This article is written by Aiswariya.R, a 4th-year student studying in School of Excellence in Law. This article deals with the Employee Provident Funds, 1952, its online process to get the PF amount and other benefits under this Act.

Introduction

The Employee Provident Funds, 1952 is a beneficial legislation enacted for the betterment of the future of industrial worker:

1. On his retirement.
2. For his dependents in case of death of employment.

This Act is enacted as a social security measure which falls under the ground of “retirement benefit”, the object of this Act is to inculcate, non withdrawable financial benefit, the sum is payable normally on retirement or on the death of the employee. Administration of the scheme given under this act is done by the central board, state board, and regional committee, a chief executive committee appointed and constituted by the central government.

• Central board _ Section 5A
• Executive committee – Section 5AA
• State board – Section 5B
• Regional committee

Boards under the Act

Constitution and position

Central board: Section 5

Central border – Central board is created by official gazette notification given by the Central government.

Functions

1. Section 6 and Section 6C discussions how the central board should use their fund vested on them.
2. Duty of the central board is to send an annual report to the Central government, of its work and activities.
3. The central government will submit a report to the comptroller and Auditor General of India. Comments of Central board is laid down before parliament.

Constitution of the following a person as a member:

• Chairman and a vice-chairman appointed by the central government
• The central Provident fund commissioner, ex-official
• Among Central government officials (not more than five-person)
• A representative of states (not more than 50)
• Representing the employer of the establishment (10 people)
• Representing the employee of the establishment (10 people)

Executive committee: Section 5AA

State Board: section 5 B 

The central government, after consulting with any of the states constitute the state board in the following state, as provided for in the scheme. Constitution of the state board is done by the notification in the official gazette. Central government from time to time prescribes the duties to be performed by the state board and the powers exercised by the state government. The following scheme will provide the terms condition subject to which a member of state board is appointed, time place and procedure for conducting meetings etc. Every board of trustee constituted under this section is a Body Corporate, being a body corporate, it has perpetual succession, a common seal and right to sue or get sued in its name.

Regional committee 

Until state board is constituted, the Central Government may set up Regional Committee, which is under the control of Central Government, it works under the advice of the following person:

1. Central board, when matters referred to it from time to time.
2. All the matter regarding “administration of the Scheme”, such as the progress of recovery of PF, contribution and other charges, speedy disposal of prosecution, settlement of claims and sanctions of advances.

Appointment of central fund commissioner

• The central government shall appoint Central provident fund commissioner, deputy provident commissioner and regional provident fund commissioner by discharging his duty they will assist central provident fund commissioner. 
• Chief executive officer is appointed by the central provident fund commissioner. 
• Central Board will appoint other officers, employees for the efficient administration of various schemes.

EPF Features

The employer is under a statutory obligation to deduct a specified percentage of the contribution from the employee’s salary for provident fund. The employer should also contribute such percentage for provident fund. An employee who gets more than 15,000 is eligible for getting the provident fund.

This Act contains nearly 20 sections and four schedules. Section 7E, F, G, H, M, N is omitted, section 20 is repealed.

Applicability of the Act – section 1 of this Act deals with the application of the Act. This is applicable to “every factory engaged in any industry specified in schedule I”. 

1. Every establishment in which 20 or more are employed. 
2. Any establishment notified by the central government. 
3. Any class of such establishment employing 20 or more. This Act is applicable to home workers held in the case Mangalore Gandhi Beedi workers V. U.O.I and P.M.Patel V. U.O.I. 
4. This Act is applied when the establishment satisfies the two tests, namely:

• Whether there is an establishment is a ‘factory’?
• Whether 20 or more person is employed which is held in the case Andhra University V. Regional Provident Fund Commissioner.

Some workers will not come under this Act. They are Casual, or temporary workers can’t be considered as employee held in the case Bikar cold storage co. Ltd. V. Regional PF Commissioner.

Non-applicability of the Act

The Act does not apply to the following things. Any establishment registered under the co-operative society Act, 1912. Any state-related co-operative society employed less than 50 people and working without the aid of power. From the date on which the establishment is set up, where the establishment as:

• Only 50 or more persons, after the expiry of 3 years.
• Only 20 or more, but less than 50 people before the expiry of 5 years, which is held in the case V.K. Bhatt V. A.C.B & T. Mfg. Co.

Central Government also has the power to exempt any class of establishment, on such condition mentioned in the notification:

• On the ground of financial position.
• Other circumstances of the case which is held in the case Mohammed Ali V. U.O.I.

Eligibility For getting EPF- Any person is eligible, who is employed:

• For work of the establishment.
• Through contractor.
• Connection with work of establishment is eligible for the benefit of the Act.

This Act was constitutionally challenged on the ground that it is:

• Discriminative in nature.
• Article 14 is violated because it is applied only to a particular class of industry, but the Supreme Court said that it doesn’t violate article 14, it is certain, classification of a certain class of industry falls in reasonable classification which is valid.

Schemes under EPF

Employees provident fund scheme 1952

Section 5 gives wholly unrestricted unguided direction to the central government to frame a scheme, and it appears on the other hand that the Act is full of carefully laid down principles to guide the central government which is held in the case R.P.F. Commr. V. L.R.F Works, A.I.R 1962 Punj. 507

When they say that this scheme has retrospective effect, the employer cannot be asked to pay the employees contribution for the period antecedent to the notification applying the scheme because he has no right to deduct the same for the future wages payable to the employee. The payment of employee contribution by the employer with the corresponding right to deduct the same from the wages of the employees could be only for the current period during which the employer also has to pay his contribution, which is held in the case District exhibitors Assn.,Muzaffarnagar & others V. Union of India (1991) II LLJ 115 (SC).

They were re-employment by the petitioner on a temporary basis. It was held that the employer cannot be asked to pay a contribution in respect of re-employed employees on a temporary basis which is held in the case Bombay printers LTD. & Others V. Union of India and others (1992)I LLJ 816 (BOM).

The fund shall be administered by the central board constituted under section 5A of the Act. The scheme shall take effect either prospectively or retrospectively.

Employees deposit linked insurance scheme, 1976

The scheme Established the purpose of providing life insurance benefits to the employees. The benefit under the scheme is to provide the incentive to the members to save more in the Provident fund account. The benefit under this scheme is linked to the amount of accumulation in the Provident fund account of the member. All the members of the employee’s Provident Fund Scheme are covered as members of the employee’s deposit linked insurance scheme also.

Employee’s family pension scheme, 1995

For the benefit of providing family pension and life insurance benefit. Following benefit package is:

• Pension for life to the member, on retirement and invalidation
• To the member of the family upon the death of the members.
• Facility for capital return ( corpus accretion) on an option formula basis
• Commutation if pension up to 1/3 Rd of pension amount.
• Retention of membership of the scheme till attaining the age of 68 

Retirement pension under the new scheme will be payable on fulfilling minimum 10 years eligible service and on attaining the age of 58 years.

EPF Form

Form 20 EPF settlements in case of employee’s death

This form is submitted by the beneficiary if the employee is departed, to the benefit of EPF, EPS and EDLI. The amount is paid directly to the beneficiary account, or they will send through money order.

Form 31 Withdrawal of EPF

This form is submitted for partial withdrawals, used for purposes of house renovation, availing loans, for education, medical treatment etc. eligible criteria will vary depending on the purpose of withdrawal.

Form 10C EPS withdrawal

 This form is used to claim the withdrawal benefit:

• Before completing 10 years of service.
• Has attained the age of 58 years but not completed 10 years of service.

This form is also used by the family member of the employee in the following circumstances like:

• Employee departed (after attaining the age of 58 years but has not completed 10 years of service).
• An employee who is above 50 years old but less than 58 years, who don’t wish to opt for a reduced pension can also use Form 10C.

Form 5 Registration form for new employees for EPS and EPF

This form is used by employers for enrolling new employees for this scheme. The new employee will give his personal details. This form helps the EPFO to register individuals who are joining the first time for this scheme. The form should be submitted by the employer before the 15th of every month, the official website of the EPFO provides the form where we can download.

Form 5(IF) Employees’ Deposit Linked Insurance (EDLI) scheme claim form

An employee who is contributing to the EPF scheme is already eligible for the employee linked insurance scheme. In case an employee is departed, this form helps the beneficiary to get the benefit. By submitting this form, the beneficiary is eligible to get insurance benefit of rs.4.5 lakhs and bonus benefit of rs.1.5 lakh (maximum benefit of Rs. 6 Lakh).

Form 10D to apply for a pension after retirement

This form is used for withdrawal of pension on a monthly basis after retirement.

Form 11 Automatic transfer of EPF

The employee must fill this form while joining a new company. This is a self-declaration regarding the transfer of EPF, details regarding last EPF account must be filled in this form.

Form 14 LIC Policy

This form is submitted to pay the premium amount for the LIC policy; this form should be submitted to EPF Commissioner after getting an attestation from the employer.

Form 15 G to save Tax Deducted at Source (TDS) for any interest that is generated from EPF

This form is submitted to use to online withdrawal of EPF amount; this form is used to withdraw the EPF amount (above 50,000) before completing 5 years of service. Senior citizens must submit 15H for this facility.

Form 19 Settlement of EPF

This form is submitted by the member who is not having UAN number after 2014.

Form 2 Nominations for the EPF and Employees’ Pension Scheme (EPS)

The employee who is under the scheme shall submit this Form 2 for nomination. The nominated person will get the EPF fund amount if the employee (EPF member) is departed.

UAN- Universal Account Number

Universal account number (UAN) is number given to an employee by the Ministry of Employment and Labour under the government of India, who is maintaining PF account. It used to know information or track information done by his employer regarding his provided fund (PF). When an employee joined in the new organisation, he was assigned with new PF account, after UAN came into existence, the member of the assemble (employee) all his PF account associated with multiple Ids of difference organization at one place. So through UAN, difficulties faced by the employee when he/she joins the new organization is overcome, with UAN they can track the activities if there are any payment issues.

Uses of UAN 

• It is a unique number given to an employee, which is independent of employers.
• UAN is used to link all the PF account when the employee is switching his company.
• An employer can authenticate his employee by verifying this number and KYC documents.
• EPF passbook can be verified by sending SMS EPFOHO UAN ENG TO 7738299899 from the mobile number which is registered under employee provident fund organization.
• An employee can check his deposit done by his employer through online using UAN number, and you can also get a monthly update regarding your deposit done by the employer.

Transparency Through UAN

• Through UAN employee can check the employer is depositing his PF amount periodically, by registering on EPF member Portal using his UAN.
• The employee would be able to find out whether his employer is deducted or hold back his PF.

EPF Calculation and Example

Contribution for EPF is two parts, one is by the employee, and the other is by the employer.

Contribution by the employee is, including basic wage and dearness allowance is -12%.

Contribution on the part of the employer is-

• 8.33% (for Employees Pension Scheme Account of Employee)
• 3.67 % (for Employee Provident Fund Account of Employee)
• 0.50% ( for Employees Deposit Linked Insurance Account of Employee) 
• 0.50% ( is Employer has to pay an additional charge for an administrative account- minimum 500 rupees and if there is no contribution by the employer that month, an employer must pay rupees 75)
• The interest rate for every month is 8.65%, which may differ every year (interest rate is calculated every month, but it is deposited in the account at the end of the financial year)

Example

For example, the employee is getting a basic salary and dearness allowances at rupees 15, 000.

Employee’s contribution to EPF is 12% of 15,000 that is 1,800. 

Employer’s contribution to EPF is 8.33 % of 15,000 that is 1,250.

• Employers contribution for EPF is subtracted from employees contribution that is (1800-1250=550)
• Total EPF contribution every month is 1800+550=2,350
• Interest for every month is 8.65%/12= 0.7083% (4,700)

Online EPF Submission

https://www.epfindia.gov.in/site_en/For_Employees.php

Online claim process reduces the time from 20 days to 10 days, follow the below-given steps for EPF online submission.

1. Activate UAN.
2. Make sure mobile no. used to activate the UAN, is in use.
3. By seeding your adhaar details, e-KYC take place through a onetime password- Aadhaar authority will send.
4. Enter your bank account details, where the claim amount will appear.
5. You should enter (PAN) permanent account number if you’re not an EPFO member for at least 5 years.

EPFO Claim status

EPF claim status can be checked through online or offline, 

The status of withdrawal/transfer claim submitted.

Online- Member can check the online claim status by visiting the UAN portal or through visiting the official website of EPFO.

Offline- Any of the PF office by accessing the EPFO website can track the status of the claim made.

Conclusion

Employees Provident Fund Scheme,1952 came to India through Para 83 of the government of India notification in 2008, October 1. Employee Pension Scheme.1995 was created by a special provision in respect of international workers as mentioned in para 43-A. After 2014 it became easily accessible through EPFO website portal. This Act is created mainly for the purpose of encouraging saving during the period of employment, where they use it in their old age, sickness or for any emergency purposes. 

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 skill.

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In the CLAT exam usually, the basic social welfare legislations & rights for the different segments of society become sensitive area from which questions may be asked which may include the right to education guaranteed by the government under article 21A, Legal Aid and upliftment of women enshrined in the Directive Principles of State Policy of the Constitution.

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Right to Education

“Prejudices, it is well known, are most difficult to eradicate from the heart whose soil has never been loosened or fertilized by education; they grow there, firm as weeds among rocks.” 
-Charlotte Bronte

India, with all its diverse cultures, traditions as well as its rightful share of superstitions happens to be a veritable bedlam of prejudices. When we seek to be a developed nation by 2020, spreading literacy to all its citizens comes as a pre-condition to it. For both these ends, i.e. to remove the prevailing prejudices and to be on the highway to becoming a developed nation, a fundamental right to education for children is the only way forward. 

In order to understand the importance of the said right, we need to look into its history. The International Bureau of Education was established in Geneva, in 1924 and was transformed into an inter-governmental organisation in 1929 as an international co-coordinating centre for institutions concerned with education.

A broader approach was chosen with the establishment of UNESCO in 1945. The preamble of the Universal Declaration of Human Rights, adopted on 10th December, 1998, states that: every individual and organ of the society…, shall strive by teaching and education to promote respect for these rights and freedoms…”

Article 26 (1) of UDHR proclaims that: Everyone has a right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.”

Article 26 (2) states that Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms; It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the United Nations for maintenance of peace. The right to education has also been recognized by the International covenant on Economic, Social and Cultural Rights.

The Founding Fathers of the nation recognized the importance and significance of right to education, and therefore made it a constitutional goal, and placed it under chapter IV Directive Principle of State Policy of the Constitution of India. Article 45 of the Constitution requires state to make provisions within 10 years for free and compulsory education for all children until they complete the age of 14 years.

Further Article 46 declares that the state shall promote with special care the educational and economic interests of the weaker section of the people. It should be noted that the right to education has been given much importance as the makers of our constitution recognised it as one of the basic necessities for the democracy and that if the people were to be denied of that right, then democracy itself would be paralyzed.

Though it was categorically stated in the constitution that the state shall ensure that children receive free and compulsory education from the state, yet nothing substantial was ever done in this regard.

 Thankfully, the Judiciary showed keen interest in providing free and compulsory education to all the children below the age of fourteen years.

In case of Mohini Jain V State of Karnataka(1992), the Supreme Court held that right to education is a fundamental right under Article 21 of the Constitution. The right to education springs from right to life itself. The right to life under Article 21 and the dignity of the individual cannot fully be appreciated without the enjoyment of right to education. The court observed that the dignity of the individual cannot be assured unless the right to life is accompanied by the right to education.

In the case of Unnikrishnan vs. State of Andhra Pradesh (1993), the Supreme Court held that, the right to education is implicit in the right to life and personal liberty guaranteed by Article 21 and must be interpreted in the light of the Directive Principle of State Policy contained in Articles 41, 45 and 46. 

The Apex Court, however, limited the State obligation to provide educational facilities as follows. 
(i) Every Citizen of this Country has a right to free education until he completes the age of fourteen;

(ii) Beyond that stage, his right to education is subject to the limits of the economic capacity of the state.

The Government of India by Constitutional (86th Amendment Act) Act, 2002 added a new Article 21A which provides that “the state shall provide free and compulsory education to all children of the age of 6 to 14 years as the state may, by law determine.”

Furthermore, Article 51–A(k) was also added which imposes a ‘fundamental duty’ on parents to provide educational opportunities to their children in the age group of six to fourteen years.

Through this effort, the children of India gained the Fundamental Right to Education, first through Judgement made law and then through a Constitutional amendment. Unfortunately the introduction of Article 21–A watered down the Judgement of the Supreme Court in the Unnikrishnan Case.

A Right which was available to all children up to the age of 14 years was reduced to a right for children in the age group of 6 to 14 only through the restrictive language of the Constitutional amendment. Even more critical to the future of this right is the wording of Article 21A which finally leaves it to the state to provide ‘in such manner as the state may, by law, determine’.

By wording the provision in such a manner, education of the children has been left at the whims of the state governments. Moreover, it does not speak about the millions of children left out, belonging to the age group of 0-5 years. Another important feature which needs to be noticed is that the Constitution only ensures that the state shall provide primary education to the children up to the age of 14 years, and the secondary and higher education is contingent and conditional upon the economic capacity of the state.

The right to education will have any meaningful ramifications only if it percolates through all levels of education and reaches all sections of the population. 

For better execution of the above mentioned goals, The Right of Children to Free and Compulsory Education bill, 2009 was passed.

The salient features of the bill include:

• Free and compulsory education to all children of India in the age group of six to 14 
• No child shall be held back, expelled, or required to pass a board examination until completion of elementary education 
• A child who completes elementary education (up to class 8) shall be awarded a certificate
• Calls for a fixed student-teacher ratio
• Mandatory 25% reservation for economically disadvantaged communities in admission to Class One in all private schools
• Mandates improvement in quality of education
• School teachers to acquire professional degree within five years or else will lose job
• School infrastructure to be improved in three years, else recognition cancelled
• Financial burden will be shared between state and central government

There might be certain drawbacks in this fundamental right, but it definitely is one positive step towards achieving the cherished goal of the founding fathers of the constitution, that of upholding the institution of democracy on the shoulders of an educated population of India.

Legal Aid

The idea of legal aid is the providing of free legal services to the poor who do not have enough resources to procure the services of a lawyer for varied purposes. The concept has its origin in France where a movement was kick started in 1851 to help the deprived class with legal services.

In India, the concept of legal aid is embodied in the Constitution under Article 39A. The concept of Legal Aid was institutionalized in 1987 by introducing the Legal Services Authorities Act which gave a statutory base to the legal aid activities in the country. The Act envisages a network of institutions under the supervision of the apex body called National Legal Services Authority at state and district levels.

The National Legal Services Authority or NALSA consists of the Chief Justice of India who shall be the Patron in Chief, a serving or retired Judge of the Supreme Court who will be the Executive Chairman (he will be nominated by the President of India) and any number of members with such qualifications as prescribed by the government in consultation with the Chief Justice of India.

The state legal service authority will be headed by the Chief Justice of the High Courts and a serving or retired judge of the High Court will act as the Executive Chairman. NALSA first came into being in 1995 and Dr. A. .S Anand became the first patron in chief in 1998. 

Women & Law

The recent Women’s Reservation Bill is definitely a milestone in the long journey of the women’s movement to gain legal rights in the Indian context, but it came about only after 14 years of languishing through the corridors of power, marked by high drama on all its outings in the Parliament.

Now, finally, women have a 33% reservation in the Parliament as well as the State Legislative Assemblies. As per article 368 of the Constitution; which lays down the procedure for the amendment of the Constitution; next, it has to be passed by the Lok Sabha, with not less than two thirds majority of the members present and voting. For this constitutional amendment to take place,  this amendment will have to be ratified by not less than one –half of the state legislatures, then  the President will have to give his assent to bring about  the said constitutional amendment. 

The demand for legal rights has long been a foundation of the women’s movement in India. Social reformers and activists in the women’s movement have all fought for women’s right and law reform. They have actively campaigned against any form of discrimination against women in law.

Despite the legal victories over the years, the social, political and economic status of women has shown little improvement. The Committee on the status of women, appointed by the Government of India in 1971, in their report, stated some basic but vital observations, which included:

• That the equality of women was necessary as a basic condition for social, economic and political development of the nation.
• Improvement in the employment opportunities and earning power of the women.
• That society owed a special responsibility towards women due to their essential child-bearing function.
• That any policy or movement for the emancipation and development of women have to be seen in the total context of the society, it has to form a part of the total movement for the removal of inequalities and oppressive social institutions.

Recognising the existence of institutionalised inequalities in the Indian society, the constitution itself has provided certain affirmative action by the state-empowerment of the state to adopt special measures, overriding the fundamental right to equality- in favour of women and children [Article 15(3)]. 

The various legislations and decisions in cases have led to a differential treatment of women according to their specific needs. For example; women can only be questioned at their residence and in presence of their family members.

Even at the time of arrest, no handcuffs are to be used without a Judge’s permission and it can be done only in the presence of a female constable. In the police station the women have a right to ask the Magistrate for their Medical Examination if they are beaten, abused or tortured by the Police. They have a right to request immediate medical examination on arrest.

Apart from the above mentioned concessions, specific laws and provisions have been formulated pertaining to violence against women.

Domestic violence

1. The Protection of Women from Domestic Violence Act, 2005 came into force on October 26, 2006. `Domestic violence’ includes actual abuse or the threat of abuse that is physical, sexual, verbal, emotional and economic. Harassment by way of unlawful dowry demands to the woman or her relatives would also be covered under this definition. One of the most important features of the Act is the woman’s right to secure housing. The Act provides for the woman’s right to reside in the matrimonial or shared household, whether or not she has any title or rights in the household. The other relief envisaged under the Act is that of the power of the court to pass protection orders that prevent the abuser from aiding or committing an act of domestic violence or any other specified act, entering a workplace or any other place frequented by the abused, attempting to communicate with the abused, isolating any assets used by both the parties and causing violence to the abused, her relatives and others who provide her assistance from the domestic violence. The Act by itself does not punish the perpetrator of domestic violence. But if a case discloses any offences punishable under IPC, CRPC or Dowry prohibition Act, the Magistrate may then, frame appropriate charges to either try the case himself or he may commit it to Sessions Court if he may deem fit. Another significant aspect is that the Act establishes adequate machinery to ensure effective protection through the Protection officer who is charged with the responsibility of taking expeditious steps for providing timely relief and it also grants authority to the Magistrate to give sufficient relief in the form of maintenance orders, custody orders and compensation. 
2. A complaint can be filed under Section 498-A of IPC for any physical or mental harassment/ Torture / Abuse etc. n 1983, domestic violence was recognised as a specific criminal offence by the introduction of section 498-A into the Indian Penal Code. This section deals with cruelty by a husband or his family towards a married woman. Offences under Section 498-A are cognizable and non-bail able i.e., the Police Officer can arrest without a warrant and cannot grant bail themselves.  The accused Party has to obtain the Bail Order from the concerned Court.  
3. Civil Remedy: Sometimes, the women due to personal reasons may not like to go for criminal remedy i.e., registration of FIR or filing the Criminal Complaint.  In the said circumstances, there are certain Civil Remedies are available in the Case of Domestic Violence: – Women can file a suit under Order VII Rule I of the Code of Civil Procedure in the Family Court. The court might restrain the spouse or / and his relatives from ousting the woman and her children from the matrimonial house. Her personal property is also restored to her.

Rape

Rape is an offence not against the Individual but like all the crimes in the Indian Penal Code, it is a crime against the State. Once the incident occurs, it has to be reported immediately without any delay to the police station of Jurisdiction. As far as possible the complaint must be given in writing containing all relevant facts in order to avoid manipulation. 

Then the police will investigate the matter and file charge sheet. The information, i.e., the person filling the complaint is entitled to a copy of the First Information Report (FIR).

The victim must undergo medical examination conducted by a female medical officer. The trial is conducted in a court of Sessions. Like all criminal matters the victim cannot have an independent lawyer, unless she makes an application for appointing a Special Prosecutor. Any advocate with 10 years of practice can be appointed as a Special Public Prosecutor.  
 

Sexual harassment at workplace

There is no specific law regarding sexual harassment, Supreme Court has laid down guidelines in Vishakha v. State of Rajasthan (AIR 1997 Supreme Court 3011) 

Any unwelcome sexually determined behaviour – direct or implicit viz.   

• • Physical contact and advances 
  • Demand or request for sexual favours 
  • Sexually coloured remarks 
  • Showing pornography 
  • Any other unwelcomed physical, verbal or non-verbal conduct of sexual nature. 

 The judgement also laid down certain duties for the employers, which include:

• • Duty to Prevent Commission of Acts of Sexual Harassment.
  • Duty to Provide Procedure for Resolution Complaint Mechanism headed by women.  
  • Duties of the committee:  – provide counselling, medical aid, legal aid, maintain confidentially and time bound inquiry.  

The Indecent Representation of Women (Prohibition ) Act, 1986

• • The Act prohibits depiction in any manner the figure of woman, body or any part thereof, in such a way that has the effect of being indecent or derogatory to or denigrating women.  
  • It primary aim of this act is to prevent women being depicted as sex objects in the media for commercial gain or prevent the co-modification of women.  
  • It penalizes persons who sell, hire, distribute, circulate or send by posts any books, pamphlets paper; slide, firm, writings, drawings, paintings, photograph figures or representation which contains indecent representation of women in any form.

The Medical Termination of Pregnancy Act, 1971

• • A pregnancy may be terminated by a Registered Medical Practitioner.  

• • 1. where the length of the pregnancy does not exceed twelve weeks, if such medical practitioner is, or 
    2. Where the length of the pregnancy exceeds twelve weeks but does not exceed twenty weeks, if not less than two registered medical practitioners are. 

If the doctor/s is/are of the opinion that continuance of the pregnancy would involve a risk to the life of the pregnant woman or would cause grave injury to her physical or mental health. 

• • If the pregnancy is caused by rape and the anguish caused by such pregnancy is presumed to constitute a grave injury to the mental health of the pregnant woman.  
  • If the pregnancy occurs as a result of failure of family planning device, the anguish caused by such unwanted pregnancy may be presumed to constitute a grave injury to the mental health of the pregnant woman.

Law on Molestation (Section 354 IPC) 

An assault or use of criminal force with intent to outrage the modesty of any woman shall be punished with imprisonment up to two years of fine or with both.  

Law on dowry

The Dowry Prohibition Act, 1961, prohibits the request, payment or acceptance of a dowry, “as consideration for the marriage” where “dowry” is defined as a gift demanded or given as a precondition for a marriage.

Gifts given without a precondition are not considered dowry, and are legal. Asking or giving of dowry can be punished by an imprisonment of up to six months, or a fine of up to Rs. 15000 or the amount of dowry whichever is higher and imprisonment up to 5 years. It replaced several pieces of anti-dowry legislation that had been enacted by various Indian states. 

Section 304B of the Indian Penal Code was inserted by amendment in 1986. In the Section, ‘dowry death‘ is defined as the death of a woman caused by any burns or bodily injury or which does not occur under normal circumstances within seven years of her marriage. For a woman’s death to be a dowry death, it must also be shown that soon before her death she was subjected to cruelty or harassment by her husband or any relative of her husband for, or in connection with, any demand for dowry.

If this is proved, the woman’s husband or relative is required to be deemed to have caused her death. Whoever commits dowry death is required to be punished with imprisonment for a term which shall not be less than seven years but which may extend to imprisonment for life.

Law on Eve Teasing (Section 509 & 214 IPC) 

• • An intention to insult the modesty of a woman either by uttering any word or making any sound or gestures or exhibiting any object, is punished with imprisonment up to one year or with fine or both.  
  • Anyone who annoys other by doing obscene acts in public places, or sing songs or recites or utters and obscene songs, ballad or words in or near a public place shall be punished with imprisonment up to three months or with fine or with both. 

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This article is written by Barathwaz T, third semester student of School of law Christ University, Bangalore.  

Introduction

Many young students and graduates dream of owning a firm, but what stops them from pursuing this lucrative and highly responsible career path? Is it the lack of clarity over the bigger picture as to how a law firm comes into existence. This is too minuscule, a hurdle to stop you from pursuing your dream. 

This article shall give you the clarity to start your firm and registered under the Indian Partnership Act. Join me as I take you through the process of registering your law firm under the Partnership Act. Without any further delay let’s cut to the chase.

(source: https://pxhere.com/en/photo/1451265)

Firm meaning

Persons who have entered into a partnership with one another are called individually ‘Partners’ and collectively ‘A firm’ and the name under which their business is carried on is called the firm name.

When is partnership registered

The registration of a partnership is at the sole discretion of the partners. The Partnership Act does not demand registration as a mandatory process that has to be adhered to.

However, it is always advisable to register the firm under the act since it gives the firm other advantages that send an implied message of the act favouring registered firms than the unregistered. Only registered firms are considered legally existing.

The firm can be registered at any time before the existence or during the continuance of the partnership. However, if a firm wishes to enforce a legal right arising out of any legal document by filing a case, the firm shall do so only after the registration of the partnership deed is done.

Another instance where registration of the firm becomes compulsory is when the firm wishes to adopt a new form of organization such as LLP or company more easily. 

The firm is registered when the registrar of firms is satisfied with the compliance of section 58 of the partnership act. This compliance with section 58 shall be discussed in detail in the furtherance of the article. 

It is important to note that registration at the income tax department is still mandatory for both registered and unregistered firms by the registrar. 

Proof of registration

A certified copy of any entry relating to the firm in the Register of firms shall act as conclusive proof of the registration of the firm.

Any statement, notice of intimation recorded or noted in the registrar of firms shall be conclusive proof of any fact stated therein. 

Business name of the firm

• The name of the partnership firm shall not be identical or similar to existing firms in the same business.
• The name of the partnership firm may include names of the members included in the register of members.
• The name of the partnership firm shall be of consonance with the provisions of The Names and Emblems (Prevention of Improper Use) Act, 1950. 
• The name of the partnership firm may end with suffixes such as “and Company”, “and Co.” or “and Associates”.
• The firms are restricted from using words that suggest, support or patronisation of the firm.
• The name of the partnership firm may use “and/&” to differentiate principal name/centre name/surname of the accomplice of the business.
• It is mandatory to use “and/&” either in the middle of the full first names and full centre names, full surnames of the partners or before the last full first name or full centre name or full surname of the accomplices. 

Every firm must adhere to the above-mentioned rules while considering the name for the business firm. Once a name is chosen go here to check for the availability of the chosen name. Use the same website for availability of trademark and domain name for the business name.

Once the business name is selected, register for the trademark to avoid other business misleading the public with the same name, it also provides for additional legal protection.

(Source:https://bit.ly/2NqULYR)

Advantages of registration

Benefits to Partner

Any partner of the firm can sue the other partner, ex-partner or the firm when there is a dispute arising out of the partnership deed which is a contract or any right arising out of the partnership act for such purpose. On the contrary, the partner can’t exercise such powers if the firm is not registered.

If partners wish to file a suit against any third party to exercise any right arising out of a contract or any other legal instrument, it is necessary that the firm is registered and partner so doing must be a partner whose name is registered in the register of firms. The same does not apply for third parties to sue against a firm. 

However, this immunity does not apply in case of criminal liability of the partner against others. 

Partners of a registered firm can exercise their right to set-off debt against creditors.

Illustration: if x firm and a creditor y mutually owe Rs 20,000 to each other then the firm shall exercise the power of set-off their debt against y’s outstanding debt.

Benefits to creditors

A creditor shall on-demand request any partner to repay the debts of the firm. All the partners who have their names written on the deed are equally responsible to repay the debt to the third party. This allows the creditors to claim their money due to them by the firm.

Since creditors enjoy such benefits from the registered firm, the credibility of the firm increases drastically. Though both registered and unregistered firms are valid in the eyes of law, creditors prefer to advance loans to such type of firms.

Benefits to the work 

The partnership has its own advantages and disadvantages when the firm feels the disadvantages of the partnership form is greater than its advantages they tend to gravitate towards another form of organization. This process shall be undertaken only if the firm is a registered firm.

A registered firm can claim tax benefits under the Income Tax Act, which can save a lot of bucks that can be otherwise utilized for the growth of the firm.

Benefits to an incoming partner

The incoming partner shall enforce his dues against the existing partners if defaulted. If there is no registration of the firm the same shall not be enforced against the existing partners.

Again, this increases the credibility of the firm in the eyes of others. This credibility is very important to the firm as an incoming partner does not only share the profits but also contributes additional capital to the firm. A simple registration can cost a fortune. The registration of partnership cost somewhere around Rs 3000 to 6000. 

Challenges of partnership

Problems with Partners

A partnership firm involves a lot of human interaction and working together with co-partners. Human relationships are complex and create a lot of friction. This human interaction makes it more complex than any other form of business model.

Exit from a partnership becomes difficult as the transfer of partnership share of a partner is subject to the agreement of the other partners. Upon approval of the other partners, the existing partners shall transfer his shares to someone.

Liability

The unlimited liability of a partner is a challenge to this form of business as a partner has to pay off the debts of the firm even at the cost of his personal property. A high degree of liability is expected from the partner.

Raising Capital

The most frequent challenge that is faced by a partnership firm is the limitation on the capital that shall be pooled. The firm can only raise capital from a limited number of partners. If a need arises new partners have to be invited, however, it is not an easy deal as a firm’s reputation and credibility has to be high.

Protecting your stake in a Partnership

The risk of personnel profit is always there in the partnership form of business. The active partner of a firm can always make a decision on behalf of other partners. Such decisions made always has the risk of personnel profiting which may affect the interest of the firm.

Public faith

Public faith in this form of business model always has not been very warm due to the above-mentioned challenges. But it shall be overcome by taking appropriate measures.

Indian Partnership Act

Nature of Partnership

The partnership is a form of organisation where two people come together to carry out a business jointly as per their contract. 

It is placed next in the pedestal of various organizations after sole proprietorship. It evolved as an improvement to the existing sole proprietorship form of business, it enabled firms to increase the capital and increase the amount of intellectual contribution to the firm. 

Essentials of Partnership

Contractual Relationship

A partnership firm operates fundamentally on the basis of a voluntary valid contractual relationship between the partners. 

This contractual relationship shall be either oral or written, sometimes there is no need of either of the above, just an existing mutual understanding will suffice for the same.

Two people or more

The Partnership act demands a mutual agency amongst two or more individuals. There must be more than one individual who is competent to enter into a contract to start a partnership firm.

This being the minimum number of partners required to start a partnership firm, there is a cap on the maximum number of partners who can enter into a contract under the Companies Act.

• For a Banking business, the number of partners shall not exceed 10.
• For any other business other than banking the number of partners shall not exceed 20.

Anything above this limit shall be deemed to be unlawful in the eyes of the law.

Profit-sharing

The association of partners in a partnership firm is for the sharing of profit. The profit earned by a firm in the financial year shall be apportioned on a ratio that is pre-determined on the deed or in case of no such arrangement the apportionment shall be done equally. 

If unfortunately no profit is shared with a person he shall not deserve the title of an accomplice, hence he shall also not be entitled to any misfortune there off.

Mutual Agency

The partnership is a mutual agency wherein partners carry out the business or one partner acts for them all as an agent. One partner acts a principle and all others are agents. 

An act done by one partner shall attract liability from all other partners due to this degree of relationship of mutual agency.

Carrying on of a Business

Every Partnership firm must be established with the aim of running a business. This business shall be in any form such as a trade, profession or any form of occupation.

Such business undertaken shall be for the motive of profit-making. Any activity that does not involve the profit-making motive. It is not considered to be a partnership. Any activity of charitable nature shall not qualify as Partnership. 

Criteria of Partnership

The minimum number of partners that is essential to make a partnership association is 2. However, the Companies Act to make a cap as to the maximum number of partners that can be involved in a partnership firm.

• For a Banking business, the number of partners shall not exceed 10.
• For any other business other than banking the number of partners shall not exceed 20.

If this limit is exceeded the firm shall be registered as a company under the companies act if not the firm shall be deemed to be unlawful.

Advantage of Partnership over a company

• To establish a partnership firm a simple contract will do, but in the case of a company, there is a high degree of compliance procedures that are to be undergone. It needs a lot of time and effort to incorporate a company.
• Internal affairs of a firm can be resolved by simple consensus by the partners, whereas in the case of a company there is a high degree of statutory and institutional regulations that are to be complied with.
• The procedure of dissolution of the partnership in a partnership is as simple as an agreement between the partners, whereas in case of a company there is a high degree of statutory and institutional regulations that are to be complied with.
• All revenue that is earned out of a partnership will be shared only by the limited number of partners. Therefore there is a high level of incentive for the partners to work harder. In a company, this is not the case. Most of the profit earned will be retained as reserves. There is less incentive.

Importance of Partnership 

There are certain very important and essential characteristics that make partnership form of organization very important and better than other forms.

• Mutual agency of a partnership enables a partner to run the organization on behalf of other partners. Each partner is an agent and a principal to each other. Acts of one partner are binding and liable by other partners.
• Decision making and control in case of a partnership firm are that the partners shall make decisions based on mutual consent amongst the partners and decide upon. The decision making power is contained within the partners.
• Risk bearing and Profit sharing in case of a partnership is according to the predetermined ratio of apportionment. The partners share their losses also in the same way.
• Continuity of a partnership becomes impossible when there is a death, retirement, insolvency or insanity to anyone partner. If the rest of the partners wish to continue the partnership they may do so by enforcing a new agreement.

Procedure of Registering a Partnership firm

Step 1: Selection of name 

Choose a name that is very different, unique and easy to remember that will represent the business. As discussed earlier in this article the business name of the firm has to satisfy those conditions to be eligible to qualify as a proper business name. It is highly recommended to check for existing trademark applications to avoid overlapping.

The guides for a proper business name is restated again for your convenience.

• The name of the partnership firm shall not be identical or similar to existing firms in the same business.
• The name of the partnership firm may include names of the members included in the register of members.
• The name of the partnership firm shall be of consonance with the provisions of The Names and Emblems (Prevention of Improper Use) Act, 1950. 
• The name of the partnership firm may end with suffixes such as “and Company”, “and Co.” or “and Associates”.
• The firms are restricted from using words that suggest support or patronisation of the firm.
• The name of the partnership firm may use “And”/”&” to differentiate principal name/centre name/surname of the accomplice of the business.
• It is mandatory to use “and”/”&” either in the middle of the full first names and full centre names, full surnames of the partners or before the last full first name or full centre name or full surname of the accomplices.

Refer this link to know more about the common reasons for rejection of the names proposed 

Step 2: Draft the Partnership Deed

The next important part of the registration process is preparing the partnership deed. The partnership deed is a mother document of the partnership. Hence there is a need for foolproof drafting. 

