This article is written by Srishti Kaushal, a first-year student of Rajiv Gandhi National University of Law, Patiala, Punjab, pursuing B.A.LL.B. (Hons.). In this article, she discusses what the shell companies are, how these can be identified, and what the government is doing to tackle issues related to shell companies.

Introduction

A few years back, while talking about India’s battle against black money, Prime Minister Narendra Modi said that more than 1.75 lakh shell companies had been de-registered under his Government. 

Recently, the Securities and Exchange Board of India also brought 331 shell companies under its radar and put a restriction on all trading activities of these companies.

Such news related to shell companies is a common occurrence. But what are these companies? Why are there constant efforts to put restrictions on their functioning? How successful has the government been in actually putting these restrictions? 

We will answer all these questions in this article.

What is a shell company?

Before answering any other question, let us first understand what exactly a shell company is.

At present, neither Companies Act, 2013 nor Companies Act, 1956 nor any other Act gives a definition for a Shell company. In fact, around three years back, a parliamentary panel asked the Ministry of Corporate Affairs to find a definition for ‘Shell Company’. Efforts to define it are still being made and many recommendations have been considered.

One suggestion was given by the Organisation for Economic Co-operation and Economic Development. The definition given was, “A shell company is a firm that does not conduct any operations in the economy (other than in a pass-through capacity), but it is formally registered, incorporated, or legally organized in the economy.”

Thus, a shell company is a company that exists only on paper. It does not have any actual active business operations nor any significant number of assets. These companies do not engage in any economic activities but have some corporate legal personality.

How to identify a shell company?

Though there is no statutory provision in this regard, The Securities and Exchange Board of India has identified certain parameters for the identification of shell companies. These are:

• No significant operation activities;
• No significant operational assets;
• Acting only in a pass-through capacity (like a channel for some other purpose).

Besides SEBI, there are many agencies and individuals who have also tried to lay down parameters for identifying these companies. Some parameters laid down are:

• These entities have insignificant business activities.
• These entities have an insignificant amount of assets.
• They are basically set up to facilitate cross border currency and asset transfer.
• They do not have any physical existence at the registered address.
• Multiple companies at times have the same registered address. 
• These companies have no economic rationale of any kind behind their banking transactions.
• These companies carry out rotational transactions of money without any apparent legitimate business.
• High-value transactions which are inconsistent with the operations of the business.

Why are shell companies created?

Now that we know how we can identify a shell company, let’s see why these companies are created.

Today, Shell companies are usually associated with the following activities:

• 1. Tax Evasion: Many times corporations set up shell companies at offshore venues where the taxes imposed are very less. These places are known as ‘Tax Havens’. Examples of these places are Panama and Switzerland. These corporations park their assets in the shell companies and escape from paying taxes on these assets.
  2. Money laundering and converting black money into white money: A lot of shell companies were discovered in 2016 when demonetization happened. This was because they were engaged in making use of black money. Many people and corporations make use of shell companies to store their surplus cash, instead of making deposits.
  3. Making money off Ponzi Schemes: People or corporations may create shell companies to defraud people by offering fraudulent schemes and earning money out of it. By making use of these companies, they save themselves as when fraud is found, it is very difficult to find the actual people behind the scheme, and the only thing upon which the blame can be put on is the company (which is not of any use).
  4. Hide identities of real owners: Finding the real owner of a shell company can be a problematic task as more often than not, the owners of these companies successfully hide their identities. They cannot be located as usually the registered office of the company or directors is at a completely different place, then the address submitted to the registrar.

Are shell companies always created for illegal purposes?

No, it is not necessary that a shell company is engaging in illegal activities. Though, till now we have only discussed how shell companies can be used illegally, at times, shell companies work within the legal limits as well. Let’s look at an illustration to understand how shell companies can work legally.

Company ‘A’ creates a subsidiary solely for looking after its HR Functions. Now, this subsidiary does not engage in any form of trade or business. Because, it neither has any significant assets, nor does it have real business operations, this subsidiary can be considered as a shell company, but it is not illegal.

In  Assam Co. India Ltd. vs. Union of India, a company owning a substantial number of tea estates, producing millions of kilograms of tea on an annual basis and feeding thousands of families was termed a ‘shell company’. The court held that considering the negative implications of being branded as a shell company, it was not justified to treat the company as a shell company.

The legal reasons for which a shell company can be created are:

• Hold or store money temporarily when the main company/ owner of the shell company is planning to start a new company.
• If a company wants to hide its dealings with another company, which has a bad reputation, it may create a shell company solely to engage with the other company.
• A shell company may be created to stage a hostile takeover. This happens when a company buys another company, without the approval of the management of the target company.
• To protect assets from lawsuits.
• In case a company is working in a dangerous country, for instance, with rampant terrorist activities, then people may formulate shell companies to hide money in order to avoid being a target of criminals and thieves.
• Shell companies can also be created to gain access to foreign markets.

As mentioned creation of shell companies is not an offense. However, some issues arise with establishing a shell company. These are as follows:

• In case a company forms a shell company offshore, it can lead to bad publicity as profits are being sent out of the nation.
• While not necessarily illegal, using a shell company to hold assets in it, falls in a legally grey area, and could lead to legal issues. Hence, it is definitely advised not to create shell companies.

Laws that a shell company may violate

Now that we know illegal purposes a shell company is created for, let’s have a look at some of the laws it violates when engaging in such illegal activities.

