers have questioned and deliberated the applicability of such provisions before incorporating them and modifying them in a manner to best suit the conditions of Indian society.

Who is the constitutional advisor?

Mr. B.N. Rau was appointed as the constitutional advisor to the Constituent Assembly. He was the man responsible for the general structure of the democratic framework of the Indian Constitution.

Who is known as the father of the Indian Constitution?

Dr. B.R. Ambedkar is known as the father of the Indian Constitution. He was also the chairman of the drafting committee in the Constituent Assembly.

Who was the 1st president of the constituent assembly?

Dr. Sachidanand Sinha was the first president of the Constituent Assembly and later, Dr. Rajendra Prasad was elected as the president.

References

Legal Classics Making of India’s Constitution, HR Khanna, Eastern Book Company
https://rajyasabha.nic.in/rsnew/constituent_assembly/constituent_assembly_mem.asp
https://constitutionnet.org/sites/default/files/the_role_of_constituent_assemblies_-_final_yg_-_200606.pdf
https://rajyasabha.nic.in/rsnew/publication_electronic/Selected%20Women%20Speech_Final.pdf
https://www.nextias.com/blog/constitution-of-india/#Significance_of_the_Constitution_of_India
https://main.sci.gov.in/pdf/Museum/m2.pdf
https://ceodelhi.gov.in/eLearningv2/admin/EnglishPDF/Chapter%203%20Constitutional%20Design.pdf

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

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

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

Goodyear India Ltd vs. State of Haryana (1990)

By

-

July 21, 2024

The article is written by Clara D’costa. It delves into the landmark case of Goodyear India Ltd vs. State of Haryana (1990), wherein the Supreme Court addressed the constitutional validity of the purchase tax imposed on raw materials used in manufacturing. The article meticulously examines the issues raised, arguments advanced by the parties and the Court’s decision, as well as the rationale behind the same. This case strikes a balance between state taxation powers and the constitutional guarantee of free trade and commerce.

Table of Contents

Introduction

The case of Goodyear India Ltd. vs. State of Haryana (1990) saw a landmark judgement by the Supreme Court of India, addressing issues concerning the interpretation of tax laws and the definition of “sale” under The Central Sales Act, 1956. The case arose when Goodyear India Ltd., a tyre manufacturer, challenged the imposition of sales tax by the State of Haryana on certain transactions which the company contended as not constituting a “sale” as defined under the Act. At its core, this case delves into the question of whether the State of Haryana could impose a tax on goods merely consigned out of the state, despite no actual sale occurring.

This debate led the Supreme Court to embark on a detailed examination of what constitutes a “sale” and “goods” under the law. The Court’s analysis was not just about interpreting legal definitions but also about understanding the nature of the transactions and the broader legislative intent. It was a balancing act between maintaining the state’s right to levy taxes and protecting the integrity of inter-state commerce from potentially burdensome state regulations.

This judgement, while rooted in the specifics of tax law, speaks volumes about the principles of fairness, federalism, and the delicate balance of power within India’s legal framework.This case is a vivid reminder of how legal interpretations can shape the economic landscape and the importance of maintaining a clear demarcation of legislative powers.

Details of the case

Case name: Goodyear India Ltd. vs. State of Haryana
Name of the Parties:

Petitioners: Goodyear India Ltd. Etc.
Respondents: State of Haryana & Anr. Etc.

Petition numbers: 1166-72 of 1985
Type of case: Civil Appeal
Name of the Court: Supreme Court of India
Bench: Justice Sabyasachi Mukharji, Justice S. Ranganathan
Date of the judgement: 19th October, 1989
Equivalent Citations: 1990 SCC (2) 71, 1989 SCR Supl. (1) 510, 1989, JT 1989 (4) 229
Laws discussed:

Section 50 and Section 24(3) of the Haryana General Sales Act, 1973 ,
Section 13-AA of The Bombay Sales Tax Act, 1959,
Section 3, Section 9(1) of the The Central States Act, 1956,
Article 14, Article 245, Article 246, Article 269(1), Article 301, Article 304 (b) of the Constitution of India 1950

Facts of the case

Goodyear India Ltd. (hereinafter referred to as appellant), was a registered dealer engaged in the production and sale of automobile tyres and tubes at its factory in Ballabgarh, Haryana. The appellant would regularly source the raw materials required for the manufacturing of automobile tyres and tubes, both from within and outside the state of Haryana. The company would manufacture and sell their goods both within and outside the state of Haryana. Goodyear India Ltd. was registered as a dealer under the Haryana General Sales Act, 1973 and The Central States Act,1956. The appellant would diligently submit their quarterly returns and pay their taxes in accordance with the rule of law.

However, in 1979, the assessing authority of Faridabad, imposed purchase tax under Section 9(1)(b) of the Haryana General Sales Act, 1973 on the returns of the years 1973-1974 and subsequently for the years 1974-1975 and 1975-1976. Further, the authority also imposed taxes on the goods used in the manufacture of any other goods dispatched outside the state of Haryana. The revenue authorities also imposed taxes on the dispatches of manufactured goods, namely, automobile tyres and tubes dispatched to the various depots of the company in other states.

The appellant therefore, challenged the imposition of purchase tax, by filing various writ petitions in the High Court of Punjab and Haryana. The Punjab and Haryana High Court on 4th December, 1982 decided the said petition in favour of the appellant. The High Court held that mere dispatch of goods to Goodyear India Ltd’s own branches outside the State, does not constitute “disposal of goods in any manner other than by way of sale”, as given under Section 9(1)(b) of the Haryana General Sales Act, 1973.

The High Court held that the above-mentioned Section only provided for imposition of purchase taxes on the disposal of manufactured goods. However, the impugned notification went further, by making a mere dispatch of goods to the dealers themselves, taxable. This created a new tax, which was not authorised by Section 9 of the Haryana General Sales Act, 1973. Therefore, it was held to be contradictory and in conflict with the provisions of Section 9 of this Act.

The High Court referred to Section 9 and concluded that the term “disposes of” was not a specialised term and thus, looked at the definition of the same, in Webster’s Third New International Dictionary and Corpus Juris Secundum (volume 27). Thereby deciding that “disposes of” or “disposal”, cannot be equated with just sending goods to oneself. Therefore, the High Court held that the notification exceeded the scope of Section 9, which only allowed for purchase tax on the disposal of manufactured goods. As the Court granted a decision in favour of the appellant, with respect to the assessment years 1976-77 to 1979-80, Goodyear India Ltd. then filed writ petitions for the assessment years 1973-74, 1975-76 and 1980-81, in the High Court, challenging the assessment.

The High Court further held that “mere dispatch of goods to a place outside the State, in any manner otherwise than by way of sale in the course of inter-state trade of commerce” is equivalent to a consignment in inter-State trade or commerce. This is covered by Article 269(1)(h) and Entry No. 92-B of List 1 of the Seventh Schedule of the Constitution. Due to this, the authority to levy sales or purchase taxes on these consignments, along with any related matters, lies exclusively with the Parliament. The State Legislature does not have the power to impose such taxes on these transactions.

The Haryana General Sales Tax (Amendment and Validation) Act, 1983 amended Section 9(1)(b) of the the Haryana General Sales Tax, 1973 thereby levying a purchase tax on the consignment of goods outside the State and thus, it was beyond the legislative competence of the state of Haryana. Therefore, it was declared to be inoperational and void. The High Court further held that irrespective of the 46th Amendment, the attempt to tax the mere dispatch of goods outside the State, does not come under the ambit of Entry No. 54 of List II of the Seventh Schedule. The High Court decided that neither buying the raw materials, nor making them into the final product, triggers purchase tax.

These actions are not considered as taxable events. The appellant companies filed writ petitions in the High Court, challenging the orders of the assessing authority that imposed an additional tax of 2%. They also questioned the validity of section 13-AA of the Bombay Sales Tax Act, 1959, under which this additional tax was imposed. The companies argued that the 2% additional tax on raw materials, when the finished goods made using them were sent out of the State, was essentially a consignment tax, which the State Legislature did not have the power to impose.

The High Court dismissed the petitions. Aggrieved, the appellant companies challenged the High Court’s decision, by filing a joint petition before the Supreme Court. Hence, the present case.

Issues raised

The issues raised in this case, were on the basis of the subject matter of the appeal made by Goodyear India Ltd., against the decision of the Punjab and Haryana High Court. The issues/questions raised in this case were as follows:

Whether the dispatch of goods by a manufacturer, to its own branches outside the State, comes under the purview of Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 as a taxable event?
What is the correct interpretation of the phrase “disposal of goods in any manner other than by way of sale” under Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 and does it cover the mere transfer of goods from one warehouse to another outside of the State, by the same manufacturer?
Whether Section 13AA of the Bombay Sales Tax Act, 1959 is beyond the legislative competence of the State Legislature and violative of Article 14 and Article 301 of the Constitution?
Does the State Legislature have the power under Entry 54 of List II of the Seventh Schedule of the Constitution, to impose purchase tax on dispatch of goods by a manufacturer, to its own branches outside the State?
Whether Section 13AA of the Bombay Sales Tax Act, 1959 is in pith and substance and whether it levies tax on consignment and not on purchase?

Arguments of the parties

Petitioners

Adv. Raja Ram Agarwala, the learned counsel for the appellants, argued before the Supreme Court, that it was necessary to determine the exact taxable event before levying tax. He further contended that if it was proved that the taxes had been levied on mere dispatch or consignment of goods from one warehouse to the another outside the State, according to the amended provisions of Section 9(1)(b), it would be beyond the State’s authority.

The appellants emphasised that the imposition of the purchase tax in question, exceeded the legislative competence of the State Legislature under Entry 54 of list II. The counsel further argued that it restricted the freedom of trade and commerce, thereby violating Article 301 of the Constitution.

Mr. Rajaram Agarwala, representing the appellants, argued that the case of State of Tamil Nadu vs. Kandaswami (1975), which Mr. Tewatia (counsel for the respondents) cited, should be understood in the context of the specific issue it addressed. That case dealt with whether the Madras High Court was correct in saying that a sale exempted from tax could still be considered liable to tax, and if so, whether the exemption meant the tax was not payable. Mr. Agarwala emphasised that even if the taxable event was identified, it was based on the assumption that the goods were generally taxable and subject to tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 if purchased without paying tax and then dealt with to avoid state sales/purchase tax.

Respondent

Adv. Tewatia, the learned counsel for the State, put forth a different perspective. He stated that the state of Haryana came into being, as a result of the Punjab State Reorganisation Act, 1966. Consequently, the legislative history of the taxing statute is shared by both Haryana and Punjab. The learned counsel further highlighted the development of the purchase tax in Punjab, which was introduced by the East Punjab General Sales Tax (Amendment) Act, 1958. This Act, under Section 2(f), defined “purchase” and expanded the definition of “dealer” to include purchasers of goods. Dealers, specifically those involved in crushing oil-seeds, were required to pay purchase tax on raw materials and the term “taxable turnover” was also revised through this amendment.

Mr. Tewatia referred to observations in the case of State of Tamil Nadu vs. Kandaswami (1975), to further support points made in the case of Malabar Fruit Products Company and Ors vs The Sales Tax Officer and Ors. (1972), where Justice Poti of the Kerala High Court decided that the taxable event was the purchase/sale of goods, and not their dispatch.

He further contended that initially, Punjab exempted dealers from paying purchase tax on raw materials if they were manufactured and sold within the State. The idea behind this exemption was to increase the state revenue, through sales tax on the goods manufactured and sold within the State. However, dealers found ways to escape this condition and hence, this amendment subjected the goods listed in Schedule C, to purchase tax, thereby removing the tax exemption for manufacturers. The State further argued that no tax was payable under the Haryana Act, when goods were exported outside the State, whether through inter-State sales or international export. They asserted that tax liability only arose when goods were dispatched to certain designated depots, especially those of the Food Corporation of India (FCI), located in other states.

Mr. Tewatia, in his arguments, referred to the observations made by this Court, in the case of State of Tamil Nadu vs. Kandaswami (1975), wherein the High Court addressed Section 7A of the Tamil Nadu General Sales Tax Act, (1959).

The counsel for the State further explained the provision under Section 9(1) of the Central Sales Act, 1956 which levied purchase tax on dealers, for purchase of goods within the State, when goods are not listed in Schedule B and are used to produce Schedule B goods, or if the manufactured goods are not sold within the State, involved in inter-State trade or commerce, exported outside India, or if the purchased goods are exported outside the state.

It was further argued that the taxable event was the purchase of goods in Haryana, with the obligation to pay tax deferred until certain conditions are met. This can be avoided by the dealer by submitting a declaration in the S.T. Form as given under Section 24 of the Haryana General Sales Act, 1974. It was further argued that if the conditions mentioned in Section 9 of the Central Sales Tax of the Act are not met, the tax obligation is revived. The tax was on purchase of goods and it fell within the ambit of Entry 54 of List II and the State Legislature had the authority to impose the purchase tax under the provisions of the Constitution.

The State maintained that the tax was levied on the purchase of raw materials and not on the process of manufacturing the goods. The legislative intent and language of the state clearly stated that the tax aligned with the legislative powers of the State. Further, it was argued that Section 9(1)(c) stated that no tax was payable on exports outside the state. However, tax is levied on goods dispatched to depots in another state.

The State argued that goods under different parts of the Act, particularly under Section 13AA, were justified based on the objective of encouraging resale within the state and preventing tax evasion.

Mr. Dholakia argued that the Act primarily imposes a tax on purchases, rather than on consignments. He referred to a previous judgement by the Supreme Court in the case of State of Karnataka vs. Shri Ranganatha Reddy (1978) to support his point. In this case, the court clarified the nature of such taxes. Mr. Dholakia emphasised that Section 13-AA of the Act, deals specifically with the consignment of manufactured goods. He pointed out that no tax is actually imposed under Section 13AA for these manufactured goods, suggesting that the focus of the legislation is not on taxing consignments.

The State defended their contentions regarding the authority of the legislation to impose taxes under Entry 54 of List II of the Seventh Schedule of the Constitution. The respondents argued that interference into matters assigned to other legislatures should be evaluated under the doctrine of pith and substance.

Laws involved in Goodyear India Ltd vs. State of Haryana (1990)

The case of Goodyear India Ltd. vs. State of Haryana (1990) referred extensively to these legal provisions and constitutional articles to determine the constitutionality, validity, and application of the Haryana General Sales Tax Act, 1973 in relation to inter-state trade, taxation of goods, procedural compliance, and protection of fundamental rights.

The arguments and decisions were shaped by interpretations of these laws and constitutional principles to ensure adherence to legal norms and principles of justice.

Section 13AA of The Bombay Sales Tax Act, 1959

Section 13AA classifies goods for the purpose of taxation, within the state of Bombay (now Maharashtra). It divides goods into two categories- Part I includes the goods that are meant for resale within the State, and Part II includes goods used in manufacturing of new taxable goods.

This Section prescribes a 2% purchase tax for certain non-declared goods mentioned under Part I of Schedule C. This tax is to be paid by a liable dealer or the commission agent, on purchase from either registered or non-registered dealers. It comes into play only when the taxable goods are manufactured and sent outside the State. Further, it is to be noted that this 2% purchase tax, is in addition to any other purchase or sales tax that has been paid or is payable.

As Section 13AA classified goods into two categories based on their use, it directly impacted how goods are taxed under the Bombay Sales Tax Act, influencing exemptions and liabilities. In the present case, this provision was relevant in understanding how goods were categorised for tax purposes under state law, potentially affecting the tax liabilities of Goodyear India Ltd.

Section 3 of the The Central States Act, 1956

Section 3 defines what constitutes an inter-state sale or purchase, which is crucial to determine the application of the Central Sales Tax (CST). It ensures clarity in tax imposition across state borders. A sale or purchase takes place in the course of inter-state trade or commerce if

The goods are moved from one State to another, or
The sale or purchase is affected by a transfer of documents of title of goods, in the course of their movement from one State to another.

This Section aims to prevent ambiguity and disputes regarding what constitutes inter-state sales or purchase. It provides a legal framework for levying CST and establishes procedural clarity for taxpayers and tax administrators.

In this case, Section 3 was pivotal in determining whether Goodyear’s transfer of goods transfer as inter-state sales and thus, subjected to CST.

Section 9(1) of the The Central States Act, 1956

This Section outlines the circumstances under which tax is levied and the exemptions for the sales to registered dealers, exports and specific transactions. This section determined the tax liability of goods sold across state borders.

It has been stated that the Government of India will levy and collect taxes from any dealer who sells goods in the course of inter-state trade or commerce. The State in which this will be collected, is the one from where the movement of the goods began. After the first sale, in case of a subsequent sale of goods from one state to another

If it is carried out by a registered dealer, the tax is collected from the state where the dealer must have obtained the necessary form for the purchase of the goods.
If it is carried out by an unregistered dealer, the tax is collected from the state where the subsequent sale took place.

The provisions of Section 9(1) are aligned with the principles under Article 269(1), which regulates taxes on inter-state trade and commerce. This thereby ensures that CST is imposed in a manner that respects constitutional provisions of equality and fairness of taxation.

This Section was pivotal in determining whether the transfer of goods by Goodyear Ltd. qualified for the exemptions under CST provisions.

Section 24(3) of the Haryana General Sales Act, 1974

Section 24(3) focused on procedural requirements involving declarations required for claiming exemptions and refunds, to ensure that taxpayers comply with administrative rules to receive tax benefits accurately and efficiently.

This provision stated that if a dealer purchases goods, without paying tax as per sub-section (1), those goods must be utilised for the specific purpose laid down in that sub-section. If the dealer fails to do so, tax must be paid on the purchase value of the goods. The rate of tax will be as prescribed under Section 15 of the Act. In case the goods are already subjected to tax under any other provision of this Act, the tax under this Section, shall not be levied.

This Section enhanced the efficiency of tax administration in processing CST exemptions and refunds. It provided taxpayers and authorities with the documentation and evidence required to support claims, minimising disputes and delays.

In the present case, Section 24(3) was referred to, in order to assess if Goodyear India Ltd. complied with these procedural requirements to be exempted from CST or to get refunds for their inter-state transactions.

(This Section has now been omitted.)

Article 269(1) of the Indian Constitution

This Article states that taxes on the sale, purchase or consignment of goods, are levied and collected by the Government of India. However, on and after 1st April, 1996 these taxes shall be assigned to the State, with respect to matters as specified under clause (2).

Article 301 of the Indian Constitution

Article 301 ensures freedom of trade, commerce, and movement of goods across India, without restrictions. It aims to remove barriers to trade and promote economic unity by ensuring that there are no restrictions on the movement of goods and services across states.

Courts interpret Article 301 to eliminate laws or regulations that create barriers to trade between states, unless such restrictions are justified under other provisions of the Constitution, such as Article 304.

Article 304(b) of the Indian Constitution

Doctrine of pith and substance

The doctrine of pith and substance is a principle used in constitutional law, to determine the true nature of a legislation, focusing on its main purpose and effect, rather than its incidental aspects, to establish whether it falls within the legislative competence of the enacting authority.

Article 245 divides the legislative powers between the Union and State legislature. The Parliament may make laws for the whole of or any part of India, while State Legislatures may make laws for the whole of or any part of a state.

Article 246 specifies the subjects that the Parliament and the State Legislatures, may legislate on. The Parliament holds the exclusive power to make laws relating to the matter mentioned under List I in the Seventh Schedule (Union List). The State Legislatures possess the exclusive power to make laws relating to matters mentioned under List II in the Seventh Schedule (State List). Both the Parliament and the State Legislatures have the authority to make laws relating to matter mentioned under List III in the Seventh Schedule (Concurrent List)

These provisions give effect to the doctrine of pith and substance. They determine a law’s purpose and the legislative competence, when it overlaps between the Union and State lists, guiding constitutional interpretations.

These Articles separate the powers of the Union and State legislature and determine the true nature of a law. This doctrine of pith and substance is used to determine the true nature and competence of a legislature when they act upon the matters that fall under the jurisdiction of both levels of legislature. It clarifies the scope of authority and establishes which subjects fall under the exclusive or concurrent jurisdiction of each level of government, aiding in the interpretation and enactment of new laws.

Courts apply Articles 245 and 246, along with the doctrine of pith and substance, to determine whether a law is within the legislative competence of the enacting authority. This includes assessing whether a state law encroaches upon matters reserved for the Union or or vice versa, ensuring that each legislative body operates within its constitutionally defined boundaries.

Judgement in Goodyear India Ltd vs. State of Haryana (1990)

In the case of Goodyear India Ltd. vs. State of Haryana and Anr (1990), the Supreme Court of India adjudicated upon the application of the Haryana General Sales Tax Act, 1973, to transactions involving Goodyear India Ltd. The Court analysed whether the imposition of sales tax under the Act, infringed upon constitutional provisions, particularly Article 301, which guarantees freedom of trade, commerce, and movement of goods across India. It clarified the taxable event under the Act, deciding whether it dealt with the sale itself or the transfer of property. The Court further upheld the validity of the imposition of sales tax, provided it did not restrict interstate trade without any reasonable grounds. The judgement stressed on the balance between state taxation powers and constitutional guarantees of economic freedom, ultimately upholding the constitutional validity of the sales tax as applied to Goodyear India Ltd. Therefore, the present appeal was dismissed.