Components of a basic Partnership deed is as follows.

1. Firm’s name.
2. Name, address and details of the partners.
3. Date of commencement.
4. The ratio of apportionment of profits and losses.
5. Interest on capital.
6. The proportion of capital contribution by the partners.
7. Salary payable.
8. Settlement of outstandings with executors of dead. 
9. Method to compute the goodwill.
10. The procedure of admission of partner and retirement of a partner.

In case if there is no partnership deed then the following rules will apply irrespective of the approval or disapproval by partners.

1. Equally distributed profit and loss.
2. No salary shall be provided to any partner.
3. There shall be no interest on capital paid.
4. No interest shall be attracted when a drawing is made.
5. On mutual agreement, the firm shall pay interest of 6% p.a to the partner who has an advanced loan.

The basic structure of a Partnership Deed shall be referred from this link (or) this link.

However, there are several other important clauses to make the partnership deed watertight and also to avoid litigation in the future.

• Capital Contribution clause is a covenant in the Partnership deed as to the capital contribution by the partners. It is not compulsory for all the partners to contribute initially, it is just a mutual agreement. 

The contribution need not be limited to only cash but also assets. Such contributions shall be measured so as to record the proportion of contribution.

• Duty and Responsibility clause is very essential because partners come together to form a partnership. Each partner might have a different set of goals and aspirations to achieve, to avoid any deviations in this regard the clause has to be elaborate enough to outline the duties and responsibility of every partner in every aspect.
• Profit-sharing clause outlays the proportion in which the profit shall be shared. The sole objective of any firm is profit sharing. Likewise, the loss is also apportioned in the same ratio.

The ratio shall be decided by the partners themselves. The customary practice being that the apportionment ratio is based on the capital contribution done by the partners.

• Dispute Resolution is always essential as disputes do always arise no matter how much ever the partners try to avoid it. But, the resolution method has to be decided early on in the deed. 

For petty matters, it shall be small voting, for a much bigger problem it shall be arbitration or approaching courts. It is always appreciated to go to arbitration first and the same shall be drafted in the deed.

• Result of violation is a clause which entails the consequence of the breach of the deed or any violation thereof. As a customary practice on the occurrence of any such incident, the partners will surrender their stake to someone the firm decides and not sue the firm for the same.
• Leaver clause helps the firm to retain the partners in a long term relationship with the firm. This clause gives the authority to hold back a part of capital by the firm, irrespective of the reason for which the partner has left. 
• Non- Compete clause demands the partners not to get involved in a similar type of business or to disclose any trade secrets or strategies to its competitors or for the purpose of personnel profit. It protects the proprietary interest of the firm partners.
• Admission of a new partner should be a dedicated clause. As it might harm the interest of the existing partners, a proper procedure as to how a new partner is admitted has to be written down to avoid future disputes. Introduction of a new partner means a share in the pie that is available to the existing partner. There are high chances of problems being created by this process, it is better to have this clause.

Source – http://bit.ly/2C1c79m 

Step 3: Notarize and Execute the Deed

Once the deed is ready it shall be reviewed by the partners and if necessary by experts to avoid any technical error. The final Deed shall be printed on a non-judicial stamp paper with a value of 100/- or more depending upon the value of properties that are present in the deed. The parties are thus requested to verify the state stamp duty act of the respective state in which it is registered. 

The process of E-Stamping shall be done to avoid the pain of stamping physically. Stock Holding Corporation of India Limited is the new recording agent of E-Stamping process in India.

Another way of executing the deed is by franking. It is a process which renders the document stamped and carry the same effect of the stamping. Before parties sign the deed it shall be taken to the nearest bank and requisite amount shall be paid. The bank shall stamp the deed stating that the stamp duty has been paid.

All the partners or their authorised agents have to sign the deed in the presence of the other partners and the witness. It is a customary practice that every partner retains a copy of the original signed deed for their reference. Then the signature of the witness is obtained.

The partnership act does not require the deed to be notarized but it is advisable to notarize the deed because it adds more credibility to the deed. Litigations questioning the genuineness of the deed shall be avoided just by notarizing it. It is a mere customary practice of this industry.

Go here to see a fully executed partnership deed.

(Source: Bluediamondgallery.com)

Step 4 : Application of PAN

The partnership firm is not a separate entity as a Joint Stock Company which is separate from that of the owners or shareholders. However, still, the partnership firm has to acquire a separate PAN for the purpose of compliance with the statute. 

Acquiring of PAN can be done before or after the registration of the firm. However, in certain states, it is mandatory to acquire PAN before the registration process is done. Even if the firm is not registered the PAN has to be acquired by the firm. 

Go here to apply for PAN online. One authorised partner will have to sign in the application process using a digital signature.

Step 5: Registration of the Partnership Deed

As per section 58 and Rule 3 of the Indian Partnership Act 1932, Form 1 has to be filled by the partners. Go to https://bit.ly/33Wj3ka to download the form. The form contains the following information.

1. Name of the firm. (full name)
2. Full name, address and details of the firm.
3. Duration of the firm.
4. Location of the firm.
5. Other places where the business transaction occurs.

Go here to see how a final version of form 1 looks. 

The registration is done by the registrar of Firms (ROF) in the jurisdiction of the place of operation of the business. The following documents are necessary for the registration of the firm:

1. Duly filled form 1 attached with a Rs 3 court fee stamp or Original Deed.
2. Photocopy of the duly prepared Deed on a minimum Rs 200 stamp paper.
3. Registered property documents photocopy.
4. Affidavit or NOC on Rs.10 and Rs.5 Notary stamp If the place is rented. 
5. Ownership proof of other places.
6. Address proof and PAN of the partners (self-attested version)
7. Rent or lease agreement of the business place if any.
8. Two passport size photo of each partner.
9. Identity proof of the partners. (any)
10. Utility bills of the registered office.

It is preferable that the notarized version of the above said documents shall be encouraged to avoid any disqualification by the ROF on grounds of genuinity. 

Step 6: Receiving Certificate

Once the registrar is satisfied with the documents submitted, he shall intimate any outstanding fees or stamp duty that has to be paid. The fees vary according to the area, it is better to ask the registrar in advance for any such fees that have to be paid. 

Once this process is over the certificate will be mailed to the business address. The firm does not have to wait to operate until the certificate is received as the registration itself is not compulsory.

Other registrations

Shop and Establishment Registration

The registration under Shops and Establishment Act differs from state to state and is regulated by the respective state’s Labour Department. It is applicable for all entities who do not come under the ambit of The Factories Act, 1948. This is to prevent the rights of the employees.

Any establishment commercial in nature includes shops, educational institutes, hospitals, societies, etc. The exception is given to the factories as it is governed by the Factories act.

Approach the state’s Labour department for applying for registration.

Documents Required:

1. PAN Card / Aadhar Card.
2. Registration fee as per state regulation.
3. PAN of the firm.
4. Utility Bills.
5. NOC of the owner if the place is rented.
6. Partnership Deed.
7. Other documents as per the state’s Labour Department.

Trade License

This license shall be obtained by the firm if involved in any trade-related activity to protect the interest of the public at large and to protect them from the harmful trade-related activity of the established trade. This license also ensures compliance with other laws that are applicable to the specific establishment.

The license shall be obtained from the specific municipal corporation under whose jurisdiction the entity falls under. However, the license is not compulsory in some states. Please refer to the specific state acts to ensure so is the fee. 

Documents Required:

1. PAN Card / Aadhar Card.
2. Registration fee as per state regulation.
3. PAN of the firm.
4. Utility Bills. (Premise proof)
5. NOC of the owner, if the place is rented.
6. Partnership Deed.
7. Cancelled cheque leaf of the firm.
8. Bank Statement of the firm.
9.  Site plan of the establishment.
10. Other documents as per the respective municipal jurisdiction.

Professional tax registration

For the purpose of the Professional Tax Act, partner of a firm is considered as a professional. Such a partner must obtain the registration 30 days from such an appointment. This ensures that the professional tax is deducted from the source salary of the employee.

Every employer must collect the tax from the employee or customarily it is cut at the source and the same amount shall be paid to the respective state department. After which the return of the professional tax must be filed. For which registration under Professional Tax Act is a must.

Documents Required:

1. PAN Card / Aadhar Card.
2. Salary and Attendance Register.
3. Attested PAN of the firm.
4. Partnership Deed.
5. Cancelled cheque leaf of the firm.
6. Bank Statement of the firm.
7. Other documents as per the respective States’ tax department.
8. NOC of the owner if the place is rented.

GST Registration

The new GST laws tax all entities and persons who are involved in the sale of goods or services. Whosoever hit the threshold of 20,00,000 (1000000 for North Eastern states) in turnover shall register under this law. The registration is compulsory within 30 days of hitting the threshold. If the business activity is involved in the supply of service or good inter-state it is a must to register under the law. The registration is done online but is very complicated.

Documents Required:

1. PAN Card / Aadhar Card.
2. Attested PAN of the firm.
3. Certificate of registration of the firm.
4. Bank Details.
5. The digital signature of the partners.
6. Other documents based on the type of application.

FSSAI Registration

Under the Food Safety and Standards Act, 2006 all entities who are involved in the process of “food business” is required to get registered under this act. Irrespective of the firm being for profit or not, it shall apply to both private and public entities. However, this registration is very subjective to the type of activity and the location.

If the firm reaches the threshold of 12,00,000 in the financial year, it shall obtain the FSSAI State License. Any operation in the inter-state level, Export and Import shall obtain the FSSAI Central License.

Documents Required:

1. Application Form.
2. Declaration form.
3. PAN Card / Aadhar Card.
4. Passport size photo of the partners.
5. Attested PAN of the firm.
6. Certificate of registration of the firm.
7. Bank Details.
8. Turnover forecast.
9. Digital signature of the partners.
10. Other documents based on the type of application.

Drug License

The Drug License is granted by the competent authority under the Drugs and Cosmetic Act, 1940 to conduct business related to medicines, drugs or cosmetics. Without obtaining this license business of such a nature can’t be conducted. This act also covers AYUSH medication, for professionals involved in these drugs will also have to obtain this license.

Documents Required:

1. Partnership Deed.
2. PAN Card / Aadhar Card.
3. Attested PAN of the firm.
4. Certificate of registration of the firm.
5. Bank Details.
6. Cancelled Cheque leaf.
7. Biodata of the partners.
8. Other documents based on the type of application.

Private Security Agency License

The Private Security Agencies Regulation Act, 2005 (PSARA) is the act that governs the regulation of entities involved in the private security agency business. The registration under this act is a must for all the firms that are involved in this type of business.

Documents Required:

1. Certificate of registration
2. Address Proof.
3. Documents related to Security Guard.
4. PAN of the firm.
5. Income Tax Return of each partner.
6. Passport size photo.
7. MOA of the firm and the training institute.
8. Any other documents demanded by the state officials.

Import Export Code

This IEC code is a 10 digit alphanumeric code associated with the PAN. It is mandatory for all businesses who are involved in Import and Export activity. The IEC shall be applied to the Director General of Foreign Trade. All the Import and Export need to acquire this IEC but, when it comes to the Import and Export of the specific commodity that affects the national interest, the license shall be obtained with specifying the reason for the same.

Documents Required:

1. IEC questionnaire to be filled.
2. PAN of the firm and of all the partners.
3. Cancelled Cheque.
4. Digital signature of all the partners.
5. Address proof. (utility bills)

Furnishing false particulars

A person shall be imprisoned for up to 3 months or a fine or both in case of furnishing information that is false or at least known to be not to be true, relating to the documents, statements or any records thereby provided to the registrar.

Rectification of mistakes

The registrar has all the powers to rectify any mistake relating to or inconsistent with the statements filed by the partners and so shall make necessary changes in the register as well. 

Rectification shall also be made at the request of the partners regarding any record or statement filed to the registrar regarding the firm. The registrar is entitled to do so under sec. 64 of the act.

Subsequent alterations after the registrations

Any alterations or change in the deed shall be notified to the registrar timely by means of the relevant forms. This need may arise when the business firm wishes to move their place of business, change the name of the business firm or any change that will affect the original Partnership deed has to be notified to the registrar. However, it is to be noted that the mutual agreement between the partners. Follow the steps below to do the same.

Alterations with respect to Firm’s name – Nature of business – location of the business

Such alterations shall be made by sending the Application Form within 90 days since the date of alteration along with the specified alteration fee, signed and verified by the partners.

If the registrar is satisfied then he makes the relevant alterations in the register.

Use this link to download the form.

Alterations with respect to branches.

Such alterations related to branches such as discontinuing of operation in a branch or starting of operation in a new branch shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee, signed and verified by the partners and the same shall be noted by the registrar in his register.

Use this link to download the form 

Alterations with respect to partners details.

Such alterations with respect to partners details such as a change in the name of the partner or the permanent address of the partner shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee and the same shall be noted by the registrar in his register.

Use this link to download the form 

Alterations with respect to the Constitution of the firm.

Such alterations with respect to Constitution of the firm such as dissolution or alteration in the constitution of the firm shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee and the same shall be noted by the registrar in his register.

Use this link to download the form for alterations in the constitution of the firm. Use this link to download the form for dissolution of the firm https://bit.ly/2MPDOIC

Alterations with respect to minor partner attaining the age of majority.

When a minor partner on the attainment of majority wishes to continue his partnership or if he wishes to get retired shall notify the registrar of the same with the application form stating his position related to the firm. The registrar shall make the necessary change with respect to the same.

Use this link to download the form for alteration related to minor partners. 

How to make changes in the Partnership Deed?

Reasons for change in the Partnership Deed

Change in Business

If a firm discontinued operation of a certain business vertical, discontinued operation from a certain branch or alteration amounting addition, it shall amount to change in the Partnership deed. 

Change in Name

If the firm decides to change the name of the firm or alter it. It shall amount to change in the Partnership deed with the mutual consent of all partners. Such change would lead also lead to change in PAN and other necessary change. 

Change in Business place

If the firm decides to change the business place. It shall amount to change in the Partnership deed with the mutual consent of all partners. Such change would lead also lead to change in PAN and other necessary change. 

Change in Capital Contribution

Any change related to capital contribution such as the addition of capital, Change in capital contribution ratio and withdrawal of capital of the firm shall attract change in the partnership deed.

Change in Management Structure

When firms decide to alter the management responsibilities it shall directly affect the Duty and Responsibility clause of the partnership deed. If a person designated or alterations relating it shall also lead to amendment of the deed.

Change in partnership duration

If the partners wish to increase or decrease the duration of the partnership by means of mutual consent amongst all, it shall be amended in the deed.

Any other alteration that leads to alteration of the clauses in the Deed.

Procedure to amend

The partners may alter the deed if they agree to it mutually. The same shall be carried out by way of executing a Supplementary Deed. The following are the steps.

• Prepare Supplementary Deed:

Based on the requirement of the change partners shall prepare the necessary supplementary deed incorporating the change which they wish to make. All the partners must mutually agree to the deed so prepared and solicit their signature on the same. Once the final draft is made it shall be executed.

• Execute the Final draft of the Supplementary Deed:

The execution shall be deemed to be in 2 different ways one being for change in capital and other being for any other change other than the capital change.

For a change in the capital, the payable stamp duty shall be calculated as per the amount of change with respect to the relevant state acts.

If execution is of the second way that is any other change other than the capital change then the stamp duty payable will be Rs. 100.

The partners of the firms should solicit their signature on the relevant page and their initials on all other pages. Then the Supplementary Deed has to be attested by two witnesses and then notarized by a competent person.

• Registering with the Registrar of firms:

The supplementary deed has to be filed with the same registrar with whom the initial registration was made. Along with the supplementary deed the application of modification has also to be furnished. There are other documents that are required. 

• Original deed 
• Supplementary deed (executed)
• Identity proof (if new partners are added)
• Utility bills(if the operation of the business is moved to a new place)

Common reasons for rejection by Registrar to register firms

• The business place of the firm does not come under the jurisdiction of the registrar.
• If anyone partner refused to solicit his / her signature.
• Flaws in the documents submitted or any question of ingenuity arising.
• If a partner is not competent to contract.
• If NoC is not obtained genuinely.
• If the name of the firm is not in conformity with the rules.
• If the relevant amount of stamp duty is due.
• If there is any malpractice sensed in the execution of the deed.
• If the deed is printed on the wrong stamp paper.
• In some states, the PAN has to be attained before the registration is done, in that case, the registrar may decline.
• Furnishing false particulars in the Partnership Deed.
• Any mistake as to particulars in the Partnership Deed.
• Or any other grounds that registrar deems fit under the state act or rules.

References

1. http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf
2. https://www.toppr.com/guides/business-studies/forms-of-business-organisations/partnership-deed-and-registration/
3. http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf
4. http://legislative.gov.in/sites/default/files/A1950-12_0.pdf
5. http://legislative.gov.in/sites/default/files/A1950-12_0.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 skill.

The post Registration of Firms under the Indian Partnership Act  appeared first on iPleaders.

This article is written by Shreyak Patnaik, a third-year student studying at Symbiosis Law School, Hyderabad. The article deals with the Dissemination Board of Stock exchange and the procedure for trading on it. 

Introduction

In India, there are two types of stock exchanges a public company would be listed in, and therefore, two types of stock exchanges you as an investor would be a part of. A National Stock Exchange and a Regional Stock Exchange. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are the only two stock exchanges with nationwide operations and to be in their listings, a company has to have shares worth 10 crores to offer in the primary market (shares worth three crores if its an FPO).

But other than that, there also exist regional stock exchanges with operations of a much-limited scope. While the threshold is lower, these stock exchanges also run the risk of going non-operational. So on the occasion, a stock exchange does go non-operational or de-recognised, what happens to the companies exclusively listed in those exchanges? What happens to the shareholders of those companies? 

By a circular dated May 30th, 2012, SEBI provided the derecognised/exiting exchanges, the companies exclusively listed in those exchanges, and the shareholders of those companies with a somewhat of an exit strategy. 

And thus, the Dissemination Board was born. 

What is the Dissemination Board of stock exchange?

A perusal of any dictionary will give you the meaning of dissemination to be to spread something or give something out, especially information, and that’s exactly what the Dissemination Board does. 

On derecognition, the exiting stock exchange has an option to enter into an agreement with the national exchange (Click here to see what an agreement between the NSE and an exiting regional stock exchange looks like). By way of the agreement, the National exchange agrees to put out information regarding the shares of the company listed in the exiting stock exchange on a place called the Dissemination Board where buyers and sellers can deal in those shares. For the services of the national exchange, the regional stock exchange pays a prescribed fee mentioned in the agreement and provides the national exchange with a list of the eligible companies for the DB and the list is accordingly displayed online in the sites of the National Stock exchanges. 

The online portals for the two dissemination boards run by the two national exchanges are mentioned here: 

For Dissemination Board of the National Stock Exchange, click here

For Dissemination Board of the Bombay Stock Exchange, click here 

What does the Dissemination Board do? 

Essentially, the Dissemination Board can be considered somewhat of a demotion wherein the shares of the company who were in the derecognised Stock exchange are shifted to a different forum, outside the purview of the traditional stock exchange, for being traded. So those shares are not taken out of existence, they still exist to be purchased or sold, just on a different platform. All the information of all those companies is listed on Dissemination Board wherein the sellers and the buyers place their bids and offers, through registered trading members of the stock exchange.

The Dissemination Board is hosted in the capital market segment of the Stock exchange and is open to all registered trade members to participate in. An investor will not be able to participate in the trades of the shares on the board without a registered trade member. 

Who controls the trades happening on the Dissemination Board?

While Dissemination Boards are established by the two national stock exchanges of the country, trades of shares of the companies listed on the board do not abide by the normal rules of National Stock Exchange. In fact, in the agreement between the national stock exchange and any exiting stock exchange it is explicitly mentioned that the national stock exchange will not be responsible to the regional stock exchange, the companies listed on the stock exchange nor the shareholders or prospective shareholders of such company for the settlement of those trades.

The bye-laws, rules and regulations of the capital market do not apply to trades taking place from the Dissemination Board either which has been explicitly mentioned in the agreement as well. 

How do you participate in trades happening on the Dissemination Board?

Trading in stocks listed on the Dissemination board can only be done through the registered trade members of the stock. The registered trade members of the stock exchange are the only ones who are allowed by the stock exchange to participate in the trades happening on the board and are the only ones who can put up the bids or offers made by the current shareholders and investors.

One has to approach a registered trade member of the stock exchange to be able to buy or sell shares of the companies listed on the board.

Now, not everyone with a registered trade member can place an offer or a bid though. To be able to trade in shares of the companies of the board, in addition to requiring a registered trade member, the investor or shareholder would also have to be KYC compliant. A shareholder would already be KYC compliant which is how they came in possession of those shares. But a prospective investor, who’s new to the market might not be. So, they’d have to know what a KYC is. 

KYC or Know-your-client is a procedure through which you would be furnishing your relevant details with the SEBI. Fortunately, it is not very difficult to get a KYC done these days either. 

Procedure for getting KYC done 

To get your KYC done, you’d be requiring a few documents and a form wherein you have to fill your relevant details. SEBI has provided prospective shareholders with a uniform KYC form for every kind of trade possible with the organisation. While there are a lot of other forms required to be filled for trading in other markets such as stocks or mutual funds (A topic for another article), to be able to trade in the shares of the company on the dissemination board, one only needs KYC.

So how do you get your KYC done? 

First, Fill in the form provided by SEBI. 

you can get that form by clicking here. A print out of only the first page would be required if you’re an individual investor, and a print out of only the second page would be required if you’re a non-individual investor.

Along with the form, an individual investor also has to submit the following documents:

• Self Attested copies of their PAN Card. The name mentioned in the KYC form must also match the name mentioned in the PAN Card or additional proof will be required to prove the name on the form. The date of birth mentioned in the PAN Card must also match the date of birth mentioned in the KYC form.
• Proof of Identity: The copy of Pan Card could also be used as POI, but a copy of Aadhar Card, Passport Card or even driving licence can be used as well. 
• Proof of address. It can be your Voter ID card, ration card or registered lease of sale agreement of the address provided. Utility bill such as telephone bill or electricity bill can also be accepted if they are less than 3 months old at the date of furnishing. Even a bank statement, less than 3 months old, wherein the address is mentioned can be considered to be proof of address.

If the correspondence and permanent address are different, proof of address for both must be furnished by the investor.

Second, carry the originals with you and approach your trader for verification. If you cannot produce the originals then you would have to attest the photocopies by authorities authorized to attest those documents. Those authorities are:

• Notary Public
• Gazetted Officer, 
• Manager of a Scheduled Commercial/ Co-operative Bank or Multinational Foreign Banks (Name, Designation & Seal should be affixed on the copy).

In case of NRI’s, the following authorities are allowed to attest the photocopies:

• Authorized officials of overseas branches of Scheduled Commercial Banks registered in India, 
• Notary Public, 
• Court Magistrate, 
• Judge, 
• Indian Embassy /Consulate General in the country where the client resides.

If the investor is of foreign nationality then they have to specify their nationality and provide photocopies of their passport as well.

If the investor is a non-individual then the POI and POA of the director must be submitted along with additional documents depending on the type of non-individual entity applying. 

After verification, your side of the job is done, the trader will send all the information to the agency. Once confirmed you shall be able to trade through your registered trading member.

Once the documents are submitted, you can track your KYC application status on the portal of the KYC registration agency. All you’d require to track your status would be your PAN number. You can check your application status here. 

A good thing about the KRA is also that KYC, once done, wouldn’t have to be redone if you change your trader. Once KYC is done you are all set to trade on the Dissemination Board! 

What’s the current status of the Dissemination Board

One of the biggest problems plaguing trades in the dissemination board is the refusal of the stock exchange to be involved in the trades taking place on that forum. Not only does the stock exchange not involve itself in the settlement of trades from the board, but also the traders, who are necessary for an investor and seller to bid and offer on the board, are not legally bound to see the settlement of the trade through. Trading of shares of the company listed in DB are transactions between the seller and the buyer and are beyond the protection of the clearing corporation of the exchange and beyond the legal duty of the trader. 

In an article published in Hindu business, it was stated that the exit strategy the exchanges devised for the companies as an option to still be listed when their exchanges become inoperational has failed as enough transactions are just not taking place. In addition to the fact that there are no binding regulations and rules governing these trades, there just isn’t enough education regarding the existence of the Dissemination Board either. According to the agreement made between the national exchange and the regional exchange, the national exchange need only release a gazette regarding the listing of the companies of the regional stock exchange in the dissemination board only once in a nationally circulated newspaper. Since the national exchange doesn’t gain anything from these trades (as is obvious from the lack of any of the capital market regulations binding on these trades) it doesn’t communicate the existence of these shares more than the legally mandated times it has to (which is just once) and then opening up portal for the information of the board which can’t be found unless the investor is specifically looking for it.

Should you care about the Dissemination Board as an investor?

One cannot deny the potential possessed by the board. The companies listed on these boards are usually sharing their shares for a much lesser price than what their face value was in the regional stock exchanges. These companies, while on the dissemination board, are not debarred from the national exchanges and can be accepted to be listed in the stocks the moment they achieve the minimum requirements. It was reported by the mint, that the SEBI has provided a sort of exit to the companies to raise the capital to be listed in the national exchanges. They were allowed to raise capital through preferential allotment and qualified institutional placement. 2000 firms were helped as a result of this move. So any of the shareholders who would have bought shares of those companies during the time they were listed in the dissemination board would stand to gain a monumental profit the moment they are able to secure enough funding to be listed in the national exchanges. 

The dissemination board, while suffering from its shares of problems and a state of lawlessness as compared to other derivatives and equities available in the stock exchanges, can still be a lucrative space with well-thought-out investments. An investor does stand to profit from an investment in the dissemination board, all for a KYC and a trader who’ll put up their bid/offer on the board. 

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 skill.

The post Dissemination Board of Stock Exchange appeared first on iPleaders.

This article is written by Mariya Paliwala of seventh semester, student at MohanLal Sukhadiya University College of Law, Udaipur, Rajasthan.

What is the law of tort?

The literal meaning of the word ‘tort’ is ‘civil wrong’. Further, a ‘civil wrong’ is a wrong which is committed against an individual. And it can be redressed by bringing forth the legal action for compensation against the tortfeasor. As a matter of fact, not every civil wrong such as breach of trust, breach of contract, etc. is a tort. In the case of Ashby v. White, (1703) 92 ER 126, it was held that the tort is a violation of another’s legal rights. It is well said that the bunch of flowers comes with thorns, in the same manner, rights also come with certain obligations and when these rights are used in excess, it results in the infringement of another person’s rights. So the other person’s right is your obligation, and the breach of it leads you to land in the pit of law of torts.

What is Battery?

Battery is an intentional tort wherein one person (the tortfeasor) makes:

• Intentional,
• Harmful,
• offensive 

Contact with another person (plaintiff/complainant). 

For a tortious act to be a battery contact by the offender may result in harm to the victim, which may be:

• Immediate and direct harm

For instance: when ‘A’ pushes ‘B’, battery is committed.

• Immediate and indirect harm

For instance: When ‘A’ throws a rock at ‘B’, who gets hit by the rock, battery is committed.

• Indirect and remote harm

For instance: ‘A’ lays a trap for ‘B’ and a few days later ‘B’ falls into it. A has committed Battery. 

Moreover, the offence of battery comes under both criminal and civil law. Though the definition of battery is same in both civil and criminal law. However, the only difference in civil and criminal law pertaining to battery is of remedies. If the case is filed under tort (civil wrong) a compensation is granted to the victim/plaintiff, or if the case is filed under criminal law then the offender is punished with imprisonment, as all the laws which are covered under criminal laws, those crimes are considered to be a crime against society.

Essentials of Battery

Battery comes under the purview of intentional tort. It is unlike the act resulting from negligence, battery is an intentional harmful or offensive contact by one person to another. 

The elements which result in the tort of battery are no other than a battery committed under criminal law except the presence of criminal intention. 

There are 3 elements which results in the tort of battery namely:

Intention of the offender

As battery is an intentional tort, the element of intention of an offender to commit the act of battery is necessary. The presence or absence of criminal intention is of no consideration in the case of tort of battery. This means for a tort of battery, a mere touch or contact without consent is requisite. The wrong-doer may not intend to do particular harm but merely a non-consensual touch amounts to the tort of battery. 

Contact by the offender

There must be the non-consensual act of contact by the offender. This means that without the permission of the plaintiff, the offender and either caught hold of his clothes or his body. Battery can be as direct as striking on someone’s face or by digging a pit for someone who falls into it after several days. Moreover, it can be any sexual conduct. 

Harm done to the plaintiff

The offender may cause any kind of harm including physical, mental or emotional. This means the harm is not limited to bodily or physical injuries but also beyond them. All that a plaintiff needs to prove is that there was unlawful contact with a plaintiff’s person or property in an offensive manner. 

Battery as a Crime

For an offence to be a crime it requires 2 essential conditions:

• Mens rea which means guilty mind (intention)
• Actus reus which means wrongful act (action)

Mens rea plays a very important role to distinguish between battery as a crime and battery as a tort. If there is the criminal intention of a person to commit battery, it amounts to the offence of battery in crime.

Suit for Damages 

Once all the elements or essentials of battery are fulfilled then an aggrieved person may file a case against the offender. 

• Suit for damages under criminal law

In criminal law, the state will file a case against the offender for committing battery, wherein the victim becomes the witness in the case. The main focus of the court is to either prove the accused guilty or innocent and it does not look into the matters pertaining to the grant of damages, and if in case the accused is proven guilty then he is imprisoned for a stipulated period of time.

• Suit for damages under civil law

Under civil law if the order is passed in favour of the plaintiff, the tortfeasor is liable to pay compensation to the plaintiff. The civil suit is filed with the objective to claim damages and not imprisonment. 

For instance a chain snatcher snatched the chain from a lady. The lady (plaintiff) may ask for compensation to cover the following losses:

• Property

In the above case the property there is a necklace, which when snatched was damaged or broken.

• Physical harm/ bodily injury

The physical injury leads to the treatment in the hospital which results in medical bills, apart from economic losses the lady also suffered pain and suffering.

• Emotional harm caused by the incident 

Apprehension of battery and embarrassment that the lady (plaintiff) has suffered from this incident.

• Damages in case of medical malpractice

In the cases pertaining to medical malpractice if there is a lack of consent and unauthorised treatment, the patient may sue for all the cost of treatment, procedures and the harm and pain suffered by him. This is applicable even in cases where the treatment was done for the benefit of the patient but without the patient’s consent.

Kinds of Damages

The kind and nature of the damages are assessed by the jury. There are a few kinds of damages namely:

1. Nominal damages
2. Special compensatory damages
3. Wrongful death damages
4. Punitive damages

• Nominal Damages

Nominal damages are also known as general damages. General damages pertains to those cases wherein the non-monetary damages are given to the aggrieved party. General damages vary from case to case and victim to victim. The most common type of general or nominal damage are:

• Suffering
• Pain
• Mental Anguish
• Loss of companionship or consortium 

• Special compensatory damages

Special compensatory damages include the monetary compensation for the harm done and expenses incurred by the plaintiff. The compensation varies from case to case. The award for the special damages compensate the victim for all the expenses incurred by him or for all the losses suffered by him. The most common type of special compensatory damages are:

• Loss of earnings
• Loss of future earnings
• Medical bills
• Cost of future medical bills
• Household expenses
• Cost pertaining to altered future plans and cancelled trips

• Wrongful death damages

These damages are claimed when the offender causes the death of a person and the court orders an award under this head for the relatives and the loved ones of the dead. The most common type of death damages are:

• Funeral and burial expenses of the person.
• Cost of pre death medical care.
• Emotional agony and distress of the deceased family and loved ones.
• Loss of support and service.
• Loss of job and employment, in the case where he is the sole breadwinner of the family.
• Loss of consortium and companionship.

• Punitive damages

In the case of apprehensive or despicable wrongful behavior of the offender, punitive damages are awarded to the injured plaintiff. The most common scenario where punitive damages are awarded by the civil courts is in the cases of malicious acts or fraudulent conduct which includes sexual assault, aggravated battery or a fraudulent conduct which causes a grave financial harm to the plaintiff. 

Defenses for Battery

Self defence as a defence against Battery

The offenders may take the defence that he has committed the tort of battery in self defence. However, for proving self-defence an offender has to prove the following pointers:

• There was a reasonable apprehension by the person for an immediate threat to person or property.
• The offender had a genuine fear and apprehension from the other party.
• The offender has not provoked the plaintiff.
• There was no reasonable chance in the hand of the offender to escape from that place.

Consent as a defence against Battery

When an individual has consented for the act then it does not constitute the offence of battery. However, if the extent of the permission or consent given is exceeded by the offender then it amounts to battery.

Defence of other person or his property as a defence against battery

Just like in the case of self-defence, action in respect of saving the other person or his property. The proportion of force used must be in accordance with the threat posed on the other person.

Case Laws Pertaining to Battery

Garratt vs. Dailey

Statement of Facts: In this case, the defendant was 5 year boy who visited the plaintiff’s home. When the plaintiff was about to sit on a chair, the defendant moved the chair, as a result, the plaintiff fell down and had his hip broken. In response to this, the plaintiff sued the defendant for battery. The plaintiff’s sister contended that the defendant had intentionally moved the chair. However, the plaintiff contended that he moved the chair with the intention to replace it and prevent the fall.

Court’s observation: The court decided in favour of the defendant by believing in the testimony given by the plaintiff. And concluded that the boy did not possess any unlawful or willful purpose to cause harm to the defendant. Although, the court dismissed the action but the court said that the loss of $11,000 was suffered by the plaintiff.

Rationale: The absence of the intention does not amount to the offence of battery under tort. Thus, tortious liability does arise in this case.

Vosburg vs. Putney

Statement of facts: A Fourteen-year-old plaintiff, had injured his leg, which did not heal quickly. One day his classmate, eleven-year-old boy (defendant), made contact with the plaintiff’s leg just below the knee, whereby technically committing an offence of battery. Initially, the plaintiff did not feel the contact, as it was very light, but a few minutes later the plaintiff experienced severe pain at the site. The injury became so severe, that the plaintiff suffered vomiting and swelling, which resulted in two surgeries, and it was discovered that the bone in the plaintiff’s leg had degenerated so badly that the child lost the use of his leg, thereby leading to permanent impairment. So Andrew Vosburg’s (plaintiff) parents filed a lawsuit against George Putney (defendant) for battery. 

Court’s Decision: The trial court after due investigation decided in plaintiff’s favor, by awarding him $2,800. Defendant’s family appealed, which lead to a new trial was ordered due to an error in the first trial. During the trial, defendant’s defence contended that he had a lack of knowledge that plaintiff already suffered from an injury, and so he had no intention to cause such a severe injury. The trial court again decided in favor of plaintiff by awarding him only $2,500.

Rationale: The case of Vosburg v. Putney is an exclusive example of the rule in common law which is called the “eggshell skull rule,” which means that an individual (the defendant) takes another individual (the plaintiff) as he finds him. It is immaterial that the defendant lacked knowledge that the plaintiff had a prior injury (“eggshell skull”), as he should know that his actions might cause serious injury/ implication on the health to another person.

Conclusion

Wherefore, battery is an offence which has both civil as well as criminal remedies. The plaintiff possesses both the civil and criminal remedies. If the plaintiff wants the compensation then he may knock the doors of civil court and in case he wants to punish the tortfeasor by the imprisonment then he may approach the criminal court.

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 skill.

The post Battery as a Tort and its Remedies : An overview appeared first on iPleaders.

This article is written by Mariya Paliwala of seventh semester, student at MohanLal Sukhadiya University College of Law, Udaipur, Rajasthan. This article throws light on Constitution of India with special emphasis on Part III specifically Article 12 and 13. 

Introduction

Like many other concepts and ideas, the concept of fundamental rights is borrowed from the west. Relating this idea of fundamental rights in this era of human rights the two basis to his theory are reflected in our India liberal constitutionalism. Firstly, it imposes a negative obligation on the state, not to intervene/ interfere in the liberty of the individual. Secondly, it imposes positive obligations on the state to undertake all the possible steps to make this State as a welfare state. 

When we see both of these basis through the lenses of liberal tradition of constitutionalism the former is easily accepted whereas the latter is accepted but with some resistance. The concept of Fundamental rights are conceived in Part III of the constitution. 

How is ‘state’ related to the Fundamental Rights?

Unlike the other legal rights which are created by the state that confers the right upon the individuals against one another, however the fundamental rights can be claimed only against the state. Therefore, whether the constitution is silent or vocal about it, generally it is assumed that fundamental rights are available only against the state which includes the actions of the state and against the officials of the state. For this very reason, the constitution of U.S.A, which is 1st amongst the modern written constitution to provide the fundamental rights are actionable only against the state irrespective of the fact that the constitution does not say it. Similarly, the same concept is applied on the fundamental rights under India Constitution also, though some are expressly applied to non state action and some others not expressly confined to state action. 

Article 12: Meaning of ‘the State’

The term ‘state’ specifies the authorities and all the instrumentalities which are functioning within or outside the territory of India and those institutions will be considered to be ‘the state’ under Part III of the constitution. This definition is not exhaustive but inclusive. The authorities and instrumentalities which are included in Article 12 are:

1. The government and Parliament of India (Lok Sabha and Rajya Sabha).
2. The state government and the legislature of each state (Vidhan Sabha and Vidhan Parishad).
3. All local authorities (municipalities, District Boards, Panchayats, Improvement Trust, Port Trust, Mining Settlement Boards etc. 
4. Other authorities within the territory of India or under the control of government of India. 

The first 3 categories can be easily understood as they are quite specific and self-explanatory. The last category is not specific and require some explanation. 

Other Authorities

Apart from the central, state and local authorities, the authority or institutions which exercise governmental or sovereign powers or functions can be counted under ‘other authorities’. 

Electricity Board, Rajasthan SEB v. Mohan Lal 

This case is also known as Rajasthan Electricity case. It was held in this case that all the authorities which are created by the constitution or any other statute on whom powers are conferred by law irrespective of the fact that statutory authority is not engaged in performing governmental or sovereign functions. Further, it was also stated that ‘other authorities’ would also cover the bodies created for the purpose of promoting educational and economic interests of the weaker sections of people. However, it was overrule the earlier decision in the case of University of Madras v. Shantha Bai that Universities are excluded from the meaning of Article 12. Accordingly the university was later held to be ‘the state’ under Article 12.