• Benami Transactions Prohibition (Amendment) Act, 2016, which prohibits anyone from holding assets under a fake name to avoid taxation.
• The companies (restriction on the number of layers) Rules 2017, which restrict the number of layers of subsidiaries a company can have.
• Prevention of Money Laundering Act (PMLA): When black money is passed through a shell company, it is presented as tainted money. This is punishable under Section 3 of PMLA.
• Indian Penal Code: In case the shell company is used for engaging in Ponzi Schemes, the owners and anyone involved can be punished under Section 420 of IPC which prohibits cheating. 
• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
• The Income Tax Act, 1961: PoEM Guidelines issued by the Central Board of Direct Tax.

How does the existence of shell companies affect you?

To answer this question, you need to ask another question is whether you are ready to let your money be used for illegal purposes? If you invest in a shell company, or in an entity which has set up a shell company, your money might be used for illegal purposes.

Moreover, since the government has been on a mission to remove these companies from the exchanges, you may lose your invested money completely as well. 

Besides, if you are an honest taxpayer, you are bound to be exasperated by seeing a company or an individual repeatedly escaping the tax liability. Also, repeated tax evasion harms the economy as a whole, as well.

Challenges faced in India in an effort to stop illegal shell companies

The Indian government has been making significant efforts to restrict shell companies from engaging in illegal activities. But, it has faced certain issues. These are:

• Lack of a legal definition for ‘shell company’ under any law.
• No specific law to deal with shell companies primarily.
• Existence of a complex corporate structure, which makes it difficult to track transactions from different accounts and differentiate between illegal and legal shell companies.

What is the government doing to act upon the illegal shell companies?

• The income tax department carried out an investigation to find out all the shell companies which were engaged in illegal activities and initiated criminal prosecution against the beneficiaries of many companies.
• Ministry of Corporate Affairs targeted shell companies for deregistration, attacking the companies who did not file the required financial statements. Under Section 248 of the Companies Act, 2013, the Registrar of Companies struck off many such companies from the register of companies.
• In February 2017, a joint force was set up. Let’s look into the achievements, efforts, and suggestions of this task force in detail.

Task Force 

The task force was headed by the Secretary and Revenue Secretary of the Ministry of Corporate Affairs. Others Members of this task force include the Department of Financial Services, SFIO, CBDT,  RBI, SEBI, CBEC, CBI, ED, FIU-IND, DG GSTI, and DG-CEIBs. Since its incorporation, It has met multiple times.

It has given many suggestions, which have been accepted and followed:

• Requested the Reserve Bank of India to freeze the accounts of the defaulting companies who have failed to file the financial statements and returns in the stipulated time limit, as required by the Companies Act, 2013.
• Asked SEBI to ask all the exchanges operating in India, to appoint auditors to verify the credentials of suspected companies. If it is found that their credentials do not match, the stock must be delisted.
• Asked Serious Fraud Investigation Office (SFIO) to create a database of shell companies and share it with all the required regulators.
• Directed all members to send the details of any CA’s who were involved in any such malpractice to the Institute of Chartered Accountants of India (ICAI).
• It has also directed the Centre to come up with a concrete definition for shell companies, so as to enable better implementation of its efforts.

The main achievements of the task force are:

• Compilation of a database of shell companies (by SFIO). This database is elaborate and is divided into 3 sections which are Confirmed List, Derived List, and Suspect List. The Confirmed List contains the names of over 16500 shell companies which have been found to be involved in illegal activities by various law enforcement institutions. The Derived List contains over 16700 companies identified as shell companies on the basis of 100% common directorships with confirmed shell companies. The Suspect List contains a list of almost 81000 companies which are suspected to be shell companies by the SFIO on the basis of multiple red flag indicators.
• SEBI has directed the stock exchanges to initiate action against 331 suspected shell companies and put a  ban upon them, disallowing them from trading. Bombay Stock Exchange and National Stock Exchange restricted 162 and 48 companies respectively, from active trading.
• The Ministry of corporate affairs has identified and removed more than 2,00,000 companies from the register, as they have not filed the financial statements and returns.

Conclusion

By engaging in tax evasion, money laundering, etc., shell companies engaged in illegal transactions, as they usually are, can be a huge hurdle for the economy. In India, there is a big issue with regards to dealing with these companies. This is because there is no specific provision or law which explicitly deals with Shell companies. Moreover, a legal definition and criteria for recognition is also lacking.

The need for a coherent structure to deal with shell companies is highly felt. Such a structure also needs to ensure that such regulation does not create unnecessary obstacles for legal entities, which appear to be shell companies. 

A careful balanced definition of shell companies is required which should be wide enough to cover all criteria to identify the illegal shell companies, while at the same time leaving all legal companies out of its purview.

References

• https://www.mondaq.com/india/CorporateCommercial-Law/841132/Shell-Companies-In-India
• https://enterslice.com/learning/shell-companies/
• https://www.sbsandco.com/blog/challenges-to-the-shell-companies-in-india

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

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This article is written by Kashish Kundlani, a third-year student of (BBA.LL.B) Ramaiah Institute of Legal Studies, Bangalore. In this article, we’ll discuss the ‘Doctrine of Transferred Malice’ under the Indian Penal Code.

Introduction

Have you ever heard any cases or stories where a person intended to kill someone instead killed someone else? I think you must have heard and also must have discovered people taking the defence in court that there was no intention to cause death or he was unaware of the fact that such an act is likely to cause the death of the person. 

Do you think the person with such an excuse can be acquitted or declare innocent by the court? The answer to this question is no, he will be held guilty. 

Now here comes into picture the concept of transferred malice. It relates or applies where the Mens Rea of one offence can be transferred to another. Before having knowledge about this concept, we must first understand what is malice.

Meaning of malice

It refers to the intention of a person causing injury to another person. Malice can be either expressed or implied. If any deliberate action or conduct is initiated towards the other person with an intention to kill, it is known as expressed malice.