Rationale behind the judgement

The Court, while granting the decision, stated that it was necessary to determine whether the tax imposed by the legislature was in pith and substance. The Court stated that the nomenclature given by the Haryana Legislature in this case, was not decisive and needs to be decided after a deep study of all aspects.

The Court stated that there was no hesitation in holding that the tax was imposed on dispatch between states. It was, however, to be noted that it is of great importance that imposition of consignment tax has taken place after an in-depth consideration of all the aspects and consensus among the concerned states. The rates, grant of exemption and the ratio relating to the distribution of proceeds amongst the states, should be considered. Although reaching an agreeable solution may take time, this does not mean that such a tax should be delayed or suspended. The states should not claim the need to impose this tax due to potential evasion or revenue shortages.

Justice Ranganathan agreed with the decision of the High Court of Punjab and Haryana and further observed that the issues mentioned in these appeals were complex. According to his observations, Section 9 of the Haryana General Sales Tax Act,1973 and Section 13AA of the Bombay Sales Tax Act, 1959 appeared to impose a purchase tax. This tax is, however, triggered after the purchase, when the purchaser or buyer uses the goods as raw materials to manufacture taxable goods, and moves the manufactured goods, not by way of sale, to a location not within the state. It is to be noted that the tax is imposed on the purchase price of the raw materials and not on the value of the finished goods sent out of the state.

Justice Ranganathan further agreed with Justice Mukherjee that it was reasonable, after further consideration, that the tax imposed in issue, is distinct from the standard purchase tax, as it applies to different categories of goods. Further, it was observed that the category of goods mentioned, was triggered by an event that was not concerned with the purchase of goods. The event that is taxable here, is the consignment of manufactured goods and not the purchase of goods.

The Court further agreed that the decision given in the State of Tamil Nadu vs. Kandaswami (1975) did not address the specific issues mentioned in this case, thereby rejecting the arguments of the respondents.

The Court also emphasised on the importance of Article 301. The Supreme Court agreed that imposition of a tax that effectively hinders a free flow of trade across the state borders, must be scrutinised closely. Article 301 guarantees freedom of trade, commerce, and movement of goods throughout the territory of India, emphasising the need to prevent any restrictions that could hinder economic unity. Article 304(b) permits states to impose reasonable restrictions on trade in the public interest, provided these do not unduly inhibit inter-state commerce. Article 269(1) deals specifically with taxes on inter-state trade and commerce, aiming to ensure uniformity and fairness in tax collection across states.

In the present case, these provisions were interpreted to safeguard against state tax laws that hold the potential of burdening interstate commerce or violating the fundamental freedom of trade enshrined in Article 301. The Court sought to strike a balance between the financial independence of states and the national interest of promoting economic unity.

It was further reasoned by the Court that, although the actual imposition of the tax might take some time until an agreeable solution is found, the delay does not cause the consignment tax to be suspended. It further led them to hold that a tax declared as a consignment tax, is recognized as such. This is done in order to prevent any evasion of taxes. It was observed and concluded by the Court, that these amendments prove that there were indeed attempts made by people in trade, to avoid sales tax. They did so by moving goods made from raw materials purchased locally, to other states as consignments, rather than selling them within the state, since it would attract a tax liability. The Supreme Court invalidated the tax provisions under the Haryana General Sales Tax Act, 1973, as unconstitutional. The Court emphasised the need to balance state taxation powers with the constitutional guarantee of free trade and commerce across India, thereby upholding the principle of a unified national market.

The Court stated in its opinion that, Mr. Dholakia correctly argued that the requirement to maintain accounts in a specific manner, is not a valid criterion or evidence for determining when the liability arises. The Court went on to observe that the interpretation of specific laws that create the tax, is what is required to determine the obligation to pay tax. As per the doctrine of pith and substance, The same has been stated in the Kerala State Electricity Board vs. Indian Aluminium Co. (1975) and Prafulla Kumar Mukherjee vs. Bank of Commerce Ltd. AIR (1947) .

Therefore, the Court stated its opinions regarding the contention about the penalties under the Haryana General Sales Act, 1973 by declaring these proceedings as unsuccessful.

Relevant judgements referred to in the case

The Supreme Court referred to a number of precedents in order to interpret the various provisions of the Haryana General Sales Tax Act, 1973 particularly concerning the definition and meaning of “sale”, “purchase” and the conditions to impose purchase or sales tax.

The State of Tamil Nadu vs. Kandaswami (1975)

The Supreme Court held that the decision granted in this case did not constitute as a warrant to the idea that a mere dispatch of goods from one warehouse to the other, fell under the ambit of the goods being disposed of. The Supreme Court held that it did not guarantee that the meaning of the expression ‘dispatch’ and ‘to disposal’ are similar. Rather, the expression “disposal” of goods is separate and distinct from the expression ‘dispatch’.

The Court in this case noted that this Section functions both as a charging and a remedial provision, aimed primarily at preventing tax leaks and evasion. While analysing legal provisions, interpretations which defeat the purpose, must be avoided. If there exists multiple interpretations, the one which is the most effective and functional, must be chosen. It was emphasised that tax laws must be interpreted strictly. The meanings of the words used in these laws, must be taken at face value, without any assumptions. Further, the Court found that the wording of Section 7A was unclear about its intent and did not address what constituted the taxable event.

It’s well-established, that a legal precedent only serves as authority for the specific decision it makes, not for any implications that might logically follow. This principle is also supported by the cases of Quinn vs. Leathem (1901) and State of Orissa vs. Sudhansu Sekhar Misra (1967). Therefore, the ruling in the Kandaswami case does not directly apply to interpreting Section 9(1)(b), to determine the taxable event in the present case.

Bata India Ltd. vs. The State of Haryana & Anr. (1983)

In Bata India Ltd. vs. The State of Haryana & Anr. (1983), the High Court of Punjab and Haryana ruled that sending goods outside the State, not through a sale by inter-state trade, falls under the consignment of goods, as defined under Article 269(1)(h) and Entry No. 92-B of List 1 of the Seventh Schedule to the Constitution. This means that the authority to levy sales or purchase tax on such dispatches or consignments, and related matters, lies exclusively with Parliament, excluding State Legislatures.

Therefore, Section 9(1)(b) of the Haryana General Sales Tax Act, 1973, as amended by the Haryana General Sales Tax (Amendment & Validation) Act, 1983, which imposed purchase tax on goods consigned outside the State by inter-state trade, was held void for exceeding Haryana’s legislative competence. The court also nullified the retrospective validation of the 19th July, 1974 notification and actions taken under it.

The High Court further clarified that simply manufacturing and consigning goods outside the State, by a manufacturer, for themselves, does not constitute a sale or disposal under Entry No. 54 of List II of the Seventh Schedule of the Constitution. Thus, both before and after the 46th Amendment, attempts to tax the mere consignment or dispatch of manufactured goods outside the State by inter-state trade, does not fall within the scope of State Legislatures’ authority, but rather under the Parliament’s jurisdiction, according to Article 248 (residuary powers of legislation) and Entry No. 97 of List I.

The court emphasised that neither the original purchase of goods, nor their manufacture into finished products alone, attracts purchase tax. The true taxable event under section 9(1)(b) of the Act, is the disposal of manufactured goods in any manner other than by sale within the State.

Atiabari Tea Co. Ltd vs. The State of Assam & Ors. (1961)

The Supreme Court, in its judgement in the present case, referred to the decision in Atiabari Tea Co. Ltd. vs. The State of Assam & Ors. (1960). This landmark judgement established principles regarding the constitutional limits on state taxation powers concerning inter-state trade. It was found that not all taxes infringe upon Article 301, but only those taxes that directly and immediately impede interstate transfer of goods.

The reference to the Atiabari case, focussed on the principles laid down regarding the interpretation of Article 301. It highlighted that while states have the authority to levy taxes, such laws must not unreasonably burden or obstruct inter-state trade and commerce, as guaranteed by the Constitution.

The Supreme Court aimed to ensure that the imposition of sales tax in the Goodyear case was in compliance with constitutional principles, particularly with respect to Article 301 and its implications on economic freedom and inter-state commerce.

Kalyani Stores vs. The State of Orissa & Ors (1966)

In determining whether a provision amounts to a restriction on the free movement of trade or commerce under Article 301 of the Constitution of India, the Supreme Court, as observed in Kalyani Stores vs. The State of Orissa & Ors (1966), emphasised that not every imposition of duty or tax constitutes a violation of Article 301. Only those measures that directly and immediately impede the free flow of trade are prohibited by Article 301.

The Court explained that the imposition of a tax may hinder trade in some cases, but each situation must be evaluated on the basis of its specific circumstances. It stressed that for a tax to contravene Article 301, it must significantly obstruct trade or commerce movement without justification.

In the case at hand, where the taxed goods do not leave the state as raw materials, but undergo processing within the state, there was no direct, immediate, or substantial hindrance to the free flow of trade. Therefore, the Court agreed with the High Court’s finding that the challenge to the tax imposition under Article 301 was not sustainable. Consequently, there was no need to address whether the tax imposition could be saved under Article 304(b) of the Constitution, which allows states to impose taxes on imported goods subject to certain conditions.

This approach underscores the Court’s careful consideration of each case’s factual context to determine if there is a violation of Article 301, thereby upholding the principles of economic freedom and interstate commerce guaranteed by the Constitution.

Andhra Sugars Ltd. & Anr. vs. The State of Andhra Pradesh (1968)

The Court stated that to levy a purchase tax on goods described in a specific manner, as seen in cases like Andhra Sugars Ltd. & Anr. vs. The State of Andhra Pradesh (1968), differs significantly from the present case. Here, the tax, although labelled as a purchase tax, applies to an entirely different category of goods and only triggers upon an event unrelated to the act of purchase. In this context, if one were to identify a “taxable event,” it would be the consignment of manufactured goods rather than the act of purchase itself.

Kerala State Electricity Board vs. Indian Aluminium Co. (1975)

In the Kerala State Electricity Board case, the Court discussed the extent of the state’s power to impose taxes and the boundaries within which such powers must be exercised. The reference was used to support the argument that states cannot extend their tax laws beyond their constitutional mandate, particularly when such laws impact inter-state trade and commerce.

Prafulla Kumar Mukherjee vs. Bank of Commerce Ltd. AIR (1947)

In this case, the court emphasised on the doctrine of pith and substance, which is used to determine the true nature and character of legislation. The Privy Council explained that when evaluating the validity of a law, one must look at its substance rather than its form. This doctrine helps in identifying whether a particular legislative action falls within the competence of the enacting body. The reference was pertinent to establishing that the consignment tax imposed by the Haryana General Sales Tax Act, 1973, was essentially a tax on inter-state trade, which falls under the purview of the Central Government, not the State.

Analysis of Goodyear India Ltd vs. State of Haryana (1990)

This case of Goodyear India Ltd. vs. State of Haryana (1990), involved a thorough examination of Section 9(1) of the Central States Act, 1956 and Section 24(3) of the Haryana General Sales Act, 1974, with reference to Article 14, Article 245, Article 246, Article 269(1), Article 301, Article 304(b) of the Constitution of India 1950. The Supreme Court in this case, clarified the scope of state legislative powers under the Constitution of India, by distinguishing between legitimate state taxation and overreach into areas reserved for central authority. The Court’s decision reaffirmed the constitutional principle that state legislatures cannot impose taxes on transactions that do not constitute actual sales within their jurisdictions. This ruling prevents states from extending their tax laws to cover goods merely dispatched outside the state, thereby protecting the integrity of inter-state trade.

By emphasising the necessity for a clear distinction of legislative competence, the decision upheld fundamental principles of federalism. The Supreme Court highlighted that states must operate within the bounds set by the Constitution, ensuring that state legislation does not infringe upon the central domain, particularly in matters affecting interstate commerce

The Supreme Court’s approach in this judgement ensures fairness and transparency in the tax system, preventing states from imposing taxes on transactions that do not genuinely fall within their legislative competence. The judgement, therefore, upholds the rule of law by ensuring that tax laws are applied justly and equitably. It reinforced the constitutional boundaries of state taxation powers, promoted fairness in the tax system, and facilitated the free flow of inter-state trade.

Aftermath of the judgement

This case of Goodyear India Ltd. vs. State of Haryana, (1990) has been referred to in various subsequent cases by courts in India, to interpret and apply principles related to sales tax and assessment. Here are some notable instances where this case has been cited:

In State of Haryana vs. Haryana Concast Limited (2019), the Punjab and Haryana High Court had referred to this case while discussing the powers of the assessing authority to make best judgement assessments under the Haryana Value Added Tax Act, 2003. The court emphasised the need for fairness and reasonableness in such assessments.

In State of Punjab vs. Shreyans Industries Limited (2016), the Supreme Court referred to the principles laid down in the Goodyear case regarding the discretionary power of tax authorities in making best judgement assessments and the necessity of recording reasons for such assessments.

These showcase the relevance of the Goodyear India Ltd. vs. State of Haryana, (1990) case, in interpreting sales tax laws and the principles of judgement assessment across various jurisdictions in India.

Conclusion

In conclusion, Goodyear India Ltd. vs. State of Haryana (1990) was a significant decision in the trade and commerce industry. It is a crucial milestone in Indian jurisprudence, concerning inter-state trade and taxation.

This case highlighted the importance of balancing state fiscal autonomy with economic unity and national integration. The Court further concluded that the need for states to ensure these measures do not obstruct the free movement of goods across state borders and thus, the judgement ultimately contributed to the development of taxation and constitutional law on economic matters and set a precedent to guide the courts in any future decisions relating to interstate trade and taxation.

Frequently Asked Questions (FAQs)

What separates a purchase tax and a consignment tax, according to the decision of the Court in this case?

As per the decision of the Court in this case, a purchase tax is tax that is imposed during the purchase of goods within the state. A consignment tax is imposed when the goods are dispatched outside the state, after being used in the manufacturing process. A manufacturing tax is that which is levied on the movement of goods, rather than on the purchase of goods.

On whom is the purchase tax levied?

Purchase tax is levied on the buyer of goods. It is generally applicable when the buyer is a business, purchasing goods for use, consumption, or manufacture. The tax is imposed at the point of purchase and is in addition to the overall cost incurred by the business for acquiring the goods, impacting their operational expenses.

What is the status of purchase tax after the introduction of GST?

With the introduction of goods and services tax (GST) in India, purchase tax has been combined under this unified tax system. GST aims to consolidate various indirect taxes previously levied by the central and state governments, into a single tax structure.

As a result, purchase tax, along with several other indirect taxes such as VAT, excise duty, and service tax, are not applied separately anymore. Businesses now pay GST on their purchases (input tax), which they can offset against the GST charged on their sales (output tax). This system ensures an efficient flow of credit across the supply chain, promoting efficiency in tax administration.

Who bears the incidence of consignment tax?

Consignment tax, also known as consignment sales tax, is borne by the consignor, that is, the entity that sends goods to a consignee. In consignment transactions, the consignor retains ownership of the goods until they are sold by the consignee or returned. The consignee acts as an agent who sells the goods on behalf of the consignor.

The consignor is responsible for paying the consignment tax, which is usually based on the value of the goods sent to the consignee. This tax is imposed when goods are transferred between branches or entities across different states, ensuring that state-specific tax regulations are complied with.

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:

https://t.me/lawyerscommunity

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

All about UNCITRAL Model Laws

By

-

July 21, 2024

This article is written by Vidushi Kachroo. The following article aims to deliver relevant information about the United Nations Commission on International Trade Law (UNCITRAL) Model Laws, by elaborating on their purpose and features. The article also offers a brief explanation of how these laws have been actively adopted by various countries worldwide, particularly India.

Table of Contents

Introduction

With time, the world has not just changed; it has evolved exponentially. Technological advancements, shifts in global economics, and cultural transformations, which can be largely attributed to globalisation, have reshaped nearly every aspect of human life. The face of international trade was thus bound to change dramatically. Access to products of foreign origin, be it Korean skincare, Japanese Wagyu, or American clothes, has become more seamless than ever. This accessibility demonstrates only a glimpse of the changing face of international trade and commerce. However, it was not just the international markets and trade that witnessed a change.

United Nations Commission on International Trade Law (hereinafter referred to as the UNCITRAL) is responsible for enacting Model Laws which facilitate cross-border trade and commerce among States in the international community. These laws are enacted as a response to the complexities and challenges of modern international trade. These laws are developed under the guidance of the United Nations with one primary objective- to harmonise and standardise trade practices across borders. As the name suggests, UNCITRAL, a crucial body of international repute under the United Nations, plays a pivotal role in shaping the norms related to global trade and commerce through Model Laws.

These Model Laws address various aspects of international trade, thereby facilitating it. They help shape international trade practices, from enabling smoother cross-border transactions to providing legal frameworks for efficient and effective dispute redressal. The UNCITRAL has covered various aspects of international trade by enacting specific Model Laws for each of such aspects such as electronic commerce, mediation, arbitration, cross-border insolvency, etc. Hence, UNCITRAL Model Laws cover a variety of laws on different subject matters involved in cross-border trade. Therefore, given their importance, this article discusses some of the important UNCITRAL Model Laws in detail, the pivotal role these laws played in international trade and their implications in India. But, before moving on to understand its importance, it is essential to clear our basics.

What is UNCITRAL

UNCITRAL, which stands for the United Nations Commission on International Trade Law, is a subsidiary body of the United Nations General Assembly (UNGA). Established in 1966, UNCITRAL is a core body under the United Nations that plays a crucial role in the field of international trade law. It aims to provide a robust legal framework for the smooth functioning of trade and commerce between different States in the international community. Initially composed of 29 Member States, UNCITRAL’s membership later expanded in 1973, 2004, and most recently in 2022. Currently, there are 70 Member States, each elected for a term of 6 years.

UNCITRAL’s primary goal is to formulate a comprehensive legal framework for international trade and commerce. This framework includes various conventions, guidelines, recommendations, and rules that are widely accepted globally. Among these, the UNCITRAL Model Laws are particularly significant. They are one of the most significant and influencing developments done by UNCITRAL. They serve as a guiding light for States and international organisations in framing laws to facilitate secure and efficient trade and commerce on an international level. Many States, including India, have adopted these Model Laws into their domestic legal frameworks.

The inclusion of Model Laws into a State’s legal system helps nurture the principles of globalisation and liberalisation, enabling States to globalise their trade practices. This, in turn, boosts economic growth and enhances their relationships with other States and international communities.

What are UNCITRAL Model Laws

The UNCITRAL Model Laws are pivotal legal enactments designed to provide fundamental guidelines for States to facilitate a proper and harmonised operation of international trade. Drafted by the United Nations Commission on International Trade Law, these Model Laws aim to guide States in adapting and shaping their domestic laws so that they align with global standards. This promotes international peace and cooperation, two things which are highly significant for successful and profitable international trade in this era of globalisation. While the Model Laws are a part of international law, they are not legally binding on the States. Both member and non-member States have the option to incorporate these laws into their domestic legal systems, either in their entirety or with certain modifications to suit local contexts.

UNCITRAL has developed a variety of Model Laws and rules that address specific areas of commercial law directly associated with international trade such as arbitration, electronic commerce, mediation, cross-border insolvency, etc. These Model Laws serve as templates that States can adopt and amend or modify according to their unique legal requirements and economic environments. Some of the important Model Laws drafted and enacted by the UNCITRAL are as follows:-

UNCITRAL Model Law on International Commercial Arbitration, 1985
UNCITRAL Model Law on Electronic Commerce, 1996
UNCITRAL Model Law on Cross Border Insolvency, 1997
UNCITRAL Model Law on Commercial Mediation, 2018
UNCITRAL Model Law on Public Procurement, 2011

Why UNCITRAL Model Laws were adopted

The UNCITRAL Model Laws were enacted and adopted by many States to facilitate the smooth operation of international trade practice. Being a subsidiary body of the United Nations, UNCITRAL mainly focuses on developing laws that do not compromise international peace and security. With this aim in view, various Model Laws were enacted to address different aspects involved with or arising out of the practice of international trade and commerce. These Model Laws have been subjected to several modifications and amendments over time to adapt to emerging challenges and dynamic global changes that significantly impact trade practices. The following points offer a more detailed explanation of the need for the enactment and adoption of the UNCITRAL Model Laws:

To bridge the inadequacy of domestic laws

Domestic laws are the legal frameworks that govern a particular sovereign State and are enforceable within its courts. These laws cover various important aspects that affect the State, including cross-border trade. Even though domestic laws cover international trade, the problem often lies in the inconsistency of these laws as they do not cover each and every aspect of international trade. Every State has its own set of domestic laws, including laws on international trade but one State’s laws may be conflicting or inconsistent with the domestic laws of other States. Moreover, the domestic laws usually date back to a very long time. Some of the States have domestic laws that were enacted in the 18th or 19th century. Although there is no doubt that these laws may have been amended or modified with the advancement of technology, still there may be a lack of uniformity and some inconsistencies which make it important to have laws on an international level for governing the trade practices of the modern time.

The emergence of new technology and innovation has led to a significant development in trade practices. Facilities like electronic and secured transactions, electronic registration, etc. did not exist a few decades ago. These advancements make domestic laws somewhere inconsistent and are lacking in dealing with the present issues of international trade. Therefore, it gives rise to the need to have some uniform and modern laws, which are now being fulfilled by the various Model Laws.