State outside Article 12

In the definition of ‘the state’, the judiciary has time and again affirmed that what is ‘the state’. For the purpose of wider application of fundamental rights state must be defined liberally, but not for other purposes. Therefore, an employee of the public corporation may challenge the violation of his fundamental by the corporation but for that reason he does not become a state employee and cannot seek the protection, for instance Article 311. 

Economic liberalisation and fundamental rights

With the globalisation of the world economy and economic liberalisation in India, some people are doubtful about the application and efficacy of the fundamental rights. There are 2 reasons for this doubt, which is as follows:

1. With the increasing role of private enterprise and the decreasing role of the state, the fundamental rights will be violated more by private enterprise than the state. 
2. The private enterprise itself will claim the fundamental rights as legal person such as a corporation, including a municipal corporation. 

However, it may be hoped that evolving universal expansion of human rights will ensure suitable efficacy to and enforcement of the fundamental rights in the changing scenario. The constitution in general sense and fundamental rights in particular are capable of meeting the challenge in society. 

Article 13: Laws in derogation with fundamental rights will be void

Article 13 expressly sets the principle of the supremacy of fundamental rights over any other law in the case of inconsistency between the two. This can easily interpret the intention of the constitution makers to confine the application of fundamental rights to what is stated in this Article. For instance, pre-constitutional laws shall be invalid only to the extent they fall within the category of “law in force”. As uncodified personal laws do not fall within the category, it could be urged that they were not intended to become invalid in the ground of any inconsistency with the fundamental rights. 

The Clause 1 of Article 13 give rise to various doctrines of interpretation which are as follows:

No retrospective Effect

The provisions of the constitution pertaining to fundamental rights have no retrospective effect. The word retrospective means that intending to take effect from the past date. All the existing laws which are inconsistent, they will be void after the commencement of the constitution. 

Illustration: ‘A’ has committed an offence in 1946 which was punishable at that time, but later on after the commencement of the constitution in 1949 that offence was abolished as it was inconsistent with the fundamental rights. On this basis ‘A’ contended that he must be freed from the charges but the court did not allow it on the grounds that in 1946 the act committed by him was an offence. 

Rule of Severability

Article 13 does not make entire Act or statute to be void or inoperative rather it makes inoperative such provisions which are inconsistent with the fundamental rights. 

Illustration: Eight section of ‘XYZ’ Act were held ultra vires on the grounds that they infringed the fundamental rights of the citizen. However, the Act minus those eight provisions was allowed by the court to stand. 

Doctrine of eclipse

The existing law which is inconsistent with the fundamental right, though becomes inoperative at the time of the commencement of the constitution, is not dead altogether. In simple words the laws are overshadowed by the fundamental rights and remain dormant, but is not dead. The doctrine of eclipse which at one point of time was applicable only to pre constitutional laws but is now applicable on the post-constitutional laws also. 

Future laws

Clause (2) of Article 13 of the constitutions elaborates on the future laws i.e. the laws made after the commencement of the constitution. The state is prohibited from making law which takes away or abridged any right conferred by Part III of the constitution. A law made in contravention of clause (2) shall to the extent of the contravention will be void. This concept of void has eventually come to be considered as ‘relatively void’ or partially invalid. 

Sometimes the courts also apply their decisions prospectively. It means that though the law was found against the fundamental rights, they invalidate only for the future. Therefore the law is not declared void ab initio or nullity from the very beginning. 

Test of infringement of fundamental rights

In the Bank Nationalisation case the court was of the view that the theory that the object and form of the state action determines the extent of the protection which the aggrieved party may claim, was not consistent with the constitutional scheme which aims at affording the individual the fullest protection of his basic rights. The state action must therefore be judged in the light of its operation upon the rights of the individual and the group of individuals in all its dimensions. 

Under the constitution, protection against impairment of the guarantee of fundamental rights is determined by the nature of rights, the interest of the aggrieved party and the degree of harm resulting from the state action. 

However, the precedents does not clearly states when the effect of state action is direct and when it is indirect. Simply, the directness of the effect has to be judged with reference to the protected right or activity. If state action prohibits or restricts any activity which is not a fundamental right, then any effect on the fundamental right is indirect. 

Waiver of Fundamental Rights

To address the question of whether fundamental rights can be waived by a person who has it. In the case of Basheshar Nath v. CIT the fact of the case are that the petitioner has concealed large amount of his income. In order to escape from his liability the petitioner agreed to the settlement under Section 8-A to pay Rs. 3 lakhs in monthly instalments by way of arrears of tax and penalties. On the basis of Income Tax rules being ultra vires to the constitution thereby violative of Article 14 he is not supposed to pay the tax. It was held that right under Article 14 can not be waived. Since then the law has been settled that the fundamental rights can not be waived. 

Definition of Law

Clause (3) of Article 13 consist of the word ‘law’ and ‘law in force’. The law can be of the following kinds:

1. Statutory Law: These are the laws which may be directly enacted by the legislature or by the other subordinate authorities under the delegated lawmaker powers. The delegated legislations appears under various names – rules, regulations, notifications, and bye-laws. 
2. Customs: The term ‘law’ includes ‘customs’ and ‘usages’. In early times, custom was the main source of law but now to a large extent, it has been suspended by statutory law. However, custom has not wholly lost its law creating efficacy. A reasonable and certain ancient custom is binding on the courts like an Act of legislature. 

Constitutional Amendments

In Shankari Prasad Singh Deo v. Union of India the Constitutional (1st Amendment) Act, 1951, which amended the fundamental rights guaranteed under the constitution, which was challenged on the ground that since the amendment has the effect of abridging the fundamental rights it was not valid law within the meaning of clause (2) of Article 13. The contention was rejected by the apex court and held that the word ‘law’ in clause (2) did not include a law made by the Parliament under Article 368 amending the constitution. It was said that the word ‘law’ means the “the rules and regulations enacted by legislatures” and not the “constitutional amendments made in exercise of constituent powers.” Therefore, this judgement was followed by majority of judgements such as in Sajjan Singh v. State of Rajasthan. However, in the case of Golak Nath v. State of Punjab, the apex court by 6:5 majority held that the word ‘law’ in Article 13 (2) included the amendment of the constitution and as a consequence, if an amendment abridged or took away fundamental rights guaranteed under Part III of the Constitution of India, the amending Act itself will become void and ultra vires. Subsequently, in the case of Kesavananda Bharati v. State of Kerala, the Supreme Court of India overruled the Golak Nath case and unanimously held that the Constitution (24th amendment) Act, 1971, which inserted clause (4) in Article 13 and clause (3) in Article 368 was valid. Therefore, all the judges agreed that the amended Article 368, all the provisions including those enshrining fundamental rights (Part III) could be amended. 

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 skill.

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International Law

International law is divided into two kinds – public international law and private international law. Private international law is known as ‘conflict of laws’, and it essentially refers to which country’s law should be applicable to a particular dispute. It is usually deployed by the domestic courts of a country. Public international law concerns the structure and conduct of sovereign states and inter-governmental and international organizations.

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History of Public International Law

Although international law in the modern sense of the word has only existed since about the 16th century, many historians of international law also take ancient history into account as a source for the early development of international legal principles. In that respect, important concepts are derived from the practice between Greek city-states and the Roman law concept of ius civile (which regulated the relationship between Roman citizens mutually) and ius gentium (which regulated the relationship between Roman citizens and non-Roman people). 

Hugo Grotius’ treatise titled De Jure Belli Ac Pacis, authored in 1625, marks the beginning of the modern theory of international law. It dealt with the law of war and peace.  

Beginning with the Peace of Westphalia in 1648, where several European nations signed a peace pact, the concept of the sovereign “nation-state”, which consisted of a nation controlled by a centralized system of government gained a fillip. The existence of several nation states implied the necessity of a body of rules which would govern the conduct amongst them.

The field of study in international law combines two main branches: the law of nations (jus gentium) and international agreements and conventions (jus inter gentes), which have different theoretical foundations and should not be confused.

What are the components of International Law

The sources of international law are custom, treaty, general principles of law (this would include some of the principles recognised in the domestic law of nations, say for example, the recognition that a company has a separate legal existence, equity, good faith, etc.). Further, there is a separate set, known as subsidiary sources, which are opinions of judges in prior cases and opinions of eminent legal scholars as mentioned in their writings.

Treaties

Treaties are of two kinds – bilateral and multilateral. A bilateral treaty is one concluded between two states only and is also known as a treaty-contract. Double Taxation Agreements are generally bilateral treaties. Multilateral agreements are agreements entered into by several nations, such as the United Nations Agreement, International Covenant on Civil and Political Rights (ICCPR), International Convention of Economic, Social and Cultural Rights (ICESCR), the Refugee Convention, Convention on the International Sale of Goods (CISG) and the Agreement establishing the World Trade Organisation, etc.

In the same way as the provisions of any contract in India are to be interpreted in accordance with the Indian Contract Act, 1872, treaties are to be interpreted in accordance the Vienna Convention on the Law of Treaties (or VCLT), 1969. The Convention entered into force on 27 January 1980.The VCLT has been ratified by 110 nation-states as of October 2009.

International Telecommunications Union

While rules governing the conduct of independent nations inter-se continued to evolve, it was not until the late 1800s that a separate international organisation consisting of various nations as its members was formed. 

The International Telecommunication Union is the eldest organization in the UN family still in existence. It was founded as the International Telegraph Union in Paris on 17 May 1865 and is today the leading United Nations agency for information and communication technology issues, and the global focal point for governments and the private sector in developing networks and services.

Universal Postal Union

Prior to the establishment of the UPU, a country had to conclude a separate postal treaty with each other country that it wished to carry international mail to or from. The Universal Postal Union was created in 1874, under the name “General Postal Union“, as a result of the Treaty of Berne signed on 9 October 1874. Its most important reform was that postal authorities were required to give equal treatment to foreign and domestic mail.

Further, it was not required any more to affix the stamps of any country through which one’s letter or package would pass in transit (this would pose a tremendous problem previously); the UPU provides that stamps of member nations are accepted for the whole international route. 

Its name changed to Universal Postal Union in 1878. After the foundation of the United Nations, the UPU became a specialized agency in the UN. The organisation is headquartered in Berne, Switzerland.

United Nations

The name ‘United Nations’ was devised by the ex-United States President Franklin D. Roosevelt and was used in the “Declaration by United Nations” of January 1, 1942 during the Second World War, when the representatives of 26 countries pledged their governments to continue fighting against the Axis Powers.

The United Nations is the hope and conscience of the world, more especially of the smaller nations among the 192 members. It is an association of states which have pledged themselves to maintain international peace and security and co-operate in solving international political, economic, social, cultural and humanitarian problems towards achieving this end.

The United Nations charter, the constituting instrument of the UN was drawn up by the members of 50 countries at the United Nations Conference on International Organization, which met in San Francisco from April 25, 1945 to June 26, 1945. Those delegates deliberately on the basis of proposals worked out by the representatives of China, The Soviet Union, The United Kingdom and The United States at Dumbarton Oaks, Washington DC from August 21, 1944 to September 28, 1944. The charter was signed on June 26, 1945 by the representatives of 50 countries. 

Poland, which was not represented at the conference signed it later and became one of the original 51 Member States.

The United Nations officially came into existence on October 24, 1945, with the deposit of the requisite number of ratifications of the Charter with the US Department of State. United Nations Day is celebrated on October 24 each year. 

New Member States are admitted by the General Assembly on the recommendations the Security Council. Tuvalu was admitted in September, 2000 as the 189th Member State. East Timor was admitted as a member of the United Nations in September, 2002. Switzerland joined the world organization in the same month.

Montenegro became a United Nations member on June 28, 2006. In 1971, Communist China was admitted as the representative of all China. Red China thus became a permanent member of the security council of the United Nations. Vatican City is a permanent observer.

There are 6 official languages of the United Nations they are Arabic, Chinese, English, French, Russian and Spanish. The flag of the United Nations has an emblem of the United Nations in white centered on a light blue background. The United Nations has its headquarters at New York.

The UN , along with Kofi Annan, the then Secretary General received the Nobel Peace Prize in 2001. Kofi Annan (of Ghana) is the only United Nations Secretary General to be re-elected to the post. Kofi Annan hails from Ghana. The current Secretary-General is Ban Ki-moon of South Korea, who took office on 1 January 2007. His first term will expire on 31 December 2011, and he will be eligible for reappointment

The following are the main organs of the United Nations: General Assembly; Secretariat; Security Council; Trusteeship Council; Economic and Social Council and International Court of Justice. In number the United Nations has 6 main organs.

General Assembly

It consists of the representatives of all the Member States. Each state has one vote but it can send as many as 5 representatives. The General Assembly meets at least once a year and elects its own President and Vice President. The general assembly has its headquarters in New York.

All other bodies of the UN report to the General Assembly. It discusses and makes recommendations on any subject covered under the UN charter except those which the Security Council may be dealing. 

Security Council

It has its headquarters in New York. It consists of 15 members, each of whom has one vote. There are 5 permanent members and 10 non-permanent members elected for a 2 year term by a two-thirds majority of the general assembly. The permanent members have the power to veto any move and the retiring members are not eligible for immediate re-election.

The presidency of the Security Council is held for a one month period in rotation by the Member States in the English alphabetical order of their names. The permanent members of the UN Security Council are: China; France; Russia; USA; UK.

The non-permanent members are: Austria, Japan, Mexico, Turkey, Uganda (All until December 31, 2010), Bosnia and Herzingovina, Lebanon, Brazil, Gabon and Nigeria (until December 31, 2011). The Security Council is responsible for international peace and security. Any nations irrespective of its membership to the UN can put forward its problem in front of the council. The Security Council can suggest a peaceful solution or may use force to restore peace.

The Economic and Social Council

It has 54 members and is responsible under the general assembly for carrying out the functions of the UN with regards to international economic, social, cultural, educational, health and related matters. It has its headquarters at New York and its members are elected by two-thirds majority in the general assembly. One-third of the members are elected every year to serve for a period of three years and one-third of the members retire annually.

The following are the council’s regional economic commissions: Economic Commission of Europe (ECE, Geneva), Economic and Social Commission for Asia and the Pacific (ESCAP, Bangkok), Economic Commission for Latin America and the Caribbean (ECLAC, Santiago), Economic Commission for Africa (ECA, Addis Ababa), Economic Commission for Western Asia (ESCWA, Amman).

Trusteeship Council

The charter of the UN provides for an international trusteeship system to safeguard the interests of the inhabitants of territories that are not fully self-governing and which maybe place there under by individual trusteeship agreements.  The Trusteeship Council has its headquarters in New York.

The membership to the Trusteeship Council include the five permanent members of the Security Council plus those nations who administer Trust Territories All of the original 11 trust territories have become independent or joined independent countries. The Council is presently inactive as there are no trust territories left any more.

International Court of Justice

Also known as the World Court, it is based in the Peace Palace in The Hague, Netherlands. The ICJ was created by an international treaty, the statue of the court which forms an integral part of the UN charter. 

Number of Judges 

The ICJ is composed of fifteen judges elected for nine year terms. Judges serve for nine year terms and may be re-elected for up to two further terms.

Election Procedure: The election is done by UN General Assembly and the UN Security Council from a list of persons nominated by the national groups in the Permanent Court of Arbitration.  

Frequency of Elections: Elections take place every three years, with one-third of the judges retiring (and possibly standing for re-election) each time, in order to ensure continuity within the court. 

Current President: Hishashi Owada of Japan is the current President of the International Court of Justice.

Indians at the ICJ

3 Indians have been permanent judges of the ICJ, as follows:

1. Benegal Rama Rau (1952-1953)
2. Nagendra Singh (1973-1988), who was President (1985–1988) and Vice-President (1976–1979).
3. Pathak Raghunandan Pathak (1989-1991)

Status of Precedents

The law of precedent or stare decisis, whereby a Court relies upon its own prior decisions or the decisions of a judicial body superior to itself, does not apply in the ICJ and the ICJ is not bound to follow what it laid down in its previous decisions. However, the ICJ repeatedly cites principles it has developed in its prior case law, in cases that come before it subsequently.

Jurisdiction of the Court

It gives advisory opinion on legal matters to the bodies and special agencies of the UN and considers the legal matters than are brought before them. All members of the UN charter are ipso facto parties to the Statute of the Court. All questions are decided by majority. The official languages of the court are French and English.

The Secretariat

The Secretariat is composed of the Secretary-General, who is the chief administrative officer of the organization and an international staff appointed by him under regulations established by the General Assembly. However, the Secretary General, the High Commissioner for Refugees and the Managing Director of the Fund are appointed by the General Assembly.

Dr. Asha-Rose Migiro of Tanzania took office as Deputy Secretary General on February 1, 2007 and is the third person to hold this post since it was introduced in 1997. The tenure of the secretariat is five years and is eligible for re-election after expiry of the term. It is the chief administrative office of the UN which coordinates and supervises the activities of the UN.

Trygve Lie of Norway was the First Secretary General of the UN.

The present secretary general of the UN is Ban ki Moon . He hails from South Korea and is also the only Asian to hold the post since 1975.

U.Thant was elected as the 3rd secretary general and he was the first Asian to be appointed for the post in 1961.

Permanent Court of Arbitration (PCA)

The PCA was established by the Convention for the Pacific Settlement of International Disputes, concluded at The Hague in 1899 during the first Hague Peace Conference. The Conference was convened at the initiative of Czar Nicolas II of Russia. The 1899 Convention was revised in 1907 at the second Hague Peace Conference. 110 countries are members of one or both of the founding conventions.

The PCA provides services for the resolution of disputes involving various combinations of states, state entities, intergovernmental organizations, and private parties. Its Secretary General is Christiaan M.J. Kröner.

Special Tribunals

The United Nations established special international criminal tribunals in Rwanda and Yugoslavia to prosecute those responsible for atrocities during times of war and genocide. Successful convictions of these political and military leaders are meant to bring justice to victims and to deter others from committing such crimes in the future. 

International Criminal Tribunal for the Former Yugoslavia, 1991

The Tribunal is a body of the United Nations established to prosecute serious crimes committed during the wars in the former Yugoslavia, and to try their perpetrators. The tribunal is an ad hoc court which is located in The Hague, the Netherlands. It was constitued pursuant to a Security Council Resolution.

International Criminal Tribunal for Rwanda

The International Criminal Tribunal for Rwanda (ICTR), was established in order to judge people responsible for the Rwandan genocide and other serious violations of the international law in Rwanda, or by Rwandan citizens in nearby states, between 1 January and 31 December 1994. 

In 1995 it became located in Arusha, Tanzania (from 2006, Arusha also became the location of the African Court on Human and Peoples’ Rights).  The first trial, of Jean-Paul Akayesu, began in 1997. Jean Kambanda, interim Prime Minister, pleaded guilty. 

International Criminal Court

These special tribunals gave impetus to the formation of the International Criminal Court (ICC), finally established in 2003. The International Criminal Court (ICC) brings to trial those who commit large-scale political crimes – genocide, war crimes and crimes against humanity and the crime of aggression (although it cannot currently exercise jurisdiction over the crime of aggression).

The ICC’s first trial, of Congolese militia leader Thomas Lubanga, began on 26 January 2009. On 24 November 2009 the second trial started, against Congolese militia leaders Germain Katanga and Mathieu Ngudjolo Chui.

As of October 2009, 110 countries have joined the court, including nearly all of Europe and South America, and roughly half the countries in Africa.

Three states — Israel, Sudan and the United States — have “unsigned” the Rome Statute, indicating that they no longer intend to become states parties and, as such, they have no legal obligations arising from their signature of the statute.

The current President of the Court is Sang-Hyun Song, who was elected on 11 March 2009. 

Special Court for Sierra Leone

Sierra Leone suffered through a ten-year civil war, where multiple groups have been alleged to have committed war crimes. The Revolutionary United Front (RUF), led by Foday Sankoh, used amputations and mass rape to terrorize the population and gain control of the country’s lucrative diamond mines. Charles Taylor, then president of neighboring Liberia, backed the insurgency providing arms and training to the RUF in exchange for diamonds.

The pro-government Civil Defense Force (CDF), under the leadership of Sam Hinga Norman, committed serious offenses as well. In 1999 the UN eventually brokered the Lome Peace Accord between the warring parties.

In January 2002 the UN approved the Special Court for Sierra Leone (SCSL) to try those responsible for the crimes committed during the civil war. Based in the country where the atrocities were committed and combining international and domestic law, the SCSL ushers in a new generation of international tribunals. It is believed that this would provide justice faster and at a cheaper cost than its predecessors, the Tribunals for Yugoslavia and Rwanda.

Special Tribunal for Lebanon

The court was established by an Agreement between the United Nations and Lebanon pursuant to a Security Council resolution in March 2006. The Special Tribunal for Lebanon is an international criminal tribunal for the prosecution, under Lebanese law, of criminal acts relating to the assassination of Rafik Hariri on February 14, 2005.

The tribunal marks the first time that a UN-based international criminal court tries a “terrorist” crime committed against a specific person. Antonio Cassese, a noted international criminal lawyer from Italy, was appointed the President of the tribunal on March 24, 2009.

Special Tribunals had also been constituted for Cambodia and East Timor.

Famous International Jurists and the Books authored by them 

Vattel – LE DROIT DE GENS OU PRINCIPES DE LA LOI NATURELLE (translated into “THE LAW OF NATIONS OR PRINCIPLES OF NATURAL LAW”)

Samuel von Pufendorf THE TWO BOOKS OF THE DUTY OF MAN AND CITIZEN ACCORDING TO NATURAL LAW

International Refugee Law: A Reader by B S Chimni 

International Law And World Order: A Critique Of Contemporary Approaches by B S Chimni

International Commodity Agreements: A Legal Study by B. S. Chimni

Legal regime of the sea-bed and the developing countries by R. P. Anand 

New states and international law by R. P. Anand 

Studies in international adjudication by R. P. Anand 

International law and the developing countries by R. P. Anand 

International Criminal Law and Human Rights – Manoj Kumar Sinha

Charter of the United Nations – Bruno Simma

International Law and the Use of Force by States – Ian Brownlie

Free Trade Agreements and Regional Trade Organisations

Under the present international system, a body of international law for facilitating trade between various nations has developed, which is known as international trade law. The World Trade Organisation, established in 1995 is a famous example of such an organisation. Such organisations also exist at the regional level. Some examples of them are:Mercosur was established among Argentina, Brazil, Paraguay and Uruguay founded in 1991 by the Treaty of Asunción. Bolivia, Chile, Colombia, Ecuador and Peru currently have associate member status. Venezuela signed a membership agreement on 17 June 2006, but before becoming a full member its entry has to be ratified by the Paraguayan parliament.

The ASEAN agreement was signed on 28 January 1992 in Singapore. When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. AFTA now comprises ten countries of ASEAN. 

NAFTA – North American Free Trade Area

SAARC – South Asian Association for Regional Cooperation

Apart from regional agreements, countries may have free trade agreements with each other, subject to their compliance with WTO law. For example, India has a Free Trade Agreement with the ASEAN, and expects to enter into one with the European Union by the end of 2010.

India also has a special kind of a free trade agreement, known as a Comprehensive Economic Cooperation Agreement (which deals with free trade not only in goods, but also services and mobility of investment and capital) with Singapore, and expects to enter into one with Malaysia as well by the end of 2010. 

World Trade Organisation

The World Trade Organization (WTO) is an international governmental organization comprising of sovereign states. Its primary aim is to liberalize and regulate international trade. It provides a framework for negotiation and formalization of trade agreements and solves disputes between the member states.

The WTO agreements are ratified in the Parliaments of the member nations lay down the legal ground rules for international commerce. It was established on 1st January, 1995 under the Marrakesh Agreement with the primary aim to liberalize and regulate international trade. WTO replaced General Agreement on Trade and Tariffis (GATT) which had been formed in 1947. At present it has 153 members. India became a member of the WTO in 1995. 
 

What is GATT?

Unlike the WTO, the GATT was a treaty organization affiliated with the United Nations whose main purpose was to facilitate trading activities between different nations of the world. The organization mainly focused on freezing and reducing tariff levels on various commodities.

At the time of its creation in 1947, GATT was meant to be a part of an International Trade Organization (ITO). Since the ITO was ultimately did not come into existence, the GATT was left as an independent body. It remained in force till 1994 when it was superseded by WTO. The original GATT text is still in effect under the WTO framework, subject to the modifications of GATT 1994 
 

How was the WTO created?

The multilateral trading system originally set up under the GATT is well over 50 years old. The system further evolved through a series of multilateral trade negotiations held under GATT Eights rounds of negotiation occurred under GATT out of which the first rounds mainly dealt with tariff reductions  and the  later negotiations focused on areas like anti dumping and non-tariff measures.  The last round known as the Uruguay Round (from 1986-94) led to the formation of WTO.

By the time the negotiations were nearing their completion, 123 countries were taking part in the process. It was the largest trade negotiation in history covering diverse areas such as trade in services and intellectual property and trade reforms in agriculture and textiles. All the original article of GATT were brought up for review. 

The Uruguay round culminated with the drafting of the first draft of a final legal agreement on world trade.  This draft also known as the “Dunkel Draft” was compiled by the then GATT director-general, Arthur Dunkel in December 1991. The Dunkel Draft with minor changes became the foundation of the WTO.  

Agreements under WTO

The agreement establishing the WTO regime signed during the April 1994 ministerial meeting at Marrakesh (hence known as Marrakesh Agreement), Morocco encompasses a number of other agreements as well.  The important agreements which form part of the WTO regime are:

• The Agreement Establishing the WTO
• Goods and investment — the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures
• Services — the General Agreement on Trade in Services
• Intellectual property — the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
• Dispute settlement (DSU)
• Reviews of governments’ trade policies (TPRM) 

 What is WTO Ministerial conference?

The Ministerial Conference is the topmost decision making body of WTO, which generally meets after every two years and brings together all the member nations. The Ministerial Conference can take decisions on any matter under any of the multilateral trade agreements.  

WTO Ministerial Conference of 1996 (December 9-13)-  This was the inaugural ministerial conference held in Singapore.  Disagreements emerged between different nations on a number of issues initiated by this conference and the issues came to be collectively referred to as “Singapore Issues”. The issues pertain to 

• Transparency in government procurement
• Trade facilitation (customs issues),
• Trade and investment, and
• Trade and competition.

 Second Ministerial Conference

WTO Ministerial Conference of 1998 (May 18-20)- The Second Ministerial Conference of the World Trade Organization was held in Geneva, Switzerland. 

Third Ministerial Conference 

WTO Ministerial Conference of 1999(November 30- December 3)- The Third Ministerial Conference of the World Trade Organization was held in Seattle, Washington, USA. It was intended to launch a new round of trade negotiations known as “Millennial Round”.  In this conference, the USA and the European Union attempted to strike a mutual deal on agriculture which resulted in major disagreements with the developing countries. The conference ended in failure with massive demonstrations by the protestors and their controversial management by the authorities. 

Fourth Ministerial Conference 

WTO Ministerial Conference of 2001 ( November 9-13)- The negotiations which had collapsed at Seattle were reconvened at Doha, Qatar. The Doha Development Round was launched at the conference. At this conference, the member nations approved the joining of China which became the 143rd member of WTO. 

Fifth ministerial conference

WTO Ministerial Conference of 2003 (September 10-14)- The Fifth Ministerial Conference was held in Cancun, Mexico. It was targeted to forge the agreement on the Doha round. The G 20 developing countries ( a group of 22 southern nations) led by China, India and Brazil resisted demands from the North for agreements on the “Singapore issues” and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress.

Sixth Ministerial Conference 

WTO Ministerial Conference of 2005 (December 13-18)- The Sixth Ministerial Conference was held in Hong Kong. It was very important for the progress of Doha Development Agenda and its successful completion in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries. Other major issues were left for further negotiation to be completed by the end of 2010. 

Seventh Ministerial Conference  

WTO Ministerial Conference of 2009 (November 30- December 3)- The Seventh Session of the WTO Ministerial Conference took place in Geneva, Switzerland. The general theme for discussion was “The WTO, the Multilateral Trading System and the Current Global Economic Environment. 

What is India’s stand in the Doha Development round? 

 The Doha Development Agenda, launched at the fourth ministerial conference in Doha, Qatar in November 2001, aimed to make globalization more inclusive and help the world’s poor, particularly by reducing barriers to trade and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making and. It also provided for substantial assistance by developing counties.  The negotiations were highly contentious and an agreement has not yet been reached. In 2007, negotiations within the Doha broke down at the Potsdam Conference.

ON July 21, 2008 negotiations started again at  WTO’s headquarters in Geneva but stalled after nine days of negotiations over the refusal to compromise over the special safeguard mechanism, a measure designed to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods in the event of an import surge or price fall.  This came one of the main bones of contention between India and US which resulted in the breakdown of the negotiations.

There was also the issue of agricultural subsidies. Developing countries like India wanted a reduction in trade distorting agricultural subsidies given the farmers in US and U.K. Further, while Brazil has emphasized reductions in trade-distorting domestic subsidies, especially by the United States, while India has insisted on a large number of special products that would not be exposed to wider market opening Moreover, developing countries led by India claim  they have had problems with the implementation of the agreements reached in the earlier Uruguay Round because of limited capacity or lack of technical assistance.

They also claim that they have not realized certain benefits that they expected from the Round, such as increased access for their textiles and apparel in developed-country markets. They seek a clarification of language relating to their interests in existing agreements. Although a number of these implementation issues were resolved, outstanding implementation issues are found in the area of market access, investment measures, safeguards, rules of origin, and subsidies and countervailing measures, among others. 

What is a tariff barrier? 

A tariff barrier is the barrier to trade in the form of a tax levied on imported or exported goods. Tariffs are usually associated with protectionism, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods. For instance, a protective tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports. Tariff barriers have been significantly reduced in the face of WYO rules which require countries to cut down on their tariffs of imported goods.  

What are non-tariff barriers?

Non-tariff barriers to trade (NTB’s) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB’s are anti-dumping measures and countervailing duties, which, although they are called “non-tariff” barriers, have the effect of tariffs once they are enacted.

Their use has risen sharply after the WTO rules led to a very significant reduction in the use of tariff barriers. Some non-tariff trade barriers are explicitly permitted only in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect depletable natural resources.

• Import bans
• General or product-specific quotas
• Rules of Origin
• Quality conditions imposed by the importing country on the exporting countries
• Sanitary and phyto-sanitary conditions
• Packaging conditions
• Labeling conditions
• Product standards
• Complex regulatory environment

What are Quantitative Restrictions to trade?

Quantitative restrictions are limitations on the quantity or value of a product that may be permitted to enter a country. They are probably the most familiar of the nontariff barriers and include quotas, embargoes, restrictive licensing, and other means of limiting imports. The Uruguay Round Agreement on Agriculture requires the conversion of quantitative restrictions to bound tariffs and tariff rate quotas.  Thus, these can be considered as trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, trade between countries. 

What is the concept of bound tariff? 

Bound tariff refers to the maximum rate of tariff allowed by (WTO) to any member state for imports from another member state.  The bound tariff rate is the the most-favored-nation tariff rate resulting from negotiations under the General Agreement on Tariffs and Trade (GATT) and incorporated as an integral component of a country’s schedule of concessions or commitments to other WTO members.

If a GATT contracting party raises a tariff to a higher level than its bound rate, the country or countries adversely affected have the right under GATT to retaliate against an equivalent value of the offending country’s exports or to receive compensation, usually in the form of reduced tariffs on other products they export to the offending country. 

What is an ad valorem tariff? 

An advalorem tariff is a duty or other charges levied on an item on the basis of its value and not on the basis of its quantity, size, weight, or other factor. It is a set percentage of the value of the good that is being imported. Sometimes these are problematic, as when the international price of a good falls, so does the tariff, and domestic industries become more vulnerable to competition. Conversely, when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is high. 

What is the concept of balance of payments problems?  

Balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world.   These transactions include payments for the country’s exports and imports of goods, services, and financial capital, as well as financial transfers  The  economic problem caused by payments for imports being greater than receipts for exports. 

What is the mechanism of WTO Dispute Settlement and Appellate Tribunal ? 

Dispute settlement mechanism of the WTO is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced. The WTO’s procedure underscores the rule of law, and it makes the trading system more secure and predictable.

The system is based on clearly-defined rules, with timetables for completing a case. First rulings are made by a panel and endorsed (or rejected) by the WTO’s full membership. Appeals based on points of law are possible. Priority is given to settlement of disputes, through consultations if possible. 

Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in another guise), which consists of all WTO members. The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the case, and to accept or reject the panels’ findings or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling.

Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on points of law such as legal interpretation. They cannot reexamine existing evidence or examine new issues. The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days.

Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership. Members of the Appellate Body have four-year terms. They have to be individuals with recognized standing in the field of law and international trade, not affiliated with any government.

The Dispute Settlement Body has to accept or reject the appeals report within 30 days. The rejection is only possible by consensus. 

To access the study material on IT & Corporate Governance for CLAT, please Click Here. 

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 skill.

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This article is written by Barathwaz T, third semester student of School of law Christ University, Bangalore.

Incest In India

A relationship that is forbidden unanimously by most societies in the world is the incestuous form of relationship. This type of relationship is considered taboo in almost every part of the world. 

There is nothing black and white in taboo so is the law around this tabooed topic. Incest is the sexual relationship between two people of the prohibited degree of kinship by means of consanguinity, affinity or any other means.

Incest in ancient times developed as a medium to protect the royal lineage of the persons from the same kinship, to avoid the dissemination of power amongst the non-royal clans. Soon it evolved to be a prohibited form of relationship as it led to multifaceted genetic disabilities amongst the offsprings. 

But, what is the status of such a relationship? Is it illegal? Will it lead to criminal action against such persons? All such questions shall be discussed in detail in the article.

Sexuality in ancient times

Sexuality in ancient India is often characterized as multi-faceted and sometimes contradictory. The Indian subcontinent is one of the oldest places where sexuality has been discussed extensively by means of books and other sources. Nudity was accepted in many parts of Southern-India and to some extent in Northern-India as well, as depicted in Ajanta caves and some ancient sculptures.

History of the Indian subcontinent is very complex to understand because of its diversity and complex civilization structures that demand a great deed of attention to its evolutionary aspect. People from such important geography have given a great deal of importance to sexuality, which is intrinsically connected to religion. A lot of ancient text, arts, games and sculptures depict the importance that was associated with sexuality in ancient India. Kamasutra, an ancient text that delves into lovemaking, sexuality and romantic relationships is one of the oldest sex manuals that has ever been discovered, it explains in detail the positions to have sex. Ananga-Ranga is another significant sex manual that is male centred and talks about the pleasure zones and arousal points in detail.

This is not just it, the oldest text that discussed sexuality in detail was from India. The famous and ancient texts of Hinduism, Jainism and Buddhism were the earliest sources of sexuality in India, discussing in detail about the moral aspects of sexuality, family, relationship and fertility prayers. These texts also give us a hint of ancient Hindus’ involvement in polygamous and polyandrous relationship. The intention being to protect the royal lineage and the rest of the people were restricted to a monogamous relationship.

In most of the tropical regions people did not cover their upper body due to climatic reasons. The historical shreds of evidence also represent that the wealthier section of the society wore gold and other ornaments to cover their upper body and the rest of them survived with uncovered torso covering only the lower body. 

The ancient Indian art produced during the 10th and 12th century freely expressed the idea of sexuality and lovemaking. Temple sculptures capturing all sex positions mentioned in Kamasutra were part of ancient India’s sexuality, experts also say that these sculptures were part of sexual education. Education here is used very loosely as our modern understanding of education is totally different. Sheikh Nafzaw’s Perfumed Garden is a classical sex manual of the Islamic religion. In the later part of the 16th century, various poets described the process of lovemaking and sex poetically, appealing to a great deal of audience.

Such liberal ideology of the Indians started to evaporate at the advent of the colonial invasion of the sub-continent, where the western ideology of stigmatizing public depiction of sexuality started to spread. During the revolt of 1857, when the victorian rules were infiltrated into the political domain of India, Indian liberalisation towards sexuality was frowned upon, ridiculed and considered to be inferior. Paradoxically this new outlook led to the promotion of education of women and puritanical attitude towards sexuality even within the marriage.

Incest as a crime in India

An act becomes a crime when it is expressly declared to be a crime under the legislation, not just because of an act which is immoral or socially tabooed. Incest is not a crime under any legislation as of now. There is no specific legislation or IPC provisions that expressly declares incestuous relationship to be a criminal activity but they might attract provisions of other sexual offences like sodomy, rape etc. Therefore a person cannot be held criminally liable or punishable for involving in an incestuous relationship, despite it is socially unacceptable and frowned upon.

Hence, it is not an offence if two consenting adults get involved in an incestuous relationship. They do not offend any legal provision by doing so, but might offend the sentiments of the society at large. Also, some personal laws condemn the act of incest to a certain degree.

Laws regarding incest in India

An incident in Mumbai where a 60-year old father raped both his daughters for more than nine years, shook the conscience of the whole country. The perpetrator was charged only for rape under section 376 of the IPC. A man who forced himself on his daughter for more than nine years can’t be held for incest, as Indian Penal Code does not recognize it as an offence. (See:https://bit.ly/2Wu1a9N)

The apathy of law in serious regimes like incest would infiltrate a silent message of acceptance of such act. Social workers argue that this apathy of law is a portrayal of society’s turndown and refusal to concede that incest exists. (See:https://indialawyers.wordpress.com/category/incest/)

The situation is not gaugeable, because most of the time the child’s interests are sacrificed to protect family values. Many cases go unreported. However, to an extent, the statistics are fathomable with the 2007 study on child sexual abuse conducted by the Ministry of Women and Child Development (MoWCD). The study reveals abhorrent figures of child sexual abuse, over 53 per-cent of the female children at least once become victims of child sexual abuse. Adding to the woes 50 per-cent of these victims are victimized by people whom the child could recognise. This numbers also include incest. (See:https://bit.ly/2Wu1a9N)

• There is no legislation or provision of any statute that penalizes or recognize incest as a crime.
• The crime of “Rape” under IPC is too specific and it does not cover other sexual abuse other than intercourse. It is not a gender-neutral provision.
• IPC does not recognize incest as a crime. Conviction shall be given only for sodomy and rape.
• IPC also does not recognize child sexual abuse in which most of the time the perpetrator is from the child’s acquaintance whom the child trusts. 
• Most of the sexual offences including incest against women are covered under section 354 of the IPC “outraging the modesty of women”.
• Section 354 of the IPC is a bailable offence making it less stringent and less serious an offence. 
• The latest Juvenile Justice act also fails to recognize sexual abuse due to incest.
• Section 5 of the Immoral Traffic Prevention Act 1956, punishes indulgence into child prostitution, but does not deal with sexual abuse. 