When the intention is clearly visible from the person’s behaviour then that is implied malice.

What is the ‘Doctrine of Transferred Malice’

The ‘Doctrine of Transferred Malice’ is expressly not defined in the Indian Penal Code. Rather it is inferred from Section 301  of the Indian Penal Code.  

Section 301 states that if a person does any act which he knows or intends that is likely to cause death, commits culpable homicide and by causing the death of any person, whose death he neither intends to nor knows by himself that by his act will cause the death of that person.

The culpable homicide here is of that sort where he wanted to kill another person. He also had an intention and also the knowledge that such an act is likely to cause death but killed another person.

The person committing culpable homicide had a piece of knowledge or intention to cause the death of someone and in result kills someone else who he never intended to cause death or even knew that an act will cause his death.

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Essentials 

• Causes death,
• By doing an act with an intention or knowledge of causing the death of a person or,
• Causing such bodily injury as is likely to cause death,
• Causes the death of another person instead of the intended person.

The object of transferred malice Section 301

The object of transferred malice under Section 301 is to define the nature of culpable homicide. We shall discuss the circumstances where a guilty cannot take the defence that the presence of intention was not there. 

If a person committing culpable homicide had an intention to kill a person but killed another person. It may also be the case where he did not even have an intention to kill or where he did not have the knowledge that his act would cause death. In these cases he will be ruled as guilty and such vague excuses as the absence of intention will not be entertained in any court.

In simpler terms, a person under Section 301 cannot be set free on the grounds of not having any intention. Instead, the ‘Doctrine of Transferred Malice’ will apply and he will be held guilty.

Applicability of Transferred malice

The relevance of Section 301 or its applicability is when a person who was targetted by the offender is not killed and another person is killed by the guilty act.

Only in these cases, the ‘Doctrine of Transferred Malice’ will apply.

Illustration

• ‘T’ intends to kill ‘F’ but kills ‘Y’, without intending to kill him. In this illustration, the law will apply the ‘’Doctrine of Transferred Malice’’ and perceive that in the first instance itself, he intended to kill that person. Thus, he will be held guilty of killing ‘Y’.
• ‘S’ entered the house of ‘D’ with an intent to commit robbery. ‘S’ demand money from ‘D’. ‘D’ refused to give. Due to this, ‘S’ fired at him suddenly. ‘D’s’ wife ‘R’ came in between them to protect her husband and died due to being shot in the head. Here, ‘S’ will be held guilty for transferred malice.  

Case Laws

R v Mitchell 1983

In this case, the appellant tried to jump the queue at a post office. An elderly man objected to this behaviour. The appellant in retaliation, not only pushed the elderly man but hit him as well.

The elderly man falls on the people who were standing behind him in the queue. There was one old lady in the queue who also fell down and broke her leg. Later she died because of that broken leg. It was held that the appellant was guilty of manslaughter. 

In this case, even though the appellant did had any intention to hit the old lady, but due to his intention to hit the man, he was prosecuted by applying the principle of transferred malice.  

R v Latimer (1886) 17 QBD 359

In this case, the defendant was in an argument with another in a pub. The arguments between the two increased rapidly. The defendant took off his belt with an intention to hit the man but he missed. The person he was trying to hit only got a bit injured. The smash with the belt got diverted in another way and it hit an innocent woman who was standing by the side of the man. She got hit in her face and was severely injured.

It was held by the court that the defendant will be liable for the injuries inflicted upon the woman despite the fact that he did not intend to cause injury to her.

Here, the principle of transfer of malice was applied. The Mens Rea he had (the intention to hit the man) towards the man was transferred on the woman. 

R v. Saunders (1573) 2 Plowd 473

In this case, the defendant persuaded his wife to eat a poisoned apple laced with arsenic (a chemical). 

It was with an intention to kill her so that he can be free and marry another woman after her death. However, his wife gave the poisoned apple to their daughter. The daughter ate the apple and as a result, she died. After applying the ‘Doctrine of Transferred Malice’, the defendant was charged with murder. The intention to kill his wife got transferred to his daughter and due to that, she died.

Rajbir Singh vs State Of U.P. & Anr on 8 March 2006 

In this case, the appellant claimed that the neighbour threw some bricks on the compound of his brother’s house. On account of this, a verbal fight took place between his father and the accused but the matter was somehow settled by the local people. The next day accused with his two relatives came with guns. They came near the shop of the complainant where his father was standing. There, the accused persuade or encouraged his relatives to kill him. The accused started firing at the father of the complainant who then received injuries and fell down.

A girl came to that shop to purchase some articles from that shop and suffered injuries and fell down. Both the injured persons died on the way to the hospital.

The accused in his argument said that the girl died by accident and there was no intention on their part to kill her. She was passing by from that place and as a result, suffered injuries and died.

The Supreme Court set aside the order of the High Court and held the accused guilty. He was charged under Section 301.

R v Pembleton (1874) LR 2CCR 119

In this case, the defendant threw some stones into a crowd with an intention to hit someone with it. However, the stone somehow missed the crowd and instead hit the window. It was argued that by the ‘Doctrine of Transferred Malice’, his intention of hitting in the crowd was transferred and thus he was guilty of hitting the window.

The issue was raised that whether the defendant was guilty of the criminal damage and whether the ‘Doctrine of Transfer Malice’ can be used in these cases where the intention is different and the result is different. 

It was held that the defendant was not guilty of criminal damage and was also held that the ‘Doctrine of Transfer Malice’ cannot be applied here as the crime which actually happened did not have the same physical act (actus reus) as the crime which the defendant intended to do so.