To tackle the disparity between national laws

As mentioned before, all States have their respective domestic laws to govern cross-border trade and the issues that may arise out of such trade practices. Apart from the inadequacy of these domestic laws, another reason for the need for UNCITRAL Model Laws is the disparity that lies between the different domestic or national laws of different States. International trade occurs between two or more different States, where each party to the trade has their distinct legal framework. When these parties or States are faced with issues related to such trade and the associated decision-making, they are also posed with a crucial question. Which State’s national law should be ultimately followed?

It is obvious that the laws of all the involved parties or States can not be followed at the same time. Even if all of such laws were taken into consideration to make a unified decision, it would be very time- and resource-consuming. In fact, it may even lead to disagreements which, if aggravated, may lead to tension among the involved States and the international community at large. This defines the main aim of international organisations like the United Nations. Hence, the enactment of uniform laws is of utmost importance. That is why UNCITRAL has enacted Model Laws to bring uniformity to dispute resolution between different countries in dispute. These laws consider the needs and expectations of all the States, which are party to the trade practice in dispute, upholding their main motto—harmonisation, uniformity, and peace in the international community.

To boost economic development globally

The UNCITRAL Model Laws provide a trade-friendly environment to the States by establishing uniformity and giving legal recognition to new practices in the field of international trade. This facilitates and streamlines international trade practice, which, in turn, further helps the States to enhance their economic growth by engaging in different businesses or trade practices with other States. This also promotes unity and good relations among the States in the international community.

To provide justice and easy dispute-resolution facilities

There are UNCITRAL Model Laws and Rules, which are enacted specifically for the resolution of disputes that may arise between States in the course of international trade. Model Laws on international arbitration, mediation, and conciliation have been recognised and given more importance from the very beginning. This is to ensure that all disputes are resolved amicably and fairly without compromising the needs and rights of any State. For instance, the UNCITRAL Model Law on International Commercial Arbitration was one of the major and first Model Laws to be enacted in 1985. It is a harmonised law, covering all stages of the arbitral process. Hence, UNCITRAL Model Laws ensure fair access to justice for every State that is a party to a dispute and also protect their contractual rights.

To ensure certainty and predictability in international trade

The Model Laws were adopted to ensure uniformity in the rules and regulations related to cross-border trade, whether it be transactions, procurement of goods, insolvency, or dispute resolution. The uniformity in laws governing international trade provides certainty and predictability to the States regarding their rights as well as obligations. This guarantee of certainty doesn’t exist in the absence of a uniform legal framework. Thanks to the certainty and predictability offered by UNCITRAL Model Laws, there is also less chance of disputes between States, which ensures peace and harmony within the international community.

Salient features of UNCITRAL Model Laws

All the Model Laws under UNCITRAL share similar features despite the fundamental differences in their working. All these Model Laws have been enacted to achieve certain common goals in the field of international trade. Some of the common salient features of these Model Laws are discussed below:

Harmonisation

The UNCITRAL Model Laws aim to harmonise the domestic legal framework of different States, especially in connection with the operation of international trade and commerce. They do so by providing uniform and modernised laws that the States can adopt, thus, creating consistency and predictability in trade practices. This facilitates international trade and contributes to the maintenance of harmony, peace, and good relations among the international community.

Flexibility

The Model Laws are flexible in terms of their application and adoption. These laws act as a template that can be amended, modified, and adapted by the States according to their respective legal needs and environments. In other words, the Model Laws provide a structure or a framework that the States can customise to fit their existing legal frameworks and policies. They can fill in the gaps according to their national policies or principles. This goes on to show that the Model Laws recognise that each State is different and thus, has unique legal requirements which may be different from one another, and hence, the laws need to be modified accordingly.

Dynamic

The Model Laws are dynamic and evolve with the changing practices of cross-border trade. Rather than being tied to outdated practices, they adapt to emerging changes, as and when required, by modifying existing laws or enacting new Model Laws. A prime example can be seen in the field of electronic commerce, where UNCITRAL has modified and enacted new Model Laws. These laws align with changing times and emerging technologies to address issues related to electronic transfers, electronic signatures, and electronic transferable records, to name a few. These laws are also dynamic in terms of the diverse legal aspects they have recognised, with specific Model Laws dedicated to all those different subject matters.

Dispute resolution mechanism

There are Model Laws enacted specifically to provide mechanisms for smooth dispute resolution. UNCITRAL has given legal recognition to alternative dispute resolution mechanisms like arbitration, conciliation, and mediation. All of these mechanisms have been covered under different Model Laws, such as the Model Law on International Commercial Arbitration, the Model Law on International Commercial Conciliation, and the Model Law on Mediation. The motive behind the enactment of these laws was to provide uniform laws for amicable resolution of the disputes arising between the States involved in international trade. It also promotes fairness in procedures.

With the emergence of new technology, UNCITRAL has also adopted an online dispute resolution mechanism. All these inclusions facilitate the States to become more involved in cross-border trade and boost their economic development as well as their relations in the international community.

International recognition

These Model Laws are enacted by UNCITRAL, the core legal body of the United Nations, giving them international recognition. Although these laws do not have a binding effect on the States, they do provide the States a pathway to a peaceful and harmonised way of practising trade internationally. Also, the majority of the States have become members of UNCITRAL, indicating that they have adopted and accepted these laws.

What are the most important Model Laws

Since its inception in 1966, UNCITRAL has drafted numerous Model Laws focused on specific areas of trade law. The objective of doing so has been to gap the inadequacies among various domestic legal systems and harmonise the practice of international trade. The evolution of UNCITRAL Model Laws is a landmark development in the field of international trade and commerce. As of now, several key Model Laws have come into existence to meet the needs of the international community. Some of these major Model Laws are discussed below in brief.

Model Law on International Commercial Arbitration, 1985

The Model Law on International Commercial Arbitration was one of the first major Model Laws enacted to create harmony between the various laws on international arbitration. It was adopted by UNCITRAL on June 21, 1985, followed by its adoption by the General Assembly on December 11 of the same year. This Model Law provides a set of rules for each aspect involved in the arbitral process. It covers every step starting from the arbitral agreement to the enforcement of the arbitral awards.

This Model Law has been widely accepted by many countries to govern the arbitral process in case of disputes arising from cross-border trade between States. The need for enacting this Model Law arose due to gaps in domestic laws of different States and inconsistencies among national laws on matters related to arbitration. The arbitration laws of the various States proved inadequate for resolving conflicts arising out of cross-border trade and commerce. Hence, this Model Law was drafted. It includes the core principles of arbitration. Upon its adoption, the General Assembly recommended that all States should closely look up to and follow this Model Law while drafting their domestic laws on arbitration.

Article 1(3) of this Model Law defines arbitration as international if the parties to the arbitration agreement have their places of business situated in different States at the time of the conclusion of the agreement. Along with this, it is also been given that an arbitration is deemed international if any of the following places are situated outside the States where the parties have their places of business:

Place of arbitration agreement,
Place of contractual performance or place of the subject matter of the dispute.

Article 1(3) also adds that arbitration is international if the parties to the agreement have expressly stated that the arbitration agreement relates to more than one country.

Article 1(2), as amended by the Commission at its thirty-ninth session in 2006, envisages the principle of territorial scope and application. It stipulates that the Model Law as enacted by a specific state will apply only if the place of arbitration is within the territory of that State. It also creates certain exceptions that are given in Articles 8(1), 9, 17 H, 17 I, 17 J, and 36.

The Model Law applies to international commercial arbitration. The term ‘commercial’ used in Article 1(1) has been kept open for a wide interpretation. The notes in Article 1(1) give the definition of this term as encompassing matters arising from commercial relationships, whether contractual or not, and state that it should be given a wider interpretation. The definition is inclusive, as it includes the phrase ‘not limited to’ while explaining the relationships of a commercial nature.

The Model Law also sets out that there should be no intervention of courts in arbitration proceedings except in certain circumstances as provided by the law itself. This gives power to the arbitral tribunal established by the provisions of the Model Law and minimises the intervention of other courts in matters related to international arbitration. Additionally, the Model Law provides for the recognition and enforcement of arbitral awards.

Article 2 contains important definitions and rules of interpretation. The Model Law includes provisions for the composition of the arbitration tribunal, the appointment of arbitrators, and the grounds and procedures for challenging the appointment of an arbitrator. An arbitrator may be challenged if justifiable doubts arise about their impartiality or independence, or if they do not possess the required qualifications agreed upon by the parties. The jurisdiction of the tribunal has been outlined and the power to order interim measures has also been conferred upon it.

The Model Law follows the principle of equal treatment of the parties involved, making sure that there is no arbitrariness or discrimination involved in the resolution process. It includes detailed provisions regarding each and every aspect of arbitral proceedings, from the start of the proceeding to its termination. It aims for uniform treatment of all awards, irrespective of their country of origin, along with their enforcement and recognition of the arbitral award.

Model Law on Electronic Commerce, 1996

The huge shift in commercial transactions from paper-based to digital communication through the use of computers, known as electronic commerce, led to the enactment of a law specifically drafted for validating the use of e-commerce in international trade. The Model Law on Electronic Commerce (MLEC) was enacted on June 12, 1996 to remove legal barriers and provide credibility to e-commerce, so as to facilitate the digitalisation of international trade. With the change in time, international trade has also increasingly relied upon electronic data transfer and other means of electronic communication to carry out transactions. Hence, this Model Law provides a set of rules which are internationally accepted to increase the reliance on e-commerce. It also provides for equal treatment between paper-based and electronic information. The MLEC is legislated on three principles:

Principle of non-discrimination: This principle ensures that any document shall not be denied legal recognition, validity, and enforceability only because it is in an electronic form.
Principle of technological neutrality: This principle states that the provisions to be included should be neutral to the technology in use. This enables the adoption of new technology without having to change much legislative framework.
Principle of functional equivalence: This principle asserts that every electronic document, record, and signature shall be treated as equivalent to their paper-based document, record, and signature.

The MLEC also validates electronic contracts, provides safeguards to protect the confidentiality of electronic data, and offers protection to consumers involved in electronic transactions. It is important to note that the MLEC includes two parts. The first part talks about electronic commerce in general, while the second part aims at electronic commerce in specific areas. Initially, the specific area was in the context of transport documents, but it was later felt that an open-ended structure should be followed. This structure will make it easier to include more provisions or specific areas into the Model Law according to the changing times.

The Model Law has an open-ended structure; it has taken a wide approach to defining the term ‘electronic commerce’. It is not restricted to computer-to-computer transmission of information but has also included the aspects of the development of the internet and other sources of e-commerce. The Model Law defines the scope, applicability, and important definitions related to e-commerce, along with giving legal recognition to digital information, digital signatures, data messages, and their evidentiary value. It also provides legal validation to electronic contracts. And lastly, Articles 16 and 17 specifically talk about electronic commerce in areas such as the carriage of goods and transport documents.

The Model Law has played a huge role in the development and enactment of laws related to electronic commerce within the international community and has facilitated economic growth in the ongoing digital era.

Model Law on Cross-Border Insolvency, 1997

The UNCITRAL Model Law on Cross-Border Insolvency (MLCBI) is designed to assist States in developing more effective cross-border insolvency laws to expedite insolvency proceedings more efficiently. It was adopted on May 30, 1997 by UNCITRAL. This Model Law addresses the challenges that arise when a debtor is facing severe financial distress or insolvency and has assets or creditors in multiple jurisdictions. The MLCBI focuses on authorising and encouraging cooperation and coordination among different jurisdictions while respecting the differences among national procedural laws.

The Model Law emphasises four essential elements that are key to the conduct of cross-border insolvency cases: access, recognition, relief, and cooperation. These elements aim to

Access: These provisions provide the representatives of foreign insolvency proceedings and their creditors the right to access to the local courts in a State that has adopted these rules, allowing them to ask for help. They also enable representatives of local bankruptcy cases in that State to ask for help from courts in other countries
Recognition: The main objective of this Model Law is to simplify the legal procedures related to the recognition of insolvency cases from other countries. This reduces the complexity and time consumption that often happens and provides certainty when a foreign case has been recognised. The Model Law acknowledges the orders of foreign courts that have commenced insolvency proceedings and also appointed representatives for those cases. According to the law, a case may be recognised as a main proceeding if the debtor’s main interests are located in the State where the proceedings started at the date of its commencement. Alternatively, it may be recognised as a non-main proceeding if it commences at a place where the debtor has business or operations.
Relief: One of the main principles of the Model Law is that relief considered necessary for the fair and orderly conduct of cross-border insolvencies should be available to assist foreign proceedings. This relief includes interim relief at the discretion of the court, an automatic stay upon recognition of the main proceeding, or any other relief at the discretion of the court for both main or non-main proceedings.
Cooperation: The provisions of the Model Law aim to establish cooperation among the courts of States where the debtor’s assets are located and to coordinate concurrent proceedings.

Model Law on International Commercial Mediation, 2018

The Model Law was initially adopted in 2002 and was known as the Model Law on International Commercial Conciliation. This Model Law was amended in 2018 with the addition of a section that covered international settlement agreements and their enforcement. The Model Law previously used the term ‘conciliation’ with a view that it can be used interchangeably with the term ‘mediation’. However, when this Model Law was amended in 2018, UNCITRAL replaced the term ‘conciliation’ with the term ‘mediation’ to adapt to the actual and practical usage of the terms. This change was also done with the expectation that this change would promote the credibility and use of the Model Law.

The main objectives of the Model Law are to resolve disputes through an amicable process that intends to:

Reduce the expenses and time involved in dispute resolution.
Create a cooperative, healthy, and peaceful environment between parties involved in international trade and commerce.
Discover personalised and tailor-made solutions that address the conflict or dispute specifically.
Prevent the occurrence of further disputes or conflicts.
Facilitate certainty in the practice of international trade and commerce.

This law covers all the procedural aspects involved in the mediation. The primary aim is to promote and encourage the use of mediation while ensuring predictability and certainty in its application. The Model Law provides the definition of mediation and the appointment of mediators. It provides that a mediator can be a sole mediator or consist of two or more mediators as the case requires. Mediation refers to a process where the parties have consented to the appointment of a third party to resolve a conflict arising between them through amicable means. This conflict may arise from contractual or any other legal relationships, and the mediator does not have the authority to impose a decision on the parties.

The Model Law includes provisions for the appointment of mediators, the commencement of mediation proceedings, the confidentiality and disclosure of information, and the admissibility of evidence in other proceedings, to name a few. These provisions aim to create a structured and reliable framework for mediation, enhancing its credibility and effectiveness in resolving international commercial disputes.

Implication of UNCITRAL Model Laws in India

India, being a Member State of UNCITRAL, holds a moral obligation to consider the Model Laws enacted by the commission, even though they are not binding. Consequently, India has adopted and modified several Model Laws into its national laws. However, it is important to note that India has not adopted every Model Law but only a selected few. The implications of UNCITRAL Model Laws in India can be seen in the following enactments:

Arbitration and Conciliation Act, 1996 and UNCITRAL Model Law on International Commercial Arbitration, 1985

The Arbitration and Conciliation Act, 1996, enacted by the Indian Legislature, is largely based on the provisions of the Model Law on International Commercial Arbitration, 1985. Many provisions of the Arbitration and Conciliation Act have been taken from the provisions of the aforementioned Model Law, including some provisions that differ or have not been adopted from it. For example, Article 9 of the Model Law and Section 9 of the Indian Act talks about arbitration agreements and interim measures by the court. The only difference between these two provisions is the extent of power.

The Model Law allows the court to provide interim protection to a party during an arbitral proceeding, while the Act of 1996 in India gives the courts the power to provide interim protection to a party even after the making of the arbitral award but before it has been enforced. Further, the Arbitration and Conciliation (Amendment) Act, 2015 was enacted to provide the arbitration tribunal the power to take interim measures after the matter has been referred to it. This amendment lies in conformity with the provisions of the UNCITRAL Model Law. The Indian Legislature expressly mentioned in the Preamble of the Act that the Model Law was duly considered before enacting the Act of 1996.

Information Technology Act, 2000 and UNCITRAL Model Law on Electronic Commerce, 1996

The Information and Technology Act, 2000 was enacted by the Indian Legislature to facilitate the transition to the new paperless mode of communication and storage of information, specifically electronic commerce (e-commerce). This Act was brought into existence to give effect to the UNCITRAL Model Law on Electronic Commerce which was adopted by the UNCITRAL in 1996. The main objective of this Act was to give legal recognition to the transactions made through electronic means and electronic records. The Act also contains provisions for penalties and punishment against offences related to cybercrimes. It also gave punishment for the acts of hacking, fraudulent use of electronic signatures, breach of confidentiality, and other offences related to electronic communication and data security.

Information Technology (Amendment) Act, 2008 and UNCITRAL Model Law on Electronic Signatures, 2001

After the enactment of the Model Law on Electronic Signatures in 2001, the Indian Legislature passed the Information Technology (Amendment) Act in 2008. This amendment was done to make the Act technology-neutral and align with international standards set by the Model Law. This Act gave legal recognition to electronic signatures, emphasised the security of electronic records and digital signatures, and granted the State the power to regulate websites to safeguard privacy and also impose a check on the activities related to tax evasion. The Act was enacted to strengthen the practice of electronic transactions and also reduce the incidents of fraudulent activities related to electronic commerce.

Conclusion

The UNCITRAL Model Laws act as a guiding pathway for the international community. They provide States with a skeleton framework to enact laws facilitating cross-border trade practices and also for the resolution of conflicts arising out of such practices. States have the authority to make modifications to these Model Laws according to their national policies and principles. The aim is to create a peaceful and harmonised trade structure all around the globe and amicable ways to resolve disputes between States. These Model Laws bridge gaps in domestic laws as well as harmonise national laws across different States. Many States, being members of the UNCITRAL, have adopted these Model Laws into their domestic legislation. Even though the Model Laws are not legally binding on any State, they have been proven of great significance in the international trade community as they have brought uniformity in the laws governing trade internationally.

Frequently Asked Questions (FAQs)

Which States are the members of UNCITRAL?

Some of the current Member States of UNCITRAL include China, the Republic of Korea, Singapore, Belgium, Vietnam, Japan, and Indonesia, to name a few. These States were elected for a term of 6 years beginning from July 8, 2019.

Has India adopted the Model Law on Cross-Border Insolvency, 1997?

India still needs to adopt the Model Law on Cross-Border Insolvency. However, discussions are going on and proposals have been made for the enactment of this Model Law in India.

Where is the headquarters of UNCITRAL?

UNCITRAL conducts its work in annual sessions held in alternative years at the headquarters of the United Nations in New York and at the Vienna International Centre in Vienna.

What are some other Model Laws adopted by the UNCITRAL?

Some of the Model Laws adopted by UNCITRAL include the UNCITRAL Model Law on Procurement of Goods and Construction (1993), UNCITRAL Model Law on Secured Transactions (2016), UNCITRAL Model Law on International Credit Transfers (1992), and more.

How does a Model Law differ from a convention?

A Model Law serves as a guiding enactment for States to draft domestic laws, whereas a convention is a binding international agreement that States can sign and ratify. The Model Laws are designed to be more flexible and adaptable to different legal systems.

How can a country adopt a UNCITRAL Model Law?

A country can adopt a UNCITRAL Model Law by incorporating its provisions into its domestic laws or by creating new legislation based on the provisions of the Model Law, tailored to the needs and principles of the legal system of such a country.

References

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

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

https://t.me/lawyerscommunity

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

Cauvery water dispute case (1992)

By

-

July 20, 2024

Cauvery Water Disputes Tribunal, re

covid-construction-disputes-claims-time-money (1) — Image Source: https://rb.gy/h3cq1i

This article is written by Gauri Gupta. The article aims to provide a detailed analysis of the landmark judgement of the Supreme Court in the case of the Cauvery Water Disputes Tribunal, re (1992). The article focuses on one of the major inter-state water disputes in India and draws a timeline from the history of the conflict till the judgement of the Supreme Court of India.

Introduction

Since ancient times, river water has been a contentious issue among the different States of India. Every State in the sub-continent endeavours to use as much water as there is in its terrain, leading to unjust and ineffective allocation among the neighbouring States. Despite following the directives of the Central Government and the Supreme Court to collaborate on building multipurpose projects for the efficient use of water resources, the progress has been slow and delayed due to the inter-state conflicts between the State Governments. States have collaborated on building multipurpose projects.

The Constitutional challenge lies in the fact that rivers flowing across State boundaries cannot be claimed by any single State, thus complicating the resolution of water disputes. Some of the most significant and largest inter-state water conflicts in India include the disputes regarding the water of Krishna-Godavari, Narmada, Sutlej-Yamuna Linking Canal and the Cauvery River dispute.

Inter-state water disputes hold a peculiar position under the Constitution of India, as they do not fall within the jurisdiction of any particular Court. In order to address this issue and the growing Inter-State water conflicts, tribunals were established under Section 3 of the Inter-State Water Disputes Act, 1956 (hereinafter referred to as the Act)The object behind the same was to ensure the adjudication of the Inter-State water disputes while enabling the Central Government to oversee and manage these conflicts directly and efficiently.