Some Statistics about Incest

The RAHI, (Recovering and Healing from Incest) is a Delhi based NGO in one of its report titled “Voices from the Silent Zone” has revealed that more than 3/4th of the women in the middle and upper-class household in India are abused by incestuous activities. The perpetrators at most of the time are the uncle, brother, domestic help or any other person with whom the women develop a fiduciary relationship. The founder of the firm also comments that “lacuna in the law regarding these tabooed abuses is a reflection of the society which is immature to own up to it, and this also sends a message that it is not serious an offence to commit.

In a study conducted by the Tata Institute of Social Science, it was revealed that one out of ten boys and one out of three girls are subject to child sexual abuse. More than 50 per-cent of this abuse occurs at home. This study was conducted in 1985, It is a nightmare to imagine the numbers that will come up had the study been done today. 

A Bangalore based NGO, Samvada, had conducted research on child sexual abuse amongst a pool of 348 girls. More than 15 per-cent of the girls were used for masturbation purposes when they were under 10years of age, of which 75 per-cent of the perpetrators were their male family members. 

Vidya Reddy founder of Tulir-CPHCSA (Centre for Prevention and Healing of Child Sexual Abuse) a Chennai based NGO says abusers are not shadowy and rugged-looking people who are pedophilic in nature but usually it is a person whom the child trusts and that person without any misgiving or reticence indulge in sexual activity with the child with whom the child shares a fiduciary relationship.

Void marriage in Hindu laws

The marriage laws in India are governed by the personnel laws of their respective religion. The Hindu Marriage Act declares certain type of marriages void-ab-initio. These void marriages are not considered valid in the eyes of the law. Section 5 of the Hindu Marriage Act specifies 6 conditions for a valid marriage violation of which may lead to the nullity of the marriage so constituted. 

Hindu Marriage Act declares incestuous marital relationship to be void under sec. 5(iv) & sec. 5(v). This shall now be discussed in detail.

Degrees of prohibited relationship

Under section 5(iv) of the Hindu Marriage Act, both the parties shall not be under the prohibitory form of relationship. If such parties get married it will not be a valid form of marriage under the Act. 

The parties are in a prohibited degree of relationship if they are;

• Lineal ascendants or descendants to each other.                                      

Ex: If A and B are mother and son respectively.

If A and B are grandfather and granddaughter respectively.

• Spouse of Lineal ascendants or descendants / Uterine blood relationship.

Ex: If A and B are mother-in-law and son-in-law respectively.

If A and B are step-father and step-daughter respectively.

• Siblings and spouses of siblings.

Ex: If A and B are brother and sister respectively.

If A and B are brother-in-law and sister-in-law respectively

• Siblings of lineal ascendants or descendants.

Ex: If A and B are brother of grandfather and granddaughter respectively.

• Uncle & niece; Aunt & nephew.

Sanjiv Kumar Mahato vs Rekha Mahato MANU/JH/0228/2018 (See here)

In this case, the court dealt with the issue of whether the spouses are within the prohibited degree of relationship or not. The appellant, in this case, initiated an appeal in the Jharkhand High Court to annul the marriage on grounds of the prohibited degree of relationship, but the court dismissed the appeal stating that there is no proof of the same that is adduced in the court. Hence the appeal was dismissed. 

However, this section shall not have a super riding effect on the established customary practice of the community to which the spouses fall under. 

Shakuntala Devi vs Amar Nath AIR 1982 P H 221 (See here)

In this case, the petitioner filed for a petition to annul the marriage after 5 years of marriage on grounds of consent by fraud and prohibited degree of relationship. The petitioner failed to show evidence of the prohibited degree of relationship and also the parties fall under the community of Aroras who have a custom of having a liberal stance about prohibited degree between spouses.

What is the legal status of cross-cousin marriage in South India?

Many communities from south India practice consanguineous marriages. These communities, however, cannot marry within the same Gothra but they marry their 1st cousins. Another kind of practice that is very much prevalent is that marriage between uncle and niece. This is not in violation of the Hindu law because it is a customary practice amongst the community.

Sapinda Relationship

Under section 5(v) of the Hindu Marriage Act, both the parties shall not be under the sapinda form of relationship. If such parties get married it will not be a valid form of marriage under the Act.

Sapinda form of relationship is with reference to five generations from the lineal ascent of the paternal side including the fifth generation and with reference to three-generation from the lineal ascent of the maternal side including the third generation. Usually, the line being traced upwards has to consider the person involved as the first generation. 

The spouses are considered to be in a sapinda form of relationship if the spouses are lineal ascends of each other if they fall under the “sapinda limits” with reference to both the spouse or if the spouses have a common lineal ascendant who falls under the “sapinda limits” with reference to both the spouse.

Example: If the bridegroom is the progeny of any lineal descendants of five generations from the father’s side, including the fifth generation, or three generations from the mother’s side including the third generation and vice-versa. In this case, both the parties to the marriage are considered as “sapindas” and their marriage is prohibited under the Hindu Marriage Act 1955. 

However, this section shall not have a super riding effect on the established customary practice of the community to which the spouses fall under.

Arun Laxmanrao Navalkar vs Meena Arun Navalkar AIR 2006 Bom 342

In this case, both parties have appealed against the order that was passed by a single judge bench of Bombay city civil court. The husband appealed requesting the court to pass a decree of nullity on grounds of sapinda relationship. The wife had the onus of proving that there was a customary practice that rendered their sapinda relationship valid. However, the court found the evidence adduced to be insufficient and passed a decree of nullity against the marriage.

Muslim law marriage

Under the Muslim jurisprudence, there are two different denominations “Shiya” and “Sunni”. These denominations were caused due to the difference in the political ideology of the Islams. There are three types of Muslim marriage 1)Shahih 2)Fasid 3)Batil. Shahih is a valid form of marriage, Fasid is an irregular form of marriage and Batil is void marriage. Shiya law does not recognise any difference between void and irregular marriage, but Sunni school differentiates both of them. However, their jurisprudence varies on all major aspects of Muslim personal law, such as marriage, inheritance, adoption etc. For the scope of this article only the marriage laws of both denominations are included.

Shiya school on incest 

Shiya law prohibits/provides absolute incapacity on three grounds:

• Consanguinity
• Affinity
• Fosterage

Consanguinity

This type of prohibition on the parties is based on the blood relationship of the parties. If the parties to the marriage descend from the same ancestry or kinship it is a consanguineous relationship.

If it is a man then he is prohibited from marrying:

1. Mother or grandmother howsoever high.
2. Daughter or granddaughter howsoever low.
3. Uterine sister or consanguine sister.
4. Niece and grandniece howsoever low.
5. Aunt, paternal or maternal and great aunt howsoever high.

If it is a woman then he is prohibited from marrying:

1. Father or grandfather howsoever high.
2. Son or grandson howsoever low.
3. Uterine brother or consanguine brother.
4. Nephew and grandnephew howsoever low.
5. Uncle, paternal or maternal and great uncle howsoever high.

prevalence of consanguinity in India

Types of Consanguinity across the globe

There are various types of consanguinity but the very common ones prevalent amongst the Islamic community is being pictorially represented below.

Type A is the most common type of consanguineous marriage amongst various cultures. In this type of marriage children of brothers marry and it is also considered as a right of the male to marry his uncle’s daughter.

Type B is the second most common type of consanguineous marriage amongst various cultures. In this type of marriage children of sisters marry each other.

Type C is an unpopular form of consanguineous marriage amongst various cultures. In this type of marriage children of opposite-sex siblings marry each other.

These three types are the most popular types of consanguineous marriage in India, but this is not an extensive list. There are other types of consanguineous marriage as well.

Affinity

It is a legal disability to marry a person which arises due to the occurrence of marriage. This holds good even the relationship of affinity arises out of an invalid marriage. Also, this doctrine would hold good if the man had an adulterous relationship with a woman, then the man cannot marry those relations with whom a relationship by affinity would develop had he married her.

If it is a man then he is prohibited from marrying:

1. Wife’s mother or wife’s grandmother howsoever high.
2. Wife’s daughter or wife’ granddaughter howsoever low.
3. Wife of father or grandfather howsoever high.
4. Wife of son and wife of grandson howsoever low. 

If it is a woman then he is prohibited from marrying:

1. Husband’s father or husband’s grr howsoever and father high.
2. Wife’s daughter or wife’ granddaughter howsoever low.
3. Wife of father or grandfather howsoever high.
4. Wife of son and wife of grandson howsoever low. 

Fosterage

Any women other than the biological mother from whom the person has suckled under the age of two, then the relationship becomes a relationship by fosterage. A person is prohibited from marrying his foster-mother, foster-son’s wife, foster-sister or foster-siblings. 

Sunni school on incest 

Sunni school of law has exceptions to the prohibition on fosterage. A Sunni man can contract a valid form of marriage with his:

1. Sibling’s foster-mother.
2. Foster sister’s mother.
3. Foster daughter.
4. Foster sister.

The Shiya school does not recognize these exceptions, all marriages under the prohibited degree of relationship are absolutely void without any exception.

Children born out of an incestuous relationship

Muslim marriage

Under Muslim law, a child born out of an incestuous relationship is considered to be illegitimate. This illegitimacy can arise out of any invalid form of marriage, not just incestuous relationship.

All illegitimate children born out of invalid marriage under Muslim law is entitled to maintenance and inheritance, this position has been clearly specified in various sources of Muslim law.

The settled position of law regarding maintenance is that:

Hedaya: The child has to be provided with all the necessary goods that support his life, such as food, lodging and raiment etc.

Fatwa-I-alamgir: It has been clearly stated that the illegitimate child has to be supplied with food, raiment and lodging. Though the authoritative texts explain the concept of inheritance as all the goods that support life, in common parlance it is been confined only to food. 

Often these rights of an illegitimate child are refused by the common law principle of “Nullis Filuis”.

CRPC:  Under Hedaya which cites the Quran, establishes that the father has to maintain his illegitimate child, but the Muslim law in this regard is clear that father has no such obligations. But Hanafi law demands a mother to maintain the illegitimate child. Section 125 of CRPC clarifies the clutter of such contradicting laws and settles the law regarding the maintenance of illegitimate children. It puts an obligation on the father to maintain his illegitimate child.

Nafees Ara v Asif Sadat Ali Khan: In this case under section 488 of CRPC the Supreme court observed that the maintenance of an illegitimate child has to be provided if the in-action of the father would lead to vagrancy of the child, provided the father has the means to do so.  

Sec 23 of the Indian Contract Act: 

In the case of Sukha v Ninni the point raised in the court was that, can a contract for maintenance with a Mohammedan father be enforceable.

The contentions were that such a contract is void under sec.23 of the Indian Contract Act on grounds that this will defeat the provisions of the Muslim law.

The court observed that such a contract will not violate Muslim law because the maintenance is under section 488 of CRPC and such a claim is in consonance with the public policy.

The settled position of law regarding inheritance is that:

Shiya law: The Shiya law adheres to the principle of “Fillius Nullius” strictly and does not allow the scope for any kind of maintenance under any Muslim law. In Shiya law the illegitimate child can inherit neither from his mother nor from his father.

Hanafi law: The position of Hanafi law is not so strict in this sense. The illegitimate child has to be left to the care of the mother until the age of 7. After which the child can inherit from his mother’s side, but the Father has no obligation towards the child.

Hindu Marriage

Any marriage in violation of the conditions of the marriage under Hindu law is void, and any child born out of such a relationship is considered to be illegitimate. Only certain rights of such a child is recognised, but after the Marriage laws (amendment) act 1976, which amended the section 16 of the Hindu Marriage Act rendered the status of legitimacy to all children born out of a marriage under Hindu Marriage Act irrespective of the fact that such a child is born out of a null and void marriage.

Also, section 3 of the act provides for the rights of inheritance to a child who is born out of a null and void marriage. This amendment was brought with the intention to remove the stigma that is associated with the illegitimate status granted to such children.

Jinia Keotin and Ors. v. Kumar Sitaram Manjhi and Ors

In this case, the court took up the issue regarding the ambiguity that surrounds the word “property” in sec.3 of the Amendment act. The contention was that the word “property” includes both “self-acquired” and ”ancestral” property of the parents. The Supreme Court, in this case, held that the word is restricted only to the “self-acquired property” of the parent and not the “ancestral property”.

Revanasiddappa v. Mallikarjun

In a very recent judgement, the Supreme court held that the narrow interpretation done in the Jinia Keotin and Ors. v. Kumar Sitaram Manjhi and Ors case no more hold good as a child born out of void marriage is innocent and also in the light of the societal consensus around this issue, the court concludes that the word “property ” also included all property the parents hold including the ancestral property.

The Hindu Minority and Guardianship Act, 1956 gives a preferential guardianship right to the mother of the child. The mother and father are considered as a natural guardian of an illegitimate child. In case the child is married the husband will be the natural guardian. Recently in the case of ABC v. State of Delhi (NCT), (2015) 10 SCC 1, the Supreme Court decided that an unwed single mother can be the natural guardian of the child.

Special Marriage Act and incest

Like all the personal laws and legislations regarding marriage, the Special Marriage act also prohibits marriage between relations who are:

•  relationship by half or uterine blood as well as by full blood
•  illegitimate blood relationship as well as legitimate
•  relationship by adoption as well as by blood 

The act expressly declares that marriage between such relations shall be null and void. Refer schedule I on the act for further clarity and detailed list of the prohibited degree of relationship.

Conclusion

Indian legal framework does not provide for any legislation or a provision that punish or recognize incest as a crime. Other countries like the US, UK, Germany have made strict punishments and laws against incest, India still lacks such laws. In the UK the punishment for incest is 12 years, the laws regarding incest were made in 1980. The US has different term periods of imprisonment in different states with a maximum of up to 20 years in Massachusetts. It is for 5 years in Hawaii.

Some countries have even diluted the laws against incest, they see it as a form of liberalisation. Sexual activity with close relations used to be an offence in many countries, of which many countries now have taken a liberal stance. Incestuous activity which is involved with a minor is still disgusted in many such countries who have taken a liberal stance regarding incest.

The view in India regarding incest is that, incest is never consensual it is often an expression of force and dominance by the individuals. Power acts as a trigger that infiltrates incest within the family. Denial, disbelief is mostly the reaction when it comes to incest as the reputation of the family is considered in a higher pedestal than the interest of the child. It is high time India recognises incest as a crime.

References

1. https://shodhganga.inflibnet.ac.in/bitstream/10603/132606/7/07_chapter%203.pdf
2. https://www.advocatekhoj.com/library/lawareas/marmuslim/absolute.php?Title=Marriage%20Muslims&STitle=Absolute%20Incapacity%20or%20Prohibition
3. https://pdfs.semanticscholar.org/f3db/08faf43477ce7c34146aa4b8db0769661efa.pdf
4. https://read.un-ilibrary.org/population-and-demography/parental-consanguinity-and-offspring-mortality-the-search-for-possible-linkage-in-the-indian-context_cf551e6c-en#page5
5. https://shodhganga.inflibnet.ac.in/bitstream/10603/132571/7/07_chapter%203.pdf
6. http://jurip.org/wp-content/uploads/2016/11/Nikita-Swamy.pdf
7. https://www.domesticshelters.org/articles/identifying-abuse/when-incest-accompanies-domestic-violence

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 skill.

The post Incest In India : Know everything about it appeared first on iPleaders.

This article is written by Karunashankar K.N. a 2nd-year law student from School of Law Christ University, Bengaluru. 

Interpretation

The word ‘Interpretation’ is derived from the Latin term ‘interpretari’ which means to explain or expound or to understand or translate. Interpretation is a process through which one arrives at the true and correct intention of the law-making body which is laid in the form of statutes. This helps in finding out the intention of the author.

Interpretation of any data generally means to analyze the available data and come out with an opinion which is certain and clear. This increases the ability of an individual to understand and explain it in his/her own way. This helps to find out the ways to understand and analyse the statute, where it leads the interpreter to the whole new meaning which is completely different from the general meaning.

It is necessary for all law students, lawyers, judges and anyone who belongs to the legal fraternity to know how to interpret the statute whenever a legislative house comes up with the new statute or an amendment because they will be dealing with these legislations on day to day basis. The main intention of analyzing is to know the new changes which are being brought due to the legislation and the impacts of that legislation in society.

Usually, the interpretation of the statute is done by the judges, it is the primary function of the judge as a judicial head. As we all know that our government is divided into three important wings which are: Legislature, Executive and Judiciary. Here legislature lays down the law and intends people to act according to the legislature and the judiciary that is judges will come up with the proper meaning of the law and puts the law into operation. This helps in maintaining checks and balances between the wings.

Need for interpretation

1. The ambiguity of the words used in the statute: Sometimes there will be words that have more than one meaning. And it may not be clear which meaning has to be used. There could be multiple interpretations made out of it. 
2. Change in the environment: We all know that society changes from time to time and there may be new developments happening in a society that is not taken into consideration, this lacks the predictability of the future event.
3. Complexities of the statutes: usually statutes are complex and huge, it contains complicated words, jargon and some technical terms which are not easy to understand and this complexity may lead to confusion.
4. When legislation doesn’t cover a specific area: Every time when legislations are out it doesn’t cover all the area it leaves some grey areas and interpretation helps in bridging the gaps between.
5. Drafting error: The draft may be made without sufficient knowledge of the subject. It may also happen due to the lack of necessary words and correct grammar. This makes the draft unclear and creates ambiguity in the legislature.
6. Incomplete rules: There are few implied rules and regulations and some implied powers and privileges which are not mentioned in the statute and when these are not defined properly in the statute this leads to ambiguity.

Rules of interpretation of statutes

  (Source:https://bit.ly/2Cq9kah)

Strict Interpretation

Strict interpretation means each word in the statute should be interpreted by the letter and not with respect to the spirit behind the statute. A judge has to apply the text only as it is written in the statute when there is clear meaning of the text there will be no scope for any further investigation regarding the same. Here in strict interpretation, the courts will use the literal rule of interpretation.

This method is important because judges will not make any wrong inferences from statutes and will not go out from the letter of the law and the judgment will be purely based on the text of the statute. This upholds the rule of law by giving importance to the legislature that passes the laws.

If we take the example when we are dealing with the taxation provisions we can not vary from the letter of law as it is universally applicable to all the people in the nation. It is applied as per the text in order to fix the standard in society and clear all the uncertainties which may arise in the near future.

State of Jharkhand v. Ambay Cements, 2005

In this case, it was held that the provisions of the law should be strictly constructed, it should not be let open for the court to interpret, the court cannot ignore the conditions prescribed in the provision. Wherever there is a mandatory rule it must be strictly followed, when a statute explicitly mentions the performance of a particular act in a specific way and lays down the consequences to it, that should be mandatorily followed. Cardinal rule of interpretation is that when a particular act should be done in a prescribed manner the courts cannot interpret that in any way of performance.[1]

Liberal Interpretation 

Liberal or beneficial interpretation means the interpretation of the statute should be made liberally in order to get a wider and enhanced meaning to it. Here judges have all the powers and authority to interpret the laws according to the case requirements and in this rule, there will be no compulsion to follow only the letter of the law, they can go beyond the meaning of the text and interpret. The courts will use the golden rule of interpretation or the Mischief rule of interpretation.

In this method, the judge does not restrict themselves to the literal meaning of the law but they will give all the opportunity to the lawyers to enlighten them with the different interpretations of the law. They will try looking at the law from the other perspective, by which many of the modern-day problems would be solved. As it is an exhaustive rule of interpretation it gives a wider scope of expanding the law and helps in creating a new law if required.

If we take the example of the ‘CONSUMER PROTECTION ACT’, the main aim of that act is to protect the interest of the people. All the laws are established for the public interest it cannot be looked in a narrow way by restricting it into the letter of law.

Madan Singh v. UOI, 1999

In this case, it was held that it is the duty of the court to interpret the provisions of the law, as every case will not be having the same situation, and the court should interpret especially when there are beneficial provisions related to the parties. The interpretation as to be made in the liberal sense so as to get a wider meaning and understanding of the word rather than restricting the meaning which would probably negate the whole case. And this would destroy the complete purpose of the law which is to protect the public interest. [2]

Literal Rule 

The literal rule basically looks into what the law says, not what the law means. It considers the original meaning of the word. Here judges cannot come up with the words and interpret according to the case basis. When the language used is simple and the words have only one meaning to it at that time judges will use this literal rule of interpretation.

When there are no two meanings to a word. This rule helps courts from taking sides in legislative or political issues. If any word in the statute has a special meaning to it, usually it will be mentioned in the interpretation clause, all technical words are given ordinary meaning if the statute has not specified it. Usage of the appropriate words is very important and makes a lot of difference in the meaning of the context.

Courts should never go beyond the intention of the legislators. When the words of the statute are in themselves precise and unambiguous, then there is no need of explaining that in the natural or ordinary sense.

R v. Harriss, 1836

The defendant bit off the victim’s nose. The statute says it is offence ‘to stab cut or wound’ a person. Here the court applied the literal rule, the act of biting did not come within the meaning of stab cut or wound as these words implied an instrument had to be used. Therefore the defendant’s conviction was quashed.[3]

Fisher v. Bell, 1960

Under the ‘offensive weapons act of 1959’, it is an offence to offer certain offensive weapons for sale. Bristol shopkeeper, James Bell displayed a flick knife in his shop window. When brought to trial it was concluded that Bell could not be convicted given the literal meaning of the statute. The law of contract states that having an item in a window is not the intention of sale but is an invitation to treat. Given the literal meaning of this statute, Bell could not be convicted.

Pritipal Singh V. Union Of India

There was the criminal case was against the defendant, the charge sheet was filed as per the violations and provisions under the ‘Narcotic Drugs and Psychotropic Substance Act, 1985’ and the interpretation of words was in question. The court emphasized the literal rule of interpretation. 

It was held that there is a presumption that the words which are used in the statutes are correct and exact and it is inappropriately made.[4]

Criticism

• Judges started giving more importance to the literal meaning of the statutory provisions without considering the wider meaning of the context.
• This method ignores the limitations of the language.
• Words undergo changes in their meaning as time passes.
• Basing it on a wrong assumption that a word has only one fixed meaning.
• Lack of clarity in the statute.
• This leads us to prejudices and determines the meaning of the statute. 

Reasonable Construction 

Reasonable construction follows the principle of ‘Ut Res Magis Valeat Quam Pareat’ which means when the interpretation of the statute is made it should be done in a meaningful and sensible manner. If a statute is having a two interpretation where one is completely vague and absurd and other is perfectly making sense then that meaningful interpretation should be used.

A provision of law cannot be so interpreted where it is made without using common sense. Every word or expression used in an act should receive its natural and fair meaning which was made in accordance with the legislator.

Tirath Singh v. Bachittar Singh

It is only when the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship of injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence.[5]

Kanwar Singh v. Delhi Administration, AIR 1965

Courts can depart from the dictionary meaning of a word and give it a meaning which will advance the remedy and suppress the mischief provided the Court does not have to conjecture or surmise. Construction will be adopted in accordance with the policy and object of the statute.[6]

Golden Rule

The Golden rule is also called as British rule of interpretation, it is a form of statutory interpretation which allows a judge to depart from a normal meaning of the word in order to avoid an absurd result. As we know applying the bare letter of law sometimes may lead us to confusion and gives us an absurd result, in order to overcome these kinds of results judges will give an opportunity to the lawyer to come up with the new interpretation to the law which will be more certain and accurate to the case.

This method of interpretation is also known as the compromise method between literal rule and the mischief rule. In the literal rule, judges will only use the word meaning nothing else, but sometimes this may be irrational and gives us unexpected results which will be unlikely to the legislator’s intention.

In the case of homographs, where a word can have more than one meaning, the judge can choose the meaning which is suitable at that particular case if the word only has only one meaning, but applying that would lead to a bad decision where the judge can apply that decision and arrive at a completely different meaning.

This rule is used in two main situations:

1. When the meaning of the word is too narrow.
2. When the word itself has ambiguity or absurdity.

For example: 

1. Whenever you stand near the lift it will be written that ‘’Do not use lifts in case of fire.’’ if you consider it in a literal meaning you should never use the lifts, this would be an absurd result because the intention of the person who put the sign is to prevent using of lift when there is live fire burning anywhere near the lift.
2. When a son murdered his mother and committed suicide, now the court has to decide who will inherit the property is its mother’s family or the son’s descendants. The judgment came out in favour of the mother’s family, here what we have observed here is son never had the intention of making a profit by his crime, but now this judgment will be binding on all the lower courts.

R v. Allen, 1872

The defendant was charged with an offence of bigamy under section 57 of ‘offence against person act 1861’. The statutes states “whomsoever being married shall marry any other person during the lifetime of husband and wife is guilty of an offence.”

Under the literal rule of interpretation of this section, the offence would be impossible to commit since the civil law will not recognize a second marriage as an attempt to marry in such circumstances would not be recognized as a valid marriage.

Court applied the golden rule and held that the word marriage should be interpreted as ‘to go through a marriage ceremony.’ The defendant was convicted and held guilty.[7]

Adler v George case, 1964

Under section 3 of the ‘official secrets act,1920’ it was an offence to obstruct HM Forces in the vicinity of a prohibited area. Adler was arrested for obstructing forces whilst in a prohibited area. Under The Literal Rule, Adler was not in the vicinity of the area, he was in the area and so was not infringing the terms of the act. The Golden Rule was applied to extend the meaning of ‘vicinity’ and avoid the possible absurd outcome.

Uttar Pradesh Bhoodan Yagna Samiti v. Brij Kishore

The Supreme Court held that the expression “landless person” used in Section 14 of the ‘U.P. Bhoodan Yagna Act, 1953,’ which made provision for grant of land to landless persons, was limited to “landless labourers”. Landless labour is he who is engaged in agriculture but having no agricultural land.

The Court further said that “any landless person” did not include a landless businessman residing in a city. The object of the Act was to implement the Bhoodan movement, which aimed at the distribution of land to landless labourers who were verged in agriculture. A businessman, though landless cannot claim the benefit of Act.[8]

Criticism

• This infringes the separation of power among the wings of the government that is between judiciary and legislature.
• Here judges can technically change the law by changing the meaning of the words in the statute.
• This method can be used only when there is an absurdity in the statute.

Mischief Rule 

The mischief rule is a kind of statutory interpretation where it attempts to determine the intention of the legislators. It basically originated in the 16th century by the Heydon’s case in the united kingdom, the main objective of this is to find out the mischief and defect of the previous statute which was in question and how the new statute will come up with the remedy that resolves the defect. 

The main purpose of bringing the amendments in the statute is to add on additional areas or to make certain changes in the existing law and make it wider where it covers many other circumstances. Legislating a new law is to resolve the problem which was unable to resolve through the other laws which were existing before. And this also helps in finding out the answers to those questions which were not answered in the previous law. So here we can observe the retrospective effect in the process of making laws.

This rule is also called as purposive construction as there is a purpose behind making this ruling. Here court attempts to know the intention of the legislators for bringing in the change in the law. It also tries to analyze the mischief and the defect which was present in the previous law which leads to the creation of the new law.

Heydon’s Case 

This case helps us to know the 4 important points which we have to keep in mind while statute interpretation.

1. What was the common law before the making of the act?
2. What was the mischief or defect which the common law did not provide?
3. What remedy the Parliament had resolved by appointing to cure the disease of the commonwealth?
4. What is the true reason behind the remedy?[9]

Thomas v. Lord Clan Morris

Here it was stated that interpretation of any statutory enactment should not only restrict them to the interpretation of words and phrases used, but they should also look at the history of the act and the reasons behind passing such acts.

Bengal immunity co. V. State of Bihar, 1955

In this case, they have applied the mischief rule in the construction of Article 286 of the constitution of India. Article 286 was in question because before the implementation of this section every state had its own powers and privileges to make its own laws regarding taxation. But the supreme court said that article 286 is made in order to regulate the interstate taxation system and to maintain a well-organized taxation system. And make the whole of India as one economic unit.

Here Supreme Court has looked into the history of article 286 and also the reasoning behind it by considering both of it they have interpreted the statute by mischief rule.[10]

Elliot V. Grey, 1960

According to the Road Traffic Act of 1930 uninsured cars are not allowed to be driven or parked on the road. The defendant’s car was parked on the road near the public place but he was not using it.

The defendant was held guilty because the parliament has passed a bill which states that people should insure their car only then they can drive the car. 

The mischief rule was applied by the court by stating that the car being used in the road if in case the car causes an accident, insurance would be required. The reason behind this was that people should be compensated when they are injured by such incidents and danger caused to them by others.

Advantages:

• Law commission finds mischief rule more efficient as it opposed to Literal and Golden rule.
• It avoids unjust and absurd results in sentencing.

Disadvantages:

• It is considered as an outdated rule as it came into the picture in the 16th century.
• Gives excess power to the judiciary who are unelected and it is considered undemocratic.
• This makes the law uncertain.
• In the 16th century, the kings used to give judiciary complete power to draft laws so at that time they were well qualified about the mischief acts.

Harmonious Construction 

This rule of interpretation is adopted when there is a conflict between two or more statutes or between two provisions of the same statute. Every law has a certain purpose set, so judges should take those purposes into consideration and it should be read as a whole while interpreting. Judges should apply such provisions which are in accordance with the public interest. The laws which are applied must be consistent and shouldn’t overlap with other existing laws. The courts should avoid using such laws which bring ambiguity to the subject and makes courts inconsistent.

Sometimes it’s impossible to harmonise between two provisions of the statute at that time the decision of the judges will prevail above everything. When there is “a head-on clash” between the provisions of law the judges should bring harmony and make justice to both the parties.

Supreme Court explained harmonious rule as to when the two provisions of the same legislation are inconsistent with each other, both the provisions must be interpreted in such a way where it gives equal importance to others. Here one provision will not override on other provision, it aims at harmonizing between conflicting provisions and avoids destruction one provision.

Supreme Court has laid down five principles of rule of Harmonious Construction in the landmark case of CIT v. Hindustan Bulk Carriers:

1. The courts should avoid such provisions which are contradicting in nature and which brings the head-on clash between each other. 
2. The courts should interpret in such a way that brings harmony to the contradicting provisions.
3. The provision of one section cannot defeat the other provision.
4. When the court fails to bring harmony to both parties, it should at least interpret in such a manner where both the provisions are given effect as much as possible.
5. Courts should keep in mind that the interpretation which reduces one provision to the dead is not harmonious, here harmonising doesn’t mean destroying.[11]

Ejusdem Generis 

Ejusdem Generis means of the same kind. Generally, the words should be given their natural meaning, unless it requires special meaning based on that context. When general words follow specific words that are distinct in nature, the general words should also be given the specific meaning to it.

The courts will interpret such general words follow specific words in a restricted way. It will be based on the facts and circumstances of the case which may change case to case. The legislative intent on principle of Ejusdem Generis is if the general words to be used in the restricted sense that means those words will be having a special meaning to it or else why would they even use specific words.

For example in an act dealing with the slaughter of animals for food for human consumption, the expressions used are “cows, goats, sheep, and other animals”.

 Whether the following animals are cover:

1. Cats and dogs 
2. Poultry
3. Wild animals
4. Horseflesh

Regina v. Edmundson, 1859

It was stated by Lord Campbell “Where there were general words following particular and specific words, the general words must be confined to things of the same kind as those specified.” by applying this it helps judges to restrict the wide ambit of the general expression.

In this case, it gave us the basic requirements which should be present in the case in order to apply ejusdem generis:

1. The statue should contain an enumeration of specific words.
2. The general term should follow the specific term.
3. There should be no different intent of the legislature to the general terms.
4. The series of the enumeration should constitute a class or category.
5. The class or category should not be exhausted by the enumeration of specific words.

Beneficial Construction 

The general rule of the statute is that if a word used in the statute excludes certain cases in its common meaning, it should not be forced unnecessarily to include those cases. An exception to this rule is that when the main objective of the statute is not achieved by excluding those cases then the word may be interpreted on the basis of the case requires. 

This rule of interpretation will benefit individuals. Whenever there is an ambiguity or when the which would take the benefit away from the individual, so the meaning which prevails over the benefit to the individuals should be adopted. 

The courts should be generous towards the persons to whom benefits are conferred by the statute. Here it involves the judges to give the widest meaning to the statute in order to protect the interest of the parties, if you look into certain statutes the main purpose is to benefit and protect the interest of the person, for example, Industrial Disputes Act, Consumer Protection Act, Juvenile Justice Act and all labour-related laws. Provision is capable of giving two meanings where one would preserve the benefit and another.

Hindustan Level Ltd v Ashok Vishnu Kate

In this case, the court held that in a case which is related to the prevention of unfair labour practices it should be made completely in accordance with the labour point of view as they are benefitting people here and while interpreting Social Welfare Legislation also they should consider the benefitting people of the society.[12]

Noor Saba Khatoon v. Mohammad Quasium

The supreme court held that the rights of maintenance of children below two years old and the mother under Section 125 of the code of civil procedure 1973 are independent of each other and any other and subsequent legislature regarding maintenance of children below two year and mother that maybe Muslim women (Protection of rights on Divorce) Act, 1986 could not affect the same in absence of clear provision to the effect.[13]

Purposive Construction 

It is the modern version of mischief rule. It is actually more flexible compared to literal rule and golden rule which tends to concentrate more on the meaning of individual words or phrases. This looks for the purpose of the law. This rule allows judges to add or ignore any of the words in the statute while interpreting in order to protect the purpose of creating that law and give fair and equal justice to everyone. 

This rule is always compared with the mischief rule. As mischief rule looks into the gap between the old and new law and how parliament came up with the new law and what are the new remedies brought out to resolve the problems which were exiting before, whereas the purposive construction rule is broader where it not only figure out the gap between the old and new laws but it also helps judges to make an attempt to identify what parliament meant to achieve.

The days have passed by when judges used to use only strict rule where they interpret the law only based on the meaning of the words used in the statute, but now court seeks to give effect to the purposive rule where it not only consider the words of the statute according to their meaning but also according to the context. ‘Context’ here doesn’t mean only ‘linguistic context’, it takes into consideration the subject-matter, scope, purpose, and background of the act. 

Important features:

1. Here judges do not go by the letter of the law, but they look into the intention and the spirit of the statute.
2. Legislative intention is a fictitious concept.
3. The legislative intention with respect to a particular statute can be an intention of the majority of the parliamentarians. 
4. In mischief rule, the court resorts a particular act intended to remedy but purposive construction looks into the overall intention of the parliament on the statute. In this way, purposive construction is wider than the mischief rule. 

Regina V Barnet London Borough Council, Ex Parte Shah

In this case, there were five students who were immigrants came to London for the purpose of studies. They challenged the refusal to allow them grants for their education.

The court held that the House construed the expression ‘ordinarily resident’ in the 1962 and 1980 Acts. Long-standing authority on the meaning of the expression was referred to. The natural and ordinary meaning of ordinary residence had been settled by two tax cases. At least for educational purposes, ‘ordinary residence’ did not include a person whose residence in a particular place or country was unlawful.[14]

Other Rules

Expressio Unius Est Exclusio Alterius

It is a Latin phrase that says ‘Express Mention and Implied Exclusion’ that means express mention of one thing excludes all other things. Here it is considered that the items which are not on the list are not covered by the statute. When something is expressly mentioned in the statute it leads to the presumption that the things which are not specified in the statute are excluded. 

General words in a statute must receive a general construction unless the statute is specifying any special meaning to the general words. Whenever something is added in the statute it is added with the due consciousness. It is assumed that if something is not added in the statute there is a reason behind it, which is to exclude that from the particular statute. 

Contemporanea Expositio Est Optima Et Fortissima in Lege

It is one of the best and the strongest way of interpretation. As time passes by words used in the statute will undergo changes in their meaning but when it is interpreted the word should bear its original and same meaning as the statute intended when it was passed.

The meaning of the law should be interpreted in the context when the law was formulated. Old statutes must be interpreted in such a way where that defines its purpose of introducing it. And it also considers the prior usage and interest or of enforcing the act at the time when the law was enacted.

If the word is wrongly interpreted for all these years those kinds of words will not be eligible for interpretation. The words can only be interpreted by the court when the title of the property may be affected or when everyday transactions have been affected. 

Noscitur a Soclis

Noscitur a soclis is a Latin term which means associated words, the meaning of unclear words or phrases is to be determined or interpreted on the basis of its context and the words and phrases surrounding it. 

Associated words try to explain the meaning of the general words and also limit the interpretation of specific or special terms. When a word used in a statute is ambiguous or vague, the meaning of such words will be determined by looking associated words around it. These surrounded associate words will give clear and specific meaning to it.

The importance of this rule is it aims to interpret by reading the whole statute. It doesn’t emphasize one particular word but it tends to interpret the word by looking into its preceding and succeeding words. The words are understood in a cognitive sense and the intention of the legislatures can be easily understood.

Aids in Interpretation 

Interpretation is the process of finding out the true essence of the enactment, by giving natural and ordinary meaning to the words of enactment. This helps in ascertaining the true meaning of the words used in a statute. 

The main objective of the interpretation of statutes is to determine the intention of the legislature where the meanings of the words are expressly or impliedly mentioned. Courts sometimes interpret the statute In an arbitrary manner, so in order to overcome all these confusions, certain principles have evolved out of the continuous exercise by the courts. These principles are called ‘Rules of Interpretation’.

Rules of interpretation act as a tool in determining the meaning of the particular act which is mainly divided into two they are:

1. External Aid: the external evidence derived from extraneous circumstances, such as previous legislation and decided cases, etc.
2. Internal Ais: the internal evidence derived from the Act itself. 

Internal Aids

Judges while interpreting a statute takes many things into consideration. Determining the primary meaning of the statutory words. And where there is ambiguity in the meaning of the words in the statute. Answers to the many questions of ambiguity will be there in the statute itself. Those are called ‘Internal Aids’.

Title of the Statute

1. Long title

Every statute starts with the long title, it gives the description of the object of that Act.

For example, the long title of the Code of Civil Procedure, 1908, is – “An Act to consolidate and amend the laws relating to the procedure of the Courts of Civil Judicature”.

The long title is used by the court to interpret certain provisions of the statute. It helps in removing the ambiguity and confusion of the act and not in giving conclusive aid in interpreting the provisions of the statute.

Manohar Lal v. State of Punjab

The long title of the Act is relied upon as a guide to decide the scope of the Act.

2. Short Title

Usually, the short title is used for the purpose of referring and identification of any Act. it ends with the year of the passing of the Act. This is one of the important part of the statute but its role in interpretation is very minimum.