Emperor vs Mushnooru Suryanarayana Murthy on 2 January 1912

In this case, the accused, Mushnooru Suryanarayan Murthy had an intention to kill Appala Narasimhulu. This was so that he could obtain the sums insured on her. Without the knowledge of Appala, he gave some sweet dish which contained a poison of arsenic and mercury. Appala Narasimhulu ate a small portion and threw the rest away. Rajalakshmi, aged 8 was the accused niece. He ate some sweet dish and also gave some to the other little child. This was done without the knowledge of the accused. The children died. But Appala recovered from the severe effects of it. 

It was held by the court that the accused will be held guilty under the attempt to commit the murder of Appala and also under Section 301 of the Indian Penal Code. this is for the death of the children.

Even though he did not intend to kill them but according to the doctrine of the transfer of malice, he will be held responsible for the punishment.

The court sentenced him seven years of rigorous imprisonment for attempt to commit murder but by his appeal, the punishment got enhanced to transportation for life (transported to the colonies to serve their prison sentences). 

Conclusion 

A brief analysis on the topic i.e. the ‘Doctrine of Transfer Malice’ tells us that transfer of malice can attract punishments in the Indian Penal Code. Despite lack of intention, one cannot save himself/herself from a crime committed and this falls under Section 301. 

Transfer of malice does not operate or it cannot be used where the crime intended to be done is different from the outcome. An example is a case I have mentioned above i.e. R v. Pambelton.

The principle of transferred malice can also be seen in the Law of Torts. Under the Law of Torts, a person is held liable for damages. Under the Indian Penal Code imprisonment maybe be given. 

Some persons also call it as the transfer of intent, transfer of motive or transmigration of motive.

Section 301 only states that the accused did have the knowledge or intention to kill the other person. Whether an act is a murder or culpable homicide, that is up to the court.

References

• http://legalopinio.blogspot.com/2016/06/transfer-of-malicesec-301-ipc-intention.html
• http://www.e-lawresources.co.uk/Transferred-malice.php
• https://www.jusprudentia.com/single-post/2017/06/23/Doctrine-Of-Transferred-Malice
• http://www.e-lawresources.co.uk/R-v-Latimer.php

To know more about Mens Rea & Actus Reus, 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 Dhruv Vatsyayan of Law School, BHU pursuing his 1st year of B.A.LL.B. In this article, he deals with Types of Agreements Related to Music Production.

Introduction

Almost every one of us loves to listen to music, be it Jazz, Country, Indie or EDM. But, the music we listen to as the final product, is the result of a long process which involves various people like artists, directors, technicians, etc. 

Nowadays, the music production industry itself is worth billions and is one of the most exciting and fascinating industries.

We may say that music production is a process where various people are collectively involved in producing musical tracks and songs which includes recordings, writing, editing, etc. Moreover, it also involves certain promises, commitments, and financial transactions. Thus, it becomes important that these commitments and transactions are regulated by law, and thus, there is a vast scope of legal agreements in this industry.

So, let us discuss various legal agreements that are involved in this industry per se. 

Stages of Music Production

Just like every creative production, the Making of Music also involves various different stages. To understand the importance of legal agreements in music production in a better way, it is necessary to get an overview of these stages.

These stages are:

Song Writing

The very first step in creating music is songwriting. A greatly crafted song must contain the following elements:

• Melody
• Harmony
• Lyrics
• Rhythm

This stage mainly involves two sub-stages, i.e. Lyrics writing and Music Composition. This stage involves various players, like lyricist, music director, instrument artists, and others. This stage ends up creating a composition.

Arrangement

Arranging instruments and voices in such a way that it pleases the listener is another important stage of music production. It often happens that a piece of music has a good melody and beat, but it sounds boring just because the music gets too repetitive.

To avoid such a situation, this stage is very important. It involves the question like when to include a particular tune or beat, what instruments should be used in which part of the music etc.

This stage involves the music director, vocalists and instrument players.

Sound Design and Production

After being done with arranging all the parts, the next stage of music production is sound design and sound production. This stage includes adding multiple effects to the arranged sample, adding various layers of music, editing synth presets and more.

In this stage, various techniques are used, like:

• Filling the sample music arrangements with various effects like sound effect and transition effect.
• Editing the samples creatively by stretching the music sample, by chopping it up or by pitching the sound.
• Controlling or modulating the pitch and amplitude of the instrument’s sound.
• Finalizing the track after deciding upon what part should remain or what part should be chopped out.

This stage involves players like the sound designer and technician.

Mixing

This stage of music production involves combining the various layers of music and audio tracks to make the final audio. Mixing involves the following things:

• Equalizing
• Compressing
• Balancing
• Harmonics enhancing

This is the stage where the experience and knowledge of the music technicians come in handy. 

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Mastering

This is the final stage in the process of music production. It’s the stage of processing the audio mix and then preparing it for further distribution. The purpose of mastering is to balance the stereo mix, make all the elements sound cohesive, and to reach commercial loudness.

Distribution

In this stage, the finalized tracks and albums are sent to the market through a distributor who distributes it to various shops and platforms. A distribution company that specializes in Music Distribution signs a deal with the producer/artist which gives them the right to sell the music to the shops. In layman language, the distribution company just acts as the middleman between the producer and the store.

Importance of Legal Agreements in the Music Industry

During the production of music through above mentioned various stages, a whole lot of agreements and contracts are signed between the production house and various other players.

From the very initial stage of lyrics writing to the final stage of distribution, the process of Music Production deals with a lot of Intellectual Property rights and thereto related legal drafting.

There can be negotiations between the music producers and different people involved in the process by means of contract or agreement varying from the IPR to the Competition law.

The whole process of Music Production involves a lot of monetary and business transactions. Failing to document these transactions in the form of written contracts and agreements may lead to confusion, ambiguity and hefty losses.