The Cauvery River water dispute between the States of Karnataka and Tamil Nadu dates back to the 19th century. The erstwhile States of Mysore and Madras signed two agreements to regulate the use and development of Cauvery water in 1892 and 1924. As per the agreement, 75% of the Cauvery water was to be used by Tamil Nadu and Puducherry, 23% by Karnataka and the remaining 2% by Kerala.

During the pre-independence era, this water dispute between the cities of Mysore and Madras was settled through an arbitration agreement on the advice of the Britishers. However, the division of the water resources became a major cause of conflict between the States of Mysore and Madras after these States were reorganised in 1956. Following this, the State of Tamil Nadu opposed the construction of dams on the Cauvery River by Karnataka, however, the State went ahead and built the dams. This initiated the Cauvery water dispute.

In order to resolve these disputes, the Parliament under Article 262 of the Constitution of India enacted the Inter-State River Water Dispute Act, 1956 to regulate and control the distribution of Inter-State river water. As per this Act, the water dispute tribunal will be constituted to adjudicate disputes pertaining to the use of water at the request of the State Government.

Details of the case

Case name

Case No.

Criminal Appeal No. 1774 of 2010

Judgement date

November 22, 1991

Name of the Court

The Supreme Court of India

Provisions and Statutes Involved

Section 3 of the Inter-State Water Disputes Act, 1956
Section 4 of the Inter-State Water Disputes Act, 1956
Section 5 of the Inter-State Water Disputes Act, 1956
Section 6 of the Inter-State Water Disputes Act, 1956
Article 14 of the Constitution of India
Article 21 of the Constitution of India
Article 32 of the Constitution of India
Article 136 of the Constitution of India
Article 245(1) of the Constitution of India
Article 262 of the Constitution of India
Entry 17 of the States List and Entry 56 of the Union List

Background of Cauvery water dispute case

Cauvery is the largest river in South India with its basin area and tributaries having a substantial spread over the territories of the States of Karnataka and Tamil Nadu, with the former being the upper riparian State and the latter being the lower riparian State. With a total length of 802 kms, the river travels about 381 kms in the Southern Easterly direction before reaching the borders of the States of Karnataka and Tamil Nadu. Before joining the Bay of Bengal, it transverses a distance of about 357 kms and flows on the boundary of the two States for about 64 kms.

The Presidency of Madras and the State of Mysore entered into an agreement in 1892 following which the States of Karnataka and Tamil Nadu entered into an agreement in 1924 for sharing the river water. The agreement expired in 1974 following which there were negotiations between the two States regarding the extent of utilising the river water. These negotiations resulted in the establishment of a Fact Finding Committee in June 1972 to ascertain the facts and understand the availability of utilisation of the water resource and the nature of the areas in both the States especially the area within the river basin.

The Committee submitted its reports in December 1972 and August 1973. Following this, A Central Team was set up to examine the question of assessing the savings of the water resources in the existing and planned projects of the three States in the basin of the Cauvery River. The Team was headed by Shri CC. Paten and the Addl. Secretary to the Government of India, Ministry of Irrigation. The Committee recommended improving and modernising the irrigation system by strengthening the works and lining of channels, integrating operations of the reservoirs within the basin of the Cauvery River, scientifically assessing the water requirement in the command area and further, by monitoring the releases from the reservoirs.

These negotiations resulted in the “1976 Understanding” which envisaged the apportionment of the surplus water in the ratio of 30:53:17 amongst the States of Tamil Nadu, Karnataka, and Kerala respectively. Furthermore, the Study Team suggested that in case of savings, the apportionment should be in the ratio of 87 TMC to Karnataka, 4 TMC to Tamil Nadu and 34 TMC to Kerala.

Although the Inter-State meetings were conducted on a regular basis, they failed to be of any use. As a result, the State of Tamil Nadu lodged a Letter of Request under Section 3 of the Act in June 1986. As per the provision, the Central Government was under a mandate to constitute a Tribunal for efficient adjudication of the water dispute. In the letter, the State of Tamil Nadu made a grievance against the construction works in Karnataka and made a request for appropriating the water upstream to prejudice the interests down-stream in the State. Furthermore, it sought to implement the agreements of 1892 and 1924 which had expired.

The Central Government at the hearing of the Writ Petition filed by the Tamil Nadu Ryots Association left the matter to the Court. The judgement was rendered on May 4, 1990, after thorough consideration of the negotiations between the States and the length of amount that had passed. The Court observed that the negotiations had failed and ordered the Central Government to constitute a Tribunal under Section 4 of the Act. Following the directions of the Court, the Central Government constituted the Cauvery Water Disputes Tribunal on June 2, 1990 and referred the dispute emerging from the State of Tamil Nadu along with their Letter of Request to the Tribunal.

The Cauvery Water Disputes Tribunal (“Tribunal’) held its first sitting on July 20, 1990 at which the State of Tamil Nadu submitted its letter before the Tribunal seeking interim reliefs, following which the Tribunal ordered the State to submit an application. As per the directions of the Tribunal, two applications were submitted for interim reliefs by the Union Territory of Pondicherry and the State of Tamil Nadu.

Pondicherry in its application sought a direction from the Tribunal ordering both the States of Tamil Nadu and Karnataka to release water from Cauvery River as agreed upon during the period of September to March.

The Tribunal considered these applications along with the procedure governing the trial of the main dispute. It directed the disputing States to file their pleadings by way of statement of cases and required the States of Kerala and Karnataka to submit their replies to the applications for interim relief.

All the disputing States submitted their first round of pleadings and statements of the cases and the States of Karnataka and Kerala filed their replies to the applications for interim relief by the end of the year.

In 1991, the Tribunal passed an interim order which states that Karnataka will provide a fixed proportion of water from the Cauvery River to Tamil Nadu. Furthermore, the Tribunal also considered how much water would be released every month, however, a final decision could not be made regarding the same. Following the direction of the Tribunal, Tamil Nadu filed a petition in the Supreme Court of India seeking the implementation of the order.

Following the intervention of the Court, the Tribunal gave its final award in 2007. The Centre notified the order of the Tribunal in 2013. The order provided that of the total available 740 TMC ft of water 419 TMC ft of water will be allocated to Tamil Nadu, 270 TMC ft of water to Karnataka, 30 TMC ft water to Kerala and 7 TMC ft water to Pondicherry.

Facts of Cauvery water dispute case

In spite of the recommendations of the Fact Finding Committee and the Study Team set up by the Central government, the negotiations between the States were not fruitful. Following this, the Tamil Nadu Ryots Association filed a petition before the Supreme Court of India under Article 32 of the Constitution of India seeking the issuance of writ of mandamus to the Central Government to transfer the dispute to the Tribunal under the Act. Furthermore, it also provided for an application seeking interim relief. This writ petition filed before the Supreme Court was supported by the State of Tamil Nadu.

The petition remained pending before the Supreme Court for seven years and no application for interim relief was moved during this period.

Aggrieved by the same, the State of Tamil Nadu approached the Supreme Court by way of a Special Leave Petition under Article 136 of the Constitution of India. The same was filed against the orders passed in the original application for interim relief before the Tribunal as well as the application for an urgent relief before the Supreme Court. Furthermore, the Union Territory of Pondicherry filed a special leave petition against the order passed by the Tribunal in its application for interim relief. These petitions were combined and converted into Civil Appeals.

Furthermore, the Governor of Karnataka issued an ordinance called the Karnataka Cauvery Basin Irrigation Protection Ordinance, 1991 which provided for the protection and preservation of irrigation in irrigable areas of the Cauvery River basin in Karnataka. The ordinance empowered the State to take decisions regarding the quantum of water that will be appropriate to the State of Tamil Nadu.

Issues raised

The following issues were raised by way of a Special Leave Petition under Article 136 of the Constitution of India before the Supreme Court of India:

Whether the Karnataka Cauvery Basin Irrigation Protection Ordinance, 1991 constitutional in nature?
Whether the order of the Tribunal falls within the purview of Section 5(2) of the Act?
Whether the Tribunal was empowered to grant interim reliefs to the disputing parties?

Arguments of the parties

Petitioners

The arguments presented by the petitioners are summarised below:

The State of Tamil Nadu contended that the scheme of the Act does not envisage the making of an interim order by the Tribunal. Section 5 of the Act stipulates that after a Tribunal has been constituted under Section 4, the Union Government shall refer the dispute pertaining to water and any matter connected with the same to the Tribunal. When such a matter is referred to the Tribunal, the Tribunal is under a mandate to investigate the matters referred to it and forward a report stating its findings and providing a decision on all the matters that were referred to it.
Furthermore, if the Central Government or any State Government is of the opinion that anything provided in the report requires an explanation upon any matter referred to the Tribunal, such Government may within a period of three months from the decision refer the matter for consideration once again. Once the same has been done, the Tribunal may forward another report providing explanation as to the matter which will be deemed to be modified.
The petitioners further argued that Section 6 of the Act enjoins the Central Government to publish the decision of the Tribunal in the official gazette which is then considered to be final and binding on the disputing parties and shall be effective immediately.
The State of Karnataka contended that the scheme of the Act provides that only one final report shall be made after full investigations wherein the findings of the Tribunal will be put forth on the matters which are referred to it by the Union Government for adjudication.
They further explained that the report is considered to be final when the facts are based on investigation and are not tentative and prima facie based on cursory investigation.
Furthermore, the Government of Karnataka contended that the order of the Tribunal cannot be considered to be a “decision” or “report” under Section 5(2) of the Act since the same was not in accordance with the investigation as provided for under the Act. Therefore, the report cannot be considered to be final and even if it is published in the Official Gazette, it cannot be binding on the parties to the dispute. It was also contended that since there was no investigation, findings on facts, report or decision, the Union Government is not under an obligation to publish the interim order of the Tribunal.
The State of Tamil Nadu further contended that the Karnataka Ordinance which was later enacted is ultra vires the Constitution of India. The rationale provided for the same was that the real object and purpose of the legislation was to nullify the order of the Tribunal and unilaterally take decisions regarding the quantum of water appropriated from Cauvery River to other states.
They also argued that such matters can be adjudicated by the Tribunals established by the Central Government under the Act, and the State Governments have no power to legislate on such matters. Thus, the object of the legislation was not bona fide and the same cannot be allowed since it overrules the judicial order passed by the Tribunal appointed by the Union Government for specific purposes.
In other words, the State of Tamil Nadu contended that the Ordinance is ultra vires the Constitution as it seeks to override the law enacted by the Parliament in accordance with its powers under Article 262 of the Constitution of India. Furthermore, the legislation which purports to be under Entry 17 of List II of the Constitution has extra-territorial operation and violates the rights of the people of Tamil Nadu to use the water of Cauvery River.
Moreover, the legislation is violative of Articles 14 and 21 of the Constitution of India as the action of the Government of Karnataka is arbitrary and disregards the life of the inhabitants who survive on Cauvery River for water.
The Union Territory of Pondicherry contended that the Ordinance was unconstitutional and a piece of colourable legislation since the State of Karnataka was not empowered to enact a law on the dispute pertaining to Cauvery River water once the Central Government constituted a Tribunal for the same. The legislation is violative of Article 21 of the Constitution of India as it reduces the supply of water to Tamil Nadu and Pondicherry, thus, depriving them of a vital resource for survival.

Respondent

Six intervention applications were filed by different persons and authorities from the State of Karnataka including the Advocate General of the State in support of the case of Karnataka raising contentions which were similar to those raised by the State itself.

The Respondents contended that the object of the provisions of the Ordinance is obvious as to the Tribunal has no power or jurisdiction to pass any interim order or grant an interim relief to override the said decision of the Tribunal and its implementation. Therefore, the Act has defied and nullified the effect of any interim order of the Tribunal appointed under the law.
The same was not disputed by the State of Karnataka. The other effect of the Act is the right to appropriate as much water from Cauvery River and its tributaries as deemed necessary by the State of Karnataka.
Furthermore, it was contended that it cannot be disputed that the Inter-State Water Disputes Act, 1956 is not legislation under Entry 56 of List I of the Constitution of India. The rationale behind the same is that the Entry provides for the development and regulation of inter-state rivers and river valleys. It does not relate to the disputes regarding the riparian States. Furthermore, none of the Entries in either of the Lists provide for adjudicating disputes pertaining to inter-State river waters.
The Advocate General contended that Entry 97 of the Union List deals with the topic of use, distribution and control of waters of an inter-state river. Article 262 does not include within its ambit the use, distribution and control of the waters of such rivers.
Furthermore, Shri Venugopal had the same contention as that of the State of Karnataka regarding the scope of Entry 56 of the Constitution. He contended that although the waters of an Inter-State river pass through the territories of the riparian States, it cannot be said to be located in any one specific state since they are in a state of flow.
As a result, no particular state can claim the exclusive ownership of such waters and deprive the flow of other States. In other words, no particular State can legislate for the use of river water since the power of legislation does not extend beyond its territories.

Overview of the laws enacted by the Government for resolving water disputes

Inter-State River Water Disputes Act, 1956

The Act was enacted by the Parliament to comply with Article 262 of the Constitution of India which provides for settling disputes pertaining to water arising from administration, ownership, and allocation of an Inter-State river and river valley. The Act elaborates on the ingredients of a water dispute and provides the procedure for evolving the same.

As per the Act, if the State Government is of the opinion or has reasons to believe that there is or will be a dispute relating to water, it can request the Central Government under Section 3 of the Act to refer the dispute to a Tribunal. If the Central Government is convinced that the dispute cannot be resolved by negotiations, it constitutes a Tribunal for adjudication of such disputes under Section 4 of the Act.

After hearing the case, the Tribunal submits its decision in a report to the Central Government and the Government publishes it in the Official Gazette. After publication, it becomes binding on the disputing parties.

It is crucial to note that such disputes cannot be heard by the Supreme Court or any other Court. Their jurisdiction is barred by Section 11 of the Act.

However, experts are of the opinion that the Act lacks principles and guidelines which are crucial for ensuring uniformity in resolving such disputes by the Tribunal.

River Board Act, 1956

The River Board Act,1956 was enacted to ensure that the Central Government looks into the development of transactional rivers and river valleys by establishing river boards for the regulation and development of inter-state rivers and river valleys. The Board established under the Act primarily has two responsibilities: a) to oversee the correct and optimal use of the resources of the inter-state river water, and b) to monitor irrigation, supply of water, and hydroelectricity power generation programmes. Furthermore, the Centre is empowered to constitute a council at the request of the concerned authorities to look into the same.

It is pertinent to note that the role of the Board is advisory in nature and the recommendations rendered by it are not binding in any way.

Laws involved in Cauvery water dispute case (1992)

The Inter-States Water Disputes Act, 1956

Section 3 of Inter-States Water Disputes Act

This provision provides for the power of the State Government to refer the matter pertaining to water disputes to the Central Government for the establishment of a Tribunal for the adjudication of such disputes.

Section 3 of the Act provides that if a particular State Government believes that there is a dispute or a potential for a dispute in the near future regarding the use of water from a river flowing within the shared boundaries of the States or there is a negative impact on the people within its territory due to such disputes for the following reasons:

a) the other State has carried out or plans to carry out an executive or legislative action,

b) the other State or its authorities fail to exercise their powers regarding the use, distribution or control of river water, or

c) the other State has failed to implement the terms of the agreement regarding the use, distribution, or control of such water; the State Government is empowered to approach the Central Government to refer such a dispute to the Tribunal established under the Act for adjudication of the dispute.

Section 4 of Inter-States Water Disputes Act

This provision stipulates the constitution of the Tribunal. When a State Government makes a request for the establishment of a Tribunal under Section 3 of the Act and the Central Government believes that the dispute cannot be resolved through negotiations between the States, there is a mandate on the Central Government to establish a Water Disputes Tribunal for adjudication of such disputes within one year of receiving such request from the State Government by issuing a notice in the Official Gazette.

The proviso to the provision provides that any dispute pertaining to water or any matter related to it which was settled by the Tribunal before the commencement of the Inter-State Water Disputes (Amendment) Act, 2002, shall not be reopened.

Furthermore, Section 4 provides for the composition of the Tribunal which shall be as follows:
1. The Tribunal shall consist of a Chairman and two other members nominated by the Chief Justice of India from among the persons who at the time of the nomination are Judges either of the Supreme Court of India or High Courts of any State.

2. The Central Government has the discretion to appoint two or more persons as accessors to advise the Tribunal in the proceedings conducted before it in consultation with the Tribunal.

Section 5 of Inter-States Water Disputes Act

This provision provides for the adjudication of water disputes. It provides for the following:

Referring the matter to a Tribunal

When a Tribunal is constituted under Section 4 of the Act, the Central Government is under a mandate to refer the dispute or any matter connected to it to the Tribunal for adjudication. It is subject to the prohibition under Section 8 of the Act. Section 8 provides that no reference shall be made to a tribunal with respect to a dispute which has arisen in matters which are to be referred to arbitration under the River Boards Act, 1956.

Tribunal powers to investigate and a report:
The Tribunal has the power to investigate the matters referred to it by the Central Government and send a report to the Central Government within a period of three years. The report shall outline the facts and provide its decision with respect to the matter.

If the Tribunal does not arrive at a decision within a period of three years due to reasons which are unavoidable in nature, the Central Government is empowered to extend this period for two or more years.

Referring to the matter for further consideration

If the Central Government or any of the State Governments after careful consideration of the decision of the Tribunal is of the opinion that it requires an explanation or guidance that was not originally put forth by the Tribunal, the Central Government or any State Government can refer the matter to the Tribunal once again within a period of three months from the date on which the decision was originally rendered. When the matter is referred to, the Tribunal may forward the report to the Central Government within a period of one year from the date of such reference elaborating on the explanation and providing guidance to the Central Government and the State Governments. In such a case, the decision is said to be modified.

This provision provides that the Central Government has the power to extend this period of one year within which the Tribunal has to forward its report as it deems necessary.

Section 5(4) of the Act provides that in case of a difference of opinion between the members of the Tribunal, the point shall be decided in accordance with the majority opinion.

Section 6 of Inter-States Water Disputes Act

This provision provides for publishing the decision of the Tribunal. It states that the Central Government is under a mandate to publish the decision of the Tribunal in the Official Gazette. Once published, the decision shall be final and binding on the disputing parties and shall be effective from such date.

Furthermore, this provision provides that once the decision of the Tribunal is published, it shall have the same force as the order or decree of the Supreme Court of India.

Constitution of India

Article 14 of the Indian Constitution

Article 14 of the Constitution of India guarantees the fundamental right to equality to all the citizens of India. It provides for the principles of equality before the law and equal protection of the law. It prohibits discrimination on the basis of caste, creed, religion, place of birth, sex, etc.

In other words, it prohibits unequal treatment and provides that every citizen of India is equal before the eyes of the law.

The concepts of equality before the law and equal protection of the law, although used interchangeably, are distinct from each other.

The concept of equality before the law has been borrowed from the British Constitution. Equality before the law explains that no individual is above the law. In other words, it provides for the absence of privileges and subjects all individuals to the ordinary law of the land equally. The concept is considered to be negative in connotation since it restricts the States from engaging in discrimination between the citizens. On the other hand, the concept of equal protection of the law has been borrowed from the American Constitution. Equal Protection of Law provides that every individual must be treated alike and no one should be discriminated against. The concept states that individuals should be afforded equal treatment in cases of equal circumstances which implies that the government is empowered to take affirmative actions in favour of the vulnerable and weaker sections of the society.

Article 21 of the Indian Constitution

Article 21 is the heart of the Constitution of India. Considered to be the most organic and progressive provision in the Constitution, Article 21 is considered to be a living provision.

Justice P. Bhagwati in the case of Francis Coralie Mullin vs. The Administrator (1981) stated that Article 21 “embodies a constitutional value of supreme importance in a democratic society.” Furthermore, Justice Krishna Iyer stated that the Article is the “procedural Magna Carta protection of life and liberty.”

The provision provides that no individual (whether an Indian citizen or a foreign national) within the Indian territory shall be deprived of his/ her right to life and personal liberty except according to the procedure established by the law.

It provides for two rights:

a) right to life, and

b) right to personal liberty.

It is crucial to note that the term “life” under Article 21 of the Constitution does not refer to the mere physical act of breathing. It has a wide connotation and a growing ambit and includes within its scope the right to live with dignity, the right to die with dignity, the right to livelihood, the right to safe drinking water and safe pollution free environment, the right to health, etc.

In the landmark judgement of A.P. Pollution Control Board II vs. Professor M.V. Nayudu (1999), an exemption was granted by the Government of Andhra Pradesh to polluting industries to set up their industries near two main reservoirs in Andhra Pradesh, namely the Himayat Sagar Lake and the Osman Sagar Lake. However, the same was in violation of the Environment Protection Act, 1986. The exemption was struck down by the Supreme Court and the Court further observed that the Environment Protection Act, 1986 and The Water (Prevention and Control of Pollution) Act, 1974 do not empower the States to grant exemptions to a particular industry within areas which are prohibited for setting up polluting industries.

In the case of M.C. Mehta vs. Kamal Nath (1997), the Supreme Court observed that the States are bound to regulate the supply of water and furthermore, realise the right to healthy water to ensure there are no health hazards.

Furthermore, in the case of M.C. Mehta vs. Union of India (1988), the Supreme Court of India recognised and revived the doctrine of riparian rights and observed that every riparian owner has a right to the continued flow of the waters of a natural stream in its natural condition without any obstruction, destruction or unreasonable pollution.