For example, Section 1 of the Code of Civil Procedure, 1908, says –“This Act may be cited as the Code of Civil Procedure, 1908. It shall come into force on the first day of January 1909.”

3. Preamble

The main aim and objective of the act is found in the preamble of the statute. All the Acts starts with the preamble, stating the reasons behind the enactment of the act and the main objective of the act.

For example, the Preamble of the Indian Penal Code, 1860, is “Whereas it is expedient to provide a general Penal Code for India; it is enacted as follows”.

Kashi Prasad v. State

The court held that even though the preamble cannot be used to defeat the enacting clause of a statute, it can be treated as a key for the interpretation of the statute.

4. Heading and Title of a chapter

Heading gives the key to the interpretation of the clauses under it and helps to know what the intent of the provision. Headings might be treated as the preamble to the provision.

Durga Thathera v. Narain Thathera and Anr

The court held that the headings are like a preamble which helps as a key to the mind of the legislature but does not control the substantive section of the enactment.

5. Marginal Notes

Marginal notes are inserted at the side of the section and help to understand the effect of the section. This cannot be used for interpretation of the section.

Wilkes v. Goodwin

It was held that the side notes are not part of the Act and hence marginal notes cannot be referred.

6. Definitional/Interpretation Clauses

Definition clause is used to define all the important terms and to avoid the necessity of frequent repetitions in describing the same subject matter to which the word or expression defined is intended to apply.

Definition clause of one particular Act is applied only on the particular Act, not on any other Acts.

7. Illustrations

Illustrations are the examples given in the statutes for a better understanding of the section.

Mahesh Chandra Sharma v. Raj Kumari Sharma

It was held that illustrations are parts of the Section and help to elucidate the principles of the section.

8. Proviso

Proviso provides examples of specific cases. These specific examples are given to such cases where general words require special meaning for it.

• ‘Exception’ is intended to restrain the enacting clause to particular cases.
• ‘Proviso’ is used to remove the special cases of the general enactment and give them special recognition.
• ‘Saving Clause’ is used to protect the destruction of certain rights, privileges and remedies already existing.

9. Explanations

Explanations are added to the section to explain and elaborate on the meaning of the words in the section. The purpose behind this explanation is to explain, clarify, subtract or include something by elaboration. This forms an important part while interpreting the laws.

10. Schedules

The schedule forms an important part of the statute. This should be read along with the section. It contains minute details which adds information to the provisions of the enactment. The expressions of the schedule cannot override the meaning of the provision.

11. Punctuation

Punctuation is one of the minor element of the statue. It should be given importance only when there is proper punctuation used and when there is no doubt about its meaning.

External Aids

When internal aids that are preamble, explanation, illustrations, etc are inadequate for the purpose of interpretation, Judges may take external aids into consideration. When the words of the Act are clear and unambiguous, the external aids are not required. 

1. Historical Background

This includes the original idea of drafting such an Act. The reason behind enacting such laws the cases which influenced the parliamentarians to bring out such laws. It also includes the debates made during passing the laws. And the first-hand hand information collected while making the laws.

2. Reference to Reports of Committees

The reports made by the various committees during the enactment of the legislation can be referred as it gives more clarity to the words and also helps us to understand the intention behind the act, by this, we can figure out what was the defect or mischief which was present in the previous law.

When parliament passes the enactment based on the committee report and there is any confusion or ambiguity in the terms of the statute that can be easily clarified by referring that committee reports and it helps in the interpretation of the statute very efficiently.

Rosy and another v. State of Kerala and others

The Supreme Court Considered Law Commission of India, 41st Report for interpretation of section 200 (2) of the Code of Criminal Procedure, 1898.

3. Judicial Decisions (Precedents)

Every enactment made by the parliament is based on some or other case, so by referring to the previously giving judgments by the higher courts helps us to analyse and form laws. These judgements may be Indian judgements or foreign judgements. Foreign decisions can be taken into consideration when other countries also follow the same system of jurisprudence. But the priority should be given to the Indian judgements.

4. Dictionary 

When the meaning of the word is not clear in the statute, the meaning of those words can be figured by looking into the dictionary. And there are certain words which have a different legal definition and common English definition, so whenever we are looking for the legal meaning of any word it is good to search that in the black dictionary.

5. Social, Political and Economical and Scientific Developments

When the statute is being interpreted it should consider the present system in society. It should take into consideration the changes in the situations and circumstances which have occurred after the implementation of any act. And most importantly the changes in the social conditions and the scientific changes in terms of technology should be given at most importance. When court starts doing this kind of interpretation this helps the legislature to bring out the new amendments for the statute.

6. Other materials

Courts can also refer to the books, journals, papers, articles which are published by the eminent scholars who are expert in that field.

Conclusion 

The article covers all most all the tools of interpretation, by following these interpretations one can understand and analyse the statute in a better way. This also helps legal fraternity to analyse newly enacted laws by the parliament and to find out the pros and cons of it. It is an extensive article covering most of the relevant topics, for further information you can refer bibliography.

References

1. https://indiankanoon.org/doc/1353950/
2. https://indiankanoon.org/doc/1301943/
3. https://www.lawteacher.net/free-law-essays/administrative-law/critical-analysis-of-the-literal-golden-and-mischief-rule-law-essay.php
4. https://www.lawnn.com/top-20-landmark-judgements-interpretation-statute/
5. https://indiankanoon.org/doc/245892/
6. https://indiankanoon.org/doc/1703356/
7. https://www.lawteacher.net/free-law-essays/administrative-law/critical-analysis-of-the-literal-golden-and-mischief-rule-law-essay.php
8. https://indiankanoon.org/doc/1483657/
9. https://www.lawteacher.net/free-law-essays/administrative-law/critical-analysis-of-the-literal-golden-and-mischief-rule-law-essay.php
10. https://indiankanoon.org/doc/1629830/

11.https://indiankanoon.org/doc/688236/

12. https://indiankanoon.org/doc/1353651/
13. https://indiankanoon.org/doc/1512218/
14. https://swarb.co.uk/regina-v-barnet-london-borough-council-ex-parte-shah-hl-16-dec-1982/
15. https://www.lawnn.com/top-20-landmark-judgements-interpretation-statute/
16. https://www.icsi.edu/media/webmodules/Jurisprudence%20Interpretation%20and%20General%20Laws.pdf
17. https://www.latestlaws.com/articles/all-about-interpretation-of-statutes-by-nishita-kapoor/
18. https://www.lawctopus.com/academike/golden-rule-interpretation/

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 skill.

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This article is written by Komal Kumari, a 4th-year student of B.A. LL.B. in Lloyd Law College, Greater Noida. The article focuses on the various aspects of Law of Conversion under the law of torts and the various other aspects related to the same.

“An individual is liable to be sued for conversion if he treats goods of another as if they were his when they are not.”

A conversion is any act of wilful interference, without any lawful justification, in a manner which is inconsistent with the right of another, whereby that other is deprived of the use and possession of the chattel. The expression ‘wilful interference’ is used for describing the element of intention referring to the intentional commission of the act resulting in conversion. If a person deals with a chattel in a manner which is of such a nature that is necessarily inconsistent with the rights of the plaintiff, such dealings will be considered as intentional and will amount to conversion even if he did not know of the right held by the plaintiff and honestly believed that he was entitled to do so. For example, an auctioneer is held liable for conversion even if he honestly believed that the goods which are being auctioned belongs to the seller and not to the plaintiff. Conversion can be committed in various ways but the main link in every act that constitutes conversion is that it consists of dealings with goods by assertion of rights which is either inconsistent with the rights of another or unjustifiable denial of the rights of another in them.

The tort of conversion is applicable only to chattels and does not extend to cover the appropriation of chooses in action.

Conversion by Taking

If any individual without the proper authority takes possession of another man’s goods with the sole intention of asserting dominion over them is guilty of conversion. The reason being that the act will be inconsistent in regards to the general right of dominion which the owner of the chattel, who is entitled to the use of it at all times and in all places, has in it. An act that is constituted by taking the goods but without any intention of exercising permanent or temporary dominion can be termed as trespass but not as conversion.

If there is a wrongful taking, even though such an act was done under a mistaken but honest supposition of being lawfully entitled, or with the intention of benefiting the true owner it does not make any difference.

Refusal to deliver property taken from agent

The decision in the case of M’Combie v. Davies, (1805) 6 East 538 : 8 RR 534, explains how conversion can be committed by refusing to deliver the property taken from agent. In this case, the property of another person was taken through an assignment from agent, having no authority to dispose of the property, and the person who took it refused to deliver it back to the principal even after notice and demand by him. This was held as an act that amounted to conversion.

Principal ratifying purchase of chattel by agent 

The decision in the case of Hilbery v. Hatton, (1864) 2 H & C 822, explains the point that whether a principal ratifying purchase of chattel by agent can be held as conversion. In this case it was held that the purchase of a chattel done by an agent which the vendor had no right to sell, is ratified by the principal then he is guilty of conversion even though at the time of the ratification he had no idea about the sale being unlawful.

Pledge taking property pledged 

If a pledgee, who only has the power to sell for default, takes over, as if upon a sale to himself, the property pledged, without the authority of the pledger (or without notifying him), but credits its value in his account, he will be held liable for conversion.

Taking the goods without any right 

Taking the goods on which a person has no rights can be termed as conversion. For instance, if an individual lopped branches of the fruit trees overhanging his land and consumed the fruit, then he can be held liable to the owner for its value as he would be held guilty of conversion as he had the right to lop the branches but it did not allow with it the right to pick and consume the fruit.

Conversion by Parting with Goods

If any individual who is entrusted with the goods of another, put them into the hands of a third person contrary to orders, it will be termed as a conversion. The wrongful act is done when he aims at giving the third person rights over the property itself and not merely the possession. Any individual who without lawful justification deprives a person of his goods by delivering them to someone else so as to change the possession is guilty of conversion. The individual giving the goods and the person receiving it will be held liable as joint tortfeasors. If an individual borrows another’s horse for riding, and afterwards leaves him at an inn, this act will be termed as a conversion, as though the owner may have the horse back but he does have to pay for its keeping. Similarly, if an individual has hired a piano and later on sends it to an auctioneer for selling, the hirer of a piano is guilty of conversion; and so is the auctioneer who refuses to deliver it up until and unless the expense incurred be paid first. 

Conversion by Sale

An individual who even though innocently obtains the possession of certain goods and disposes of them, whether be for his own benefit or for that matter for anyone else, will be guilty of conversion if these goods were of another person who has fraudulently been deprived of them. The auctioneer is liable to the true owner when he gets possession of the articles sent to be sold by him, for the purposes of sale, and in result he sells them. Lord Denning explained this concept as, when the sale of goods are done through the involvement of an auctioneer, then he is liable in conversion to the owner if the goods are sold as a result of a provisional bid or under the hammer, where the seller was having no title of those particular goods. Although an attempted disposition, for example, a mere bargain and sale without the transfer of possession, i..e., delivery will not be held as a conversion. Thus, when the auctioneer returns the good in good faith without notice of title of the plaintiff, back to the person from where he received them without selling them, he is not liable for conversion.

If the goods are upgraded from raw materials into the final product – For instance, the green tea leaves are converted into black tea, the decision in the case of Carritt Moran & Co. v. Manmatha, (1941) ILR 1 Cal 285, explains the point. In this case it was held that even if the tea leaves are dried, shrunk and blackened it remains the same tea which was plucked or on the shrubs as green leaves. Accordingly, if a person trespassing into a tea-garden just by plucking and changing the green leaves into black tea does not acquire any right in respect thereof. As a result of such a case where the auctioneer who sells the black tea on behalf of the trespasser and pays the price to him will be held liable to the real owner in damages for conversion. The measure of such damages, where the trespasses were deliberate and criminal would be the actual price at which the manufactured tea would have been sold without any of the deductions for the expenses which were incurred in relation to its manufacture.

Sale of motor car – The decision in the case of R.H. Willis & Son v. British Car Auctions, (1978) 2 All ER 392, explains the point. In this case, the plaintiffs were motor dealers who sold a car to the defendant after receiving about half of the amount on the hire- purchase terms that he was not to sell the car before he paid the balance of the price. The defendant became bankrupt, and the car as well as the purchaser were not traceable, resulting in the plaintiffs filing a suit for conversion. The plaintiff recovered damages in the form of the balance price from defendant. 

In the case of Munro v. Willmott, (1949) 1 KB 295, where the defendant allowed the plaintiff to leave her motor-car without any payment in the yard of his hotel (of which he was licensee and tenant), this storage was intended to be for a short duration of time, but the car remained there for several years. Resulting in it becoming an obstacle and in the conversion of the yard into a garage. After several unsuccessful efforts to contact or communicate with the plaintiff, the defendant spent a specific amount in repairs and renovation of the car for making it saleable as the car was in poor condition, and had suffered from long exposure in the open air. Afterwards, it was sold at auction. For this the plaintiff sued the defendant i.e., damages for conversion and detinue of the car. The court held that the plaintiff was entitled to damages based on the value of the car on the day of judgement in the action; but the defendant was entitled to credit for what he had spent to render the car saleable, since the value of the car on the day of judgement included the amount spent by the defendant, the property of the defendant in the shape of work done and materials supplied for the car.

Conversion of the goods by an agent selling it to a third party who acquires it in good faith. – In the case of Jerome v. Bentley & Co., (1952) 2 All ER 114, the plaintiff who is the owner of a diamond ring, entrusted it to C (the agent) who undertook to try to sell it on his behalf. The plaintiff was to receive the price specified by him and if there was any surplus it was to be received by C with the condition that the ring has to be returned to the plaintiff if not sold within seven days. C sold the ring after the seven days had elapsed, representing himself as the owner of the ring, and sold it to the defendants, for a price which was one-third of the price mentioned by the plaintiff, who bought it in good faith and re-sold it. C was subsequently convicted of the larceny of the ring as a bailee. In an action for damages for wrongful conversion of the ring by the plaintiff against the defendants, it was held that, at the time of the sale to the defendants, C was not an agent of the plaintiff to deal with the ring and was not in the position of a person who might be presumed as an agent having authority to sell it, and that, by the sale he converted the ring to his own use; and, therefore, he did not pass any property in it to the defendants, who were thus liable to the plaintiff.

Conversion by Keeping

When an individual has the possession of another’s chattel, and still refuses to deliver it, this act violates the right of general dominion of the plaintiff over it, and the use of it at all times, and in all places, which he is entitled to make of it, this act of assertion of rights are contradicting with the plaintiff’s rights and consequently results into an act of conversion.

Demand and Refusal 

If certain goods of a person are in the possession of another, then he should send someone with proper authority to demand for them and receive them; and in result of this, if the individual holding the possession refuses to deliver them then this will be held as an evidence of conversion. A demand and refusal in itself does not constitute a conversion, but they are and can be taken as an evidence of a prior conversion.

A qualified (reasonable and justified) refusal is not considered as conclusive evidence of conversion, but an unqualified refusal is always considered as conclusive evidence of a conversion. 

Illustrations 

1. A refusal by a railway servant who is doubtful regarding the consignor’s title to the goods which are to be delivered will be termed as qualified refusal and therefore is not a conversion. 
2. A refusal by a railway clerk to deliver a consignment at a place to which it is not booked, does not amount to conversion. 
3. Although, if the defendant refuses to deliver up the goods except on a certain condition which he has no right to impose, that would result into absolute refusal. 
4. Refusal by an advocate to give up the deeds except on condition, which he had no right to impose, that his charges in respect of business done for his own client should be paid, would be evidence of conversion.

Right of finder 

In regards to the finders, the law is that the finder of chattel who did not trespass and is not a trespasser acquires a right to keep it, against all but the true owner, if the chattel had been abandoned or lost and if he took it into his care and control. But this right is subject to the superior right of an occupier of a building to retain chattels attached to that building and also to retain chattels on or in it, if he exercises his exclusive control or an intention to exercise exclusive control over the building and the things which were on or in it. 

The decision in the case of Waverley BC v. Fletcher, (1995) 4 All ER 756, explains this point, as the same rule applies to goods/articles found in or attached to land which was restated in this case as follows:

1. When any object is found in or attached to a land, as between the finder of the article and the lawful possessor of the land, the lawful possessor of the land has the better title. 
2. When any object is found unattached on land, then in between the finder and the lawful possessor, the lawful possessor of the land will have a better title only if he exercises his exclusive control over the land as to indicate an intention to control the land and anything that might be found on it.” 

In the present case, the defendant by the use of a metal detector discovered the presence of an object below the surface and after digging upto some nine inches he found a valuable medieval gold brooch. Although in the suit by the plaintiff (the local authority), owning the public park, it was held that by applying the above principle, the local authority do have the superior right to have the brooch as against the finder.

In the case of Armory v. Delamirie, (1721), the plaintiff was a chimney sweeper who found a very valuable jewel and had taken it to a jeweller to ascertain its value. The jeweller took advantage of the boy’s simplicity, told him it was worthless and offered him three pence for it, which the boy clearly declined and demanded for the jewel to be returned back. The jeweller refused to do so; causing the boy in successfully suing him for it, and for the purpose of calculating damages the court decided to consider the jewel to be of the highest value.

In the case of Hannah v. Peel, (1945) KB 509, the defendant was the owner of a house which he had never himself occupied. While the house was requisitioned, the plaintiff, a soldier, found a brooch on the top of a window frame, the owner of which was unknown. There was no evidence that the defendant had any knowledge of the existence of the brooch before it was found by the plaintiff; the plaintiff handed the brooch to the police to ascertain its owner, but the police in turn delivered it to the defendant who claimed it as being on premises of which he was the owner. It was decided by the court that the plaintiff, as finder, was entitled to the possession of the brooch as against all others except its owner.

In the case of Parker v. British Airways Board, (1982) 1 All ER 834, the plaintiff who was a passenger found a bracelet in the executive lounge at London Airport. He handed the bracelet to an employee of the Airlines with a particular direction that the bracelet be returned to him if it was not claimed by its owner. The Airlines sold the bracelet and kept the proceeds instead of returning it back to the plaintiff when not claimed by the owner. The plaintiff sued for conversion and was awarded as damages the value of the bracelet. The plaintiff being the finder was held entitled to the bracelet against everyone except the owner. Even though the Airlines being the occupier of the premises, neither showed the intention of exercising control over the lost chattel in their lounge nor did they expressed the intention that the permission granted to the public to enter the premises was on the terms that the commonly applied maxim ‘finders keepers’ would not be applicable.

Indian cases 

In Indian context, the case of Kishorymohan Roy v. Rajanarain Sen, (1862), explains the point. In this case two notes were stolen from A, which B (not a bona fide holder for valuable consideration) gave to C in payment of certain goods. B had to bring D, a person known to C, as C had refused to deal with B as he was unknown to him. Hence, the purchase was made by him in turn. It was held that B was liable to A as the part performed by B in the transaction, amounted to a “conversion of the notes for his own use” resulting in him being liable for the same. 

In the case of Debendronath Mullick v. Odit Churn Mullick, (1878), the refusal to deliver the idol by A, through which the person demanding it was prevented from worshipping or performing the rites on the specified date was held as a valid ground for the aggrieved party to sue for damages.

In the case of Haryana Cotton Mills Co. Ltd v. B.B & C.I. Ry. Co., (1927), it was held that the refusal or neglect by the railway company in delivering the goods even after the demand was held to be liable in conversion. 

Conversion by Destruction

Destruction of a chattel belonging to another is an act of conversion, as it does have the effect of depriving the owner of it altogether. If the object has been destroyed, for example by burning it, that would be in a way depriving the plaintiff of his property even if the defendant has not taken or considered of taking the goods for his own use. If an act is done without the authority of the owner, i.e., replacing wine with water is a conversion of the whole liquor and so is the spinning of cotton into yarn or grinding corn into flour.

Conversion by Denial of Right

If the defendant has never been in physical possession of the goods but his act amounted to an absolute denial and repudiation of the plaintiff’s right on them, then it will be termed as conversion. The applicability of this view was doubted and it has been overruled by Section 11(3) of the Torts (Interference with Goods) Act, 1977 which provides that denial of title is not by itself conversion.

If there has been an interference with a chattel in a certain manner that is inconsistent with the right of the owner along with the denial of title to the owner results in conversion. 

Unlawful use of the goods of another in such a manner that the goods might be rendered liable to forfeiture by the authorities would also amount to conversion. Defendant’s ignorance of the unauthorised character of his act cannot always be relied upon as a defence.

For instance if the payee of a crossed cheque especially endorsed it to the plaintiffs and posted it to them. A stranger, having obtained possession of the cheque in transmission, obliterated the endorsement to the plaintiffs’, and having substituted a special endorsement to the plaintiffs, and having substituted a special endorsement to himself, presented it at the defendants’ bank, and requested them to collect it for him. They did so and handed the proceeds over to him. Then the defendants were liable to the plaintiffs in an action for conversion for the amount of the cheque.

Distinction between Trespass and Conversion

1. Trespass is basically a wrong done to the actual possessor and therefore cannot be committed by a person in possession. On the other hand, conversion is a wrong to the person entitled to immediate possession. The actual possessor is frequently, but not always the person entitled to immediate possession, and sometimes a person entitled to immediate possession is allowed to sue in trespass so that the conversion may, but does not necessarily, include trespass.
2. Trespass is without intending to exercise an adverse possession, damaging or meddling with the chattel of another. A conversion is referred to a breach made adversely in the continuity of the owner’s domination over his goods though the goods may not be hurt.
3. The gist of the action in trespass is the force and direct injury inflicted; in conversion, it is the deprivation of the goods or their use.

For instance, if a person snatches my gold ring with a view to steal it, the act amounts to both trespass and conversion. But if a person borrows my ring for his use but later on sells it he will be held liable for conversion only.

Action for Conversion

(i) Who can sue?

The plaintiff, during the time of conversion, should either have the right of immediate possession or the right of property in the thing, coupled with possession thereof. Any possession, even if temporary, is sufficient against a wrongdoer, e.g. that of a carrier. As already mentioned that a finder of goods is in a position to sue in conversion except the real owner. Actual possession or an immediate legal right to possession is required and necessary as it enables a person to sue. A claim for conversion of goods is not maintainable by a person who had merely an equitable interest in them against another who had acquired legal title to the goods as a bona fide purchaser for value without notice of the prior equitable claim. 

A thief or a receiver of stolen property – This point was explained through the case of Costello v. Chief Constable, that a thief or a receiver of stolen property in possession has a possessory title which is good against all the world except the true owner and so he can sue every other person for conversion.

(ii) Defences

The justification or defences to an action for conversion are:

1. Lien, either general or particular – Demand and refusal are not considered as evidence of conversion, if the party has a lien upon the chattel.
2. Right of stoppage in transit – This defence arises out of contract which is related to the sale of goods.
3. Denial of plaintiff’s right of property (jus terii) – Where the plaintiff sues relying on his right only, or denial of possession. Where the plaintiff was in possession of the goods at the time of the conversion, the defendant cannot set up a plea of jus tertii (i.e. that a third party has superior title). Against a wrongdoer possession is a good title. But when the plaintiff was not in possession but had only the right to possess, the plea of jus terii can be set up by the defendant.
4. Distress – If the goods are taken under distress or under execution.
5. Sale in market overt – As per the English law, sale of goods in market overt gives a good title to the purchaser. The purchaser cannot be sued for conversion if he parts with the goods or refuses to give them up on demand; although the seller can be sued if he has no title. This doctrine is not applicable in India but such cases are governed by sec. 27-30 of the Indian Sale of Goods Act.

(iii) Damages

In general, the measure of the damage is calculated through the value of goods at the time of conversion, where no particular damage has been sustained, and the goods have not been tendered and received back after the action. This refers to the market value of goods during the time of the conversion. 

As and when the defendant unlawfully sold shares which belonged to the plaintiff and later on replaced them by an equal number of shares purchased at a lower price, it will be held that the measure of damages was the value of shares on the date of the conversion, i.e., sale price less the value of replacement shares. If the defendant does not produce the goods, then the presumption will be that it is of the highest value of any goods of that kind. But if the goods that have been returned, have fallen in price, the difference in the price at the time of the return, will have to be provided as damages.

Illustrations 

1. If there is an action against a shipowner for non-delivery of goods, the measure of damages will be the value of the goods at the date of non-delivery.
2. If the damages which have been awarded to the owner of land is in respect of digging the earth for making bricks out of it, the plaintiff will be awarded the whole amount which includes the cost of manuring and levelling the land, and also the next value of the bricks into which the earth has been converted and not simply the value of the site affected.

Conclusion

Conversion can be referred to as the forgotten tort because as a matter of fact, every year there are several cases of conversion reported, but either they are too similar to the case of trespass or are mostly concerned with the ownership of the particular disputed property but the tort in itself is not the issue.

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 skill.

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This article is written by Shambhavi Tripathi, a 3rd-year student of LL.B. in Panjab University, Chandigarh. The article explains the concept of cyber security and its importance, impact of cyber security breaches and cyber security laws. It also discusses the concept of “cyber jurisprudence” in brief. 

Introduction

Cyber law is a very vast area with many sub- disciplines emerging out of it. Few of the sub- disciplines of cyber law are artificial intelligence law, information security law and cyber-security law. Cyber law and cyber security law are often mistaken as the same, but cyber security law can be considered as a branch of cyber law. 

Cyber law can be defined as the law which governs the whole cyber space and all its elements. It protects from cyber crimes and lays down punishments for its violation. Cyber law is a common term which refers to legal jurisdiction and regulation of various aspects of internet and computer security. On the other hand, cyber security law can be defined as “the new emerging legal discipline within the cyber law umbrella, which deals with all the legal policy and regulatory issues pertaining to cyber security, its protection, preservation, maintenance and continued advancements.”

Concept of Cyber Security Breaches

A cyber security breach is an incident that results in unauthorized or illegal access to computer systems, networks, stored data, software/ hardware, services, devices by violating the security mechanisms of the systems. Cyber security breaches happen when the security policy, mechanisms or system are violated. In simple terms, a cyber security breach occurs when an individual (read cyber criminal) illegally enters a private or confidential IT perimeter. A cyber security breach is also known as a cyber security violation. A cyber security breach is one of the earliest stages of a cyber attack by a malicious intruder, such as a hacker, cracker or application. A cyber security breach can range from low-risk to highly critical depending on the nature of the incident.

In an organization or corporation, security breaches are carefully monitored, identified and processed by a software or hardware firewall. If any kind of intrusion, breach or violation is detected, this firewall issues a notification to the network or security administrator.

A cyber security breach occurs when an unauthorized party enters security measures to reach protected areas of a system to gain information or spread viruses. A cyber security breach can provide access to the valuable information to the intruder such as company accounts, intellectual property, and personal information of customers. If a cyber criminal steals such confidential information, a security breach has occurred. Such information is often sold on the dark web and can be used to commit crimes such as identity theft.

Importance of Cyber Security

A strong cyber security is extremely important for an organization to prevent its data and systems from being violated and misused. Cyber attacks cost organizations billions of pounds and can cause serious damage. Impacted organizations stand to lose sensitive data, and face fines and reputational damage. Cyber security is important because:

1. The costs of cyber security breaches are rising: It is considered as a duty of organization to have a strong cyber security mechanism to prevent data breach of the customers. With the emergence and popularity of privacy laws, liability of organizations has increased. If there is breach of security then the organizations are heavily fined. There are also non-financial costs to be considered, like reputational damage.
2. Cyber attacks are constantly developing: With the advancements in science and technology, cyber attacks also continue to grow in sophistication, with cyber attackers using well advanced technology to breach into someone’s system. This includes social engineering, malware and ransomware (used for Petya, WannaCry and NotPetya).
3. Cyber crime is a big business: Cyber crime is a big business in terms of financial gain. According to a study conducted by Bromium, in 2018, the cyber crime economy was estimated to be worth $1.5 trillion. However, money is not the only factor; attackers can also be driven by political, ethical or social motivations.
4. Cyber security is a critical, board-level issue: New regulations and reporting requirements make cyber security risk oversight a challenge. The board will continue to seek assurances from management that their cyber risk strategies will reduce the risk of attacks and limit financial and operational impacts.

Impact of Cyber Security Breach

A successful breach of cyber security can cause major damage to an organization and its business. It can affect business’ standing and consumer trust. Impact of a breach is different for each organization depending on the timing and duration, kind of breach and the industry in which it operates. For example, a data breach may have more critical consequences for the financial sector than the manufacturing sector. However, there are certain common impacts of cyber security breach. The impact of a cyber security breach can be broadly divided into five categories: 

Financial losses: Cyber crime costs small business unreasonably more than big businesses. For a large corporation, the financial impact of a breach may run into the millions, but at their scale, such monetary implications are barely affecting them. On the other hand, small businesses shell out an average of Rs. 26,85,859 to recover from a single data breach in direct expenses alone. A casual negligence on cyber security could quite easily put an organization or corporation out of business. Businesses that suffered a cyber breach will also generally incur costs associated with repairing affected systems, networks and devices. Cyber attacks often result in substantial financial loss arising from:

1. Disruption to trading (eg inability to carry out transactions online).
2. Loss of business or contract.
3. Theft of money or financial information.

Reputational damage: Cyber attacks can damage an organization’s reputation and corrode the trust the customers have for that organization. The effect of reputational damage can even impact the suppliers, or affect relationships one may have with partners, investors and other third parties vested in someone’s business. 

Loss of customer and stakeholder trust can be the most harmful impact of cyber security breach, since the majority of people would not want to do business with an organization or corporation that had been breached and attacked because of poor cyber security system, especially if it failed to protect its customers’ data. Taking a reputational hit may also affect the ability of the organization to hire the best talent, suppliers, investors and customers. This, in turn, could potentially lead to:

1. Loss of customers.

2. Loss of sales.

3. Reduction in profits.

Theft: Smaller organizations’ defenses and security systems are considerably less sophisticated and easier to penetrate, making them a softer target than bigger organizations. Cyber frauds and thefts lead to monetary losses, but stolen data can be worth more to hackers, especially when sold on the Dark Web. For example, on 31st October, 2019, it was found out that around 1.3 million debit and credit card data of Indian users have been put up for sale on the Dark Web by hackers, each card was sold for $100 and overall hackers could make $130 million out of it. Intellectual property theft is equally damaging, companies can lose years of effort and research and development investment in trade secrets or copyrighted material. Theft can be various kinds, for example:

1. Theft of corporate information.
2. Theft of financial information (eg bank details or credit/ debit card details).
3. Theft of personal information of customers.
4. Theft of money.
5. Identity theft.

Fines: As discussed above, there is the prospect of monetary penalties, fines or costs for organizations that fail to implement proper cyber security systems. Various nations are considering implementing strict regulations for breach of systems due to weak cyber security systems. One of the examples is a measure proposed by the European Parliament for a privacy breach, applicable from 25 May 2018, is a fine of 20 million euros, or 4% global annum revenues whichever is higher.

Below-the-surface costs: In addition to the financial loss, fine or costs and economic costs of response, there are several other intangible costs that can continue to affect the organization’s business.

Cyber Security Law

Cyber security law is a rather new field for many countries and still developing worldwide. Countries are being increasingly concerned about the entire issue pertaining to cyber security and the threats it imposes. Cyber security impacts not only the economy of the nations but also the sovereignty of nations by threatening the power and authority of the governments. However, there is no international framework on cyber security and countries are taking it upon themselves to come up with their own national legislations to deal with cyber security breaches.

In India also there is no particular legislation for cyber security law, but the horizontally applicable cyber security measures are provided for in the IT Act, 2000 and the Information Technology (The Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules 2013 (“CERT-In Rules”). For example, the CERT-In Rules require individuals and organizations affected by any kind of cyber security incidents to mandatorily report the same to the CERT-In in order to obtain assistance. 

Specific security-related compliances for certain types of information are also found in the following:

1. The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“SPDI Rules”). 
2. Information Technology (Information Security Practices and Procedures for Protected System) Rules, 2018 (“Protected System Rules”). 
3. Companies (Management and Administration) Rules, 2014 (“CMA Rules”). 

Concept of Cyber Jurisprudence

Cyber law is a very new field and has had very little structured study as compared to other, older, branches of the law. To define cyber jurisprudence, we must define jurisprudence first. Black’s Law Dictionary gives us two different definitions of jurisprudence:

First is, “a method of legal study that concentrates on the logical structure of law, the meanings and uses of its concepts, and the formal terms and modes of its operation.” and the other, “a system, body or division of law.” In simple terms, it can be said that jurisprudence is the science and philosophy or theory of the law.

Now coming to cyber jurisprudence, it is the legal study that concentrates on the logical structure, the meanings and uses of its concepts, and the formal terms and modes of operation of cyber law. Legal issues relating to the electronic communication, computer systems and network in this world of internet is demanding a new kind of jurisprudence, cyber jurisprudence with a virtual approach. Cyber jurisprudence describes the principles of legal issues of cyber law, which exclusively regulates the cyber space and internet and deals with the complex idea of cyber jurisdiction. 

Conclusion

There is an urgent need to establish a strong international cyber security regime which would fulfill all the needs of various concerns and issues. A common approach to cyber security can be developed, implemented and encouraged by applying the principles of governance, management and inclusiveness. This would encourage a system of cyber security which would ultimately lead to the development of a natural instinct for what is safe and what is risky. Need for the development of an international, multi-stakeholder regime that would include industry, governmental, international, and non- governmental organizations focused on cyber security in space. Apart from this, the emergence of cyber jurisprudence around the world has promoted the growth of new dimensions in law and cyber law. Development of cyber jurisprudence is opening new areas for better cyber legislations. 

References

• Security Breach; Technopedia; Date of Access: 11.01.2019 <https://www.techopedia.com/definition/29060/security-breach>
• Cyber security for business- Impact of cyber attack on your business; NIBusinessInfo; Date of Access: 11.01.2019 < https://www.nibusinessinfo.co.uk/content/impact-cyber-attack-your-business>
• What is Cyber Security?; itgovernance; Date of Access: 11.01.2019< https://www.itgovernance.co.uk/what-is-cybersecurity>

• What is a security breach? By Steve Symanovich; Norton; Date of Access: 11.01.2019< https://us.norton.com/internetsecurity-privacy-security-breach.html> 

• The Consequences of a Cyber Security Breach; Sunguard; Date of Access: 11.01.2019<https://www.sungardas.com/en/about/resources/articles/the-consequences-of-a-cyber-security-breach/>

• Jeff Kosseff: Defining Cybersecurity Law; 103 Iowa L. Rev. 985 (2018)<https://ilr.law.uiowa.edu/print/volume-103-issue-3/defining-cybersecurity-law/>
• India: Cybersecurity 2020; ICLG; Dated: 22.10.2019; Date of Access: 11.01.2019< https://iclg.com/practice-areas/cybersecurity-laws-and-regulations/india>

• Stephenson, P.R.: Defining a Cyber Jurisprudence (2017); Annual ADFSL Conference on Digital Forensics, Security and Law; 8; https://commons.erau.edu/adfsl/2017/papers/8
• Shahid Jamal Tubrazy: Cyber Jurisprudence- An Emerging Concept; Academia; Date of Access:11.01.201<https://www.academia.edu/12889941/Cyber_Jurisprudence_an_Emerging_Concept>

• Cyber Security Law, Its Regulation And Relevance For Outer Space by Pavan Duggal; Date of Access: 11.01.2019  <http://www.unoosa.org/documents/pdf/hlf/HLF2017/presentations/Day2/Session_7b/Presentation5.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 skill.

The post Cyber Security Law: Sub-Discipline of Cyber Law appeared first on iPleaders.

This article is written by Shambhavi Tripathi, a 3rd-year student of LL.B. in Panjab University, Chandigarh. The article deals with the introduction to E-commerce, its types, pros and cons of E-commerce and issues related to E-commerce under cyber law.

Introduction

E-Commerce, also known as electronic commerce or internet commerce, is an activity of buying and selling goods or services over the internet or open networks. So, any kind of transaction (whether money, funds, or data) is considered as E-commerce. So, E-commerce can be defined in many ways, some define E-Commerce as buying and selling goods and services over the Internet, others define E-Commerce as retail sales to consumers for which the transaction takes place on open networks. The buying and selling of products, services, and digital products through the Internet all fall under the umbrella of e-commerce. 

Organisation for Economic Cooperation and Development (OECD) defines e-commerce as:

“All forms of transactions relating to commercial activities, including both organizations and individuals, which are based on the processing and transmission of digitized data including text, sound, and visual images.” According to this view, E-commerce does not necessarily require the use of the Internet. E-commerce includes all forms of transactions that process and transmit digitized data which includes text, sound and visual images.

E-commerce is the application of information technology and communication technology to three basic activities related to commercial business, the three basic activities are as follows: 

1. Production and support- which includes assisting production, distribution, and maintenance of goods and services.
2. Transaction preparation- which includes getting product information into the market-place and bringing buyers and sellers into contract with each other; and
3. Transaction completion- which includes concluding transactions, transferring payments, and securing financial services. 

Types of E-Commerce

E-commerce can be categorised into six categories:

1. Business-to-Business (B2B) – B2B e-commerce consists of all kinds of electronic transactions, dealings and business related to the goods and services that are conducted between two companies. This type of e-commerce exists between the producers of a product and the conventional wholesalers who advertise the product to consumers for purchase. So, in this kind of e-commerce the final consumer is not involved and the online transactions only involve the manufacturers, wholesalers, retailers etc.
2. Business-to-Consumer (B2C) – It is the most common form of e-commerce, and it deals with electronic business relationships between businesses and consumers. This kind of e-commerce allows consumers to shop around for the best prices, read customer reviews and find different products that they would not find otherwise in the retail world. This kind of e-commerce is related to the transactions and relationships between businesses and the end customers. Today, we find various online shopping sites and virtual stores on the internet, that sell thousands of products, ranging from computers, fashion items to medicines and other necessities.
3. Consumer-to-Consumer (C2C) – This level of e-commerce consists of all electronic transactions that take place between consumers. This consists of electronic transactions of goods and services between two customers and is mainly conducted through a third party that provides an online platform for these transactions. C2C e-commerce consists of sites where old items are bought and sold, such as OLX, Quickr etc. Generally, these payment transactions are provided by online platforms (such as PayTM, GooglePay etc), and are conducted through social media networks (such as Facebook, Instagram etc) and websites.
4. Consumer-to-Business (C2B) – In C2B e-commerce, a consumer or an individual makes their goods or services available online for companies to purchase, so, in this kind of e-commerce a complete reversal of the selling and buying process takes place. For example a graphic designer making a company site or logo or a photographer taking photos for an e-commerce website. This is very relevant for crowd-sourcing projects.
5. Business-to-Administration (B2A) – This e-commerce consists of electronic transactions that takes place companies and bodies of public administration such as government. Therefore, the B2A model is sometimes also referred to as B2G (Business-to-Government). Many processes are becoming optimized through digitalization because of that many administrations and governing bodies are implementing third-party technologies to assist in the process. This involves many services in various areas such as social security, fiscal measures, employment and legal documents.
6. Consumer-to-Administration (C2A) – This e-commerce consists of electronic transactions that takes place between people and bodies of public administration. This relationship allows access for consumers to receive information, make payments, and establish direct communication between the government or administrations and the consumers. Many common C2A transactions may include paying taxes, fines, or paying tuition to a University. 