Earlier, in the music production industry, due to negligence and unawareness regarding written agreements, people and companies were not able to exercise their rights and ignored their duties towards others. But now, with the emergence of media and entertainment laws, this industry takes its contractual and Intellectual Property Rights seriously.

Also, the contracts made in the form of legal agreements provide the parties with the option of approaching the courts and tribunals for dispute resolution. This helps in protecting IP rights and enforcing the contracts.

Now let us discuss the different types of agreements that are most commonly used during the various stages of Music Production.

Types of Agreements used in Music Production

Various types of agreements are used at different stages of music production. One can not make a comprehensive list of such agreements which are to be used during the entire process but there are some agreements which are most common. These are:

Work-Made-For-Hire Agreement

This agreement is one of the most basic and initial agreements in the music production industry. This is more of a general form which guarantees that you accidentally don’t abdicate your rights to the other contributors in the making of music. This form may also include a waiver in case if the artist/Contributor is signed to a production company or record label.

Now, the question that comes is, why is it important?

This agreement is very important because, in the absence of any such Work-Made-For-Hire Agreement, all the contributors in the making of the music may claim joint ownership of the Intellectual Property.

Illustration

The song “Addicted” was sung by Enrique Iglesias and was produced by Interscope Records. The other artists involved were Paul Barry and Mark Taylor. So, if the company Interscope Records doesn’t sign a contract with all the artists, then, Enrique Iglesias, as well as Paul Barry and Mark Taylor can claim ownership of the track.

Music Collaboration Agreement

Another very basic, yet very crucial agreement between the producer and the artists is the Music Collaboration Agreement. This agreement is the most common agreement in the music industry and is signed between the music producer and the artists.

This agreement establishes that the producer is collaborating with some particular artists for producing an album or a single track.

This agreement basically deals with the agreed percentage share between the producer and the artists. After rounds of negotiations, this agreement is signed with consent and assent of both parties.

Illustration

All the songs of ‘Kabir Singh’ Album were composed by Sachet Tandon and Mithoon. The album was produced by T-Series productions. Now, when the artists were signed initially by the production house, they must have negotiated upon the percentage share, and later, the profits must have been distributed according to the agreement.

Side Artist Agreement

This agreement is equally important as the music collaboration agreement. These agreements are used where a side/auxiliary artist is engaged to contribute to the music production process. In the case of lyrics writer, this agreement may also allow keeping the part which he has written, with him.

Split Sheet Agreement

Whenever the producer is going to register the work with the competent authority of intellectual property, having this agreement in hand helps greatly. 

This agreement basically, is a form that shows the distribution of shares from profits gained by selling the composition. Having this agreement with the other contributors helps to a great extent as in the absence of such agreement, you may not be able to get the royalties and profits from the sale of music.

Illustration

Suppose that a track is being produced by a Record label XYZ. The contributing artists are Mr AB, Mr CD, Mrs GH, and Mr ER. So, to avoid confusion and dispute at the time of profit-sharing, the percentage of shares are decided already:

1. Mr AB               25%
2. Mr CD              20%
3. Mrs GH            20%
4. Mr ER               7%

So, the agreement drafted may look like:

Split Sheet Agreement

*This split sheet agreement may not be modified or amended, except by a document signed by all the co-writer named below.

Mechanical License

A Mechanical License means that the rights are granted by the producer to a record company to use the musical composition.

Such a license is important for claiming the mechanical royalties, in absence of which, the record label may not grant the royalties.

Record Company & Producer Agreement

These contracts are used when a producer enters into a contract with a recording company. Some agreements can also be used after modifying the format of the contract.

Such an agreement must include:

1. Terms and termination clause
2. Engagement Clause
3. Clause describing the Recording Process
4. Payment Clause
5. Rights and Duties Clause
6. Dispute Resolution Clause

In such cases, the producer agrees to deliver the master recording of the music to the record label and the label agrees to pay a pre-decided fee to the producer. Such agreements also include a clause about payment of royalties to the producer, from the sale of the recording.

Recording Studio Rental Agreement

Recording the track is undoubtedly one of the most important and challenging stages in the whole process of music production. The recording is generally done in a recording studio. Although most of the big production companies have their own recording studios, the smaller one is dependent on third party recording studios. They undergo recording by renting a studio. Renting the studio also requires an agreement and such agreement is known as the Recording Studio Rental Agreement.

Such agreements should ideally include the following clauses:

• Engagement Clause
• Recording Procedure Clause
• Compensation Clause
• Facilities & Services Clause
• Dispute Resolution Clause

Such agreements may also include the clause regarding using the technicians and other facilities of the studio.

Release Agreement

Such agreements are made when the producer of music, the engineer or the production company and an artist agree to release each other from the obligations under a contract previously signed by both parties. These agreements are used as a piece of evidence that the producer and the artists are not working together with any longer. Such agreements should include the following clauses:

1. A clause specifying the parties,
2. Termination Clause,
3. Consideration Clause,
4. Additional Agreements Clause (if any).

Such agreements may also be used as documentation of release after the breach of contract happens and a dispute arises between the parties.

Parental Consent And Guarantee (Used With Minors)

Such agreements are used in cases where the vocalist or the instrument player or any other artist is below the age of 18 years. In the Parental Consent agreements, it is necessary for both the minor and his/her parents to give consent to the contract.

Conclusion

Other than the agreements discussed above, several distinct types of agreements are also used in the music production industry, such as the Letter of Direction and Master Use License. Thus, it’s quite evident that the process of music production involves a whole lot of written agreements and contracts. Among all these most of the contracts and agreements are signed for the purpose of protection and licensing of the Intellectual Property of an artist or the contractual rights of the producer.