In its historic Pavement Dwellers Case, also known as Olga Tellis vs. Bombay Municipal Corporation (1985), the Constitution Bench of the Supreme Court held that the right to livelihood is borne out of the right to life. The Court observed that life cannot be taken away or it cannot be extinguished except according to the procedure laid down by the law in force. A crucial facet of this right is the right of an individual to livelihood which is crucial for his sustenance and survival.

Article 32 of the Indian Constitution

The provision is considered to be the heart and soul of the Constitution of India. The most crucial fundamental right enshrined under the Constitution of India, Article 32 provides for the enforcement of fundamental rights. The provision empowers individuals to approach the Supreme Court of India to enforce their fundamental rights against the States.

The Supreme Court has the power to issue directions, orders, or writs in the nature of habeas corpus, mandamus, certiorari, quo warranto and prohibition. This right cannot be suspended except according to when the Constitution provides so.

There are certain conditions under which the Supreme Court can refuse to grant this right to the citizens. These include:

Delay in filing a petition
Malicious petition
Misrepresentation or Suppression of Material Facts
Existence of an alternative remedy to the right of constitutional remedies

Article 136 of the Indian Constitution

The provision deals with Special Leave Petitions (SLP) which is a legal remedy available before the Supreme Court of India and allows individuals to seek permission from the Apex Court to appeal against a judgement, decree, or order of a lower court or tribunal of the country. It is an extraordinary power vested with the Supreme Court and is not limited to a particular matter. It depends on the discretion of the Court whether it wants to consider cases involving the questions of fact or law or both.

The time period within which an SLP must be filed is 90 days from the date of the judgement or order of the Court or Tribunal against whose decision an appeal is filed before the Court. However, the Supreme Court is empowered to condone the delay in filing the SLP if it believes that the same is under exceptional circumstances.

It is crucial to note that an SLP cannot be claimed as a matter of right. Furthermore, it excludes judgements, determinations, sentences, or orders that are passed by any Court or Tribunal under the laws which are related to the Armed Forces.

Article 245(1) of the Indian Constitution

The provision deals with the extent to which the laws can be enacted by the Parliament and the State Legislatures. It provides that the Parliament is empowered to pass laws which are applicable to the territory of India or a part of it. Similarly, State Legislatures are empowered to enact laws that are applicable to the entire state or parts of it.

The provision is not absolute in nature and is subject to the Constitution of India. In other words, the Parliament or the State Legislature does not have the unlimited power to enact laws and is subject to the Constitution of India. Any law ultra vires to the Constitution will be struck down by the Court.

Article 262 of the Indian Constitution

The provision deals with the adjudication of disputes relating to inter-state rivers and river valleys. It provides that the Parliament is empowered to provide by law for the adjudication of disputes or complaints with respect to the use, distribution, and control of water in such river valleys or inter-state rivers. Furthermore, it states that irrespective of the provisions of the Constitution of India, the Parliament may by law provide that neither the Supreme Court nor any other Court shall exercise jurisdiction over such matters.

If the Parliament has not enacted any legislation under this provision, it may refer the same to either the Supreme Court or the concerned High Court. However, it is crucial to note that the same depends on the discretion of the Parliament.

Entry 17 of the States List and Entry 56 of the Union List

Entry 56 of the Union List provides that only the Parliament is empowered to make laws on the development and regulation of interstate rivers and river valleys in the interest of the public. Furthermore, Entry 17 of the States List provides that water and all the matters related to it shall be subject to the provisions of Entry 56 of the Union List, which empowers the Parliament to legislate on the same.

In other words, water falls within the ambit of the State List which implies that only the State has the power to legislate on the same. However, this authority is limited by Entry 56 of the Union List. Article 262 of the Constitution of India clearly provides that the Parliament is empowered to legislate on the subjects provided for under Entry 57. The rationale behind the same is that rivers flow from different territories and no state has the sole right over the water resource. States must not enact discriminatory legislation or undertake arbitrary practices to gain the advantage over the resource. As a result, it was necessary to empower the Centre to maintain equality and ensure that the necessities of any State are not discriminated against.

Judgement in Cauvery water dispute case

The Supreme Court observed that it firmly believes that the Ordinance was enacted to affect the flow of river water from Cauvery into the territories of Pondicherry and Tamil Nadu which are low riparian States. With respect to the same, the Apex Court observed that the Ordinance has an extra-territorial jurisdiction and is beyond the legislative jurisdiction of the State, as a result, it is violative of Article 245(1) of the Constitution of India.

Furthermore, the Court observed that if the Tribunal does not have the power to grant an interim relief, the Union Government would be incompetent to make references pertaining to these disputes to the Tribunal. This in turn implies that the Tribunal would have no jurisdiction over such matters even if reference to those disputes were made to it. Moreover, if the Tribunal does not have the power to grant interim relief to the disputing parties, then the order made by the Tribunal would constitute a report within the purview of Section 5(2) of the Act and thus, would not be published by the Union Government under Section 6 of the Act. This implies that the order passed by the Tribunal would not be effective in such a case. The Court while elaborating as explained observed that the Tribunal had the jurisdiction to consider the request made by the Union Government for considering the claims made for granting interim relief by the State of Tamil Nadu. As a result, the Union Government is empowered to refer such disputes to the Tribunal for adjudication.

Section 5 of the Act empowers the Central Government to refer disputes pertaining to water and any other connected or relevant matters to the Tribunal established under the Act. This explains that a request for interim relief even if it is in the nature of mandatory direction or prohibitory order would be a matter which is connected to the main dispute itself. As a result, the request made by the State of Tamil Nadu pertaining to the grant of interim relief is a part of such reference. Therefore, the decision of the Tribunal will be within the purview of Section 5(2) of the Act and therefore, be published under Section 6 of the Act in order to be effective in nature.

In conclusion, the Supreme Court of India observed that the Ordinance passed by the Governor of Karnataka in 1991 was beyond the legislative scope of the State of Karnataka and, thus, violative of the Constitution of India. Furthermore, the order of the Tribunal was a decision within the purview of Section 5(2) of the Act and is thus required to be published by the Central Government as per Section 6 of the Act in the Official Gazette. The Supreme Court observed that the Tribunal established under the Act was competent to grant interim reliefs to the disputing parties when a dispute has been referred to it by the Central Government.

Historic judgements on water disputes

T.N. Cauvery Neerppasana Vilai Porulgal Vivasayigal Nala Urimai Padhugappu Sangam vs. Union of India (1990)

The Supreme Court in this case observed that the issue regarding the distribution of water from the Cauvery River must be looked into by the Central Government directly. The rationale behind the same was that there was a bar on the jurisdiction of the Supreme Court for hearing disputes pertaining to river water. As a result, the Central Government constituted a tribunal to look into the dispute wherein the State of Tamil Nadu filed an interlocutory application for the distribution of water. However, the application was dismissed since the State had no right to file the same.

State of Tamil Nadu vs. State of Karnataka (1991)

The decision of the Supreme Court in the case of T.N. Cauvery Neerppasana Vilaiporulgal Vivasayigal Nala Urimai Padhugappu Sangam vs. Union of India (1990) was not accepted by the State of Tamil Nadu. As a result, in this case, they approached the Supreme Court under Article 136 of the Constitution of India by way of a Special Leave Petition and contended that tribunals should accept interlocutory applications. The Supreme Court stated that the Tribunals are empowered to decide on interlocutory applications since they are a competent authority within Article 262 of the Constitution of India with respect to matters involving water disputes. Based on its power, the Tribunal ordered the State of Karnataka to release water. However, it refused to do so and enacted an ordinance to overrule the order of the Tribunal which was later challenged in the case of Cauvery River Water Tribunal, re (1992).

State of Andhra Pradesh vs. State of Karnataka (2000)

In this case, the Supreme Court once again reiterated that it is empowered to look into the validity of the award rendered by the Tribunal and has the authority to interpret the decisions of the Tribunal. Furthermore, it clarified that what it is not empowered to do is look into matters pertaining to the adjudication of water disputes. In other words, there is a bar on its jurisdiction over disputes pertaining to water. Similarly, the Supreme Court expressed similar views and reiterated its position in this regard in the case of State of Haryana vs. State of Punjab (2004) wherein it looked into the validity of the award of the Tribunal in a matter concerning the dispute over the canal built over rivers Yamuna and Sutlej.

Gandhi Sahitya Singh vs. Union of India (2003)

In this case, the awards granted by the Cauvery Water Disputes Tribunal constituted under Section 4 of the Act consisting of the Chairman and two other members appointed by the Chief Justice of India were challenged before the Supreme Court of India. The Apex Court clarified that no individual is empowered to challenge the validity of the award granted by the Tribunals and furthermore, such a power vests only with the State Government under Article 131 of the Constitution of India.

Atma Linga Reddy vs. Union of India (2008)

This is a crucial decision regarding the jurisdiction of the Supreme Court in matters pertaining to disputes regarding water and related matters. The Court excluded the jurisdiction of Article 32 and Article 131 from disputes related to water and stated that such disputes would be dealt with by the Tribunals only.

State of Tamil Nadu vs. State of Kerala (2014)

The case is crucial to understand the scenario wherein the Supreme Court has jurisdiction over disputes pertaining to water. The Apex Court explained that in cases where the issue does not only revolve around water disputes but involves other disputes as well, the Supreme Court is empowered to decide all the disputes including the dispute related to sharing the water resource.

State of Karnataka vs. State of Tamil Nadu (2017)

The Supreme Court of India, in this case, elaborated on the scope of its jurisdiction and observed that irrespective of the bar imposed by Article 262(2) of the Constitution of India read with Section 11 of the Act, the Supreme Court is empowered to exercise its authority to carry out the award rendered by the Tribunal. The rationale provided for the same was that the Tribunal is a statutory authority constituted under the Act enacted by the Parliament of India. As a result, the Supreme Court has jurisdiction to look into the parameters, scope, authority and jurisdiction of the Tribunal.

State of Haryana vs. State of Punjab

The State of Punjab and Haryana had entered into an agreement for digging the link canal built on the Sutlej-Yamuna River under the Ravi Beas project. The State of Punjab did not carry out its obligation to dig the portion of the canal within its territories. Following this, the State of Haryana filed a suit under Article 131 of the Constitution of India and prayed for a mandatory injunction for Punjab to fulfil its obligations.

The Supreme Court observed that the construction of the canal was not a water dispute within the purview of the Inter-State River Water Disputes Act, 1956. The rationale provided for the same was that the construction of the canal had no relation to sharing the water resources between the disputing states.

Furthermore, the Court observed that the State Governments had entered into an agreement following an intervention by the Prime Minister of India in 1981. As a result, they are not permitted to take a contradictory stand on the same. The Supreme Court directed the State of Punjab to continue the digging of the canal on the Sutlej-Yamuna rivers and to ensure that the canal was functional within a year. In case the State of Punjab fails to fulfil its obligations within a year, it shall be the duty of the Central Government to ensure that the canal is functional through its agencies.

International landmark judgements on inter-state water disputes

Several courts across the globe have rendered landmark judgements in various cases suggesting crucial points to be taken into consideration about Inter-State Water Disputes. India has been facing these disputes since time immemorial and analysing these judgements can have a positive impact in resolving such disputes and finding efficient solutions to the problem.

State of Kansas vs. State of Colorado (1907)

In this landmark case, the Supreme Court of the United States provided for the cardinal rule which provides that what every State has with the other is the equality of rights. This implies that the States stand on an equal pedestal with the other States and no State is in a position to impose its laws and views on the others. The Court used this relationship to explain that every state has the right to the water which flows from its territories. It clarified that the same is a right publici juris, and nobody has the right to divert or obstruct it. This implies that there is a right to reasonably use the same.

In other words, the judgement rendered by the Supreme Court of the United States explained that the right to flowing water vests with the State whose land it runs on and no one has the right to divert or obstruct this flow of water. This does not imply that the proprietor has an unreasonable right to use the water flowing from its territory.

The same is relevant for this case as the Riparian States were concerned more about their interests rather than the interests of the other States as is evident from this case wherein the State of Karnataka started building dams to store the water within its boundaries without considering the needs of the other States. However, every State has an equal right to the water of the Cauvery River flowing within its boundaries as has been explained by the Supreme Court of the United States.

State of New Jersey vs. State of New York (1931)

In this landmark case, the Supreme Court of the US observed that removing water to a different shed must be allowed at certain times unless the States are deprived of the use of water on formal grounds. In the context of this case, the diversion of water to different sheds must be taken into consideration since India is an economy deriving its major livelihood from the agricultural sector. As a result, water should also be diverted to areas where there is the scarcity of water and should not only be concentrated in the riparian states.

State of Connecticut vs. Commonwealth of Massachusetts (1931)

In this case, the Supreme Court of the US observed that the equality of the right to settle disputes with respect to the allocation of water does not connote the division of water but implies that the principle of equality means that all States are on an equal pedestal before the Constitution.

Kansas vs. Colorado (1907)

In this case, the Supreme Court of the US observed that the right to flowing water is a right publici juris which implies that it is common and equal to all those whose land it flows through. No authority, entity or individual is empowered to obstruct or divert it. Furthermore, everyone is entitled to the reasonable use of water which is flowing through their land.

Shortcomings in the decision of the tribunal

The Tribunal gave its decision on February 5th, 2007 and allocated the water from the Cauvery River as follows:

Tamil Nadu: 419 TMC

Karnataka: 270 TMC

Kerala: 30 TMC

Pondicherry: 7 TMC

Furthermore, the award reserved 10 TMC for environmental purposes and 4 TMC for inevitable outlets into the sea.

This implies that the final award provided that Karnataka will release 192 TMC to Tamil Nadu from its Billigundlu site. This includes 10 TMC allocated for environmental purposes. The award granted the State of Tamil Nadu an additional 25 TMC through rainfall in the distance which is intervening between Billigundlu and Mettur. This implies that the total amount of water flowing from Karnataka’s territory into the Mettur dam in the State of Tamil Nadu as per the award of the Tribunal was 217 TMC and the remaining share for the State will be from the rainfall and the rivers that flow within its territories. Furthermore, the award provided that the State of Tamil Nadu will release 7 TMC to Pondicherry from its share of 192 TMC that comes from Karnataka.

The decision of the Tribunal had severe shortcomings. These included extreme delays in the resolution of the disputes along with protracted proceedings. Furthermore, there was no period within which the Tribunal had to give its decision and submit the report. Another significant disadvantage is regarding the finality of the award. As per the Act, the award of the Tribunal is final and beyond the jurisdiction of the Courts. However, the States can approach the Supreme Court under Article 136 of the Constitution of India which provides for Special Leave Petitions. Another backdraw of the decision of the Tribunal is regarding the composition of the Tribunal which consists of only judicial officials instead of individuals who are experts in such matters. Furthermore, the growing connection between disputes pertaining to water and politics has transformed such disputes into vote bank policies.

How is the water being shared

The final decision of the Cauvery Water Disputes Tribunal as explained in its 2007 award along with the judgement of the Supreme Court of India in February 2018 elaborate on the system of sharing the river water. Furthermore, it provides for the institutional mechanisms to ensure the implementation of these decisions. The Supreme Court provides that 740 thousand million cubic feet (tmc ft) of water should be available in the Cauvery basin in a normal year. Following this, the Court made the following allocations:

Karnataka: 284.75 TMC ft.
Tamil Nadu: 404.25 TMC ft.
Kerala: 30 TMC ft.
Puducherry: 7 TMC ft.

Furthermore, the Supreme Court provided that 10 TMC ft and 4 TMC ft are to be set apart to ensure environmental protection and inevitable escapes into the sea.

Out of the total quantity allocated to the State of Tamil Nadu, the State of Karnataka has to ensure that 177.24 TMC ft is given to Biligundulu, located on the inter-State border on a monthly basis. Out of this quantity, 123.14 TMC ft is to be given between the months of June and September, which mark the season of southwest monsoon. As a result, the Cauvery River flared up during this.

Recent developments in Cauvery water dispute case

A special bench of the Supreme Court consisting of the former Chief Justice of India, Justice Deepak Mishra in 2007 stated that Cauvery River is a national asset. He stated that Karnataka will supply 177.25 TMC of water to the State of Tamil Nadu. The rationale behind the same was an increase in the demand and need for water in the city of Bengaluru.

Furthermore, the Supreme Court recognised that the Constitution bestows an equal status on the States within the territory of India. As a result, no State is empowered to claim full rights on any part of the river that is flowing within its territory or is sharing its boundaries. The Supreme Court further upheld the principles of equitable and just distribution of the resources by refusing absolute rights over the water resources.

Following this, the Court ordered the Central Government to constitute a Cauvery Management Scheme for releasing water from the State of Karnataka to Tamil Nadu, Kerala and Puducherry. The approval for the same came on May 18, 2018.

However, the authority of the Court to render an order and the jurisdiction of the board appointed by the Central Government was challenged under the Tribunals Act. The Supreme Court concluded that its judgement and the constitution of the Board by the Central Government was in good faith and to ensure the implementation of its order.

It is pertinent to note that the decision of the Supreme Court highlights the essential features of the customary principles of international law.

Analysis of Cauvery water dispute case (1992)

The Supreme Court in the landmark decision of the Cauvery Water Disputes Tribunal, re clarified its position regarding the legislative scope of the State of Karnataka with respect to enacting the Ordinance. Furthermore, it observed that the order of the Tribunal is considered to be a legal decision within the purview of Section 5(2) of the Act and as a result, the Tribunal is empowered to grant interim reliefs to the disputing parties. The same is not only with respect to the disputes pertaining to the sharing of river water but also those relevant and connected to such matters. The dispute pertaining to the sharing of Cauvery River water between several States presents a clear picture of what should be done in case States face such disputes. Every riparian State should have equal rights on the rivers that are flowing through its territories ensuring fair and equitable distribution of water. No particular State should take into consideration its selfish interests. Furthermore, the water should be diverted into areas that are prone to droughts and areas that require more water for agricultural and other developmental purposes.

Furthermore, multiple awards have been rendered by the Tribunals in major river water disputes involving the Krishna, Narmada, and Godavari rivers. However, there is no provision under the Constitution of India to ensure the effective implementation of these awards. As a result, even though the awards have been rendered by the Tribunals, conflicts still exist due to ineffective implementation of the awards. Furthermore, it is crucial to appoint experts in the Tribunal to overcome technical difficulties relating to specialised laws.

Furthermore, the disputing parties do not have the right to appeal against the decision of the Tribunal. The decision of the Tribunal once published becomes binding on the parties. Although the Central Government or the State Governments may seek elaborate explanations on the decision which can later be modified, there are no effective remedies to seek the implementation of the award nor to appeal against its decision.

Recommendations

In view of the current case and the involving issues regarding the same, the author would like to make the following recommendations:

The Parliament of India should look into the landmark decisions regarding the water disputes of foreign countries especially the United States and Canada. Understanding their doctrines and principles, the Parliament can amend the existing laws to resolve the disputes in the context of the Indian scenario.
The Supreme Court must lay down detailed guidelines for the Central Government and the Tribunals to adjudicate matters relating to water disputes.
The Central Government should appoint a committee of experts to supervise the Tribunals in resolving disputes pertaining to water and related matters. Furthermore, the committee can ensure transparency and separation of powers.
Tribunals should understand different Alternative Dispute Resolution Mechanisms to ensure that the disputing parties can come to an amicable settlement. This is necessary to ensure that their needs are fulfilled within a stipulated time period. Furthermore, this would reduce the burden of the case on the Tribunal and ensure an efficient and speedy resolution with effective outcomes.

Conclusion

Disputes pertaining to the sharing of Interstate river water have been a major issue in India since the pre-independence period. However, these disputes still exist and have not been resolved completely. Rivers are a crucial resource in India since India is an agrarian economy. Every riparian State has its own rights over the river water flowing and passing through its territories. It is crucial for every State to consider the necessities of the other States, and since most riparian States fail to do so, it leads to conflicts regarding the sharing of river water. Experts explain that since the order of the Tribunal established by the Central Government often leads to further disputes between the disputing parties, the best way to resort to disputes pertaining to sharing river water is negotiations wherein the States can put forth their claims, requirements and necessities. Following the same, a mutual agreement can be arrived at without any party losing its best interests.

The case of Cauvery River Water Tribunal re, is an example of such a dispute. Dissatisfied with the order of the Tribunal which provided for the share of Cauvery River water for the States of Karnataka, Tamil Nadu, Kerala and the Union Territory of Pondicherry, the aggrieved State of Tamil Nadu approached the Supreme Court questioning the decision of the Tribunal. This not only delays the dispute resolution process and makes it more complex, but also causes a delay in the distribution of a crucial resource like water, thus, affecting thousands of livelihoods, and in turn, the growth and development of the economy.

Frequently Asked Questions (FAQs)

Which authority exercises jurisdiction over water disputes in India?

The Central Government constitutes a Tribunal under Section 3 of the Inter-State River Water Disputes Act, 1956 to exercise jurisdiction over disputes pertaining to water or matters relevant or connected to it. No other court or authority is empowered to look into such disputes and their jurisdiction is barred by the Constitution of India as well as the Act.

Is the Supreme Court of India empowered to look into the water disputes?