The main objective of both the B2A and C2A types of eCommerce is to increase flexibility, efficiency, and transparency in public administration.

Important Issues in Global E-commerce

1. Issue relating to Privacy- The increase of electronic transactions over the internet raises various concerns on the collection, storing and manipulation of personal information without the consent or knowledge of consumers. The functioning of E-Commerce is highly connected and dependent upon the collection and storing of personal information of consumers to provide them with the products and services and maintain their data. Therefore, there is a chance that without the consent or knowledge of consumers, personal information may be shared with or sold to others. Because of these concerns the protection of privacy has become one of the most important policy issues among policy-makers, businesses and consumers. 
2. Issue relating to Security- E-Commerce security can be defined as “a protection of an information resource from the threats and risks in the confidentiality, authenticity and integrity of the electronic transactions transmitted via a network”. The e-commerce can only grow if the system is capable of providing the same level of trust and security which is found in traditional methods of business. This can be achieved only if consumers of e-commerce are confident of the security provided by the concerned e-commerce. 
3. Issue relating to Consumer Protection– The consumers must be sure that they are as protected in the electronic marketplace as they are in the real marketplace. There are many consumer protection issues related to electronic transactions such as card information, bank information, etc. Therefore, it becomes important that confidential information such as credit/ debit card information, bank account number etc. are kept protected. Earlier, it used to be difficult for a consumer to verify the authentication and security information in an online atmosphere, but with the introduction of digital signature it has become easy and safe.
4. Issue relating to Content Regulation- There is certain types of online transmissions that are deemed inappropriate, offensive or harmful to certain segments of consumers and users of E-Commerce. Adult materials, bullying, terrorism, hate speech against minors and sedition are some examples of those activities that raise public concerns. And those who are concerned about these harmful or inappropriate Internet contents advocate for regulatory intervention and content regulation by government and concerned organizations. This is an issue for policy makers and concerned companies. However, the counter argument for such content regulation and intervention is on the ground of right to speech and expression. This problem should be solved without affecting the functioning and growth of e-commerce.
5. Issues relating to Access: The following are the main issues related to access to e-commerce:

Access to infrastructure- In order to conduct commercial transactions over the Internet, consumers need to have access to telecommunications networks and services. 

Access to content- In e-commerce, the kind and amount of content transmitted over this infrastructure is also one of the critical elements for the growth of e-commerce. The contents have to be competitive, respecting the cultural values of others, and not inappropriate or harmful to others.

Universal access- With the increasing importance and involvement of Information and Communication Technologies in our everyday lives, universal availability of various communication services, has become a necessity for both consumers and companies of e-commerce. A large number of people are still living without the basic telephone services. This gap related to technology and digitization in the world population is called as digital divide. The digital divide affects the people’s capacity to access modern Information and Communication Technologies, which in turn impedes their capacity to access the Internet and e-commerce, which ultimately daunts the growth of e-commerce.

Language and localization: With e-commerce extending to other boundaries, language and localization becomes an issue because it becomes difficult to communicate with a native speaker of any particular country. 

Pros of E-Commerce

E-commerce is an advanced way of conducting businesses online and across the borders and because of that it has various advantages to it: 

1. Its reach is across the global market and with minimum investments. 
2. It enables sellers to sell their products on a global level and allows customers to make a broader choice. Now sellers and buyers can meet in the virtual world, without the barrier of borders.
3. E-commerce process reduces the product distribution chain to a considerable extent. 
4. It helps in making a direct and transparent business and transaction channel between the producers, wholesalers and final customers. 
5. It provides quick delivery of goods and customer complaints are also addressed quickly. It also saves time, energy and effort for both the consumers and the company.
6. E-commerce leads to increased productivity and better service as it brings sellers and customers closer. 
7. The customer can choose between different sellers. 
8. Customers now have access to virtual stores all the time.
9. E-Commerce leads to considerable cost reduction of goods and services. Transaction costs are also reduced in E-commerce and due to that customers get to buy products at a comparatively lower rate.

Cons of E-Commerce

However, along with advantages, E-commerce has certain disadvantages too, such as:

1. Its dependence on network connectivity and information technology.
2. There aren’t definite legislations both domestically and internationally to regulate e-commerce transactions.
3. There can be a loss of the privacy of the customer.
4. Security is another issue. Issues like credit card theft, identity theft, etc. are some of the security related concerns.
5. There can be fraudulent financial transactions on online platform.
6. The costs of opening the e-commerce portal and maintaining it are very high. The setup of the hardware and the software, the training cost of employees and the constant maintenance are all expensive.

Conclusion

E-commerce is an ever developing area. With the advancement in technology and communication, e-commerce has also gained popularity among the people of India and worldwide. It has made e-business easy and accessible to people sitting at home. E-commerce has a huge impact on costs, access to goods and services and increased productivity of businesses. It also plays an important role in the economic growth and development of a nation. Though it is a relatively new area belonging to the era of the internet, it has the potential to change and replace the traditional form of business and trade activities. 

However, Indian e-commerce still faces many difficulties in web marketing because of infrastructural difficulties, limited access and computer illiteracy. Majority of the Indian population lives in rural areas and they do not have sufficient knowledge about computers and the internet. Some customers even in urban areas do not have sufficient facilities and knowledge of online transactions and payments, therefore, this activity of buying and selling of goods online is limited to certain people who are equipped with the knowledge of computer and internet. However, with the government initiatives like Digital India, this scenario has changed a lot in the last decade and India is becoming a huge platform for e-commerce.

References

• Abdul Gaffar Khan: Electronic Commerce: A Study on Benefits and Challenges in an Emerging Economy; Global Journal of Management and Business Research: B Economics and Commerce; Vol. 16; Issue 1; 2016
• Rajneesh Shahjee: The Impact of Electronic Commerce on Business Organization; Scholarly Research Journal for Interdisciplinary Studies; Vol.4/27, 2016
• Important Issues In Global E Commerce Information Technology Essay; UKEssays; Dated: 05.12.2016; Date of Access: 20.10.2019<https://www.ukessays.com/essays/information-technology/important-issues-in-global-e-commerce-information-technology-essay.php>

• What are the different categories of E-Commerce by Alex Wilks; Numinix; Dated: 05.11.2018; Date of Access: 20.10.2019 <https://www.numinix.com/blog/2018/11/05/what-are-the-different-categories-of-e-commerce/>

• Types of eCommerce Business Models, Pros, and Cons by Puneet Bhalla; Shiprocket360; Dated: 08.08.2018; Date of Access: 20.10.2019 < https://360.shiprocket.in/blog/ecommerce-business-models-types-pros-cons/>

• The Different Types of e-Commerce by Jack D’Errico; Trellis; Dated: 26.02.2019; Date of Access: 21.10.2019 < https://trellis.co/blog/the-different-types-of-e-commerce/>
• Understanding the challenges in cross-border ecommerce; PitneyBowes; Date of Access: 21.10.2019 <https://www.pitneybowes.com/uk/global-ecommerce/case-studies/the-challenges-of-cross-border-ecommerce.html>
• Emerging trends in business: Electronic Commerce; Toppr; Date of Access: 21.10.2019 < https://www.toppr.com/guides/business-environment/emerging-trends-in-business/electronic-commerce/>
• International Ecommerce Issues: How to Diagnose Global Barriers with Analytics by Edin Šabanović; Date of Access: 21.10.2019 < https://www.shopify.com/enterprise/international-ecommerce-issues>

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 skill.

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This article is written by Shreyak Patnaik, a third-year student pursuing B.A LL.B from Symbiosis Law School, Hyderabad. This article deal with the Consumer Protection Act, 2019, the changes the act has gone through, the relevant authorities and important cases to keep in mind. 

Introduction

You’re a consumer. No, it’s not a conditional statement. If you are reading this article on the Ipleaders blog. You are a consumer. You have purchased a phone, a computer or whatever device you are viewing this on, you have bought an internet connection and have paid for the electricity which is charging the device you are using to read this article. You are a part of the society, and therefore are also a consumer of the market that inherently exists in modern society. Humans are not self-sustainable, they rely on each other which forms the basis of society, and with society, there also exists a market: A commonplace for individuals to trade their commodities and buy other individual’s commodities and services. So being a part of that system, makes you a consumer. Now, as a consumer, you are entitled to certain rights when you purchase something from the market, much like any other individual living in society being entitled to societal rights.

So, as an individual of the society, the way you are aware that you can’t be murdered or can’t have your purse stolen from you at gunpoint. Similarly, a consumer, you must also be aware of certain rights you are entitled to, as a participant of the market.

Definition of consumer

I told you that you’re a consumer. But that’s not enough, is it? When are you a customer? What brings you within the ambit of a customer? The answer lies in The Consumer Protection Act, 2019. Any problems you have as a consumer and all the rights that you are entitled to as a consumer along with how to go about the procedure in case any of those rights are violated are all mentioned in this Act. So who is a consumer? 

Under section 2(7) of the Act, it is stated that consumer is anyone who:

 (i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or 

(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person, but does not include a person who avails of such service for any commercial purpose.

If you have bought any goods or hired any service whatsoever for any consideration or with a promise to pay consideration or with an arrangement which allows you to pay in instalment (think: EMI), or are using goods or availing services hired by someone else but with their permission, then you’re a consumer of the good or service. 

Definition of deficiency in service

Deficiency, within the meaning of the Act, is always of service. So, problems in the goods purchased are defects and defects in services availed is labelled as a deficiency. Deficiency is defined in the Act under section 2(11): 

“deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes:

 (i) any act of negligence or omission or commission by such person which causes loss or injury to the consumer; and 

(ii) deliberate withholding of relevant information by such person to the consumer; 

So for example, if you have hired a mechanic to refill your bike’s mobile oil and he negligently uses petrol instead of mobile oil, that will be called a deficiency in service. Basically, if you face a loss directly because of the acts of the individual whose service you hired, then it can be labelled a deficiency in service. 

Consumer protection redressal agencies

To protect consumer rights, the Act mentions the establishment of three redressal mechanisms wherein the consumers can approach to address their grievances. 

District Commission 

This the lowest rung in the redressal commissions that consumers can approach. The State Government, under section 28(1) establishes at least one district consumer dispute redressal commission in every district of the state. If the government deems fit, it can even establish more than one district commission in a district. Every district commission needs to have a minimum of one president and two members but can have more members after discussing it with the Central government. If your redressal value is 1 crore or less than that, then you can approach the district commission. 

Who can file a complaint at the district commission? 

The following people can file a complaint at the commission under section 35(1) of the Act:

• The consumer

i) To whom such goods are delivered, or sold or agreed to be sold or such service which has been provided or has been agreed to be provided.

ii) Who alleges unfair trade practises in respect of such goods. 

• Consumer Association

Any voluntary consumer association registered under the law. It doesn’t matter if the consumer is part of such association or not. 

• One or more consumers appearing on behalf of all consumers with a common interest

These consumers would first need to get permission from the District Commission to proceed with the complaint in such a manner. 

• The Central Government, The State Government or the Central Authority as the case might be 

Under Section 34(2), a complaint can be filed at the District Court under within whose local limits: 

• • The opposite party or each of the opposition parties, in case there are more than one, normally reside, or carry on business, or have a branch or personally work for gain. 
• Any of the opposite parties ordinarily reside, or carry on business, or personally work for gain. Provided, the permission of the district commission is taken. 
• Where the cause of action wholly or partly arises. 
• Where the complainant resides or personally works for gain. 

On filing the complaint, it is necessary for the Commission to admit or reject the complaint within 21 days of receiving the complaint. It is legally prohibited under Section 36 for the commission to reject a complaint without first hearing the complainant. It is also necessary for every proceeding to be presided by the President and one member at least. Where the member who has been sitting for a particular proceeding is absent, the proceeding can be resumed with another method. 

Once the complaint is admitted, the commission must:

1. Refer a copy of the complaint, within 21 days of the complaint being admitted, to the opposite party and direct it to give its version of the story within 30 days or the extended period granted by the commission. 
2. If the opposite party disputes the allegation or fails and omits to take any action regarding the complaint, then district commission must deal with it in the following ways. 
3. Must seal the allegedly defective goods, and send them to the appropriate laboratory after authenticating it in the manner required. It must direct the laboratory to find if there is any genuine fault with the goods and report its findings to the commission within 45 days or how much ever time granted by the commission.
4. Before the goods go to the library, the complainant must be directed to deposit the sum of money required for testing in the credit of the commission. 
5. If any of the parties dispute the correctness of the finding of the laboratory, then the parties must be directed to submit their objections in writing to the commission.
6. Give a reasonable opportunity to the opposite party or the initiating party to be heard regarding their objections. 

If the above-mentioned procedure can’t be followed due to the lack of goods to take a sample from or if the defect alleged is in the service of the opposite party. Then the commission shall settle the dispute: 

1. On the basis of evidence provided by the complainant or the opposite party if the opposite party disputes the allegation. 
2. Take an ex parte decision if the opposite party omits to do anything regarding the allegations. 
3. Decide the case on its merits if the complainant fails to show up for the hearing. 

If it’s inconvenient for the party to show up to the commission in person, you can submit an application for hearing or examination of parties through video conferencing and if the district commission agrees with the reasons then it may allow so after recording the reason. 

The commission must deal with the case as expeditiously as possible and endeavour must be done to dispose of the case within three months if no analysis or testing is required and five months if analysis and testing are required. 

The District commission has the same power as the district court under this act.

If a party is aggrieved by the order of the district commission then they may prefer an appeal to the State Commission within 45 days of receiving such order. Even though the State Commission may entertain the plea after 45 days if sufficient reason is given by the party. 

The State Commission shall not hear the appeal of the party if the party has to pay a certain amount ordered to be paid by the District Commission. Minimum 50% of the amount must be paid before the State Commission will hear the appeal.

State Commission 

The State government establishes a State commission, under section 42(1) of the Act, in the state through the notification and can even establish regional branches if it seems fit. Each State Commission shall consist of one President and no less than four members and a maximum of as many members as is required. 

According to section 47, the State Commission has the jurisdiction to entertain:

(i) complaints where the value of the goods or services paid as consideration, exceeds rupees one crore but does not exceed rupees ten crores: 

Provided that where the Central Government deems it necessary so to do, it may prescribe such other value, as it deems fit; 

(ii) complaints against unfair contracts, where the value of goods or services paid as consideration does not exceed ten crore rupees; 

(iii) appeals against the orders of any District Commission within the State;

Apart from that, it also has the jurisdiction to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any District Commission within the State, where it appears to the State Commission that such District Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested or has acted in exercise of its jurisdiction illegally or with material irregularity. 

A bench of the State Commission must consist of a President and one member or more if the president deems it fit. 

The State Commission also has the power to shift proceedings from one district commission to another under section 48. The State Commission can do that on its own cognizance or through an application filed by the parties. But it must be to serve the purpose of justice. 

State Commission disposes of the case in the exact same method as the District Commission and also holds the power to review its own cases. 

If aggrieved by the decision, the aggrieved party may prefer an appeal to the National Commission within 30 days of receiving the order from the state commission. If sufficient reason is shown then the national commission can also entertain the plea after the thirty days. 

The national commission shall not listen to an appeal if the person who has to pay a particular amount from the order of the state commission, has not paid at least 50% of the amount ordered to be paid.

The appeal must be dealt with expeditiously and endeavours must be made to dispose of the appeal within 90 days from its date of admission.

National Commission 

Under Section 53(1), the Central Government establishes a National commission through notification. The main National Commission operates on the national capital region but the Central government can establish regional branches through notification. The National Commission must have one president and at least 4 members with the maximum being whatever is prescribed by the national government. 

The National Commission has jurisdiction, under section 58 of the Act: 

(a) to entertain:

(i) complaints where the value of the goods or services paid as consideration exceeds rupees ten crores: Provided that where the Central Government deems it necessary so to do, it may prescribe such other value, as it deems fit; 

(ii) complaints against unfair contracts, where the value of goods or services paid as consideration exceeds ten crore rupees; 

(iii) appeals against the orders of any State Commission; 

(iv) appeals against the orders of the Central Authority; and 

(b) to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity. 

A bench in the National Commission must at least consist of the President and one member but there can be more members if the President deems it fit.

The National Commission disposes of a case in the same manner as the district commission and also reserves the right to review its cases suo moto or based on an application filed by one of the parties.

Section 65(1) also states

All notices, required by this Act to be served, shall be served by delivering or transmitting a copy thereof by registered post acknowledgment due addressed to opposite party against whom complaint is made or to the complainant by speed post or by such courier service, approved by the District Commission, the State Commission or the National Commission, as the case may be, or by any other mode of transmission of documents including electronic means:

If the postal delivery guy acknowledges that the post was refused by the party then the commission must acknowledge the party as duly served under 65(2).

If aggrieved by the decision then an appeal does lie to the Supreme Court if made within thirty days of receiving the order.

Administrative control

Section 70 of the act states that the national commission shall lay down regulations for the State Commission after consultation with the Central government, for the better protection of the consumers and for that purpose must also have administrative control over all state commissions in the following matters: 

a) monitoring performance of the State Commissions in terms of their disposal by calling for periodical returns regarding the institution, disposal and pendency of cases; 

(b) investigating into any allegations against the President and members of a State Commission and submitting inquiry report to the State Government concerned along with copy endorsed to the Central Government for necessary action; 

(c) issuance of instructions regarding the adoption of uniform procedure in the hearing of matters, prior service of copies of documents produced by one party to the opposite parties, furnishing of the English translation of judgments written in any language, speedy grant of copies of documents;

(d) Overseeing the functioning of the State Commission or the District Commission either by way of inspection or by any other means, as the National Commission may like to order from time to time, to ensure that the objects and purposes of the Act are best served and the standards set by the National Commission are implemented without interfering with their quasi-judicial freedom.

There shall be a monitoring cell instituted by the president of the national commission and the State Commission shall also have the same administrative control over the district commission. 

Section 71 of the Act also states that every decision of the commission must be enforced in the same way as a decree made by the court under Order XXI of the first schedule of the Civil procedure code. 

Section 72 lays down the punishment on the disobedience of commission orders:

Whoever fails to comply with any order made by the District Commission or the State Commission or the National Commission, as the case may be, shall be punishable with imprisonment for a term which shall not be less than one month, but which may extend to three years, or with fine, which shall not be less than twenty-five thousand rupees, but which may extend to one lakh rupees, or with both. 

The section further grants the commissions the same power as a judicial magistrate first class under the Code of Criminal Procedure.

Comparative Analysis of Consumer Protection Act: 1986 and 2019

The amendment of 2019 to the Consumer Protection Act came after thirty-three years of the act being passed. Technology has progressed a lot in these years and while the older act tried to keep updated with small amendments here and there. The repeal of the older act and the establishment of the 2019 act was much needed. So what’s new in the Consumer Protection Act, 2019?

First and foremost, while there have been judicial pronouncements bringing the purchases made through online methods under the ambit of consumers. The 2019 Act explicitly includes the consumer who purchases goods or services online. Apart from the inclusion of online purchases the act has also made endorsers answerable regarding false or misleading advertisements. In the 1986 act, the onus of that was only on the manufacturers and the service providers. Under section 21(2) of the 2019 Act, the commission could even levy a fine of fifty lakhs of the endorser continues to advertise false information about the products even after getting a notice issued by the consumer. Misleading advertisements are also under the ambit of ‘Unfair Trade Practices’ in the new act. Disclosure of personal information given in the course of the transaction is also considered an offence under the act. The Act also proposes provision for product liability wherein the manufacturer not only has to compensate for the defective goods but also has to compensate for any loss or injury inflicted on the complainant due to the defect. So for example, if a bike is sold to you and the break is loose and you have an accident as a result, the manufacturer has to compensate for the defect and also compensate you for the accident which you faced because of the defect.

It’s not just the offence though, the redressal agencies have also gone through changes under the new Act. While the 1986 act did stipulate for the commissions to either accept or reject a complaint within 21 days of receiving it, the 2019 act has gone a step further and stated that if no action has been taken within 21 days then the complaint is to be assumed to be admitted. The pecuniary jurisdiction of the district commission has also been raised to ease the burden of the state and national commissions. You can apply to the district commission now if the value of your case is within 1 crore. You don’t even need to file the complaint at the residence of the opposite party. It can be filed where you reside or where the cause of action arose as well. The commissions also have the power to review their cases now and can also refer cases to mediation with the consent of both the parties.

The act also proposes for the establishment of an independent regulator: Central Consumer Protection Authority (CCPA). While this authority won’t be listening to consumer grievances or settling disputes, it will be taking administrative steps such as imposing liabilities to address any unfair trade practises etc. It’s essentially another body to ensure a stronger presence of consumer rights in the country.

Cases on Consumer Protection Act

Class Action Suit under The Consumer Protection Act

In the case of Ambrish Kumar Shukla & 21 others. v. Ferrous Infrastructure Pvt. Ltd., the national commission had the question of the legitimacy of class action suit posed in front of it. The respondents in the case argued that even if the interest is similar, with multiple causes of action, the provisions of 13(6) will not be binding on the case and therefore a class action suits with multiple consumers cannot be entertained since the consumers only really care about their cases which were different in relief and therefore it cannot be considered to be the same interest. The National Commission rejected this argument stating, while placing reliance on the rationale of the Supreme Court bench in the case of Chairman, Tamil Nadu Housing Board, Madras vs. T.N Ganapathy, that provision of 13(6), which allowed Rule 8 Order 1 of the Civil Procedure Code apply to class-action suits in consumer disputes, and of 12(1)(c) were to facilitate decisions where a large number of consumers were interested without recourse to each of them filing an individual complaint. The Commission said that the intention of the legislation must be looked at the interpretation accordingly must be done to subserve the intention of the legislation. 

The intention of class action suits stipulated in Rule 8 Order 1 and by way of that, 13(6) and 12(1)(c), was to avoid multiplicity of proceedings and therefore in deciding if a class action suit can be bought it is that particular intention which has to be kept in mind. The commission stated that mere difference in the cause of action among the different relief seekers will not be a bar from a class action suit if the nature of the interest asked by all of them is the same. The commission took the example of a builder defaulting in giving the flats to the residents even after getting paid.

The residents could have different flats such as 2BHKs and 4BHKs and 1BHKs and therefore will have different reliefs but they all share the same interest of either getting damages from the builder or getting possession of their flats and therefore can join together to institute a single suit against the builder. Now, the other side to it is that the consumers don’t have the option to only include only some of the aggrieved consumers in the complaint. On instituting a class action suit, it is the court’s responsibility to give notice to all consumers interested in the case to join the suit. The cost of serving notice to all the interested parties will be done at the expense of the person who instituted the suit. Moreover, if the person who instituted the suit has not done due diligence and is unaware of the case facts, the commission can substitute the instituting consumers with another interested consumer from the complaint. 

How can a commission decide the pecuniary jurisdiction? 

One more question which was posed in front of the commission was regarding the grounds on which the pecuniary jurisdiction of the commission is to be decided. The commission stated that in deciding the pecuniary jurisdiction the aggregated prices of the good and the compensation claimed must be taken into consideration and if its a class action suit then the aggregate prices of all the goods involved and the total compensation claimed must be taken into consideration in deciding the pecuniary jurisdiction of the commission. Further clarifying, the commission also cleared the question regarding whether the market value of the goods is to be considered or the price at which the goods were purchased by the consumer. The commission stated that the price was paid to be purchased by the consumer must be the price that is considered.

While this decision did come at a time when the Consumer Protection Act, 1986 was in the place. The rationale of this commission was affirmed by the Supreme Court bench in 2019 in the case of Rameshwar Prasad Shrivastava v. Dwarkadhin Project (P) Ltd. [(2019) 2 SCC 417].

Limitation Provision in the Consumer Protection Act 

In the case of National Insurance Company Ltd. v. Hindustan Safety Glass Works Ltd. & Anr., the respondents were seeking Supreme Court interference in the dispute being heard by the National Commission on the grounds that the complaint was admitted by the Commission after the duration prescribed by the Statuette of Limitation. The Court noticed that the delay in filing a complaint happened only because of the delay caused by the respondent. In the case, the complainant had filed for insurance the day after the mishap happened but the insurance company stalled the payment by taking the opinion of two different surveyors before eventually completely denying payment. 

The court stated that the limitation was not supposed to be strictly followed. Rather, a pragmatic view of the rights of the consumer must be taken into consideration. The court in the case stated that provision of the limitation cannot be strictly construed for the disadvantage of the consumer, especially where the supplier is causing a delay. If the delay caused is outside the power of the complainant then some concession can be granted. Therefore the Supreme Court allowed the case to be admitted in the commission. 

Trust cannot Lodge a Complaint under the Consumer Protection Act

In the case of Pratibha Pratisthan & Ors. v. Manager, Canara Bank & Ors, it was stated that since a trust does not come under the definition of neither consumer nor complainant nor even “person”. Therefore the trust cannot lodge a complaint under the Consumer Protection Act. The same was also affirmed in the case of Consumer Online Foundation through its Managing Trustee, Mr Bejon Kumar Mishra vs. M/s Supertech Ltd 1114, Hemlunt Chambers 89, 11th Floor, Nehru Place, New Delhi 110019.

Insurance Company cannot Reject Claims on Technical Grounds

In the case of Om Prakash v. Reliance General Insurance[(2017) 9 SCC 724], The insurance company denied the complainant insurance based on his delay in intimating the insurance company. The complainant stated that it was out of his power. The court finding substance in his argument stated that the inability to meet conditions due to circumstances outside the power of the victim must not be a bar for settling genuine claims. The Court stated that the Consumer Protection Act, 2019 was beneficial legislation and therefore the interpretation of the legislation must be liberal keeping the benefit of the consumer in mind. 

Corporate Bodies can be sued under the Consumer Protection Act

In the case of Karnataka Power Transmission Corporation v Ashok Iron Works Private Limited, [(2009) 3 SCC 240] the question of whether a corporation can be considered a “person” under the Consumer Protection Act. The Court, answering the question in the affirmative, stated that the definition of “person” in section 2(1)(m) is not an exhaustive definition but an inclusive one. The court called that clause to be an interpretative one and therefore urged for interpretation to be done with the intention of the legislature in mind. The court stated that the legislature would not have intended to exclude a juristic person from the definition of person enumerated in the Act. Therefore, corporate bodies were “persons” under the ambit of the act and were liable to be sued under the Act as well. 

Professional services fall within the scope of the Act

The question of the status of professional services rendered under the Consumer Protection Act was raised in the case of Indian Medical Association v V.P. Shantha and others. The status of the service rendered by a medical professional was going to be seen in respect to section 2(1)(o) of the Act, which reads as follows:

“service” means service of any description which is made avail­able to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;

The apex court stated that since the Act was established for the benefit of the consumer, the definition of the “service” was also to be construed keeping the “consumer” in mind. On perusal of section 2(1)(o) if the act, the court stated that the definition of service was divided into three parts, namely, the main part, the inclusionary part and the exclusionary part. The court stated that the scope of main part in itself was extremely wide while placing reliance on another judgement, namely, Lucknow Development Authority vs. M.K Gupta, where the court had used the definition of “any” established in Black Law’s dictionary to establish that it meant “all” or “some” or even “one”.The court in that judgement stated that the main part gave the widest scope to the definition of service with inclusive part adding to the list but not exhausting it. The exclusive part placed only two things as bars so essentially with all three added, a service doesn’t come in the ambit of consumer protection act, only if it’s free of charge or personal service.

In the medical association case, it was contended that service can only bind occupations and not professions and furthermore, people practising in the medical profession were already answerable to the Medical Council Act. The Supreme Court rejected both the contentions stating that every professional is to be answerable to a certain state of competency and therefore is not free from giving damages in case of negligence act. The apex court also stated that being answerable to the Indian Medical Council Act for professional follies is no solace for the victim of the negligence of the medical professional. Placing reliance on the changing status of the medical professionals in the UK where they are deemed to be public servants engaging in commercial activities on a wide scale therefore answerable to the same consumer rules as other service providers, the court concluded that medical practitioners are not free from the ambit of service defined in consumer protection act, merely because it is a profession. The respondents also placed another contention that since deficiency of service only refers to inadequacy or shortcoming or faults and the medical practice cannot be judged on any such fixed norms, it therefore cannot be termed a service. The court placed reliance of section 14(1)(d) of the act wherein it was mentioned that the consumer could file for relief for the loss caused due to negligent act of the service provider and therefore stated that the deficiency of service was to be ascertained with the same test as is used to determine damages due to negligence. The respondents further argued that since the bench was made with a composition which could not understand the complexities of the profession, therefore, it was not competent to judge in the case. The court rejected that contention as well stating that the Bench’s job was to look at a case from a legal perspective and it was the job of the parties to put forth the arguments. Help could be taken from experts in the field to help propound certain arguments and the bench was supposed to take all the facts given and state the legal authenticity of it. It is impossible to put a bench ho is well versed in all the subject matters that come before it and only need to be well versed in the legal jurisprudence which the President it. 

Therefore, the apex court concluded that services rendered by medical practitioners by way of consultation, diagnosis and treatment (either surgical or medicinal) are within the ambit of service. Service rendered by the doctor free of charge shall not be considered within the ambit of service under the Act and the payment of a mere token charge for consultation shall not be considered as consideration for the treatment. 

Services have to be rendered with due care and in accordance with Law

In the case of Poonam Verma v Ashwin Patel & Ors, The court stated, while placing reliance on the case of Indian Medical Association vs. V.P Shanta and others (Discussed above) states that medical practitioners have a duty of care to their patients. The court also mentioned the difference between a doctor of homoeopathy and a doctor of medicine and stated that a doctor of homoeopathy is not a registered doctor and therefore can’t administer medicinal treatments supposed to be given by registered doctors. 

Educational institutions must refund the extra fee paid

In the case of Sehgal School of Competition v Dalbir Singh, the complainant had paid the entire fees to the coaching institute but left halfway since the coaching institute was not teaching the subjects he was interested in learning. On asking for the refund of the extra amount paid, the institute denied which prompted the complaint with the national commission. The commission stated that coaching should not charge a lump sum amount and directed the coaching institute to refund the extra amount due to the complainant. 

Sympathy should not influence compensation

In the case of Nizam Institute of Medical Sciences v Prasanth S. Dhananka & Ors., much of the argument revolved around the question regarding the fault of the doctors. They found guilty of negligence and the complainant asked for 48 crores as compensation. The court agreed that the compensation was excessive and re-calculated the amount required by the complainant. The court said the complainant is entitled to the amount that is required by the complainant, but nothing more. The court said sympathy for the victim cannot influence the compensation awarded and the court has a responsibility of striking a balance and should only provide adequate compensation. 

Discovery rule for medical negligence

The discovery rule used to decide when the cause of arises in cases of a medical emergency was first propounded in Ayers v. Morgan [397 Pa.282, 154A.2d 788] by the US courts and was adopted by the Indian legal jurisprudence In the case of V.N.Shrikhande vs Anita Sena Fernandes. In the particular case, the complainant was negligently treated by the doctor resulting in a gauze inside her stomach creating an infection. The complainant got tested 9 years after the initial operation in the duration of which she was under constant pain. The respondents contended that since she did not visit the doctor even once after the operation and 9 years had passed so the entire complaint was barred by limitation. The court in response to this borrowed from the US ‘discovery rule’. Under the rule, negligence could be categorized into two kinds: 1) Patent 2) Latent. So if the damage inflicted by the doctor due to negligence is patent, then the cause of action arises on the date the act was committed but, on the other hand, if the act did was latent, then the cause of action arises when the victim realises the negligence. 

The court applying the rule said that the negligence in the case was latent, and therefore the complaint was within limitation.

Both parents and minor can claim for compensation under the Consumer Protection Act

In the case of Spring Meadows Hospital & Anr v Harjol Ahluwalia, the court was presented with the question of whether parents who take their child to the hospital are also consumers along with the child. The court answered in the affirmative stating that when parents take their child to the hospital, they are hiring the services of the doctor for their child and therefore come under the definition of the consumer while the child who is a beneficiary of the service also becomes a consumer. The court furthermore rejected the contention of the respondent that compensation can only be awarded to one of the parties i.e. the child and stated that since the child being beneficiary faced loss due to the negligence and the parent being hirer of the service also face loss in the form of mental agony. Both of them are liable to be awarded compensation. 

The imposition of a penalty for frivolous consumer claims

In the case of Sapient Corporation Employees Provident Fund Trust v HDFC & Ors., the complainant had alleged deficiency of service being provided by the respondent i.e the bank. The court rejected that argument also held that the complaint made by the complainant was frivolous and since the act was social legislation and does not charge court fees. There needs to be a guard against such frivolous complaints and therefore imposed a 25,000 rs fine on the complainant for a frivolous complaint.

Compensation to the complainants for frivolous appeals

In the case of Delhi Development Authority v D.C. Sharma, the appellant had frivolously instigated a suit against the respondent to keep him from getting the apartment allotted to him. The court noticed the baseless arguments and the clear intent of a frivolous suit, stated the following: 

We are clearly of the view that unless we ensure that wrongdoers are denied profit or undue benefit from frivolous litigation, it would be difficult to control frivolous and uncalled for litigations. In order to curb uncalled for and frivolous litigation, the Courts have to ensure that there is no incentive or motive for uncalled for litigation. It is a matter of common experience that courts otherwise scarce and valuable time are consumed or more appropriately wasted in a large number of uncalled for cases.

It is also a matter of common experience that to achieve clandestine objects, false pleas are often taken and forged documents are filed indiscriminately in our courts because they have hardly any apprehension of being prosecuted for perjury by the courts or even pay heavy costs. In Swaran Singh Vs. State of Punjab (2000) 5 SCC 668 this Court was constrained to observe that perjury has become a way of life in our courts.

It is a typical example of how a litigation proceeds and continues and in the end, there is a profit for the wrongdoers.

The court imposed a cost of 2,00,00 on the appellant to make sure no profit or benefit comes to the people who instituted frivolous lawsuits.

Conclusion

As a consumer, it is imperative for you to understand the rights and the reliefs awarded for violation of those rights. Only when the consumers in a country adamantly stand for what’s their rights will the sellers and the manufacturers take precautionary measures to ensure they never get involved over disputes regarding the violation of consumer rights. With the social legislation for consumers getting a new update and calling out the mistakes and shady practises of sellers and manufacturers being easier than ever. The onus is now on us as consumers to ensure our well-being. The maxim caveat emptor (buyer beware!) might have been rendered obsolete thanks to the new act, but it can only truly go obsolete when we use the rights that have been given to us.

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 skill.

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This article is written by Shambhavi Tripathi, a 3rd-year student of LL.B. in Panjab University, Chandigarh. The article deals with the relation and differences between cyber crime and cyber security, elements of cyber security and different categories of cyber crimes.

Introduction

Cyber crimes are increasingly becoming social engineering, where cyber criminals invest resources and time to gain knowledge about technical and scientific aspects of cyber security and because of that the term “cybercrime” is often confused with the term “cyber security”. Even though the two are extremely different and belong to different areas of expertise, yet they are interrelated with each other. The two are discussed below.

Relation between Cyber Crime and Cyber Security

Cyber Crime

Cyber crime is a crime that involves the use of computer devices and the Internet. It can be committed against an individual, a group of people, government and private organizations. Usually it is intended to harm someone’s reputation, cause physical or mental harm or to benefit from it, for example, monetary benefits, spreading hate and terror etc. As happened in 1998, a group of Tamil guerrillas, known as Tamil Tigers, sent over 800 e-mails to Sri Lankan embassies. The mails read “We are the Internet Black Tigers and we’re doing this to disrupt your communications.” Intelligence authorities identified it as the first known attack by terrorists against a country’s computer systems.

The main principle of cyber crime law is punishing unauthorized access or illegal use of computer systems and the internet with criminal intentions, so that damage and alteration of systems and data on it can be prevented. However, the largest threat of cybercrime is on the financial security of an individual as well as the government.

Cyber Security

Cyber security is a technique to protect computers, networks, programs, personal data, etc., from unauthorized access and threats. It is an activity by which information and other communication systems are protected and defended against the unauthorized use or modification or exploitation of the device. Cyber security is also called information technology security. It includes the techniques of protecting computers, networks, programs and data from unauthorized access or attacks that can cause damage to them or exploit them in any way. Basically cyber security is a technical approach to secure systems from such attacks. 

Good cyber security recognizes all the vulnerabilities and threats a computer system or network contains. It then identifies the cause of such vulnerabilities and fixes those vulnerabilities and threats and secures the system. Strong cyber security programs are based on a combination of technological and human elements.

Differences between Cyber Security and Cyber Crime

There are certain aspects on which cyber crime and cyber security can be differentiated upon, they are:

• Types of crimes: In cyber security, the kinds of crimes are where a computer software or hardware or computer network, is the main target (ransomware, viruses, worms, distributed denial of service attacks etc). 

In Cyber crimes, the crimes are where an individual or a group of individuals and their data is the main target. Governments and organizations can also be the targets of cyber crimes (cyber bullying, hate speech, child pornography trafficking, trolling).

• Victims: Victims in these two fields are also different. In cyber security, victims are governments and corporations whereas, in cyber crimes, the range of victims is rather broad as victims can extend from individuals, families, organizations, governments and corporations.
• Area of Study: Both these fields are studied in different areas. Cyber security is dealt with under Computer science, computer engineering, and information technology. Coding, networking and engineering strategies are used for making networks more secure. 

On the other hand, cyber crimes are dealt with under Criminology, psychology, sociology. Basically, it is the theoretical understanding of how and why crime is committed and how it can be prevented.

Various elements of cyber security

For a strong cyber security system certain elements are needed. The elements are as following:

• Application security: Applications play an essential role in business ventures; that is why every firm needs to focus on web application security. Web application security is important in order to protect customers, their information and interests. Application security helps in thwarting any attempts to violate the authorization limits set by the security policies of the computer system or networks. 
• Information security: Information includes business records, personal data, customer’s data, intellectual property etc; hence, it is important for a corporation to have strong cyber security for information to prevent its leakage.