There may be different requirements for particular music and different for another, thus it is very difficult to standardize the agreements involved in music production of different albums/tracks.

References

1. https://iconcollective.edu/music-production-process/
2. https://www.waves.com/six-stages-of-music-production
3. https://www.songstuff.com/music-business/article/music_publishing_contracts/
4. https://www.lawyersrock.com/music-license-agreements/
5. https://www.musiccontracts.com/shop-label-contracts/parental-consent
6. http://www.trafficpolicemumbai.org/2018/10/different-types-of-music-contracts-for-artists/
7. https://www.audiorecording.me/music-production-process-how-does-it-take-to-produce-a-song.html
8. https://www.hypebot.com/hypebot/2014/12/basic-legal-tips-for-record-producers-draft.html

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 Sachi Ashok Bhiwgade, B.A.LLB (Hons.) student of Hidayatullah National Law University, Raipur. This article discusses the Role and Duties vested with Resolution Professional in Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016.

Who is a Resolution Professional?

A Resolution Professional is a licensed professional who: 

• Has qualified the Limited Insolvency Examination,
• Is enrolled with the Insolvency Resolution Agency, 
• Is registered with the Board.

The Adjudicating Authority appoints the Resolution Professional who manages the entire process of insolvency and bankruptcy. According to the Code, “Resolution Professional” means an Insolvency Professional who conducts the insolvency resolution process and includes an interim resolution professional and takes necessary steps to revive the company. The Insolvency Professional is governed by specific legislation that they have to follow i.e., IBBI (Insolvency Professional) Regulation, 2016. 

Appointment of the Resolution Professional

Before the appointment of a Resolution Professional (RP), an Interim Resolution Professional (IRP) is appointed until the constitution of the committee of creditors (CoC) and appointment of an RP. During the process of liquidation, the RP assumes the role of a Liquidator and in case of individual insolvency, he acts as a Bankruptcy Trustee. The IRP manages the affairs of the company until an RP is appointed. As per Section 22, within 7 days of the constitution of the CoC, its first meeting is held in which they decide whether to appoint the IRP as the Resolution Professional or to appoint another resolution professional. In case the Committee decides to appoint the IRP as the RP, they are required to communicate the same to the IRP, Corporate Debtor and the Adjudicating Authority. The CoC appoints the RP within 30 days from the date of commencement of the Corporate Insolvency Resolution Process. 

Role of a Resolution Professional

The Resolution Professional plays a vital role in the Insolvency and Bankruptcy process. The Bankruptcy Law Reforms Committee (BLRC) in its final report also emphasized on the role of an RP which stated that “Insolvency professionals form a crucial pillar upon which rests the effective, timely functioning as well as credibility of the entire edifice of the insolvency and bankruptcy resolution process.”

Resolution Professional functions

• Conducting of the Corporate Insolvency Resolution Process

As per Section 23, the Resolution professional conducts the entire Corporate Insolvency Resolution Process and manages the operations of the corporate debtor during the period of the CIR Process. Further, even after the expiry of the period of CIR, the RP continues to manage the operation until the order of the approved resolution plan or appointment of the liquidator is passed. He is also vested with the exercise of power and to perform the duties that are vested with the Interim Resolution Professional. 

• Management of the affairs of the corporate debtor

After the order for the commencement of CIR is passed, an insolvency professional is appointed who acts as an IRP by the Adjudicating Authority. As provided by Section 17, on and from the date from which the IRP is appointed he is vested with the management of the affairs of the corporate debtor. The control from the corporate debtor is now transferred to the IRP. The power of the Board of Directors of the corporate debtor also vests and is exercised by the IRP. For the purpose of managing the affairs of the corporate debtor by the IRP, the officers and managers of the corporate debtor are required to give access to the IRP of all the relevant documents, books of accounts, records, etc as may be required. This Section also makes it obligatory for the officers and managers of the corporate debtor to report to the IRP. The IRP acts and executes all the deeds, receipts, documents in the name and on behalf of the Corporate Debtor and takes all such action specified by the Board. However, the managing of the affairs of the corporate debtor does mean that he has to perform the day to day activities of the entity. 

• Taking over the control of the assets of the corporate debtor 

For the purpose of the resolution, the control and custody of the assets from the corporate debtor is taken over by the resolution professional as per Section 18 (f). The NCLT, Mumbai Bench in the case of Goa Auto Accessories v. Suresh Saluja has held that to facilitate the Corporate Insolvency Resolution Process, the RP can take custody of the assets of the corporate debtor that forms the subject-matter of the litigation.

• Constitutes the Committee of Creditors

To bring the Creditor together is one of the important tasks of the insolvency professional. After the collation of claims and determination of the position of the corporate debtor, the interim resolution professional constitutes the committee of creditors. The committee of creditors then decides whether to resolve the insolvency of the entity or to liquidate it. In its first meeting of the CoC appoints the resolution professional who then convenes and conducts the meetings of the committee. Further, as per Section 24(2), the resolution professional conducts all the meetings of the Committee of Creditors.

• Management of the operations of the corporate debtor as a going concern

When the CoC approves the resolution plan, the entity continues as a going concern. The Insolvency Professional in case of a default manages the entity and its assets and runs the entity as a going concern. Section 20 mandates the IRP to preserve and protect the value of the property and to manage the operations of the corporate debtor as a going concern. The IRP or RP must do all such acts that is necessary for keeping the corporate debtor in a going concern phase. 

• Preparing the information memorandum

The Resolution Professional is required to make and submit the information memorandum in order to formulate a resolution plan. He is also required to provide all relevant information to the resolution applicant. Regulation 36(2) provides for the details to be contained in the information memorandum. Explanation to Section 29 mentions the meaning of the term ‘information memorandum’ to mean information which is required by the resolution applicant to make a resolution plan for a corporate debtor. It includes information relating to the financial position, disputes and any other matter in relation to a corporate debtor. 