Article 262 of the Constitution of India bars the jurisdiction of the Supreme Court or any other Court in India to look into disputes pertaining to water or connected matters. Furthermore, Section 11 of the Act bars the jurisdiction of the Supreme Court with respect to the same. However, it is crucial to note that there is an exception to the same. The Supreme Court can exercise jurisdiction over matters involving water disputes if they are connected with other issues over which the Supreme Court exercises jurisdiction. In this case, all the disputes involving those relating to water will be adjudicated by the Supreme Court of India.

References

How would flexibility in Labour Laws help companies

By

-

July 20, 2024

This article is written by Jaanvi Jolly and Sneha Arora. It seeks to provide an in-depth overview of the dynamic landscape of labour laws in India. It highlights the historical background and the gradual development of labour legislations, tracing how labour laws have managed to balance the interests and rights of the workers and employees over time. This article examines the present status of labour law in India and how bringing in flexible reforms can help companies, initiating the introduction of the four new labour codes which aim at simplifying and modernising the regulatory framework. Overall, this article offers a comprehensive perspective on the dynamic nature of labour laws and their impact on the economy.

Table of Contents

Introduction

The debate about balancing protectionist policies with the need for economic growth, is a never ending one. It is often argued that labour laws are restrictive and seek to put undue burden upon establishments, which makes the process of hiring and terminating workers, in line with changes in the economy, very difficult. This results in less investment, slow growth and a decline in formal employment. In 2010, the World Bank noted that “India is one of the most restrictive countries in the world in terms of regulations governing retrenchment and layoffs”. This clearly established a need to reform and bring in greater flexibility in hiring and firing regulations. These exigencies are not confined to just India. In the globalised era, as nations clamour to increase their competitiveness, the only resort is to introduce flexibility in labour laws.

The various principles that guide the legislation of labour laws include- principle of regulation, principle of protection, principle of social justice, principle of welfare, among others. Flexibility in labour laws has many contours, such as the number of people employed, provisions for job security, limits to working hours and remuneration. Companies are directly impacted by the extent of flexibility in the labour market. Liberal laws may result in a substantial increase in their profits, along with other advantages that include, improvements in efficiency, easy adaptation to changing business needs and fostering innovation. In a less regulated environment, they would be better equipped to work through changing market situations, to work out operations in an optimised manner and to create a dynamic and positive employer employee rapport. They can make changes to their workforce based on factors such as employee hiring and firing, compensation and benefits, working hours and conditions, changes in market, fluctuations in the economy, etc. This does not mean that the companies must be given carte blanche (complete freedom to act as one wishes), as the need for protection of employees’ rights would require some regulations. However, it is evident that in cases of rigid labour laws, companies are unable to modify their workforce, work on expansion, change employment arrangements or enhance the employer employee relationship, which negatively impacts not only the business but also the economy.

The evolution of labour laws in India

In today’s era of high level of industrialisation and the contemporary business landscape, labour laws play a pivotal role in displaying the cornerstone of employer-employee relationships. The existence of industrialisation relies paramountly on two factors that is capital and labour. Labour legislation in India grew with the growth of industry in the 18th century, when India was not only a great agricultural country but a leading manufacturing country too. This industrial growth necessitated the establishment of labour laws to protect worker’s rights and welfare. Key legislations like the Factories Act of 1948, which aimed to regulate working conditions in factories, including work hours, safety of workers was one among several other steps that marked a major step in labour law progression. Additionally, the Maternity benefit Act of 1961 was introduced to safeguard the rights of pregnant women, ensuring benefits like maternity leave. However, the British government in India as a matter of policy discouraged Indian manufacturers to aid the rising manufacturers of England. This discriminatory policy forced the leaders of independent india to put forward a theory of economic development and planned industrialisation suited to the conditions of the country. Thereby, in India, several labour resolutions have been enacted to promote the conditions of the labour keeping in view the development of industry and national economy such as Minimum Wages Act, 1948, The Employees State Insurance Act, 1948, The Payment of Gratuity Act, 1972, The Contract Labour Act, 1970. etc. However, we need to acknowledge the fact that for industrial regeneration, the partners of the industry must cut their respective defects. Since independence, both legislation and public opinion have had a substantial impact in improving the conditions of the workers but unfortunately, the response of the employers has been lukewarm at best.

The government and the factory owners must understand the labour psychology and consequently, a change in their outlook and attitude is required in order to secure the industrial peace. Similarly, workers in the country must understand that if they desire to secure their place in the industrial economy of the country they must think more in terms of responsibilities and duties and not a licence for impertinence.

In recent years, India has undertaken several reforms to modernise and simplify its labour regulations. The government consolidated 29 central labour laws into four comprehensive codes as follows :

The Code on Wages, 2019: This Code aims to streamline the rules and regulations concerning wages and bonuses across industries, ensuring a universal minimum wage for all workers and promoting timely payment.
The Industrial Relations Code, 2020: This code aims to simplify the process of dispute resolution between industries, introduce new provisions for strike and lockouts, and improve the mechanism for workers participation.
The Occupational Safety, Health and Working Conditions Codes, 2020: This code amalgamated several regulations concerning workplace safety, health standards and working conditions, ensuring a safer environment for workers in all the sectors.
The Code on Social Securities, 2020: This code integrates laws related to social security, including provident funds, employees state insurance, maternity benefits, gratuity, and employee compensation, aiming to extend social security benefits to all workers, including those in the unorganised sector.

The introduction of the new labour Codes has elicited mixed reactions. While some stakeholders welcome the new labour code reforms, others have expressed concerns about the dilution of employee’s rights. Trade union groups have raised serious concerns regarding the increased retrenchment threshold and the weakening of trade union rights under the Industrial Relations Code. These objections have led to various strikes and protests in various parts of the country, emphasising the need for effective dialogues before the government, employers and trade unions to address the apprehensions of all stakeholders.

By navigating and comprehending the evolution of labour laws and their impact on company flexibility, stakeholders can navigate employment landscape changes while promoting a sustainable work environment. This includes considering the benefits and challenges, the shift towards flexibility, the expansion of workers’ rights, and the historical context of the Industrial Revolution and early labour laws.

Present status of labour laws

In India, the present status of labour laws encompasses a comprehensive framework that governs various features and aspects of employment including conditions, relations, rights and incomes. About 45 other national laws and around 200 state laws regulate the relations between workers and companies in India.Some key statutes under the Indian labour laws are as follows:

Industrial Dispute Act, 1947 encompasses a framework for resolving disputes between the industries
Minimum Wages Act, 1948 ensures that workers receive minimum wages, protecting them from exploitation
Employees State Insurance Act, 1948 offers social security benefits and health insurance to the workers
Employment Rights Act, 1996 covers various employment rights such as unfair dismissal and redundancy
Employment Relations Act, 1999 strengthens workers relations
The Factories Act, 1948, regulates working conditions in the factories
The Employment Exchange Act, 1959 sets a requirement for the workers to notify employees exchanges about vacancies to job seekers
The Motor Transport Workers Act, 1961 regulates working conditions for the motor transport workers, including hours of work and rest periods
The Maternity Benefit Act, 1961 provides maternity benefits, including paid leaves and job protection
The Plantation Labour Act, 1951 ensures welfare of plantation workers, including housing and medical
The Working Journalists Act, 1958 regulates service conditions for journalists, including working hours and wages
The Mines Act, 1952 ensures health, safety of the workers in mines
The Working Journalists and Other Newspapers Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 extends working and service conditions concerning protections to other newspaper employees, similar to those for journalists and many others. These laws cover areas like maternity leave, minimum wages, dismal and trade union recognition.

Therefore, labour laws in India continue to evolve in order to protect the worker’s rights and safeguard their interest, and to maintain employer-employee relationship and ensure fair working conditions while at the same time providing the impetus to the businesses.

Why is there a need for flexible reforms in labour laws

The demands for a reform in the Indian labour law landscape have been made by various stakeholders so as to provide a conducive business environment. In the last decade, India has been extensively pitched as an economy for foreign investors, with the only hurdle being several regulatory barriers and restrictive labour laws.

The reforms in India’s labour laws have been the result of rigorous debate. The literature, as found in the work of Amirapu and Gecher (2020), argues that restrictive labour laws compel firms to remain small, use contractual workers or use capital intensive technology. On the other hand, the work of Roy, Dubey and Ramaiah (2020) argues that labour laws cannot be held responsible for the sluggish growth of the Indian economy. Believing that strict labour laws were detrimental to the growth of the economy, the government began to reform the labour laws at the national level.

Facilitating foreign investment

In numerous studies, it has been found that as the labour market regulations in the host country become flexible, the inflow of foreign direct investment (FDI) increases by as much as 18% and excessive regulations restrict growth by lowering the levels of FDI. It has been found that countries with excessive regulations and low quality institutions are unable to take full advantage of trade liberalisation and globalisation. Thus, a reform in regulatory frameworks is quintessential in achieving positive gains from trade and FDI inflows.

In recent years, the Government of India has made significant efforts to transform the country’s economy and become a five trillion dollar economy by 2024-25. The Government of India has been striving to simplify the business environment, maintain business-friendly compliance and regulatory processes, promote entrepreneurship, innovation, and wealth creation and also focus on attracting foreign investments. To achieve this Government has brought about various schemes and regulations to enhance the ease of doing business in India.

Despite India’s competitive advantage in terms of labour and numerous measures to enhance the ease of doing business technologically and economically, it has still not fully realised its potential for attracting foreign direct investment (FDI) due to the lack of flexibility in labour laws. To increase FDI in India, location advantages like tax incentives, market size, and flexibility in labour laws play a significant role. In India, labour laws are regulated by both the central and the state legislatures, resulting in over 200 state and central legislatures governing the labour code in India. This multiplicity of laws creates a hindrance, complexities and unfavourable conditions for foreign investment.

Certain labour laws pose challenges for foreign investors looking to invest in India. One of those laws is related to the termination of unemployment during restructuring or mergers. The Shops and Establishment Act, 1954 and the Industrial Disputes Act, 1947 and standing orders on service contracts impose a challenge of procedural conditionality and hinder the employers during the deployment of resources. Obtaining government permissions for the deployment of the employees and for the disinvestment creates hurdles in quick decision-making and smooth execution of business operations.

Another complexity arises from the Contract Labour (Regulation and Abolition) Act, 1970, which restricts the recruitment process for contract labourers based on production and demand, and grants the government the power to prohibit such recruitment. These complex regulations hinder regulatory compliance and the framework for foreign businesses to operate smoothly in India.

Inflexibility and restrictions on the smooth execution of businesses, along with biases towards employees, hinder economic prosperity and growth. Foreign investors and profit maximising firms seek freedom and flexibility towards their business operations and executions. India’s labour market being ambiguously regulated, hinders and restricts foreign investors from investing and entering into the Indian market, leading to impaired labour relations, reduced labour flexibility and a lack of social security. Therefore, reducing the rate of FDI in India.

Here are some sectors which are affected by the foreign investments

Manufacturing sector: Various companies like Hyundai, Honda, and Ford have established manufacturing facilities in India. These companies must have labour laws concerning minimum wages, special health and safety, working hours and leave entitlements.
Retail sector: Several foreign retail giants like Walmart, IKEA, and Amazon, among others, have entered the Indian market.These retail giants are subject to the labour laws governing workers’ wages, working conditions and other provisions concerning foreign direct investment, including source limits and sourcing requirements.
Construction and infrastructure: Foreign companies investing in the construction and infrastructure development of India must comply with the Indian labour laws related to contract labour, safety regulations, and workers’ welfare measures. These laws aim to safeguard the safety and rights of the workers.
Information Technology and Business Process Outsourcing: India is a significant destination for business process outsourcing and information technology services, attracting foreign investment from companies like IBM and Microsoft, among others. The Foreign investors investing in it and BPO must comply with the rules and regulations of the labour laws to maintain the data privacy, and working conditions of the employees, and to regulate the companies in a better way.

Therefore, flexible labour laws help foreign investments and investors by enabling adaptability, innovation, creativity, agility and competitiveness.

High rate of economic growth

To promote economic growth in India, it is essential to streamline labour laws to attract foreign investment, enhance business flexibility, and ensure workers’ welfare. The new labour Code consolidates the labour laws into four major Central laws, which fosters and simplifies compliance in a conducive investment climate. By allowing easy hiring and firing processes by the companies ultimately, increases the ease of doing business. By extension of social security benefits, these reforms aim to balance employers’ interests along with workers’ rights, therefore making India more appealing and attractive to foreign investors.

With reforms that would make the discretionary powers of businesses wider and the process of registration and licence seeking faster, these businesses would increase, which would directly affect the economic growth of the nation.

In a study by Poschke (2007), it was found that higher firing costs discourage the exit of low productivity firms, which congests the selection process and slows down growth. In a report by Basu and Maertens (2007), it was argued that stringent labour regulations were among the main barriers to economic growth in the Indian economy and that reforms were needed in the area. They suggested the introduction of a labour market system with flexible contracts, a minimal welfare and safety net for unemployed workers and a swift dispute resolution mechanism.

The government’s focus on modernising and simplifying labour reforms underscores its commitment to driving economic growth by promoting collective bargaining and resolving disputes. To further enhance economic growth and India’s sustainability, India needs to focus on boosting private investment, integration with the global economy and increasing competitiveness. Initiatives like financial sector reforms, simplification of the regulation framework and trade liberalisation are crucial for economic growth and help in reducing business costs and risk, thereby attracting foreign investment, and posting Innovation, technology and competitiveness. By addressing key factors like job creation, enhancement of employment opportunities, and increasing productivity and competitiveness. India can unlock its economic potential, create jobs and maintain a stable growth trajectory in the long run.

Enhancing industrial competitiveness

In India, 90% of the workforce is engaged in the unorganised sector, a trend that has been consistent since independence. The unorganised sector in India holds several complexities and unfavourable conditions. However, recent Labour law reforms aim to address this gap and the complexities in it to enhance industrial competitiveness. The flexibility in the labour laws that are the reforms introduced by the government are of significant understanding as they consolidate and simplify existing labour laws, making them more efficient and workers-friendly.

In order to enhance the industrial competitiveness in india, several steps can be implemented, particularly given the predominance towards the unorganised sector and recent labour law reforms:

By balancing flexibility and worker’s rights: While flexible labour laws can attract foreign investment and boost up the profitability, it’s essential to protect the workers’ rights to ensure fair and sustainable working conditions. This balance is crucial for long-term industrial growth and sustainability.
Skill development: Investing in skill development programmes can enhance the capabilities of the workforce, making them more adaptable towards technological advancement and development.
Infrastructure improvement: Enhancing infrastructure and facilities such as transportation, logistics and energy supply, can reduce operational costs and increase efficiency for industries.
Enhancing Technology and Innovation: Encouraging the adoption of new technological advancement adds to higher productivity and better quality products, making Indian industries more competitive globally.
Flexible labour laws: Recent reforms have simplified and modernised the existing labour laws thereby making them more efficient and workers-friendly. It facilitates hiring skilled, efficient workers for short-term projects or seasonal demand, reducing labour costs and increasing productivity.

Flexible labour laws help improve and enhance industry by allowing companies to adapt quickly to changing market conditions in a dynamic and diverse economy like India, and to innovate and operate more efficiently and effectively. It can facilitate the hiring of skilled labourers for short-term projects or seasonal demands, reducing labour costs and increasing productivity. Therefore it’s crucial to strike a balance between flexibility and protecting workers’ rights as flexibility enhances the foreign investors’ capacity to gain more profit as per their suitable and appropriate working conditions and at the same time the protection and safeguarding of workers’ rights and interest is of high importance, so as to ensure of fear and sustainable working conditions.

Adoption of technological advancements and updates

Adapting to new technological development under new labour law reforms highlights the significance of flexible labour laws to promote the companies in India. It involves addressing the changing nature of work and the impact of automation on jobs. Technology advancements are reshaping the labour market by creating both opportunities for the workers and challenges for the workers. Automation and technological advancement pose a challenge due to potential job losses. It is crucial to recognise that technology is more likely to transform jobs rather than eliminate them, which is increasing unemployment in a labour-intensive economy like India thereby, emphasising the need for upskilling and reskilling to adapt to evolving working requirements. The new labour codes aim to establish a positive relationship between employers’ interests and workers’ welfare by introducing reforms related to flexible hiring, grievance redressal mechanisms, and social security benefits. The employer seeks benefits through simplified compliance requirements and workforce flexibility. The introduction of fixed-term contracts and the promotion of collective bargaining under the new labour codes highlight efforts to align the labour code with the changing dynamics of the modern workplace. Adapting to technological advancements within the framework of the new labour laws involves enhancing workforce skills, embracing innovation, and ensuring that labour regulation remains responsive to the evolving demands of the digital economy.

The role of technology in enforcing labour laws has been a significant instrument throughout evolution. Digital platforms can streamline various processes, making compliance easier for companies and ensuring for workers. For example:

Reporting violations: Digital platforms can provide a user-friendly interface for workers to report labour law violations confidentiality and efficiently.
Tracking working hours: Automated systems like tracking working hours can accurately ensure compliance with regulations, legal requirements and fear compensation.
Managing benefits: Digital management of social security benefits can reduce administrative burdens and ensure timely delivery of benefits to the workers.

This development and adoption of technology can impact the society and its different sectors as follows:

Manufacturing sector: Robotics and automation can significantly reduce the need for manual labour costs, which can lead to a decline in the number of job positions but it also creates demand for skilled workers and labourers to manage these technologies.
Service sector: Digital transformation can enhance customer service and efficiency in creating new job rules in the IT sector and digital marketing.
Tech sector: Advancement in technology can create more job opportunities in software development, data analytics and cyber security and other tech-driven services.

In order to improvise these technologies the government has taken various steps like Digital India initiative by the government of India in order to empower the digital society, Skill India Mission to upskill and reskill the workforce Trend, labour codes reforms and several other initiatives in order to meet the future trends to reshape the labour laws and the workplace like artificial intelligence and machine learning to transform various job functions and necessitate continuous learning and adaptation from workers, increase in the remote work and rise of gig economy and it’s work culture to protect freelance and contract workers.

Therefore, the adoption of technological advancements in conjunction with flexible labour laws plays a dominant role in enhancing the operations of companies in India, attracting foreign direct investment, and ensuring economic growth.

Increase in dwarf companies

The labour laws in operation were based on the size of the firms. This means that different requirements were postulated for firms with different employment capacities, and a negative incentive structure was put in place, which led to the firms wanting to remain small. For example, under the Industrial Disputes Act, 1947, a firm with more than hundred employees was duty-bound to receive permission from the government before retrenchment of employees, while a firm with less than hundred workers had no restriction on seeking such permission. Seeing that an additional layer of transaction cost was present for bigger firms, there was no incentive for expansion. Under the Factories Act, 1948 only firms that had more than 20 employees were covered. To circumvent this legislation, a lot of firms try to function with less than 20 employees. In the Indian economy, dwarf firms, which are small and older than 10 years, are the dominant players and also a hindrance to the expansion of job creation and productivity in the organised sector. These firms account for around 50% by number. However, their share in employment is only 14.1% and less than 8% in net value, as per the Economic Survey 2018-2019. Further, smaller firms cannot take advantage of economies of scale, which is the key to competitive markets such as exports.

To minimise the informal economy

Another factor in the smaller firm threshold is the difference between the formal and informal sectors. The producers generally have smaller firms, which leads to keeping the majority of the workforce in the informal sector. Seeing that the main aim of labour laws was to provide social security benefits, there is a wide difference in the bargaining powers of workers in the formal and informal sectors. Further, the workers employed in the gig and platforms were not covered within the ambit of the laws.

The link between regulation growth, the informal sector and corruption, was the basis of the study by Loayza, Oviedo and Servén (2006), wherein it was found that high levels of regulation are linked with lower growth of the economy and the expansion of the informal sector. Further, strict labour regulation is positively associated with corruption and the growth of a shadow economy, while better law-enforcement shrinks the informal sector. A reduction in regulatory hindrances would increase the benefits for firms participating in the formal sector and lower the incentives to operate informally.

Expansion of businesses

The main cause of the increase in the number of dwarf firms is that the benefits and exemptions provided to firms with a limited number of workers have made them remain small and hindered the process of expansion. Thus, an increase in threshold limits for exemptions would, without a doubt, lead to business expansion.

Higher employment and better adaptability to the changing economic environment

Stiff competition exists in the business world. Cutthroat competition is a normal situation for enterprises and thus, business owners are always on the lookout for new ways to stay competitive. With the changes in the economic environment, consumers are one of the most dynamic segments. This introduces another challenge for businesses, which is to adapt to the changing needs of consumers. Meeting customer needs is the key to retaining them and making the business succeed. When the economy goes through ups and downs, businesses also need to adapt. As business owners, they need to identify the moments of opportunities and distress, and act accordingly. A poor economy sends businesses into a conservative phase, which requires a different set of adjustments. When a positive economy provides opportunities for growth, it would lead businesses to increase hiring, as they would be assured of flexibility in matters of termination in times of distress.

Avoidance of indolence among employees

The employment scenario must be based on productivity and output, as it would help in creating an environment of greater competitiveness between the employees to perform better, and would provide the companies with an opportunity to select workers who are most suitable to them. Under strict labour regulations, the process of termination may lead to increased litigation or demand for compensation, etc., which at times makes employers unwilling to let go of employees despite their dismal performance. However, a reform that makes the termination process easier would always keep the employees on their toes, as they would be aware that they could be easily replaced and would continue to be vigilant. This increased competitiveness and productivity would help the businesses grow.