Information security involves safeguarding sensitive information from illegitimate access, usage, or any other kind of damage. This also ensures that the important data does not get lost when any issue like natural disasters, malfunction of system, theft or other potentially damaging situation arises. The characteristics defining information security are confidentiality, integrity and availability. Information security also includes Data Confidentiality, Data integrity, Data availability, and Data authenticity. 

Network Security: Network security consists of protecting the usability and reliability of network and data. A network penetration test is conducted to assess the vulnerabilities in a system and network.

It refers to broad range security policies for thwarting and monitoring unauthorized access, misuse, damage to a computer system and other network systems. Network security extends coverage to diverse computer networks, surrounding private and public communication systems among corporations and organizations.

• Disaster Recovery/ Business continuity planning: Business continuity planning (BCP), also known as disaster recovery, is about being prepared for any kind of interference or cyber threat by identifying threats to the systems on time and analyzing how it may affect the operations and methods to counter that threat.
• Operational security (OPSEC): Operations security is used to protect organization functions. It identifies important information and assets to track down threats and vulnerabilities that exist in the functional method.
• End-user education: It is important for an organization to train their employees about cyber security because human error is one of the major causes of data breaches. Every employee should be aware of the common cyber threats and should have the knowledge to deal with them. 

Training will allow management to accustom themselves with system users and threats to it and user training will help in eliminating resistance to change and advancements and lead to user scrutiny on a closer level.

Leadership commitment: It is important to have leadership commitment in organization and corporations in order to have a strong cyber security program. Without having the leadership in the team it is complicated to develop, implement and maintain the cyber security processes.

Different Categories of Cyber Crimes

The cyber crimes may be broadly classified into four groups. They are:

Crime against the Individuals

Crimes against the individual refers to those criminal offences which are committed against the will of an individual to cause certain harm to them like physical or mental harm. For example assault, harassment, kidnapping, and stalking etc. but in cyber crimes the nature of crimes against individual changes a little bit and takes the form of cyber stalking, pornography, cyber bulling, child abuse, fraud, cyber threats etc. Such as cyber defamation is committed to cause harm to the reputation of an individual in the eyes of other individuals through the cyberspace. A few cyber crimes against individuals are: 

1. Harassment via electronic mails.
2. Dissemination of obscene material.
3. Cyber-stalking.
4. Defamation.
5. Indecent exposure.
6. Cheating.
7. Unauthorized control/access over computer system.
8. Email spoofing.
9. Fraud.

Crime against Property

The second category of cyber crime is that of cyber crimes against property. With the growth of international trade, businesses and consumers are increasingly using computer and the internet to create, transmit and store information in the electronic from instead of traditional form. This has ultimately lead to certain cyber offences which affect a person’s property. These types of cyber crimes include cyber vandalism to steal information of other organizations or to steal someone’s bank details, use software to gain access to an organization’s website etc. This is similar to instances of a criminal illegally possessing an individual’s bank or credit card details. In cyber crime, the hacker steals a person’s bank details to gain access to funds, make purchases online or run phishing scams to get people to give away their information. They could also use any kind of malicious software to gain access to a web page with confidential information. These types of crimes include vandalism of computers, intellectual property crimes (Copyright, patented, trademark etc), online threatening etc. Cyber crimes against property include: 

1. Computer vandalism.
2. Transmitting virus.
3. Net-trespass.
4. Unauthorized access / control over computer system.
5. Internet thefts.
6. Intellectual Property crimes:

• Software piracy.
• Copyright infringement.
• Trademark infringement.

Crime against Governments or Organizations

There are certain cyber crimes committed to threaten the international governments or organizations. These cyber crimes are mainly committed for the purpose of spreading terror among people of a particular country. The instigators or perpetrators of such crimes can be governments of enemy nations, terrorist groups or belligerents etc. Cyber crimes against Government include cyber attack on the government website, military website or cyber terrorism etc. In these kinds of cyber crime, cyber criminals hack governments or organization’s websites, government firm, and military websites and then circulate propaganda or threats or rumors. These cyber crimes are known as cybercrimes against Governments or Organizations. Following are the few examples of crime against Governments or Organizations:

1. Unauthorized access / control over computer system.
2. Cyber terrorism against the government or organization.
3. Possession of unauthorized information.
4. Distribution of Pirate software.

Crime against Society

Those cyber crimes which affect the society at large are known as cyber crimes against society. These unlawful acts are committed with the intention of causing harm or such alterations to the cyberspace which will automatically affect the large number of people of society. The main target of these types of crimes is public at large and societal interests. The cyber crimes against society include the following types of crimes: 

1. Child pornography.
2. Indecent exposure of polluting the youth financial crimes.
3. Sale of illegal articles.
4. Trafficking.
5. Forgery.
6. Online gambling.
7. Web jacking.

Conclusion

In conclusion, cyber security can be considered as a set of guidelines and actions intended and needed to prevent cybercrime but cyber security is not only limited to that. The two types of problems differ considerably in terms of what happens and who the victims are, as well as the academic areas that study them. Therefore, the two, cyber security and cyber crimes, must be considered as separate issues, with different safeguards designed to address the different privacy and security issues of each.

All sorts of data whether it is personal, governmental, or corporate need high security. Some of the data, which belongs to the government defense system, scientific research and developments, banks, defense research and development organization, etc. are highly confidential and even small amount of negligence to these data may cause great damage to the whole nation or society at large, therefore, such data need security at a very high level.

Hence, cyber security is all about protecting government, organizations and corporate networks, intending to make it difficult for hackers to find weaknesses and exploit them or threaten them. Cybercrime, on the other hand, tends to focus more on individuals and families online. It is highly needed that the top leaders of an organization or government should invest in the cyber security measures to make it strong and impenetrable. 

References

1. Cyber Crime and Cyber Security; tutorialspoint; Date of Access: 30.10.2019 <https://www.tutorialspoint.com/fundamentals_of_science_and_technology/cyber_crime_and_cyber_security.htm>
2. The difference between cyber security and cybercrime, and why it matters by Roderick S. Graham; The Conversation; Dated: 19.10.2017; Date of Access: 30.10.2019 < https://theconversation.com/the-difference-between-cybersecurity-and-cybercrime-and-why-it-matters-85654>
3. Understanding the Difference between Cyber Security and Cyber Crime; Privacy International; Date of Access: 30.10.2019 <https://privacyinternational.org/explainer-graphic/2273/understanding-difference-between-cyber-security-and-cyber-crime>
4. Elements of cyber security by Robert Roohparvar; InfoGuard Cyber Security; Dated: 02.03.2019; Date of Access: 30.10.2019 < http://www.infoguardsecurity.com/elements-of-cybersecurity/>
5. Elements of Cyber Security; Cross Domain Solutions; Date of Access: 30.10.2019 < http://www.crossdomainsolutions.com/cyber-security/elements/>
6. Chapter III: Meaning, Concept and Classification of Cyber Crime; Shodhganga; <https://shodhganga.inflibnet.ac.in/bitstream/10603/188293/11/11_cha%5bpter%203.pdf>
7. Types of cyber crime; Panda Security; Dated: 20.08.2018; Date of Access: 30.10.2019 < https://www.pandasecurity.com/mediacenter/panda-security/types-of-cybercrime/>
8. Cyber Crime Vs Cyber Security: What Will You Choose?; Europol; Date of Access: 30.10.2019 <https://www.europol.europa.eu/activities-services/public-awareness-and-prevention-guides/cyber-crime-vs-cyber-security-what-will-you-choose>

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 skill.

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This article is written by Meenal Sharma, a student of Vivekananda Institute of Professional Studies. The author, in this article, has discussed the concept of Goods and Services Tax.

Background 

The structure of indirect taxes in India up to 30-6-2017 was based on three lists in the Seventh Schedule of the Constitution of India, which came into effect on 26-1-1950. These provisions were based on the situation prevailing in 1935 and were based on the Government of India Act, 1935. Due to changes in the functioning of society, this structure had become outdated. Most of the countries have moved towards the common tax structure long ago. However, for India, GST is the tax for the twenty-first century. 

The foundation of GST in the country was laid down in the Budget Speech of 28th February 2006 by the then Finance Minister. Since then, there has been a constant endeavor for the introduction of the GST in the country whose culmination has been the introduction of the Constitution (122nd Amendment) Bill in December 2014.

Indirect taxes

The government requires funds for carrying out numerous tasks like maintenance of law and order, defense, healthcare, social services, etc. The main source from which the government obtains these funds is taxation. Justice Holmes of the US Supreme Court has rightly said that ‘tax is the price we pay for a civilised society’.

Taxes are classified into Indirect Taxes and Direct Taxes. Direct Taxes include those assessed upon income, property, business, etc. of those who pay them.  Indirect taxes are levied upon commodities before they reach consumers and are paid by those upon whom they ultimately fall, not as taxes, but as part of market price commodity.

Earlier structure of indirect taxes (up to 30.06.2017)

Article 1(1) of the Constitution of India states that India, that is Bharat, shall be a Union of States. Thus, India has a federal structure of governance, like the USA, Australia, UAE etc. i.e. Union Government and State Governments. In the presence of two authorities, the bifurcation of power is necessary between Union and State to avoid conflicts and ambiguities. Article 246(1) of the Constitution provides that the Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List II (State List). 

In respect of matters enumerated in List III (termed as ’Concurrent List’), both Parliament and State Governments have the power to make laws. Major taxes covered in Union List (up to 30.06.2017) were Central Excise, Customs Duty, Income Tax, Corporation Tax, a tax on the sale of goods from one State to another (Central Sales Tax). Major taxes in the State List (up to 30.06.2017) were tax on the sale of goods within the State (VAT), tax on land and buildings, excise duty on alcoholic liquor, entertainment tax, Entry tax.

Till 30.06.2017, the structure of indirect taxes was as follows: 

• Central Excise duty on manufacture of goods, levied and collected by the Central Government.
• State Vat was levied on the sale of goods within State, levied and collected by individual State Government.
• Central Sales Tax (CST) on inter-State sale of goods i.e. sale from one State to another,  was levied by the Central Government but collected and retained by State Government at a place from where goods were dispatched outside the State.
• Service tax on services levied by Central Government.
• Entry tax on entry of goods within the State levied and collected by State Government.

Besides, there were many cesses. 

Major defects in the previous structure of indirect taxes

The major defects in the structure of indirect taxes, existing up to 30.06.2017 are as follows:

• Central Sales Tax (CST) was payable @ 2% for every movement of goods from one State to another. Even in cases of stock transfers or branch transfers, there was an incidence of tax as input service credit (set off) of input taxes was not fully available.
• In the European Union, the movement of goods from one country to another is exempt from taxation. However, that is not the case in India. Here, the movement of goods from one state to another was not tax-free. 
• There was a cascading effect of taxes, i.e. the same goods getting taxed again and again, which could not be avoided because of CST and Entry Tax. State VAT was payable on central excise element also.
• There was an absence of national market in India due to a lot of visible (CST, State VAT and Entry Tax) and invisible barriers (like various check posts).
• A huge amount of time was lost standing in long queues at check posts. Also, huge corruption is involved.
• Central Government could only impose tax on goods till the manufacturing level. State Government could not impose service tax, it was only done by the Central Government
• Over the years, the distinction between goods and services had become hazy, due to which there is overlapping of State VAT and CST on transactions like work contract, food related services, software, IPR related services, lottery, SIM cards, operating lease/ renting of goods etc.  
• Every State had its State VAT laws with different provisions, VAT rates, forms and procedures. As a result, taxable persons having business in more than one State found it extremely difficult to keep pace with the tax laws of each state. 
• Competing among States to give sales tax reliefs to attract industries, which badly affect tax revenues of State Governments. Most of the State Governments are now in debt trap.

Why was there a need for GST?

The most important question that arises here is that what is the need for GST? To understand that, we first need to observe the previous structure of indirect taxation which has been in existence. There were various taxes levied:  the Central Government levied Central Excise duty on manufacture, Service Tax on provision of services, CST on interstate sale of goods but collected by the appropriate State Government and the State Governments levied VAT on retail sales, Entry Tax on entry of goods in the State, Luxury Tax, Purchase Tax, etc. There were various apparent multiplicity of taxes which were being levied on the same supply chain.

Thus, there was cascading of taxes. Also there were certain taxes levied by the State Governments were not allowed as set off for payment of other taxes being levied by them. Further, due to the presence of numerous VAT laws there was a difference in the tax rates and tax practices, which divided the country into separate economic spheres. Due to creation of tariff and non- tariff barriers, there was a hindrance in the free flow of trade throughout the country. Furthermore, the large number of taxes created high compliance cost for the taxpayers in the form of number of returns, payments etc.

GST Council

Article 279 A in Constitution of India provides for the constitution of a GST Council. GST Council, constituted vide Notification No. SO 2957(E) dated 15.09.2016, is the Apex Constitutional Authority to decide the policies of GST. It shall make recommendations to Union and States relating to GST. The Chairman of the Council is the Union Finance Minister. Following are the members of the Council:

1. The Union Minister of State in charge of Revenue or Finance; and 
2. The minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. 

The Vice Chairperson of GST Council shall be taken with at least 75% of weighted average voting in favour of the decision. The Union Government shall have 33.33% voting power and States shall have 66.67% voting power.

What is GST?

A single tax subsuming all the previously mentioned taxes is called the Goods and Services Tax (GST). It shall be levied on the supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So basically, any tax that is presently being levied by the Central or State Government on the supply of goods or services is going to be converted into GST.

GST is a dual levy where the Central Government shall levy and collect Central GST (CGST) and the State shall levy and collect State GST (SGST) on intra-state supply of goods or services. The Centre shall also levy and collect Integrated GST (IGST) on inter-state supply of goods or services. Therefore, GST is set to integrate various taxes being levied by the Centre and the State at present and provide a platform for forging an economic union of the country.

GST shall lead to the creation of a single national market, common tax base and common tax laws for the Centre and States. Another very important feature of GST will be that input tax credit will be made available at every stage of supply for the tax paid at the earlier stage of supply. This feature would also alleviate cascading or double taxation in a major way. Moreover, it will be supported by the extensive use of Information Technology through Goods and Services Tax Network (GSTN), which will eventually lead to greater transparency in tax burden, accountability of the tax administrations of the Centre and the States and also ameliorate compliance levels at reduced cost of compliance for taxpayers. 

Overall structure of Goods and Services Tax

1. Goods and Services Tax (GST) is applicable on ‘supply’ of goods or services or both, in India w.e.f. 01.07.2017 (including Jammu and Kashmir w.e.f. 08.07.2017). Area up to 200 nautical miles inside sea is ‘India’ for GST. 
2. For supplies within a State or Union Territory-
   1. Central GST (CGST) will be payable to Central Government; and
   2. State GST (SGST) or Union Territory GST (UTGST) will be payable to State Government or Union Territory (as applicable). Area up to 12 nautical miles inside sea is part of State or Union territory which is nearest.
3. For inter-State supplies, Integrated tax (IGST) will be payable to Central Government. IGST is payable if supply is beyond 12 nautical miles but up to 200 nautical miles. 
4. GST Compensation Cess shall be payable on tobacco products, pan masala, coal, aerated waters, motor cars etc. 
5. Basic customs duty, Education Cess of customs and Secondary and Higher Education Cess of Customs, IGST and GST Compensation Cess on goods where Compensation Cess is applicable shall be payable on imports of goods. 
6. Distinction between goods and services will be mostly eliminated, this will eliminate the problem of dual taxation presently faced by various industries.
7. GST is based on VAT concept of allowing input tax credit of tax paid on inputs, input services and capital goods, for payment of output tax.
8. GST is a consumption-based tax i.e. tax will be payable in the State where goods or services are finally consumed.
9. The rates of IGST-Nil, 0.1%, 0.25%, 3%, 5%, 12%, 18% and 28%. In case of supply within State, CGST will be 50% of IGST Rates and SGST/UTGST for supply within the State or Union Territory will be 50% of IGST rates.
10. Though GST is payable to both Central Government and State Government/Union Territory Administration, the control will be exercised either by State Government/Union Territory Authorities or Central Government Authorities to avoid dual control as well as disputes amongst them.
11. Petroleum products, i.e. petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel  are out of GST at present and may be brought under GST later. 
12. Tobacco products will be subject to excise duty plus GST. 
13. Alcoholic liquor will be subject to State duty. This product is out of GST.
14. GST Council is Apex Constitutional body which will determine policies of GST.

Rates of GST 

The IGST and CGST Acts do not indicate GST rate structure. 

According to section 9 of CGST Act, rate of CGST will be as notified by Central/ State Government. The rate shall not exceed 20%. Same provisions will be in SGST Act of each State. The total GST rate for inter-State supplies will not exceed 40% [20% CGST and 20% SGST].

According to section 5 of IGST Act, rate of IGST will be as notified by the Central Government. The rate shall not exceed 40%. 

CGST and IGST rates will be common all over India. SGST rates are also expected to be common all-over India. The State Governments have sovereign powers to levy GST as a result of which different States may have different rates.

Broadly the IGST rates are as follows [for supply within State/Union Territory, 50% of IGST rate is CGST rate and 50% of IGST rate is SGST/UTGST rate] [as amended up to 15.11.2017].

NIL: Fresh meat, fish, chicken, eggs, fresh milk, buttermilk, live animals, live poultry, curd, natural honey, unpacked wheat, unpacked rice, fresh fruits and vegetables, coffee beans, wheat, rye, rice, flour, besan, bread, jaggery, papad, prasad, salt, bindi, sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, pooja equipment, jute, khadi, national flag, raw silk, electrical energy, human blood, human hair, hearing aids, passenger baggage,, duty credit scrip. 

• 0.1%: Supply of goods by Domestic Tariff Area unit to Merchant Exporter who is going to export the goods supplied by DTA unit (w.e.f. 23.10.2017).
• 0.25%: Rough diamonds, rough precious or semi-precious stones falling under 7102, 7103 and 7104.
• 3%: Gold, silver and jewellery, platinum, imitation jewellery, pearl, diamonds, synthetic stone, precious stones.
• 5%: Packaged food (wheat, barley, oats, maize, rice, rye, aata, maida, jawar, corn, honey), fish, fillet, cream, skimmed milk, powder, eggs, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, cashew nuts, edible oils, sabudana, kerosene oil PDS, coal, oreos, specified medicines, stent, lifeboats, handmade safety matches, newsprint, footwear below Rs 500, sugar, cotton yarn, natural fiber, silk yarn, silk woven fabric, cotton fabrics, embroidery, readymade garments up to Rs 1000, readymade locomotives and parts, e-waste, khakra, plain chapatti or roti, unbranded namkeens, bhujia, mixture, chabena and similar edible preparations ready for consumption form, other than those put up in unit container- inserted w.e.f. 13.10.2017.
• 12%: Live horses, condensed milk, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, branded namkeens, bhujia in unit containers, ayurvedic medicines, tooth powder, tableware and kitchenware of wood, colouring books, picture books, corrugated paper, cartons, exercise books, calendars, yarn, carpets, textile fabrics, umbrella, sewing machine, table kitchen articles, knives, LED lamps, cell-phones, readymade garments above Rs 1000, agricultural machinery, permanent transfer of IPR (except software).
• 18%: Flavored refined sugar, pasta, sugar confectionery, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, ethyl alcohol, slag, perfumes, fireworks, steel products, printed circuits, camera, speakers and monitors, biscuits, footwear Rs 500 and above, tendu leaves, artificial fibre, synthetic yarn like nylon, polyester, computers, hand tools, machinery for industrial use, machine tools, ball bearings and roller bearings, CCTV, printed circuits, spectacles, clocks, watches, permanent transfer of IPR of software, all other goods not elsewhere specified.
• 28%: Molasses, pan masala, aerated waters, tobacco products, Portland cement, paints, tyres, IC Engines, refrigerators, air conditioning machines, water heaters, washing machines, motor vehicles, motorcycles, aircrafts for personal use, revolvers, video games. [List as pruned on 15.11.2017]

GST Compensation Cess 

There shall be GST cess of 1% applicable  on small cars, 3% on mid-sized cars and 22% on luxury cars. Motorcycles above 350cc will attract 3% GST compensation cess. GST Compensation cess is also payable on aerated waters, cigarettes and pan masala.

Motor vehicles purchased prior to 01.07.2017 and sold or given on financial lease after 01.07.2017 

If motor vehicles purchased before 01.07.2017 and Cenvat credit was not availed, the tax rate is 65% of normal rate. Similarly, if such vehicle was given on financial lease, tax rate will be 65% of normal rate.

Lottery tickets

GST rate will be 12% in the case of State run lotteries and 28% in case of lotteries authorized by State and run by private persons. Tax on lottery will be collected at first stage under reverse charge. Later, there will be no GST on subsequent sale of lottery tickets. The valuation will be 100/112 or 100/128 of face value.

Exemptions 

Goods supplied for petroleum operations have been exempted.

Advantages of GST

Advantages for the government

• It will help to create a unified national market for India, thus, giving a boost to foreign investment and the “Make in India” campaign;
• It will lead to harmonization of laws, procedures and rates of tax between Centre and the States and across States;
• Improved environment for compliance as all returns are to be filed online, input credits to be verified online, encouraging more paper trail of transactions at each level of supply chain;
• Similar uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States and that between intra and inter-state sales;
• There will be increased certainty in the taxation system due to various common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services;
• Use of Information Technology will help to reduce corruption as it will decrease human interface between the taxpayer and the tax administration.
• It will boost exports and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth;
• It will help in creating more financial resources and employment which will ultimately help to eradicate poverty.

Advantages to Trade and Industry

• There will be a simpler tax regime with fewer exemptions;
• Increased ease of doing business;
• There will be simplicity and uniformity in various procedures as a result of reduction in multiplicity of taxes;
• Elimination of double taxation on certain sectors;
• There will be a reduction in compliance costs leading to lesser records and hence less use of manpower and resources for maintaining records;
• There will be a boost in the exports of Indian products in the international market due to neutralization of taxes;
• There will be an increase in consumption leading to an increase in production as a result of a decrease in the average tax burden. This will help in the growth of the industries manufacturing in India.

Advantages to Consumers

• There will be transparency in the price of commodities as a result of seamless flow of input tax credit between the manufacturer, retailer and service supplier;
• The price of commodities will be reduced in the long run due to reduction of cascading effect;
• Small retailers will either be exempted or will suffer with very low tax rates;
• Generating more employment and more financial resources, will help to eradicate poverty.

Advantages to States

• There will be an expansion in the tax base as the entire process from manufacturing till the last retail level will be taxed;
• Since the States will also have the power to tax the services, it will boost revenue and give States the access to the fastest growing sector of the economy;
• Since GST will be a consumption based tax, the consuming States will be favoured;
• The overall investment climate will be improved which is bound to benefit the States in their development;
• Since the SGST and IGST rates will be uniform, the incentive for invasion will be reduced.

Conclusion

GST is set to bring a change in the system of indirect taxation by bringing  transparent and corruption-free tax administration, removing the current shortcomings in indirect tax structure. GST is bound to be business-friendly as well as consumer-friendly. In India, it is set to drastically improve the positions of each of these stakeholders. There has been a need to improve the previous structure of indirect taxation due to various shortcomings in it like the cascading effect of taxation.  This need for change leads us to the need for GST. GST will allow India to better negotiate its terms in international trade forums. It aims at increasing the taxpayer base by bringing the small and medium enterprises and the unorganized sector under its compliance. This will the Indian markets more stable and they will be able to compete in the international market.

References

1. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”
2. Parashuram Pottery Works Co. Ltd v. ITO (1977) 106 ITR 1 (SC)
3. Union of India v. Nit dip Textile Processors P. Ltd (2012) 1 SCC 226
4. Article 1, The Indian Constitution
5. Retrieved from, http://www.gstcouncil.gov.in/about-gst
6. GST Law and Practice with Customs & FTP, Taxmann, V.S.Datey
7. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”
8. GST Law and Practice with Customs & FTP, Taxmann, V.S.Datey
9. Vide Notification No.37/2017-CT (Rate) dated 13.10.2017
10. Vide Notification No. 38/2017-IT (Rate) dated 13.10.2017
11. Vide Notification No 3/2017-CT(Rate) dated 28.06.2017 and No. 3/2017-IT (Rate) dated 28.06.2017
12. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”

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 skill.

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This article is written by Karishma Ramchiary, a 4th-year student of B.A. LL.B. in Lloyd Law College, Greater Noida. This article provides the details on the rules and regulations related to road tax in India.

1.Introduction

Transportation as a means of communication is unavoidable; therefore, constructing roads and maintaining them is necessary. This is the reasoning for which road tax is charged from every vehicle which is used or kept for use on roads. Every Country or State charges road tax.

This taxation is also essential because the government in order to ensure the safety and security for all travellers and helps in connecting them to every town or cities conveniently. In india, the road network is the second largest road network, with a total length of around 4,320,000 kilometers which consists of 1000 km -Expressways, 79,243 km National Highways, 1,31,899 km State Highways and other major district and rural roads.

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1.1 Road tax in India

As per the constitutional provisions of the country, Schedule 7th List II  Entry 56 which states, “Taxes on goods and passengers carried by road or on inland waterways”. And Entry 57 which states , “Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III.” 

List III entry 35 states, “Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied.” Thus, It is evident that road tax is regulated by both State Government and Central Government. 

1.1.2 Road tax for vehicles

All vehicles either four wheelers, two wheelers or any other types of vehicles used for private and commercial purposes are levied with road tax. Road taxes are paid at the time of registration of the vehicle. Also, different states have different methods to pay road tax; it is either paid annually or all at once. Road taxes are to be paid at the Regional Transport Office (RTO).

While the initial payment of road tax of a vehicle is done by the dealer of the automobile or the showroom; however after the expiration of the initial payment it is to be done by the individual. The payment of road tax at the RTO requires certain documents such as the  registration papers and insurance paper of the vehicle, address proof, and purchase invoice. It may be done by Cash or Demand Draft.

The need to transfer a vehicle’s registration from one state to another may arise when the owner himself transfers to a new state or when he wants to sell the vehicle in another state. In the first circumstance, the owner has to cancel the original registration of the vehicle and apply for Grant of No Objection Certificate (NOC) to the RTO of the original state.

For the second circumstance, i.e, to sell it in the new state, he shall not only deregister and apply for NOC but also apply for notice of transfer of ownership of the vehicle. The further process is to submit the NOC to the RTO in the new state; pay the road tax applicable to new state and get a new vehicle registration number from the RTO.

1.1.3 State wise road tax in India

§  Road tax in Delhi

Road tax in Delhi is regulated by the Delhi Motor Vehicles Taxation Act, 1962, Amended in the year 2004. 

Levy of taxes:

Section 3 of the Act provides for payment of one time tax at the time of registration on all vehicles used or kept in use in Delhi. Any vehicle that is more than 10 years old from the date of first registration do not attract any tax. (Section 3 (b)(iii) proviso ). The vehicles to be taxed are particularly described in Schedule 1 of the Act. 

Payment of Taxes (Section 4 of the Act): 

The owner of the vehicle shall declare the payment to be paid by him as per required under Schedule 1 of the Act. The tax may be paid – i) for a year or ii) for one or more quarter  for such vehicles specified in part A of Schedule 1 and one time tax for such vehicle described in part B of Schedule 1.

Penalty for non-payment of taxes in time (Section 11 of the Act):

In case of default in making payment of tax,the tax authority will direct penalty of  a sum not exceeding the annual tax payable in respect to the concerned vehicle with the in addition to the amount of arrears. 

The payment of tax for 2 wheels and 4 wheelers (Schedule 1 Part B) are-

The way in which the ‘cost price’ is calculated –

1. In the case of motor vehicles manufactured in India the basic manufacturing cost and excise duty plus sales tax without allowing any cash or trade discount; and 
2. In the case of imported motor vehicles, the price shown in the Bill of Entry and shall be inclusive of customs duty, sales tax or any other levy, as may be applicable. 

For other details of rate of tax refer to 

1. Schedule 1 of the Delhi Motor Vehicles Taxation Act, 1962, Amended in the year 2004. 

Maharashtra Road tax

The Maharashtra Road tax is regulated by Maharashtra Motor Vehicles, 1958. The Act has been amended several times, the latest being on 2017 which was called as ‘Maharashtra Motor Vehicles Tax(Amendment) Act, 2017.’ This Act has 25 sections and 5 schedules.

The objective of the Act is to consolidate and amend the law relating to the taxation of motor vehicles in the State of Bombay (Maharashtra) and to provide for certain other matters.

The important provisions of the Act in relation to road tax in Maharashtra are discussed below:

Levy of Taxes: 

Section 3 of the Act provides for tax to be levied on all vehicles used or kept for use in the state. The rate of tax to be paid is fixed by the state government by notification in the Official Gazette but it shall not exceed the maximum rates specified in the First Schedule of the Act.

One time tax for the lifetime may be levied for the lifetime on all motorcycles and tricycles however, one time tax thrice the rate shall be levied and collected on motorcycle or tri cycle (Section 3 (1C)) used or kept for use in the State by a person not being an individual, a local authority, a public trust, a university or an educational institutions as specified in Part I and Part II of the second schedule of the Act. The maximum limit of this tax shall be rupees 20 lakhs.

Also, motor cars and omni bus shall also be taxed once for a lifetime (Section 3( 1D))and tax twice the rate shall be levied as specified in Part I and Part II of the third schedule provided further the maximum limit being 20 lakhs. One time tax shall also be levied for all goods carriages (Section 3(1E)) and all motor vehicles (including Tricycle) plying for hire or reward fitted with fare meters and used or kept for use in the State of the carriage of not more than six passengers (Section 3 (1F)). 

Section 3A of the Act provides for environmental tax to be levied on all vehicles as specified in 5th Schedule of the Act.

Payment of Taxes: 

Section 4 of the Act provides for payment of tax that is levied in advance by the registered owner or those who are in possession or control of the motor vehicle. The tax may be paid at Annual rate, Quarterly rate or More than one quarter, at multiples of the quarterly rate or For any period less than a quarter expiring on the last day of the quarter,-

(a) at the rate of one-twelfth of the annual rate of tax plus 20 percent, thereof where the period does not exceed one calendar month;

(b) at the rate of two-twelfth of the annual rate of tax plus 15 percent, thereof, where the period exceeds one calendar month but does not exceed two calendar months; and

(c) at the quarterly rate, where the period exceeds two calendar months.

In case of tax payable for one time as specified in Section 3 (1C) (1D) (1E) and (1F), shall be paid at the time of registration-

ii. Within one month from the date of expiry of the period for which the tax is paid 

iii. At the time of Registration mark is assigned to the vehicle in the State of Maharashtra.

Penalty for non-payment of the tax (Section 16):

In case of non-payment of the tax and having its possession and control shall be punished on conviction for incomplete and untrue declaration-

i)  with fine equal to the tax payable for the vehicle for two quarters;

ii) in case of previous offence under this section, penalty of fine not be less than a sum equal to the annual tax payable of the vehicle and it may be extended to a sum equal to twice the annual tax payable in respect of such vehicle, and

iii) fine shall not be less than three hundred rupees which may extended to a sum equal to the one time tax payable in case of motorcycle, tricycle, motor car or omni bus. This fine shall not be less than five hundred rupees and may extended to a sum equal to twice the one time tax payable of the vehicle if previously convicted of an offence under this section.

The 5 Schedule of the Act 

The maximum rates of the vehicles are listed in Schedule 1 of the Act.

The Second Schedule of the Act consist details in regard to the rates of those motor vehicles (specifically motor cycle and tri cycle) which requires one time tax at the time of registration (Part I); payment of one time tax in case the vehicle is already registered (Part II) and details to refund (Part III).

The Third Schedule of the Act also contains details in regard to the rate of those motor vehicles (specifically motor cars and omni buses) which requires one time tax at the time of registration (Part I); payment of one time tax in case the vehicle is already registered (Part II) and and details to refund (Part III).

The Fourth Schedule details out the amount to be paid to the local bodies by the State Government for levying or collecting tolls of motor vehicles and trailers. 

The Fifth Schedule list the rate of environment tax to be levied on Motor Vehicles in rupees.

Road tax in West Bengal

The Road Tax in West Bengal is under Section 39 of the Motor Vehicle Act, 1988 which provides for registration to be done for every vehicle driven in a public place. The road tax for the State of West Bengal is regulated both by the central government and the State Government.

We can find a brief legislative history of the promulgation of the statute relating to tax on Motor Vehicles in West Bengal in Soumitra Banerjee And Ors. vs State Of W.B. & Ors.(2004) which challenged the West Bengal Additional Tax and One-time Tax on Motor Vehicles Tax (Amendment) Act, 2003, the West Bengal Motor Vehicles Tax (Amendment) Act, 2003 and the West Bengal Additional Tax and One-time Tax on Motor Vehicles (Second Amendment) Act, 2003. 

The West Bengal Motor Vehicle Tax Act, 1979 (‘the Act’) provides the rules and regulations relating to imposition and levy of tax on motor vehicles in the State of West Bengal. 

Levy of Taxes: 

Article 3 of the Act states that all types of vehicles shall be levied tax that are used or kept for use on the public roads of the State and the State is entitled for the purpose of safeguarding the revenues of the State and to prevent evasion of tax, to enact a provision raising a presumption the vehicle is used or kept for use in the State without any further proof.

Payment of Taxes:

Taxes shall be paid for the year and in advance by the person liable to pay the tax within such period as may be determined by the Taxing Officer. In case of transport vehicle, taxes may be paid quarterly in advance, but a rebate of five per cent, shall be allowed if the tax is paid for the whole year in advance. Provided  that the Taxing Officer may allow payment of tax in respect of both transport and non-transport vehicle for any period, not exceeding six months at a time to avoid overcrowding of taxpayer during any particular period in a year. (Section 4 of the Act).

Penalty of non-payment of taxes (Section 11 of the Act):

In case of non-payment of taxes, in time, the person liability shall be paid penalty-

1. one-quarter of the tax in case the payment is made within 30 days of the expiration of the time of payment of the tax.
2. One-half of the tax in case the payment is made after 30 days but within 60 days of the expiration of the time of payment of the tax
3. Equal to the amount of tax in case the payment is made after 60 days of the expiration of the time of payment of the tax

The description of Motor Vehicles and Annual Rate of Tax is as below:

For other details with regard to rate of tax refer to 

1. The Schedule of West Bengal Motor Vehicle Tax Act, 1979 
2. Motor Vehicles, Taxes and Fees.

Road tax in Madhya Pradesh

The Road Tax in Madhya Pradesh is regulated under Section 39 of the Motor Vehicle Act, 1988 which provides for registration to be done for every vehicle driven in a public place. The road tax for the State of Madhya Pradesh is regulated both by the central government and the State Government.

The State Government regulates the road tax which is one of the most important sources of revenue by the Madhya Pradesh Karadhan Abdhiniyam, 1991. The latest Amendment done on this act was in 2006. This Act was brought with the objective to rationalize and simplify the motor vehicle tax as it unified ‘motor vehicle tax’ and ‘additional tax’ under MP Motor Vehicle Taxation Act, 1947 and ‘goods tax’ under MP Motor Vehicles (Taxation of Goods) Act.1962.

Levy of taxes:

Article 3 of the Act provides for tax to be levied every vehicle used or kept for use in the State at the rate specified in Schedule 1 and one time tax as specified in Schedule 2.

Payment of Taxes (Section 5):

The tax levied under Article 3 may be paid in advance at the choice of the owner – i) quarterly, ii) half yearly or iv) annually.

Penalty for non-payment of tax (Section 13): 

In case of non-payment of tax or default in payment of tax, a penalty at the rate of 4% of the unpaid amount of tax of each month. However, this shall not exceed twice the unpaid amount of tax.

In case of lifetime tax that is not paid, the owner shall be liable of penalty at the rate of one-tenth of the lifetime tax of each year or part in addition with the payment of tax due. This shall not exceed the lifetime tax specified in Schedule 2.

Description of motor vehicles and Rates 

 In cases of lifetime tax payment

The Cost of the vehicle is determined by the dealer and to calculate the Life Time Tax on the basis of cost of the vehicles, the owner of the vehicle shall be required to produce sale receipt issued by the dealer at the time of registration.

For more details on the rate of tax on vehicles, refer to 

1. The Schedules of the Act.

Road tax in Haryana

Along with the Central Motor Vehicle Act, 1988 (Amended in 2019), the road tax in Haryana is regulated with Haryana Motor Vehicles Act, 2016. Several Other rules that regulate motor vehicles in Haryana are Central Motor Vehicles Rules 1989,Haryana Motor Vehicle Rules 1993, Carriage by Road Act, 2007, Carriage by Road Rules 2011 and Haryana Motor Vehicles Taxation Rules, 2011.

The Haryana Motor Vehicles Act, 2016 provides for-

Levy of Taxes (Section 3)

The State Government shall levy and collect taxes on all vehicles used or kept for use in the State of Haryana, at the rate and penalty that may be specified by the State Government by notification, from time to time however this rate shall not exceed the maximum as specified in Schedule of the Act.

Payment of Taxes (Section 4):

The tax shall be paid to the licensing officer within a period of 30 days from keeping the motor vehicle in the State. In case, the payment is for a particular period , the licensing officer shall grant a licence valid throughout the State as prescribed. Also, In case of a one time tax, the payment would be recorded in the certificate of registration and no license shall be granted. 

Penalty for non-payment of taxes in time (Section 10):

When the payment of tax is unpaid in the specified time, the owner of the vehicle shall pay penalty as may be notified under section 3 of the Act. This penalty shall not exceed twice the amount of tax due in case of one time payment and in other basis, the penalty shall not exceed five times the amount of tax due for a year. 

When the owner of the vehicle fails to pay the tax due or the penalty to be paid, then he would be liable to pay simple interest on the amount of tax due and penalty, at the rate of one and a half per month from the last date of submission of the tax due or from the day when the penalty was imposed by the license officer or in case of no specified period in the order, then from the 15th day from the date of the order.

In cases of non-compliance of the provisions of this Act or any order specified under this Act and if no penalty is provided in the Act for such compliance, then penalty which shall not exceed five thousand rupees will be imposed. 

The maximum rate specified in the Schedule for Non-Transport Vehicle, Transport Vehicle, Private Vehicle and Educational Institute Vehicle is described below. The rate of other classes of motor vehicles are also described in the Schedule of the Act.

1.2  Calculation of road tax

As the road tax in India differs from each state, it is calculated on various factors which include age of the vehicle, seating capacity and weight of the vehicle. Other factors that may be taken into calculation are engine capacity, cost price of the vehicle etc. the factors taken into consideration vary from state to state.