• Examining the resolution plan

The resolution professional facilitates the resolution plan. As per Section 30, on the basis of the information memorandum prepared by the resolution professional the resolution applicant submits the resolution plan to the resolution professional.

The RP is required to examine each resolution plan submitted to him to ensure that each resolution plan has in the manner specified by the Board:

• Has provided for the priority of the payment of insolvency resolution process costs to the payment of other debts of the corporate debtor.
• Has provided for the payment of debts of the operational creditor not less than. 

1. Amount paid to be paid to such creditor in the event of liquidation under Section 53(1). 
2. Amount to be paid to such creditor if the amount is to be distributed as per the order of priority under section 53(1). 

• Has provided for the payment of debts of the financial creditor (not voting in favour of the resolution plan) not less than the amount paid to such creditors in the event of liquidation of the corporate debtor as per section 53(1). 

If the resolution confirms the above condition then, the resolution professional presents the resolution plan for the approval of the committee of creditors. If the committee approves the plan it has to do so by a vote of not less than 60% of the voting share of financial creditors. The approved resolution plan is then submitted to the Adjudicating Authority by the resolution professional.

The Adjudicating Authority if it is satisfied, approves the resolution plan by an order and such order will be binding to the corporate debtor, employees of the corporate debtor, members, creditors, guarantors and other stakeholders that are involved in the resolution plan. If the Adjudicating Authority is not satisfied, it may by order reject the resolution plan as per Section 31. 

Duties and responsibilities of an Insolvency Professional

The duties of the IRP and RP are provided by the code under Section 18 and Section 25. 

• To preserve, protect and monitor the assets of the corporate debtor.
• Collecting all the information of the assets, finances, and operations.
• To invite the prospective resolution applicant fulfilling the criteria prescribed by the CoC.
• Following the public announcement under section 13 and 15 to receive and collating of claims that are submitted by the creditors.
• Filling of information collected with the information utility.
• To represent himself and act on the behalf of the corporate debtor.
• To raise interim finances as per the limits prescribed by the CoC.
• Disclose the insolvency resolution process cost.
• Appointment of accountants, legal professionals, and other professionals.
• Receiving, verifying and maintaining an updated list of the claims.
• Presenting resolution plans before the CoC meeting.
• To submit the resolution plan to the Adjudicating Authority approved by the CoC. 
• Any other such duty as specified by the Board.

Apart from the above mentioned, the RP is also required to follow a certain code of conduct provided by the IBBI regulation. The Adjudicating Authority in the case of ARC (India) Pvt. Ltd v Shivam Water Treaters Pvt Ltd held that a Resolution Professional discharges his/her duties as an officer of the Court and any non cooperation or non-compliance with the Court’s officer amounts to Contempt of Court.

Limitation on the resolution professional 

Section 28 of the code places restrictions on the actions of the resolution professionals. It sets out certain actions that he cannot do during the corporate insolvency resolution process without the approval of the committee of creditors. In the ESIL v. Satish Kumar Gupta, the Court held that a resolution professional is only required to give his prima facie opinion to the Committee of Creditors that the requirement laid down by the law has been fulfilled. In Dinal Shah v. Bharti Defence Infrastructure Ltd, the NCLAT observed that in case of any misconduct by the RP, it shall be reported to the appropriate authority.

Judicial Pronouncements

In the case of Swiss Ribbon Pvt. Ltd v. Union of India, the Supreme Court observed that the resolution professional is only a facilitator of the resolution process. He cannot act without the approval of the committee of creditors.

In the case of Arcelor Mittal India v Satish Kumar Gupta, the court observed that the role of an RP is only to examine and confirm that each resolution plan confirms to the requirement of section 30(2).” It further said that his role is administrative and not adjudicatory.

The Supreme Court in the case of ESIL observed that the RP is required to ensure that the resolution plan is complete before submitting it to the Committee of Creditors. It further observed that an RP not only manages the affairs of the corporate debtor as a going concern from the stage of admission of application under Section 7,9,10 till the approval of the plan by the Adjudicating Authority but is also a key person who appoints and convenes the meetings of the CoC who decides the resolution plan who decides upon the resolution plan. 

Conclusion

The Resolution professional plays a very significant role for the efficient operations of the insolvency process. He has to perform a whole range of functions and duties that are vested in him. The primary responsibility of a resolution professional is to conduct the Corporate Insolvency Resolution Process with transparency. Besides, the Insolvency Professional is also required to possess the appropriate skills, knowledge, expertise to ensure that the proceedings are conducted in an effective manner and carry out the duties and responsibilities vested in him. 

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 has been written by Disha Mohanty of National Law University and Judicial Academy, Assam. It gives a very brief idea of the State Executive and landmark judgements regarding the same. 

Introduction

The State Executive consists of the Chief Minister, the Council of Ministers and the Governor. It has the same Parliamentary pattern as followed by the Union Government with the upper hand being given to the Union in certain matters. This has been done to maintain the unitary spirit of the structure of the country. The Governor plays the twofold role of being the constitutional head at the stage level as well as being a link between the state government and the centre. He/She acts on the advice of the Council of Ministers and all executive actions are taken in his name. This article extensively studies the relation between these various state functionaries, the distribution of power between them and their accountability. 

The Governor

Article 153 of the Indian Constitution provides for every State to have a Governor. Just like the President is the nominal head of the republic, the Governor is the nominal head of a state. This means that he/she has powers and functions similar to the President of India but operates at the state level, with the real power lying in the hands of the State Chief Minister and his/her council of ministers. Further, the 7th Constitution Amendment Act of 1956 has added a provision under Article 153 which provides for the same person to act as the Governor of two states simultaneously. The term of office of the Governor is 5 years. 