Enabling multinational companies to enter the labour intensive production process of the country

The adverse impact of labour protection and the high cost of dispute resolution, among other factors, hinder the entry of multinationals into the labour intensive production process, as compared to countries like China and Philippines.

Preventing dependence on temporary labourers and increasing capital

It has been found that Indian firms have higher capital intensity than other countries with the same economic development level. The reason for this is strict labour regulations. Further, producers in pro-worker states replace labour with capital and firms prefer to use contractual or fixed term workers for reasons like reduced labour cost, reducing the bargaining power of permanent workers and increasing flexibility, as employers are free to hire and fire contract workers, etc.

What reforms would help bring in flexibility to the labour laws

Increased threshold limit for falling within the ambit of labour laws

Under the new labour codes, there has been recognition of the need to provide greater autonomy to businesses. The limits for firm size have been increased to provide an impetus for the expansion of businesses. In cases of retrenchment and layoffs, the limit has been increased from 100 to 300. Only firms with more than 300 workers are required to seek permission from the government prior to such an act. Further, in the case of the Factories Act, the number of workers required to fall within the definition of “factory” has been increased from 20 to 40. In the case of contract workers, establishments or contractors employing more than 50 workers beyond the earlier limit of 50, would be covered by the new law. This brings uniformity across the states and provides employers with operational independence and the opportunity to expand.

A single licence instead of multiple location specific licences

In order to make the process of hiring easier and simpler, instead of the prior provision requiring multiple location specific licences, the new laws provide a single licence to firms, to hire contract workers in different locations.

Compliances prior to calling of a strike

Strike is a mass casual leave taken by employees on a working day. If an unlawful strike is called for, the employer has a right to lockout. A lawful strike checklist has been provided. Employees may not go on a strike –

Before 60 days from notice of strike
Before 14 days from giving this notice of strike
Before the end of the date of strike specified in notice
During pendency of conciliation proceedings
Seven days after end of conciliation proceedings
During pendency of arbitration proceedings
Sixty days after end of arbitration proceedings
During any period of time wherein award or settlement are underway related to the matter

These restrictions would stop employees from going on strike arbitrarily, hindering the functioning of businesses.

Formalisation of workforce

An informal economy is one wherein workers and enterprises are “not recognised or protected by legal and regulatory frameworks”. It was believed that with time, such an informal economy would decline, but that hasn’t been true. It is a major source of employment in developing nations. The job quality is far lower in these sectors and the workers are paid much lower than in the formal sector. They receive no health benefits, no child care benefits, sick leaves, etc. The key to economic development is converting the informal to formal. As per the Ease of Doing Business Index, labour laws are seen as the reason for informality. The two key reasons cited are- firstly, arduous labour laws lead to increased labour market rigidity, which reduces creation of new jobs or absorption of non- standard workers, like women and youth, in the workforce. Secondly, rigid labour laws create incentives for law evasion or informality, as seen in the case of dwarf companies.

Digitisation of compliances

One of the most pro-business changes includes the formation of common digital returns for Employees Provident Fund Organisation and Employees State Insurance Corporation, a reduction in the number of registers, a single return system to ease compliances, and a single window compliance portal called ‘Shram Suvidha Portal’, which makes compliances simpler. In New Zealand, embracing digital technology in matters of government services, administrative processes and reduction in bureaucracy has been a major factor in their rank in the Ease of Doing Business Index.

Special exemptions to MSMEs and start-ups

These categories of businesses have been granted an impetus to grow, by providing special exemptions to them in matters of self certified returns and disclosure, for the initial few years.

A recent demand to do away with ‘Angel Tax’ has been raised, which is essentially the tax levied on the difference between the issue price of the unlisted securities and their fair market value.

The reforms would also enable them to scale their innovative ventures. Here are some ways in which entrepreneurs can benefit from flexible laws:

Flexibility in working hours: The new labour codes help workers to achieve greater flexibility, making it easier for them to navigate. This can help adapt to the unique needs and requirements of the labours.
Ease of compliance: this helps them to navigate the regulatory framework. Ultimately, saving time and resources, allowing them to focus on growing their business.
Incentives for training: the new labour codes help the entrepreneurs to incentivise the training programmes. This can help develop a skilled workforce thereby increasing quality of production.
Reduced bureaucracy: the new labour code tries and seeks to reduce bureaucracy and to streamline the [process of setting up and running a business. This can allow entrepreneurs to get their ventures off the ground and scale them quickly.

Decriminalisation of non compliances

Non-compliance in the case of disclosures has been decriminalised and is now only met with monetary penalties to keep a check on enforcement.

Incentivize infant firms

These are the firms that are small when they are young but can grow to become large firms as they age and have higher productivity and higher value added in manufacturing. When incentives are provided to firms irrespective of their age, it does not push them to grow. For such firms, there would be no incentives if age were a criteria. The dwarf firms are the ones that are small and continue to remain small despite ageing, having low productivity and low value added in manufacturing. Thus, a shift from size-based incentives to age-based incentives would help in the economic growth of the country. Age-based incentives can be implemented to ensure the withdrawal of firms’ incentives after a fixed period of years, irrespective of their size. Once the small firms are aware that they would receive no benefits by continuing to remain small despite ageing, they will be pushed to grow, and this will in turn generate economic growth and employment.

Prioritise start ups

Start-ups are the face of a new India. These new emerging businesses are at the forefront of innovation. They seek to develop technologies, products and services that have the potential to change the world. These businesses are based on new age ideas to solve new problems and thus, exemptions in various labour regulations would provide them with an impetus to grow. Providing digital set ups for registration, compliance licences, benefits in taxation, refund benefits on patent filing, and easy winding up procedures, along with providing them with financial and infrastructural aid, would help change the face of the Indian economy by creating unicorn businesses.

Improvement in inspection mechanism

In some cases the introduction of provisions for web-based inspections and third-party certification for notified classes of establishments would make the process of inspection swifter and reduce instances of corruption and red tape.

Establishing a negotiating council

All the industries that have a registered trade union must set up a single negotiating union, which would be responsible for handling all the matters relating to industrial relations. Establishments with only one functioning registered trade union will recognise the trade union as a sole negotiating union of the employees, and for establishments with multiple trade unions, the union that is made up of 51% or more employees will be recognised as the sole negotiating union of the employees.

Reducing or abolishing minimum wage

This seeks to establish a laissez faire economy, wherein wages are decided as per the calibre and contract between the employer and the employee. It seeks to reduce the interference of the government in creating a welfare state and, as an alternative, suggests setting up a capitalist free market economy. It would help the businesses to pay money to the employees as per their talent and effort.

Promotion of innovation and collaboration

The government must support research and development, grants and incentives, which would help in creating an atmosphere where industries can rely on cutting edge technology and create forward thinking industries.

Providing a transparent tax system

Transparency and simplicity are two factors that develop confidence in investors, both Indian and international. We must focus on digital services, accessibility of information and clear tax guidelines to make it easier for industries to understand and comply with their obligations. This not only reduces the administrative burden but also fosters a culture of tax compliance, which indeed enhances the overall economic environment.

Providing investor friendly regulations

A country with investor friendly regulations and a strong and speedy legal framework, provides a secure environment for investors and businesses. Additionally, the protection of minority investors is a very important aspect of the legal system, along with ensuring fair treatment and transparency. This goes a long way in instilling confidence in investors and encouraging them to invest in the nation.

Dialogue with the trade unions

Labour law reforms, especially those related to the simplification of business practices, have met with serious opposition from the trade unions, which consider these reforms an attempt to dilute their rights. The policymakers must find ways to make the reforms more palatable, which could include higher compensation and notice periods, in exchange for some flexibility in the labour laws approach, which is acceptable to all the parties- the employees, trade unions and employers. Small tweaks to the social security system and administration for employee welfare, increasing state freedom for business friendly regulations and engaging trade unions can build momentum for reforming India’s working sector.

Providing education and skill training to workers to improve their mobility

The perspective of viewing workers as the weaker dependent class has to be changed in order to create a healthier power balance. An employee re-skill fund will provide laid off employees with opportunities to upskill themselves. These would include crediting the accounts of such laid off employees with wages worth 15 days of work. This would provide the employees with better prospects for future employment with increased pay and better opportunities.

Simplified business registrations

A nation where entrepreneurs can register new businesses in an easy, efficient and, if possible, digital manner, would help cut red tape and use technology to the fullest. This would provide a conducive and friendly environment for investors and businesses, both Indian and international.

How will reforms aimed at introducing flexibility benefit companies

Increase in foreign investment

As the labour market of a host country becomes more flexible, foreign direct investment, as per various studies, may increase by as much as 18%. This effect would be particularly strong in transition economies and more significant for investments in the service sector. Nations with strict regulations and low quality institutions have been unable to take advantage of the full advantages offered by trade, liberalisation and globalisation. Where a nation offers an easy dispute resolution mechanism, flexible labour markets, easy licences, permits and authorisations, effective laws mandating the performance of contracts, etc., it provides a lucrative opportunity for foreign investors to invest in such a country. India aims to become a manufacturing hub with programmes like Start Up India, Make in India etc. To get maximum benefits out of these programmes, they must be accompanied with liberalisation in the labour law arena.

Short term labourers or contract labourers

One of the most difficult tasks after employing workers is termination. Numerous safeguards from termination have been provided to the workers. If the companies are allowed to employ short-term contract labourers or contract labourers in response to the fluctuations and changes occurring in the market economy, it would help them to cope with such fluctuations without having to increase their permanent workforce.

Easy adaptation to changing business needs

We indeed are functioning in an era of volatility, wherein globalised economies are more interdependent than ever before. Happenings in one part of the world impact economies all over. Flexible labour laws in such circumstances would enable the companies to modify their modus operandi, to adapt to dynamic business conditions. They can modify the size and nature of their workforce, working hours and terms of employment as per the changes in economic conditions and fluctuations in market demand.

Easy negotiation of wages

Where there is no minimum wage set, it would help the businesses to pay each employee according to his talent and calibre. The wages would be determined as per the contract between the employer and the employees, not by legislation. The companies would be free to pay more to employees who bring in more output and less to employees who do not reach the desired level of output.

Easy termination of employment

The company is reluctant to expand an employee’s additional workforce, as the termination process often creates problems for businesses due to the protectionist laws provided in our country. If easy termination procedures are provided, the companies would be more active in employing additional workers when the market conditions are suitable. This would help in expansion of businesses and the creation of jobs without the fear of facing litigation for unfair termination, etc, by the workers.

Increase in the competitiveness of the company

Where the employment period and conditions, including wages, are determined not by legislation but by a contract between the employer and the employee, depending on the output produced by the employee, it would provide an impetus for the employees to work harder and create a positive competition within the company. This would indeed help the company grow and consequently, the national economy would grow. Further, inter-company competition would benefit both the businesses and the consumers.

Promote innovation and growth

When companies are no longer restricted by labour laws, they will have the resources to explore new business, outlooks, and innovations. They would be braver to experiment with different work cultures, which may include remote working or working within flexible schedules. This practice would help companies engage skilled workers, foster creativity and boost employee morale, which would result in growth in the business’s performance. There are multiple links between labour, market institutions and growth. In the investment and entrepreneurship study by Hallward-Driemeier and Stewart (2004), it was found that a reduction in regulations improves the investment climate and, in turn, leads to increased productivity, higher investments and job creation, particularly for smaller firms. Strict and overambitious labour regulations often raise the labour cost and cause the firm to hire fewer workers and depend more on newer technologies.

Increase in efficiency

It is a proven fact that in business, efficiency is the only currency that works. Every consumer seeks to opt for the cheapest or most productive option. Companies with the most efficient ecosystem often end up being the preferred choice. Flexibility in labour laws would allow the establishments to efficiently allocate their funds, fix work schedules with flexible shifts for optimal workforce management, and employ part-time or temporary employees as the demand arises. This freedom to modify the overall workings of the company would minimise inefficiency and optimise labour costs. In Sweden, labour market flexibility was seen to be linked with higher labour productivity.

Impetus for business expansion

When the labour laws are aimed at promoting industries and businesses and are flexible in their approach, it would push the businesses to further expand their operations all over the country and in various different segments. Often, regulations and restrictions on entering different states or different avenues inhibit business expansion. Flexibility in labour laws in employment terms, would allow the country to scale the workforce when the specific need for expansion arises, thus allowing the companies to adapt to the local labour market conditions, and legal requirements. A 2004 European Commission study pointed out that reforms in the labour market have both direct and indirect productivity impacts. Directly, it decreases the cost of doing business and re-removal of barriers to entering new avenues, and indirectly, it leads to higher levels of allocative, productive, and dynamic efficiency.

Promote creation of jobs

While businesses seek the greatest profit, they do recognise the role that skilled and talented employees play in the success of the business. When the labour laws are flexible in their approach, it would be easier for companies to employ more members into the workforce and expand their business. If the company is able to hire additional workers who may be temporary without having to face any legal difficulties, it would undoubtedly have an effect on employment rates and provide an impetus to economic growth. It has been found that over-ambitious labour regulations tend to raise the labour cost, which consequently curbs the incentives for firms to hire additional workers and they rather choose to adopt newer technologies, which reduces the allocation of labour to productive jobs in the formal economy.

Reduced unemployment

A restrictive labour law could create a situation wherein a company, while considering hiring a full-time employee, may be concerned that once he is hired, it would be difficult to fire him when such circumstances arise, and of the compensation which might be claimed by the worker, claiming unfair treatment, etc. Such a company would end up hiring a short-term contract employee. This system may benefit full-time employees who have secure positions, but would harm prospective permanent employees, who may be hired on a temporary basis, making their life unstable.

Improve employer-employee relationship

Marx argues that the first historical act is the production of material life. Production is a social enterprise since it requires cooperation, the modern day enterprises also work on the same principle of cooperation. Businesses that are built on trust, loyalty, and cooperation between employers and workers are the ones that grow. When the labour laws provide employers with the independence to hire and fire as per the requirements of the company, it could help create a more productive and positive work environment with improved job satisfaction and loyalty. The employer must keep an employee in service, not because he has to, but because that employee actually adds value to the company. Further, when a company provides the flexibility to accommodate individual employee needs, such as work-life balance, caregiving responsibility, or time constraints, a more cooperative environment is created, which would result in improved employee turnover and higher engagement and productivity.

How will reforms aimed at introducing flexibility help the employees

Flexible working hours Flexible working hours are allowed under the new labour codes, enabling companies to offer arrangements such as flexible work hours, compressed work weeks, and remote work options. These initiatives contribute to employee well-being.

Paid Time off: Paid time off policies include generous vacation, sick leave, and personal days. These provisions allow employees to take time off for personal well-being and proper rest.

Wellness program: The company aims to provide wellness programs such as a stress management programme, fitness classes and counselling services that can help employees maintain their mental and physical health well-being. This holistic approach to the well-being of employees can boost both morale and productivity.

Child care assistance: Child care assistance, such as onsite facilities or subsidies for external child care services, significantly eases the burden on working parents.

Proper mentorship, guidance and training: Companies providing mentorship and training opportunities and programs can help employees develop their skills and advance their careers. This investment in employee growth demonstrates the company’s commitment to their long-term success and work-life balance.

TCS (Tata Consultancy Services), a leading company in India, has implemented several initiatives to promote work-life balance among its employees. Some of their key programs include:

Flexible work hours for employees as well as available facilities for work from home that is flexible work.
Generous leave policies, including paid time off for new parents.
Onsite child care assistance and facilities.
Wellness programs such as yoga classes and stress management programs and workshops.
Career development opportunities through training and mentorship.

As a result of these initiatives, TCS has seen improved employee satisfaction, reduced attrition rates and enhanced productivity. The company’s commitment to work-life balance has also contributed to its reputation as an employer of choice in the industry.

Certain data and studies support the impact of TCS:

Improved employee satisfaction: A study by Swapnil Deoghade and Dr. Sapna Ghutke found that TCS employees reported a high level of satisfaction with their work-life balance, thereby citing the company’s flexible work hours and generous leave policies as key factors..
Reduced attrition rates: TCS has reported a certain reduction in attrition rates, which can be attributed to its focus on work-life balance and employee satisfaction. For example: in the fiscal year 2010-13, the rate of attrition was 10.6%. The attrition rate is the rate that defines the pace of employee turnover and is also known as a metric rate, it is generally expressed in terms of percentage. This rate helps the HR teams to evaluate retention efforts and understand organisational dynamics.

Rajasthan – a case study on flexible labour laws

The Economic Survey of 2018-2019 discussed studies that found that labour intensive industries in states that have moved towards more flexible labour markets, for example, Rajasthan or Uttar Pradesh, are 25.4% more productive than their counterparts, which continue to remain rigid in their labour laws. The state of Rajasthan implemented labour reforms in 2014, which include the following-

Industrial Disputes Act, 1947

In order to form any union, membership increased from 15% to 30% of the total workforce.
There was no requirement of permission by the government for establishments employing up to 300 workers (earlier, 100 workers was the limit) for retrenchment, layoffs, or shutting down units.
Any objection related to discharge or termination must be raised by the worker within three years. No limitation period was set earlier.

Factories Act, 1948

The applicability threshold limit was increased from 10 or more workers to 20 or more workers in industries using power.
The applicability threshold limit increased from 20 or more workers to 40 or more workers in industries not using power.
Complaints for violation of the Act against the employer cannot be taken into cognisance by the court without prior state government permission.

The Contract Labour (Regulation and Abolition) Act, 1970

Under this Act, the applicability threshold limit increased from 20 or more workers to 50 or more workers, on contract.

Apprentices Act, 1961

This Act fixed the number of apprentice related seats in industries.
Stipend for apprentices would not be less than the minimum wage
To encourage upskilling, the government would bear a part of the cost of apprentice training.

Results

The labour reforms in Rajasthan had severe notable impacts on the state’s industrial landscape. It led to increased investment and industrial growth. There were relaxing labour laws in Rajasthan, thereby attracting more investors. The greater operational flexibility in the labour law and the increased employment opportunities in Rajasthan have increased the ability to adjust workforce size in accordance with the market conditions. On an average, it led to the increase in the production gains, which has significantly contributed towards the ability of the forms to optimise their workforce and operations without hampering the restrictive regulations.

Before 2014, the average number of firms with hundred employees or more was the same in Rajasthan and the rest of India. However, after the change in the law, we have seen a significant increase in firms employing more than 100 workers in Rajasthan, which is substantially above the national average. After the reforms, the percentage of factories employing more than 100 workers in Rajasthan jumped from 3.6% to 9.33%, while in the rest of the nation it increased from 4.56% to 5.52%. The total output jumped from 3.1% to 12% in rajasthan as compared to the increase from 4.8% to 5.7% in the rest of India. The number of workers per factory in rajasthan jumped from -8.8% to 4.17%, while in the rest of the country is increased from 2.1% to 2.6%. The CAGR (Compound Annual Growth Rate) for Rajasthan has increased manifold, as compared to the rest of India. Clearly, each of these outcomes was positively impacted by the amendments in labour laws and the numbers are sufficient to acknowledge the success story of Rajasthan.

European perspective

The European Commission’s flexibility approach aims to enhance flexibility for both workers and employers, enabling workers to adjust their working lives and hours to their preferences while providing a conducive environment for business growth.

The labour market in Europe faces severe challenges, including globalisation, technological advancement, demographic ships and economic fluctuations. The labour laws in accordance with these challenges can allow Swift to adapt to various changes while ensuring that workers will secure employment and career prospects.

The approach behind implementing this flexibility in Europe was to settle reliable contractual arrangements that involved comprehensive learning strategies to promote the consistency in skill development and education among the employees and the workers. It has also been effective in the implementation of active labour market policies such as assistance in improving employment or self-employment prospects. These policies help the unemployed workers to find jobs and fill the gap. This approach has helped in developing the sicilia security system for the workers during periods of unemployment, illness and career transition. This led to an active working life, thereby enhancing social security, job security and greater opportunities for all.

In the retail sector, the Union of Shop, Distributive, and Allied Workers (USDAW) has facilitated collective bargaining, resulting in improved minimum wages, working conditions, and benefits for its members.

The flexibility in the labour laws denotes a notable framework while relating it to the companies as well as the workers. The concept of ‘kurzarbeit’ in Germany, also known as short-term work, is a notable and landmark example of flexibility in labour laws. This policy allows companies to reduce the working hours of the workers and employees during economic downturns, rather than laying them off, thereby preserving jobs and maintaining economic and market stability.

Case laws

In the UK, the combination of legal principles established through indirect sex discrimination case law with the procedural emphasis of the Right to Request Flexible Working has strengthened women’s ability to successfully request flexible working in court, in part because employers are aware that this is the prevailing interpretation of the law. Court cases have successfully challenged employers’ blanket refusals to consider alternative work arrangements or seriously consider the feasibility of a flexible working request. In the UK, flexible working disputes annually have comprised at most 0.2% of all tribunal claims since 2003, helping to clarify the boundaries of flexible working rights and sending strong signals to employers about their obligations.

The UK’s right to request flexible working hours has been established in various court cases that have clarified the legal principles and employer obligations.