1.2.1 Age of vehicle

Road tax to be paid depends on the age of the vehicle. The  Road Tax would differ for new and old vehicles. For example in the State of Karnataka in case of two wheelers: (Part A1 of Schedule of The Karnataka Motor Vehicles Taxation Act, 1957)

1.2.2 Seating capacity

The Road tax levied can also be determined by the seating capacity of the vehicle. For example: In the state of Bihar, Transport vehicles excluding goods carriages and motor cabs are charged additional motor vehicle tax on the basis of seating capacity (Schedule II of Bihar Motor Vehicles Taxation Act, 1994);

1.2.3  Weight of vehicle

The weight of the vehicle is also one of the basis to calculate road tax. We may again cite the example of Bihar Motor Vehicles Taxation Act, 1994 where trailers are charged tax on the basis of its weight.(Schedule II Part C (6)).

1.3  Rate of road tax

As road tax is a state level tax, the rate of road tax is imposed and determined by each state individually in their own State. Therefore, the rate of road tax vary in all states. Road tax is levied on all vehicles by the State Government, Central Government and Local Authorities.

1.3.1 Pay road tax online

Payment of road tax online can be done on the official website of the Ministry of Road Transport and Highways in case of several states (Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir,Jharkhand, Punjab, Rajasthan, Tripura, Uttar Pradesh & Uttarakhand ). For other states tax may be paid online on the website of the Transport Department of that State. Payment of Road Tax through online websites requires the vehicle registration number and the Chassis number of the vehicle and other general information of the vehicle (Vehicle Permit Type, Seating Capacity (Excluding Driver) etc. ) .The payment is to be done with the available online mode of payment (through internet banking, credit card or debit card etc.).

1.3.2 Refund of road tax paid

The owner of a vehicle may claim for road tax refund in certain circumstances when he decides to – i) transfer and move his vehicle to another state; ii) discard the vehicle which is less than 15 years. To claim refund the registration of the vehicle shall be cancelled at the RTO where the vehicle was registered. In the cancellation process, the owner shall produce the documents related to the vehicle. The refund process is slow and at times it might get stuck at some level. To know about the refund’s progress or reason for its slowdown, one may also file an RTI.

1.3.3 GST on road tax

After the introduction of GST, the State Government has increased the road tax. The report by Economic Times, ‘Higher road tax in 9 states pushes up cost of cars’ (September 17, 2019) states that nine states including Punjab, Kerala, Jammu and Kashmir and Bihar have increased road taxes and this has resulted into rise of road cost of passenger vehicle.

In The report, Maruti Suzuki chairman RC Bhargava says that the simple reduction in the GST will not help on passenger vehicles will help reduce costs and spur demand though GST is a major element that increases the cost of the car. But even if the Central government reduces the GST and the State government adds more to road tax, it would make no difference in the cost of  vehicle.

Conclusion

In the modern world, the use of motor vehicles is on the rise. India became 4 largest auto industry in the world as the sales increased to 9.5 per cent year-on-year to 4.02 million units (excluding two wheelers) in 2017. In 2018, it was the 7th largest manufacturer of commercial taxes. To own a car or a vehicle has become more of a status symbol in urban India. Taking into consideration these new developments, the State Government should consider bringing reforms and progress in the rate of road tax.

Road tax levied should be reasonable for the owner of the vehicle and not tax that is imposed haphazardly by the government.

To brace your knowledge on GST, please Click Here. 

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This article is written by Shriya Sehgal, a first year student pursuing BBA.LLB. from Symbiosis Law School, Noida. This article deals with the various aspects of restraint of trade including landmark judgements.

Introduction

Who doesn’t get excited when he/she is hired at a top notch firm? Decent salary, good infrastructure and a lively work environment are the prerequisites for every employee. However, what happens when they get bored with their jobs or want to explore better opportunities? Are they permitted to leave their jobs before the completion of their term of employment? Are there any restrictions on the employees while they are working for a particular organisation/institution?
The above questions would be answered in the following article with respect to Exclusivity and Non-Compete Clauses under Contract of Employment. 

General Rule

Section 27 of Indian Contract Act,1872

Section 27 of ICA,1872 makes the agreements in restraint of trade to be void. This section states that, “Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.” However, there are certain exceptions to this rule.

Exceptions of Restraint of Trade[1]

Statutory Provisions

• Sale of Goodwill- It is the only exception that is mentioned in Section 27. It means that the restrictions imposed on the seller should be reasonable. The seller can only be restrained from carrying on a similar business for such period for which the business sold is actually carried on either by the buyer or by any person deriving title to the goodwill from him.
• Indian Partnership Act, 1932- Under Section 36 of this Act if the outgoing partner makes an agreement with the other partners that he will not carry on a similar business for a specific period of time then such an agreement is valid, provided the restrictions are reasonable. Also, Section 11 of this Act states that the partners should not carry a competing business during the continuance of the partnership.
• Limited Liability Partnership Act, 2008-  Section 24 of this Act talks about ‘Cessation of partnership interest’. The former partners may also be consulted during inspection. 

Judicial Interpretations

• Trade Combinations- It’s a universal practice to carry on a trade in an organised way. Regulations as to the opening and closing of business in the market, licensing of traders, supervision and control of dealers and the mode of dealing are not illegal. [2]
• Service Agreements- These agreements refer to the negative covenants and prevents an employee from working for someone else during the term of employment. This is to prevent leakage of trade secrets etc.
• Sole or Exclusive Dealing Agreements and Franchise- It refers to a practice where manufacturer markets his goods through a single distributor or agent. 

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd., 1894 AC 535

It is this case that established the concept of restraint of trade in 1890s in England. In this case, the appellants sold their business to the respondent company and agreed to enter into a negative covenant not to work for a rival business for a period of 25 years in an unlimited geographical area. Later he worked for a rival business. Consequently, the respondents brought an action against the appellant to enforce the covenant by injunction.

The appellant argued that the clause was in restraint of trade and the clause of unlimited geographical area was unreasonable. Whereas, the respondent argued that the clauses were imposed to protect the interest of their business. 

The House of Lords upheld that the clause was in restraint of trade and was prima facie unlawful. However, the restraint was reasonable in the interest of the parties as Nordenfelt obtained a huge sum of money for his business. Moreover, the restraint was reasonable in the public interest. Therefore, the clause was upheld.

Superintendence Co. of India v. Krishan Murgai, (1981)

The appellant company carries on business as surveyors undertaking inspection of quality, sampling of merchandise, machinery etc. It has established a reputation and goodwill by developing its own techniques and possess trade secrets in the form of those techniques. They have their head office at Calcutta and a branch at New Delhi.

The appellant company employed the respondent as the Branch Manager of its New Delhi Office on the terms and conditions mentioned in the letter of appointment. Clause 10 of the terms and condition placed the respondent under a post service restraint that he shall neither carry on a business on his own nor serve any other rival firm in similar line as that of the appellant company for two years at the place of his last posting.

When the appellant company terminated the respondent’s service, he started his own business in New Delhi on lines identical with the appellant company. Thus a suit was filed by the appellant company and they also sought an interim injunction.

The court granted them an interim injunction which was converted into a permanent injunction after listening to the respondent. The restraint was considered to be reasonable with respect to time and place however the clause contained the expression ‘leave’ which was susceptible.The clause was considered unreasonable as the term of employment was terminated. 

On an appeal by the respondent, a Division Bench of the High Court reversed the order of the learned Single judge holding that the negative covenant operating post service was in restraint of trade and void under Section 27 of the Indian Contract Act, 1872. 

Rationale for Rule Against Restraint of Trade

An employment contract generally includes restraint of trade clause to protect the interest of the employer after an employee leaves their organisation or business. The various restraint of trade clauses are imposed due to the following reasons:

• Non-compete clause prevent the employees from competing with their former employer for a reasonable period of time the employees can compete by opening a similar business or working with a rival business.
• Non-solicitation clause prevents the employee to solicit his former employer’s clients for a reasonable period of time.
• Non-recruitment clause prevents the employee to hire the former employer’s employee for a reasonable period of time.
• Confidentiality clause prevents the employee from disclosing the former employer’s confidential information.

Here, the word ‘reasonable’ is of significant importance. For a contract to be enforceable, the restraint of trade clause must be reasonable. Reasonability can be ascertained on the basis of the following grounds:

1. Time period
2. Geographical location
3. Scope of work 

Conflict of Laws

Conflict of law refers to relations among various legal jurisdictions. Something valid under the jurisdiction of X may be invalid or illegal under the jurisdiction of Y. 

For instance, Conflict of Laws took place in the famous case, Taprogge Gesellschaft Mbh vs Iaec India Ltd.[5]. In this case, the Bombay High Court held that a restraint operating after termination of the contract to secure freedom from competition from a person who no longer worked within the contract was void. The court refused to enforce the negative covenant and held that, even if such a covenant was valid under German law, it could not be enforced in India. [3]

Doctrine of Restraint of Trade not applicable during the subsistence of the Contract

A contract of employment which is operative during the employment doesn’t attract the provisions of Section 27 of the Indian Contract Act, 1872. The main purpose for restraining an employee from joining a competing business or profession is to fulfil the legal terms of the contract that are binding on the employee. This also encourages better performance on the part of the employee.

The clauses of restraint of trade are imposed after the conclusion of term of employment to prevent the employee to benefit from the skills that he/she has acquired during the term from the employer. In other words, the employer prevents his competition to a certain extent. Whereas, when restrictions are imposed during the term of employment, the motive is to ensure performance of employees and the fulfillment of legal terms of the employment contract.

Thus, when the purpose of restraints imposed is transparent and lawful it is considered to be valid by the court. However, when the purpose of restraints imposed is unclear or unlawful it is considered to be void by the court. In other words, only reasonable clauses of restraints of trade can be imposed by the employer.

For instance, an employee of a company during the contract of employment or prior to termination of contract of employment should not join another company carrying on similar business or shouldn’t establish his own business of similar nature.

In case of a franchise, the franchise agreement prohibits the franchisee from dealing with competitors goods during the subsistence of the contract. In this way the franchiser can promote his/her own goods and prevent the competition to a certain extent. It will also lead to ease of distribution of goods.

It was stated in a case that, “There is a growing trend to regulate the distribution of goods and services through franchise agreements providing for the grant of franchise by the franchiser on certain terms and conditions to the franchisee. Such agreements often incorporate a condition that the franchisee shall not deal with competing goods. Such a condition restricting the right of the franchisee to deal with competing goods is for facilitating the distribution of the goods of the franchiser and it cannot be regarded as in restraint of trade.” [4]

Judicial Precedents

Niranjan Shankar Golikari v Century Spg. & Mfg. Co. Ltd., (1967) 

The respondent company is the manufacturer of tyre cord yarn and other things. Their plant is located at Kalyan known as the Century Reyo entered into an agreement with Algemene Kunstzijde Unie of Holland (AKU) and Vereinigte Clanzstoff Fabrikan AG of West Germany (VCF) to transfer their technical know-how to the respondent company for consideration of 1,40,000 Deutsche Marks(currency). It was to be used exclusively for the respondent company’s tyre cord yarn plant at Kalyan.

Clause 4 of that agreement provided that the respondent company should keep secret until the termination of the agreement and during three years when all technical information, know-how, data and documents would be passed on by the AKU and VCF then, the Century Rayon should enter into corresponding secrecy arrangements with its employees.

The respondent company then invited applications for appointments in said plant. The appellant was hired as a Shift supervisor in the tyre cord division and entered into a contract of standard form for a term of 5 years. After obtaining training for 9 months the appellant started absenting himself and then informed the company that he has resigned. The company rejected his resignation and asked him to join back but he had already obtained another employment. The appellant’s services were considered essential for the respondent company as his employment with rival company would cause him damage because they had undertaken to obtain secrecy undertakings from its employees.

Therefore they wanted an injunction restraining the appellant to obtain employment with the rival company. Whereas the appellant said that the agreement was a restraint on trade and against public policy.

Both the trial court and the High Court found that the negative covenant in the present case were reasonable and necessary for the protection of the company’s interest. 

BLB Institute of Financial Markets Ltd. v. Ramakar Jha (2008)

The petitioner company is one of the leading institutes in imparting education and knowledge in the field of financial services. In the course of its business, the petitioner appointed the respondent as a faculty member who was to be responsible for the development of the petitioner’s study material and teaching methodology. Consequently, they entered into an employment agreement including various terms and conditions.

The respondent realised his value to the organisation and asked for a hike in his salary multiple times. One day he sent his resignation via email and stopped coming to work because his demands were not accepted. The petitioner returned the resignation unaccepted and asked him to resume work as his unauthorized absence was in breach of the terms and conditions of the employment agreement.

According to the terms and conditions of the agreement the respondent cannot resign before the compulsory period of 3 years and in case he wants to resign before the completion of 5 years he has to give 6 months notice of the same. Moreover he cannot join a rival business. The same was ordered by the court until the arbitrator independently evaluated the observations made.

Bluedart Aviation Ltd. v Captain Puneet Shankta (2006)

In this case, the defendant, a qualified pilot was trained at the behest of the plaintiff. It was done to enable him to be released as a Senior First Officer for an aircraft and thereafter to serve the plaintiff. But the defendant has abandoned the services of the plaintiff without giving him a written notice of three months or payment for the same. 

Consequently a suit was filed and during it’s pendency an interim injunction was filed for restraining the defendant from taking employment as pilot of any other company. The defendant was made liable to pay a sum of Rs. 10,00,000 with 15% interest from the date of filing the suit for committing a breach of contract. The plaintiff also claimed a permanent injunction restraining the defendant for taking up employment as pilot of any other company or airline or corporation for a period of three years. 

Since injunction is a discretionary relief, the court can grant an injunction for a reasonable period as it is difficult for the airline to make an alternate arrangement. Due to their inability to make the arrangements they will have to minimise their operations which will cause them damages. 

Thus, in the appeal it was held that the learned single judge was was not correct in not granting the injunction at least for a period of notice. In the given circumstances the court desist from directing restoration of status quo ante. However, it is open to the plaintiff to claim any compensation by amending the plaint. Thus, the appeal was disposed of with the aforesaid observations.

Wipro Ltd. v Beckman Coulter International S.A., (2006)

In this case, Wipro worked as a sole and exclusive canvassing representative for Beckman Coulter International, S.A. They worked together for a span of 17 years. Beckman Coulter decided to undertake direct operations in India and issued advertisement seeking employment from people and giving preference to candidates having experience in having handled respondent’s product or similar products. Wipro Limited alleged that such advertisement was in violation of non-solicitation clause and approached the court for prohibiting solicitation and claiming damages.

It was held that the restrictions had not been imposed on the employees but on Wipro and Beckman Coulter and therefore Section 27 would not be attracted and the agreement was held not in restraint of trade.

Conclusion

There is a legal assumption that a restraint of trade is legally unenforceable. However, there are certain exceptions to the same. The various types of clauses mentioned in employment agreement aims to protect the interest of the employer and are not against public policy. The reasonability of these clauses can be determined on the basis of various factors and the clauses beyond the scope reasonability are considered to be void.

References 

1. https://resource.cdn.icai.org/46634bosfnd-p2-seca-cp1-u2.pdf 
2. http://www.legalservicesindia.com/article/1753/Exceptions-of-agreement-in-restraints-of-trade-with-reference-to-Indian-and-English-case-laws.html 
3. https://www.majmudarindia.com/pdf/Validity%20of%20agreements%20in%20restraint%20of%20trade%20in%20India.pdf 
4. Gujarat Bottling Company Ltd and Ors. v. Coca Cola Co. and Ors. 1995 (5) SCC 545
5. https://indiankanoon.org/doc/1495448/ 

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 skill.

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This article is written by Karunashankar K.N. a 2nd-year law student from School of Law Christ University, Bengaluru. This article explains the concept of hawala transaction, the legislations which deals with hawala and the adverse effects of it.

What is Hawala transaction?

The International Criminal Police Organization – INTERPOL’s definition of hawala is ‘money transfer without money movement’.

‘HAWALA’ is an informal, unregulated mode of transferring foreign currencies to and fro in a country. This system works and operates in a similar fashion to the formal banks without any paperwork, questioning and accountability. 

Hawala transactions are those transactions which are not regulated by the Central Bank that is, Reserve Bank of India (RBI). In this, no actual money transfer happens between the persons. These transactions are made through the intermediaries called hawaladars. This transaction works purely on the basis of trust that the person holds on the hawaladar. There is no promissory note present in these kinds of transactions, this is completely based on the trust and journal balances of both the hawaladars. Hawaladar is the person who is not authorised by the financial regulatory bodies (RBI-Reserve Bank of India, FEDAI-Foreign Exchange Dealers’ Association of India) in India, but still deals with the movement or transfer of money from part of the country to another and also from one country to another. 

These transactions are usually made when a person from one country wants to send money to another person in the other country they use this hawala transaction because in hawala transactions there is no limit set for a transaction made by the person, one can send how much money they want, which will not be regulated by any authority.

Most of the businessmen who made huge amount of black money by not paying appropriate taxes to the government wants to hide their money somewhere safe and politicians who made good amount of black money by taking bribes and by doing scams through government projects, use this way to transfer money because they want to convert their kickback black money into white or want to keep their money safe in some other country without paying the required tax in the home country.

Background

Hawala or hewala is an Arabic origin word which means transfer or sometimes as trust. In India, it is also famously known as hundi. The system started in South Asian countries, particularly in the Islamic community during the 8th century, and now it is very popular and used in every part of the world. It was used as one of the modes of transferring money from one person to another who lives in different places. It is one of the traditional banking system, where it is connected with the set of hawaladars. These kinds of traditional banking system induced a major impact on the formation of the present-day banking system.

The hawala system became very important in the society because of mainly two reasons:

1. Lack of efficient banking system.
2. Many people prefer doing cash transaction as it was the traditional mode of transaction.

Is hawala Legal in India?

It is definitely not legal in India as it has been declared as an illegal way of transferring money by The Foreign Exchange Management Act, 1999. Prior to that, it was made illegal under The Foreign Exchange Regulation Act (FERA) Act, 1973. 

The Foreign Exchange Management Act, 1999

“Section 3. Dealing in foreign exchange, etc.

Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall-

• deal in or transfer any foreign exchange or foreign security to any person not being an authorized person;

• make any payment to or for the credit of any person resident outside India in any manner;

• receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner;
• enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person.”

This section essentially defines the persons who can deal with the Foreign exchange and with foreign securities, the persons who are not authorised by the central bank are not allowed to involve in any kind of transfer of money outside India or receive the money from outside India. There should be no third party involved in the money transfer other than the parties and the official foreign exchange banks. 

There should be no credit for any person who is transacting with foreign exchange, there should be a two-way transfer of money made during the exchange of currencies between countries. A third person can not be represented on behalf of the persons who want to transfer the money, the parties themselves have to transfer the money which they want to, there should be corresponding money transfer made for the transaction made.

Penalties imposed

Section 13 Penalties

According to FEMA states the penalties awarded for any violation committed under this Act; or any contravention of any rule, regulation, direction or order which are issued under this Act, or contravenes any condition subject to which the authorisation of RBI should be taken. The penalties issued as follows:

• If the amount involved in the violation is quantifiable in nature then, the penalty for that offence would be “THRICE” the sum.
• When the amount involved in the offence is non-quantifiable then the penalty may be imposed up till two lakh rupees.
• And if such contravention is continuing even after imposing the penalty, then such offences will be further penalised with five thousand rupees per day.
• Adjudicating Authorities have the power to confiscate any currency, security or any other money or property which is found during the search.

Section 14: Enforcement of the orders of the Adjudicating Authority

If any person fails to pay the full penalty money which is mentioned in section 13 within ninety days from the issue of notice for payment of the penalty, then he will be liable to civil imprisonment under this section.

The term of civil imprisonment varies from person to person. The term depends upon the amount involved in the transaction, if the amount of transaction is exceeding one crore rupees then the imprisonment term may go up to three years. If the amount is less than one crore then it is six months compulsory and it will increase till the person makes full payment of his penalty.

Hawala transaction in India

India has made hawala transactions as illegal in the country, as it is transacted through the unauthorised persons who are not recognised under the Reserve Bank of India and also due to the lack of bureaucracy in the system. Hawala transactions are made illegal by The Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA).

Demonetisation has had a significant impact on hawala transactions in India. On November 8th 2016, Prime Minister Narendra Modi announced the demonetisation, banning 500 rs and 1000 rs denomination notes which completely paralysed the hawala network in the state of Kerala.

Hawala Transaction Act

Every year around fourteen billion dollars foreign currency comes to India out of which only four billion dollars come through authorised banks and financial institutions and the remaining ten billion will enter India through hawala system. In order to regulate this Government of India as formulated certain rules and regulations.

There is no specific act called Hawala Transaction Act in India. It is governed by various other legislations which are mentioned below. 

Financial Exchange Regulation Act (FERA), 1973

This Act has explicitly prohibited “hawala-type” transaction. The objective of introducing this Act was to regulate the entry of foreign capital into the Indian economy. That was one of the peak time where international trading started. 

FERA provides detailed legal prohibitions on the hawala market. Section 8 it created some restrictions on the individuals who deal with the foreign currency and also states some restrictions on the conversion of Indian currency into foreign currency. It mandates the person to possess the authorised license by the RBI to deal with the foreign currencies that may be selling and borrowing or transferring the foreign exchange. Section 9 covers the domestic hawala transactions, by prohibiting the payments or providing credit to the person outside India. FERA was revised and made several amendments as the process of globalisation, liberalisation, and privation was implemented in India. In the year 1999, this Act was replaced by FEMA.

Foreign Exchange Management Act of 1999

Section 2 prohibits the person from entering into any financial transaction India where the associated consideration of money or an asset outside India. 

Section 6 highlights the importance of the RBI and it states by consulting central government, the central bank may specify the class or classes of capital transactions which is permissible and also sets the limit for the foreign exchange transactions.

Section 10 of FEMA – “The Reserve Bank may, on an application made to it in this behalf, authorise any person to be known as authorised person to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.”

This simply means that when a person wants to deal with the foreign exchanges, he/she should register themselves with the RBI. Where hawaladars are not registered under RBI.

Prevention of Money Laundering Act, 2002

According to Section 2(da) of PMLA – An authorised person is one who deals with the exchange of foreign currency and one who deals with off-shore banking unit with the prior permission from the RBI.

Hawala transaction charges

Generally, in hawala transactions, the commission rates are not fixed. It will vary from one transaction to another, the basis for this commission is the amount which has been transacted and the location to which the money has been sent. Hawala is very attractive to the customers because of their commission rates it ranges from, they charge a very nominal rate of interest as commission. Which is very lesser compared to the bank transfer, as the person has to pay a huge amount of tax to the Government of India. And sometimes to promote hawala transaction, hawaladars exempt expatriates from paying fees to them.

Hawala Transaction as a branch of money laundering

Hawala system comes under one of the branches of the money laundering, ‘money laundering’ means hiding the origins of illegally obtained money which are acquired by not paying appropriate tax, which will be transferred to another country through foreign banks or legitimate businesses.

For example, Mohammad Farooq alias Farooq Shaikh was known as Mumbai’s hawala ‘King’. He was arrested by the Enforcement Directorate (ED) on 24th April 2018, as he was involved in an Rs. 2253 crore money laundering case. In that 2253 crores, 680 crores were transacted by involving his own company Stelkon Infratel Pvt Ltd. and remaining 1572cr was remitted by 12 other dummy companies having fake addresses and directors. He had opened around 160 shell companies to do money laundering.

In the hawala system, there is no such official channel of transferring money through bank transaction or by establishing fake companies. The transfer of money happens through hawaladars which is completely based on trust. Here there is no actual transfer of money. The person who intends to hide their unrecorded money will give that money to the local hawaladar and he sends a message to another hawaladar who is present in the place where money has been sent, and the hawaladar there gives the money to the person to hide it or use it as an investment.

Hawala commission rates

Hawala system charges its customers’ very low amount as commission rates as there is no expense of international bank transfer fee and it is an informal agreement made so there will be less probability of hawaladars to charging more commission is very less. Usually, in the hawala system, they charge 0.2% to 0.5% which is very less compared to the bank transfer rates through international banks ranges from 12% to 15%.

One of the attractive features of the hawala system is that there is no limit set for the transaction amount, this makes customers free to send how much money one wants to transfer. In contrast to this, international banks set up the limit of $250000 which is equal to Rs. 17663694.

In order to encourage this system sometimes hawaladars wave off their commission and hand over the entire money to the receiver, by this they build their trust in the minds of the customer and also goodwill for their future transaction. 

How do Hawala Transactions work?

As mentioned earlier this transaction takes place between two persons through the help of intermediary hawaladars who connect with each other in order to transfer money to the intended person.

For example, Moosa is a businessman in Saudi and his entire family stays in Kerala, India. When he wants to send money to his wife Mary he uses hawala.

• He contacts the local hawaladar Mr A and gives 5205 dirhams which he wants to send it to his wife.
• Mr A gives him the passcode which is highly confidential.
• Moosa sends the passcode to Mary by stating how much money has been handed over.
• On the other side in India Mary will get connected to the local hawaladar Mr B who deals with Saudi transactions.
• Mary gives him the passcode which was given to her by her husband and the amount which has been sent to her.
• Mr B will charge 0.5% as a commission that is equal to Rs. 500 and gives only Rs. 100000 to Mary. 
• Now Mr A owes that amount to Mr B.

Hawala money

Hawala money meaning

Hawala is also known as hundi in many places. Hawala literally means transfer or remittance of money. Hawala money is referred to that money which is being transacted through the hawala system. The money which is sent through the system is black money of certain people who want to transfer it from one country to another without paying any tax. Here there is no actual transfer of money from one country to another. It works on the trust principle.

It is one of the alternative means of transferring funds unlike the conventional method of transferring through banks. Money transfer in hawala is arranged through the network of hawaladars across the places.

Hawala money transfer

Hawala acts as the parallel money transfer system to the formal banking system. Here the businessmen and the politicians who want to evade taxes uses this system. Hawala money is transferred by Hawaladars who acts as an intermediary by collecting the money which is to be sent and connects with the counterpart in the other country and sends information about money transfer and he gives said money to the specific person. And after the transfer money, hawaladars settle each other on a later day. Hawaladars maintains an informal journal where they record all the debt which are to be cleared and the credit which needs to be received. Debt money can be settled between hawaladars in cash, property or providing an equivalent service.

Hawala Cases

1. Jain Hawala Diary Case

Jain hawala diary case is said to be the biggest hawala scam in the history of independent India, nearly 115 top politicians, businessmen, film industry people and bureaucrats of Kashmir were involved in this scandal. This all started with the search for the funding of the terrorist money which was sent to Hizbul Mujahideen organisation of Kashmiri militants. 

The money involved was about 18 million US dollars that is equal to Rs. 650 million. The hawala agents involved were S.K. Jain, N.K. Jain, B.R. Jain, and J.K. Jain and they were famously known as Jain Brothers. Some of the top politicians namely L.K. Advani, V.C. Shukla, P.Shiv Shankar, Sharad Yadav, Balram Jakhar, and Madam Lal Khurana and many others.

This was exposed by Vineet Narain through Kalchakra video, news cassette in August 1993.

2. Hassan Ali Khan-The Biggest Tax-Evasion Scam

Hassan Ali Khan is an Indian businessman, in 2007 his Pune and Mumbai residence was raided by Income Tax (IT) and Enforcement Directorate (ED) officials and found laptop containing all the details of the Swiss bank account where it had 10 banks accounts details with having deposits of Rs. 20000 crore, they also found the 85 lakh hard cash in his residence. He had connections with the international arms market. Ali got introduced about the Swiss bank by Adnan Khashoggi in the year 1982. From there on he started depositing the arms dealing money in a Swiss bank account as money in there is untraceable.

And most importantly IT department officials found 4 crores of unaccounted money and they dig deep into it and found that Ali was one of the biggest hawala operators in India, who used to ship the money of the big politicians and businessmen to the countries like Mauritius and Madagascar where the tax rates are really low and again bring that money back to India as an investment to the companies like Autumn Holding and Payson which are shell companies where there will be no actual company existing in that name.

SC invoked terror charges under Anti-Terror law, Unlawful Activities Prevention Act and also under the provisions of Indian Penal Code against Ali for his relationship with various arms and ammunition dealers and with the people who are involved in terror-related activities, by threatening the national security.

3. IT sleuths dig up Rs. 20000-cr hawala Racket in National Capital 

On 11th Feb 2019, the Income Tax Department cracked down one of the big hawala operators in the National Capital Delhi. The Estimated amount which involved in this scam was around Rs. 20000 crores. There was a series of raids conducted by sleuths of Delhi investigation unit of IT in different areas of old Delhi. It was an operation conducted to dig-in the illegal financial activities done by three groups of operators.

The first raid was conducted in one such group in the Naya Bazar area, they found around 18000 crores worth of fake bills and fake entities through which they used to transfer money from one country to another. But the IT department did not disclose the identities of the accused.

The second case was a highly organised money laundering where unaccounted money was fraudulently shown as the sales of the old shares which is being held for years. They tried to show fake long-term capital gains. And the IT estimates the amount involved here in this scam would be around 1000 crores.

Lastly, sleuths conducted a similar kind of search where they found the persons having undisclosed foreign bank accounts and a well-established racket of claiming bogus duty drawbacks of GST through invoicing of exports. The estimated fake exports are more than Rs. 1500 crores, and during this search, they also seized many signed, unsigned papers, agreements, MoUs, cash settlement of disputed immovable properties around Rs. 100 crores.

4. Rs. 3,300 crore Hawala Racket Involving Infrastructure Firms

On 1st week of November 2019, IT Department raided on the major Infrastructure firms in India, it was one of the biggest tax evasion made by the corporate firms. This raid was conducted in 42 premises that include major cities of the country which are Delhi, Mumbai, Hyderabad, Erode, Pune, Agra and Goa on the group of people who were indulging in hawala transaction by producing fake bills.

Here, the IT department successfully opened up the incriminating evidence and also established the connection of big corporates, hawala operators and identification of the entire chain of the process of money laundering. Officials found that Rs. 3300 crore amount of fund was being transferred illegally by making fake contractual obligations. And also they found unexplained cash of Rs. 4.19 Crore and unaccounted jewellery of worth Rs. 3.2 crore.

This funds which are meant public infrastructure projects was emptied by entry operators, lobbyists and hawala dealers. The companies involved in these kinds of deals are situated in NRC and Mumbai. The companies claimed in billing fake invoices. The projects which were involved in this were major public infrastructure and Economically Weaker Section projects mainly located in Southern India.

The evidence of cash payment of Rs. 150 crores to a prominent person in Andhra Pradesh during the search of this hawala transaction.

5. The target of Enforcement Directorate on Rs. 700 crore Hawala Racket

The interrogation started with the Kashmiri businessman named Zahoor Watali, who was a co-accused in this case. The ED had conducted searches at 11 locations in Delhi and Mumbai which is linked with the international hawala racket which involves around 700 crores. Pankaj Kapur and his associates are the main accused in this case. The ED filed a case of Forex violation against them under the Foreign Management Act (FEMA), 1999. During the search, the ED has seized cash of Rs. 29.19 lakhs and also some of the important documents, electronic gadgets, diaries and the stamps of more than 150 shell companies which are related to the whole hawala transaction of 700 crores.

According to the inquiries conducted by the ED, it is said that hawala transactions is being carried out by one of the Indian Company named M/s Radhika Gems Pvt Ltd, where this company collects the money in cash and transfer that money to abroad as against the payment of diamonds. These overseas companies are also owned and controlled by Pankaj Kapur himself.

Why does the Hawala transaction exist?

1. Hawala gives an easy way for the conversion of Indian currency to Foreign currency.
2. In hawala, there is no set cap for the amount which is being transacted. It allows the whole amount which needs to be sent.
3. Hawala system charges a very minimal amount of money as commission whereas foreign exchange banks will drain money through commission.
4. Hawala gives an opportunity for the black money diggers to convert their black money into white by transferring the black money to a foreign country without any knowledge of the regulators like RBI, Income tax etc.
5. This is the only way through which terror organisations will receive money and transfer money as they don’t have the opportunity to use official banks due to their illegal business transaction.
6. This system maintains a high level of confidentiality where the sender and the receiver will not be disclosed anywhere.
7. The transaction made cannot be traced easily.
8. Hawala system is not regulated by any of the governmental organisation as it is made illegal under the law.

How does Hawala impact India?

1. Increase of informal fund transfer: Informal fund transfer domestically and internationally harms the formal line money transfer, which in turn affects the entire economic system of the country.
2. Increases Corruption: Politicians who make kickback black money by receiving the bribes can easily convert that black money into white through hawala. And most importantly politicians anonymity will be maintained here.
3. Increase of Black Money flow in the economy: As the hawala system is an unregulated transaction. So it is widely used in India and other countries to transfer that money to another country.
4. Conversion of Black money into white money: This system helps the black money holders to convert their black money into white easily by:

(i) Transferring their money to foreign country’s bank where there will be no tax or minimal amount of tax imposed, 

(ii) Transfer black money as a loan to individuals residing in the same country or in foreign.

(iii) Transferring the black money abroad as an investment in a foreign company.

5. Terror Financing: Usually terror organisations receive funds from other countries, those funds cannot be transferred easily through formal banks, so terrorists use hawala transaction for receiving and sending all the funds. 

Measures to curb

Government of India has introduced many measures in order to control the Hawala transaction.

• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: The main aim of this Act is to curb black money, bring light out of undisclosed foreign assets and income which is being circulated freely in the economy.
• Multi-Agency Group: This was set-up in 2016, as per the order of the Delhi High Court by Finance Ministry after knowing the involvement of Indian Nationals in Panama leaks.
• Special Investigating Team on Black Money: Supreme Court ordered for the setting-up SIT on black money in 2014 to curb and investigate cases of black money that is circulated in the economy.
• The crackdown of Shell Companies: Government of India is trying its best to close all the shell companies which is being run to convert all the black money to white. According to government officials out of 17.79 lakh registered companies in India 5.43 lakhs are shell companies and these companies were closed by the government in the year 2018.
• Demonetisation: On November 8, 2016, Government of India announced a ban on usage of 500 and 1000 rupee currency note and issued new currency notes of 500 and 2000. This helped the economy to cut down the liquidation of cash which leads to the creation of black money, hawala and all the illegal transaction.
• Introduction of a new section in Income Tax Act, 1961: In the year 2017 a new section of 139AA was included in Income Tax Act, which mandates Aadhar no. while applying for the new Permanent Account Number(PAN) card and while filing Income Tax Returns.
• Liberalising Foreign Transaction: RBI has reduced the restrictions and blockages for the foreign transaction and made it faster and customer friendly.
• Notification rules of Prevention of Money Laundering (Amendment) Act, 2005: Government made mandatory to provide Aadhar details while opening a new bank account in any bank and also to provide PAN and Aadhar details while transacting amount is more than 50000.
• Ban on cash transaction: According to section 269ST states that no person shall receive an amount 2 lakh and above in liquid cash in a single day, single transaction and which is related to the same event or occasion.

TransferWise

Transferwise is a British online money transfer service established by Estonians Kristo Kaarmann and Taavet Hinrikus in the year 2011 in London.

This online money transfer service allows the customer of 750 different currencies for transacting across the world. Some of them are GBP, USD, EUR, AUD, and CAD. The net profit of transferwise reached 8 million dollars. And deals with the transfer of more than 4 billion dollars in a month. 

The aim focus of transferwise is to provide a platform for people who want to transfer money from one country to another with the cheaper commission rates unlike traditional banks charging a very high amount of commission. And as of now, this is being in functioning in seven different languages and the profile is created with the help of connecting person’s social media account like Facebook.

TransferWise in India

Transferwise considers the tax regulations of all the countries where it operates. They comply with all Indian laws which are present and operate according to those laws. 

The partner banks to transferwise in India are HDFC bank and Yes bank. Through these banks, it has also registered with the Indian tax authorities. Transferwise also provides all the necessary certificate for the transfer of money from one country to another through these banks.

TransferWise to India

As mentioned earlier all the transactions of transferwise are done with the collaboration of HDFC and Yes bank. There is a minimum amount of 50000 set for receiving foreign currency in India. Compared to all the other competing banks transferwise charges less and transactions takes place in a faster mode.

TransferWise from India

Same as mentioned above there is a minimum amount of 50000 set for transferring money from India to other countries. As many branches all over India, it helps the customers to access it easily and the funds can be transferred faster.

Exchange Rates Involved 

The amount of exchange rates charged by the transferwise is very low compared to all the foreign exchange banks. The commission rate charged by them varies from one country. It takes into consideration the country from where the money is sent and to where that money is being sent.

For example,

The dollar rate as of today is Rs. 71.9, consider you are sending 1000$ to your friend from the US to India, the whole amount without any foreign exchange taxes will be Rs. 71920, transferwise charges 1.92% as commission and your friend in India will be receiving only Rs. 7055 after deducting Rs. 1865 rupees going as commission.

A British Pound rate as of today is Rs. 92, consider you are sending 1000£ to your friend from London to India, the whole amount without any foreign exchange taxes will be Rs. 92000, transferwise charges 0.83% as commission and your friend in India will be receiving only Rs. 91881 after deducting Rs. 119 as commission.

Conclusion

Hawala is one of the economic evils present in our country, which helps the kickback moneymakers to convert their illegal, unaccounted money into white money. This hampers the overall development of a Nation. This is also a parallel illegal exchange market which drives the customers out from the official foreign exchange banks. FEMA Act makes hawala transaction illegal by allowing only RBI authorised persons to transact with the exchange of foreign currencies. It imposes penalties on the persons who are involved in these transactions. And probe agencies like ED, CBI are very active in recent days and it is breaking down all the hawala networks. However, with a lot of effort by the government and enforcement agencies hawala is still existing with a huge amount of transactions taking place on a daily basis.

References

1. Hawala: A Parallel Economy
2. https://www.investopedia.com/terms/h/hawala.asp
3. The Foreign Exchange Management Act (FEMA) Act.1999
4. https://mckinneylaw.iu.edu/iiclr/pdf/vol15p619.pd
5. https://economictimes.indiatimes.com/news/politics-and-nation/i-t-sleuths-unearth-rs-20000-cr-hawala-money-laundering-racket-in-delhi/articleshow/67946158.cms?from=mdr
6. https://www.financialexpress.com/industry/crackdown-on-shell-companies-only-66-registered-firms-active-5-43-lakh-closed/1262062/

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 skill.

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