Zerehannes vs. Asda Stores Ltd. (2018)

This case signifies the importance of considering the alternative work arrangements and the feasible working request. The court ruled that an employer’s blanket refusal to consider flexible working requests was discriminatory and in violation of the right to request flexible working hours.

Facts

Mr. Zerehannes, the claimant applied for the amendment for his claim against asda to add a complaint under section 80H of the Employment Rights Act 1996 regarding his appeal for flexible working hours. The amendment application was refused by the Employment Judge, Camp, on 28 January the date of the preliminary hearing in Nottingham. The judge also made a deposit order against Mr. Zerehannes in this case, which was separate from the larger equal pay claims brought by predominantly female asda retail employees of the company. The written reason provided details on the judge’s rationale for refusing the amendment and imposing the deposit order..

Issues

Whether la Zerehannes faced discrimination and unfair treatment by her employer, Asda. the case examined these specifically:

The allegations of the discriminatory treatment under the Equality Act 2010.
Claims of unfair dismissal under the Employment Rights Act 1996.

Judgement

The tribunal held in favour of Zerehannes, determining that she was subjected to unfair dismissal and discrimination of Asda. The applicant was awarded compensation for these violations.

Thomas vs. King’s House School Trust (Richmond) Ltd (2019)

This case highlights the need for employers to engage in meaningful considerations and consultation with employees regarding flexible working requests for the employer’s business.

Facts

The facts of the case involved an employment dispute where Mr. Thomas, a teacher, brought acclaim against his employer, King House School Trust Ltd. Thomas contended that he had been unfairly dismissed and was discriminated against on the grounds of disability. The facts which evolve now are whether the school had made reasonable modifications to facilitate his disability and if the discharge process is handled in a fair and lawful manner.

Issues

Whether the school discriminated against Mr. Thomas based on his disability’
Whether reasonable adjustments were made to facilitate Mr. Thomas disability.
Whether Mr. Thomas was unfairly dismissed from the school.

Judgement

It was held by the tribunal in favour of Mr. Thomas, finding that he has been unfairly dismissed and ill-treated against due to his disability. The school failed to make reasonable adjustments for his condition.

Dankyi vs. St Margaret’s School (2017)

This case highlights the need for employers to provide a valid reason for refusing flexible working requests. The court stated that the employee’s request was based on an incorrect assumption and was therefore invalid.

Facts

A teacher named Mr. Dankyi, was a claimant claiming that he was unfairly dismissed and subjected to the racial discrimination by the school St. Margaret’s school. The case centres around the situation which led to the discrimination and whether the school had treated him less favourably because of his race.

Issues

Whether the claimant was unfairly dismissed.
Whether Mr. Dankyi was subjected to racial discrimination by the school.

Judgement

The tribunal held in favour of Mr. Dankyi the teacher of the school, finding that he was both discriminated against and subjected to racial discrimination by the school.

These case laws illustrate how flexible labour laws can impact both workers and companies, with the potential to create more job opportunities and a conducive environment for growth, while also highlighting the need for a balanced approach that considers the interests of both parties.

The impact of flexible labour laws on gender and minority rights

Gender and minority rights are one of the most crucial rights for workers. These rights give basic rights to the workers, flexibility in labour law can assist the workers (male and female) and can also help the companies.

But, the flexibility in these kinds of laws has effective and bleak impacts on both the labourers and the company it will help them to embrace the market conditions and will give more job opportunities to the people whereas we can’t also deny the fact that it will also harm the vulnerable groups if these things are not taken seriously.

However, we can see that the New Labour Codes which provide aid to the workers are aiming to maintain a balance by accommodating flexibility while still protecting the interest of workers. Here we can look at this example which can give a clear view of these rights that, the Occupational Safety, Health and Working Conditions Code 2020 has amenities for equal opportunities and forbidding discrimination.

Flexibility can benefit workers by allowing arrangements such as casual/temporary jobs, remote work, and flexible hours.

In summary, flexibility in labour laws has both positive and negative implications for gender and minority rights. The dignity and equality of all the people who are working is very crucial, so we should conscientiously execute and provide strong safeguards so that it can create more opportunities for the people rather than causing any kind of problems for them.

Disadvantages of flexibility in labour laws

Excessive control in the hands of the employer, wherein he would be free to exercise his option of firing workers if they did not give in to his demands, which may at times be unreasonable, would lead to people living in constant fear of losing their jobs.
Arbitrary exercise of powers by the employers, which leads to exploitation of the workers. For example, there could be dangerous and dirty workplace conditions wherein workers are expected to perform for long shifts for little wages, etc.
Labour regulations can generate long-term economic gains for businesses that adopt a high productivity route to competitiveness, which means that they prevent other firms from competing against them on the basis of poor working conditions. The regulatory measures thereby channel competition away from the unacceptable treatment of workers into other sources of competitive advantage, such as technological and managerial innovation, etc.
A growing body of empirical evidence suggests that labour regulation does not necessarily lead to weaker labour market outcomes and that the cost and benefits of regulations change over time. Regulations cannot be considered a hindrance to the flexible working of labour market. It differs from country to country. In order to understand employment performance, a whole range of variables have to be considered in addition to the labour laws.
Flexibility in labour law can lead to preferentialism, with some workers getting little benefits. This can create inconsistency within the workforce. In order to mitigate this issue of preferentialism coming from the labour laws, the companies must adhere to clear guidelines for benefits of the employment terms. Along with this, regular audits and transparency in hiring and promotion process can help monitor out the compliance and prevent discrimination. Additionally, training management and HR personnels on non- discrimination and fair labour practices can further ensure that the employees receive equal opportunities and benefits.
Legal compliance becomes more complex when supervising a flexible workforce under evolving labour laws. Ensuring adherence to regulations and avoiding legal disputes becomes challenging with increased flexibility. In order to manage legal compliance with a flexible workforce, companies should invest in comprehensive compliance training and must utilise the specially established legal structure to track regulations. Along with this, it must also regularly consult the legal experts to stay updated on evolving labour laws. Also implementing robust internal policies and procedures for monitoring compliance and conducting periodic audits can help prevent legal disputes and ensure adherence to legal regulations.
Regarding work-life balance, excessive flexibility without proper regulation can blur the boundaries between work and personal life, potentially leading to burnout. In order to address the impact of excessive flexibility on work-life balance. In order to overcome this challenge of excessive flexibility of work-life balance, companies should implement clear guidelines and policies that define working hours and ensure employees have designated time off. Therefore, encouraging a culture of respecting and maintaining personal time, providing resources for mental health and promoting the idea of regular breaks can help in maintaining healthy boundaries between work and personal life.
In a lot of developing countries, only a small share of the workforce is employed in the formal sector. So, regulation, rather than the formalisation of the labour market, would constitute a key policy priority.

Conclusion

India is a labour surplus economy. Due to this, it is expected to be protective of its labour force. However, if this is the sole motive kept in mind while legislating, it would create difficulties for the operation and growth of businesses, which would in turn lead to limited job opportunities and ultimately badly affect both the businesses and the workers. However, as labour laws are to be reformed, other laws like property laws and security regulations must be strengthened through effective institutions. A study conducted by Bardhan resulted in the conclusion that the history of underdevelopment suggests that a major stumbling block to beneficial institutional change in poor countries, lies in the distributive conflicts and the asymmetries in bargaining power among social groups. Thus, labour regulations must be seen as an institution that promotes efficiency in the market by promoting greater equality and social cohesion, along with individual and collective freedom.

The new labour laws indeed seem to provide solutions for the current economic demand of India. It includes a greater number of firms and employees under its ambit and simultaneously makes the requirement of legal sanctions, lighter and simpler. The compliance costs of firms are also reduced. All these reforms would definitely boost India’s position in the Ease of Doing Business Index and increase its competitiveness in the global sphere. However, the government and businesses must remember that labour market reforms will only succeed when they are accompanied by improvements in social protection mechanisms and cushion adjustment costs for workers.

Frequently Asked Questions (FAQs)

Which country ranks the highest in the ease of doing business rankings and why?

According to the 2020 report, New Zealand retained its first position as the country with the most business friendly regulation. The success of the country is driven by a combination of factors which create a conducive environment for entrepreneurship, innovation and economic growth. The following other factors have helped the nation achieve this ranking-

Simplified business regulations, including online business registration, which cuts the red tape and embraces technology.
Efficient construction permits with clear guidelines, efficient communication and digital platforms, play a pivotal role in fast tracking this process.
Investor friendly regulations, such as the protection of minority investors, is a critical aspect of the nation’s legal system, which ensures fair treatment and transparency.

What is the ILO’s WISE Program?

The Work Improvements in Small Enterprises (WISE) Program, seeks to improve working conditions in MSEs by educating owners and managers, about the link between improved working conditions and higher productivity. The program is based on the recognition that one of the major problems with occupational health and safety, is that most workers and employers lack understanding of the importance of improving health and safety at work. WISE focuses on simple low-cost solutions to improve job quality. It relies largely upon the voluntary participation of employers and their willingness to implement higher safety standards.

What is the Make in India project?

The Make in India initiative was launched in 2014, as a part of a wider nation building programme. It seeks to transform India into a global design and manufacturing hub. It was a call to action, for India’s citizens, business leaders and potential international investors. It represented a comprehensive and unprecedented overhaul of outdated processes and policies and a changed governmental mindset, a shift from issuing authorities to business partners and a shift from minimum government to maximum governance. Through this scheme, the government intended to revive the lagging manufacturing sector and initiate the growth of the economy, along with encouraging businesses from abroad to invest in India and also set up their manufacturing units in India, by improving the country’s Ease of Doing Business Index. It focuses on 25 sectors, which include leather and footwear, aerospace and defence, new and renewable energy, medical, value, travel, and legal services, communication services, financial services etc. For the first time, the railways, defence, and insurance sector have been opened up for more FDI. The maximum limit for FDI in the defence sector through automatic route, has been raised from 49% to 74% in construction and for specified real infrastructure projects, FDI has been permitted up to the limit of 100%. Permits and licences required to start a business have also been relaxed, among other reforms.

What is the Startup India project?

Under the Startup India scheme, eligible companies can gain recognition as start-ups, by the Department for Promotion of Industry and Internal Trade, and consequently be entitled to access a host of tax benefits, easier compliances and IPR fast tracking, among other benefits. Under this scheme, it was intended to develop over 75 start-ups and support hubs in the country. The aim of this project is to discard some of the restrictive policies, like licence raj, land permissions, foreign investment proposals, and environmental clearances, and is based primarily on three pillars- providing funding support and incentives to various start-ups in the country; providing industries with academia, partnership and incubation; and simplification and handholding. The Government of India, in line with the project, also launched the Pradhan Mantri Mudra Yojana, which aims to provide financial support to entrepreneurs hailing from low socio-economic backgrounds via low interest bank loans.

What are the constitutional provisions that are connected to the subject of labour laws?

Labour is a concurrent subject under the Indian Constitution, which means that it can be legislated on, both by the federal and state governments. The following articles provide a link between the Constitution and the labour laws.

Article 19(1)(c) provides that all citizens shall have a right to form associations and unions. This right extends both to the employees working in an establishment, as well as the employers.
Article 23 prohibits and makes punishable, the practice of trafficking, beggars (practice of forcing people to work without paying them for the same) and any other form of forced labour.
Article 24 prohibits the employment of children below the age of 14 in any factory, mine or hazardous employment.
Article 39 makes the state duty-bound to direct its policies towards securing for men and women equally the right to adequate means of livelihood, along with equal pay for equal work. It also provides that the state must monitor the health of the workers, along with ensuring that children of tender age are not abused and no person is forced due to economic deprivation, to enter employment unsuitable in view of their age or strength.
Article 42 directs the state to make provisions for securing just and humane conditions of work.
Article 43 directs the state to secure, by legislation or other means, a living wage, humane conditions of work, providing for a decent standard of living, and full enjoyment of social and cultural opportunities.
Article 43-A directs the state to take steps, by legislation or other means, to ensure that the workers are able to participate in the management of establishments or other industries.

How can the balance be maintained between flexibility and protecting labour laws through government policies?

Achieving a harmonious balance between flexibility and protection within labour laws requires thoughtful government policies. These regulations should simultaneously safeguard workers’ rights and foster business growth. Here are some key considerations:

Fair wages: Policies must ensure that workers receive fair compensation for their labour. This includes addressing minimum wage standards and promoting equitable pay practices.
Reasonable working hours: Striking the right balance between productivity and employee well-being involves setting limits on working hours. Policies should prevent excessive workloads while allowing companies to operate efficiently.
Social security provisions: Workers need safety nets to protect them from exploitation. Policies should establish provisions for health insurance, retirement benefits, and other forms of social security.
Adaptability for companies: Recognizing the dynamic nature of markets, policies should allow companies to adapt swiftly. Flexibility enables businesses to respond to changing demands, technological advancements, and economic shifts.
Comprehensive approach: The government’s role extends beyond protecting workers; it also encompasses supporting employers. Policies should address the needs of both parties, fostering a healthy and sustainable work environment.

References

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

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

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

AI-based fraud detection on online pharmaceutical sales

By

Vanshika Kapoor

-

July 19, 2024

This article has been written by Geetanjali Wadhwa pursuing a Training program on Using AI for Business Growth course from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Table of Contents

Introduction

In our ever-evolving digital landscape, more and more people are turning to the internet for healthcare advice, information and even to buy medicines. Especially during the COVID-19 pandemic, online pharmacies became incredibly popular due to their convenience during lockdowns.

In the Journal of Medical Internet Research, Andras Fittler Pharm D, PhD, and his colleagues An online pharmacy is an internet-based vendor (legal or illegal) that sells medicine and may operate as an internet-only site, an online branch of a “brick-and-mortar” pharmacy, or sites representing a partnership among pharmacies.”

While these online pharmacies offer convenience, they also come with risks. There is a dark side to this ease: fraudulent practices. Some websites sell fake drugs or use stolen prescriptions, putting people’s health in danger. Unlike spotting fake designer bags or counterfeit money, identifying shady online pharmacies or bogus medications is much harder. An illegal or fake online pharmacy does not follow any rules, They are not licensed, to sell pharmaceuticals and those running the pharmacy do not have permission to prescribe or distribute medications.

It is worth emphasising that the traditional methods used for fraud prevention are inadequate in the current environment because the cyber attacks being executed are highly advanced and sophisticated. This is where AI emerges as a game changer.

The problem of fraud in online pharmacies

The internet has made it easy to buy all sorts of medicines through online pharmacies, often at lower prices than traditional stores. But unfortunately, among the legitimate ones, many shady websites are posing as real pharmacies. They take advantage of the online platform to sell fake, tainted or low-quality drugs.

And to make matters worse, some medicines are sold illegally without the necessary prescriptions. Counterfeit drugs are a global issue, with their presence increasing worldwide. As per The Times of India In some countries, the percentage of counterfeit drugs is even higher, with estimates ranging from 10% to 30%. According to the National Library of Medicine, An estimated 95% of all online pharmacies operate unlawfully.

Consequence

Risk to health and wallet

Counterfeit drugs are fake copies of real, legitimate medicines. They often look identical to the real thing-the same size, shape, and colour.

Health risks Counterfeit drugs may contain:-

An incorrect amount of the active ingredient.
The wrong active ingredient, or
No active ingredients at all,
Counterfeit drugs laced with fentanyl (an opioid that is 50 times stronger than heroin) have killed numerous people
Counterfeit antibiotics:- They not only fail to deliver the much-needed treatment, but fake antibiotics can also create antibiotic resistance in a community, decreasing the effectiveness of these critical medications.

Financial risk (Identity theft)

Consumers often unknowingly purchase counterfeit drugs directly through online sources that seem like legitimate pharmacies but are, in fact, illegal.
They are lured into illegal sales as these sites offer large price discounts,
They are offered options for purchasing medications without a prescription or in large quantities.
These illegal online pharmacies put consumer’s financial information into the hands of criminals.
They do not meet the required security standards, which means consumers who shop at them may be at risk of having their information leaked, stolen, or shared by antisocial elements. Some fraudulent online pharmacies have planted malware downloads intended to steal personal information from consumers who visit them.

Rip-offs

Various illicit web-based pharmacies demand payment through PayPal or Google Pay. Countless grievances lodged by consumers with the National Consumers League’s Fraud.org attest to payments made for medications that never materialise. Attempts to trace purchases or secure refunds lead to a frustrating cycle of customer service communications or outright silence, leaving consumers empty-handed.

AI: a weapon against fraud

AI is a machine performing a task that would otherwise require human intellect. Consumer products such as Siri, Alexa, and Google are examples of AI for day-to-day tasks like depositing a cheque with a banking app or, converting speech to text. But AI goes beyond these basics, it is involved in things like facial recognition, brain-implanted computer chips, and even creating content.

AI fraud detection operates much like a vigilant detective, piecing together clues from vast amounts of data to uncover suspicious activities. It starts with gathering data from various sources, much like detectives canvassing a neighbourhood for evidence. Then, it’s about refining the data, picking out the most telling features that might indicate foul play, akin to identifying key pieces of evidence at a crime scene.

Once the data is prepped, it’s time to train the AI models, teaching them to recognise patterns of fraud just like detectives train their instincts through experience. The models are then unleashed to sift through the data, looking for anything suspicious, much like detectives scanning for anomalies.

But AI isn’t just a one-and-done deal; it’s a continuous learning process, much like detectives who keep up with evolving criminal tactics. AI systems constantly update themselves with new data, ensuring they’re always one step ahead of fraudsters.

When the AI detects something fishy, it doesn’t just keep it to itself; it raises the alarm, flagging suspicious activities for further investigation, much like a detective reporting their findings to the higher-ups.

In short, AI-powered fraud detection systems use machine learning algorithms to analyse large amounts of data, including transactional patterns and user behaviour. By establishing a baseline of normal activity and continuously monitoring for deviation, these systems can efficiently

Identify suspicious activities that are indicative of fraud.

Beyond detection- AI for proactive measures

Beyond just spotting fraud, AI also takes proactive measures. It’s like having a detective who not only solves crimes but also predicts where the next one might happen. By analysing vast amounts of data, AI can sniff out potential risks before they turn into full-blown threats, causing

significant losses or substantial harm to a platform and its users.

Technology applied for proactive measures

Enhanced data analysis

AI refines risk management by incorporating more sophisticated data analysis. Machine learning models can evaluate a broader range of data sources, including news articles and social media, to pinpoint potential risks that may not be evident through traditional methods.

Continuous learning

Predictive analytics excels in fraud detection due to its ability to learn continuously and adapt simultaneously. These systems constantly update their models with fresh data so that they stay in line with the latest fraud tactics and remain highly up-to-date and effective.

Implementing additional verification steps like two-factor verification (2FA) and blocking suspicious IP addresses bolsters security measures against fraudulent activities.

Thus, AI extends beyond detection to proactive measures such as enhanced data analysis and continuous learning. By leveraging predictive analytics, AI systems can anticipate emerging threats before they result in significant harm.

Human AI partnership- a winning combination

The symbiosis of human expertise and AI remains vital, with AI complementing human capacity rather than replacing it. Collaborative efforts between AI and humans enhance efficiency and effectiveness by mitigating fraudulent activities.

Paypal hired detectives to train the machine to identify patterns of fraudsters. They developed legitimate and fraudulent user examples so that machines could identify one from the other.

Jason Gasper, senior vice president and chief commercial officer of Orderinsite, an inventory software company for pharmacies, told PYMNTS that his company uses AI to help recognise instances of prescription fraud or abuse by examining prescription patterns, dispensing habits, and patient histories. It can flag dubious activities, enabling the pharmacy to take necessary measures to protect against misuse.

It’s important to note that while AI can greatly benefit pharmacies, human judgement and action remain crucial, he said. “AI systems should be viewed as tools to augment pharmacists rather than take their place to ensure the highest standards of patient care and safety.”

The future of AI based fraud detection

Looking ahead, it’s clear that AI and machine learning will keep evolving and play a big role in how we catch fraudsters. There’s a lot of hope that they’ll make fraud detection more accurate and faster, but at the same time, we need to deal with worries about privacy and biases that these technologies might bring. However, if we can find a way for humans and AI to team up, the future of fraud detection looks pretty bright. It means we can keep online transactions safe and trustworthy, especially in sensitive fields like pharmaceutical sales.

Moreover, by combining the strengths of human intuition with the computational power of AI, we can create a robust system that not only identifies fraudulent activities but also adapts to new threats in real-time, ensuring a constantly improving defence against cybercrime.

Conclusion

The proliferation of online pharmacies presents both opportunities and challenges in the healthcare landscape. While these platforms offer convenience and accessibility to consumers, they also open avenues of fraudulent activities, including the sale of counterfeit drugs and the compromise of sensitive personal information. Traditional methods of fraud detection have struggled to keep pace with the increasingly sophisticated tactics employed by cybercriminals. This is where artificial intelligence (AI) emerges as a vital tool in combating fraud in online pharmaceutical sales.

However, it is essential to recognise that AI should complement rather than replace human expertise. While the challenges of fraud in online pharmacies are significant, AI offers a promising solution for detecting and preventing fraudulent activities, ultimately contributing to a safer and more secure online healthcare ecosystem.

References

Fundamental rights under the Indian Constitution

By

Sneha Mahawar

-

July 19, 2024