Appointment, Tenure and Removal of a Governor

Appointment of a Governor is talked about under Article 155 and information regarding his tenure and removal are provided under Article 156. It states that the President appoints the Governor by warrant under his hand and seal i.e., bearing his seal and signature. The Governor shall hold office as long as he/she enjoys the pleasure of the President. The Governor may resign his office by writing under his hand i.e., a written letter undersigned by him addressed to the President. In accordance with the foregoing provisions of this article, the Governor’s term of office shall be five years from the date on which he/she enters upon his office, provided that the Governor shall continue to hold office until his/her successor enters upon his office, notwithstanding the expiration of his term.

Qualifications

Article 157 states the two qualifications to be fulfilled for a person to be appointed Governor. The two provisions are:

• He/She should be an Indian citizen.
• He/She should have completed 35 years of age. 

Conditions of Governor’s Office

Along with the above mentioned preliminary qualifications, there are a set of other criteria which need to be met. These are stated under Article 158. They are:

• He/She should not be holding any office of profit.
• He/She should not be a member of the Parliament or any other State Legislature. However, if someone holding these positions is appointed Governor, he/she would have to vacant their previously held office.
• He/She is provided with such allowances, emoluments and privileges which the Parliament provides by law and in case these provisions are absent, they are provided to him/her as per Schedule II.
• The above mentioned allowances, emoluments and privileges would not be diminished during his term. Further, if two states come under him/her, such expenses would be shared between them in accordance with the President’s decision. 

Oath

Every Governor, before entering his office is bound to take an oath before the Chief Justice of the High Court or the senior most judge, in the former’s absence. This is mentioned under Article 159. The oath is as follows:

“I, A. B., do swear in the name of God that I will solemnly affirm faithfully execute the office of Governor (or discharge the functions of the Governor) of ………….(name of the State) and will to the best of my ability preserve, protect and defend the Constitution and the law and that I will devote myself to the service and well-being of the people of..………(name of the State). ”

Can the governor be dismissed arbitrarily?

As per Articles 155 & 156 of the Constitution, the Governor is an appointee of the President and holds office as long as he continues to enjoy his pleasure. This essentially means that the Governor can hold his office for the prescribed term of 5 years if he continues to enjoy the pleasure of the President. Article 74 states that the President is bound to act upon the aid and advice of the Council of Ministers.Therefore, the President’s decision to remove the Governor, in effect, is actually the decision of the Centre. In the case of B.P. Singhal vs UOI (2010), the Hon’ble Court’s constitutional bench held that even though the Central Government holds the power to remove the Governor, they cannot do so arbitrarily and would have to prove the facts of the case and grounds for his/her removal. Thus, the Governor cannot be removed simply because the Union government has lost confidence in him/her.

B.P. Singhal VS Union of India (2010) case

The circumstances leading to this case revolve around the removal of the Governors of Uttar Pradesh, Gujarat, Haryana and Goa after the 14th Lok Sabha elections. The writ petition was filed by a former member of Parliament, B.P. Singhal and the matter was referred to a five judge constitution bench consisting of the then Chief Justice K.G. Balakrishnan and Justices S.H. Kapadia, R.V. Raveendran, B. Sudershan Reddy and P. Sathasivam. 

Quoting Justice Raveendran, “What Article 156 (1) of the Constitution dispenses with, is the need to assign reasons or the need to give notice, but the need to act fairly and reasonably cannot be dispensed with by Article 156(1).”

The bench clarified that the exercise of powers by the President under Article 156(1) should not be arbitrary. In case the President withdraws his pleasure, the court will assume that it is for compelling reasons and where the aggrieved person is unable to point out mala fide reasons for his/her removal, the court won’t interfere. But, in cases where the said person is able to prove that there existed a mala fide intention behind his/her removal, the court would cause the Union government to produce records/material to satisfy itself that the withdrawal of pleasure was for good and compelling reasons. What constitutes good and compelling reasons would depend upon the facts of the case. Thus, there won’t be any interference from the judiciary unless the executive makes a strong case based on malafide intentions.

In summary, the Court made it clear that even though the Union and the President held the power to remove the Governor, such could not be effected in an arbitrary manner or in bad faith even if his/her policies and ideologies were different from those of the Union Government. 

Discharge of his functions in certain contingencies: Article 160

The article means that in case there’s a certain eventuality where the President thinks the Governor needs to discharge certain duties not mentioned in this chapter, then the President can do so via this provision. 

Powers of Governors

As it has already been made clear in the beginning of the article, the position, power and functions of the Governor are analogous to that of the President. His/Her powers are discussed below under four heads. 

Executive power

Under Article 154(1), the executive powers have been vested to the Governor and he can choose to exercise them either directly himself or indirectly through his Council of ministers. 

• As such, the Governor makes important appointments of the state such as the Chief Minister and Council of Ministers, Chairman and members of State Public Service Commission, State election commissioner, Advocate General, Chief Justice of the High Court, District judges and the Vice chancellors of Universities.
• Under Article 356, the Governor can recommend the President for the imposition of a State Emergency and during such emergency he/she enjoys extensive executive powers as an agent of the President.
• He/She runs the state administration by extending control over the subjects in the state list and deciding the policies and portfolios of the various ministers. 

Financial power

• A money bill cannot be introduced in the state legislature without prior approval of the Governor.
• The state Contingency Fund is at his/her disposal and he/she can make withdrawals out of it to meet unforeseen expenditures.
• He/She makes sure that the Annual state budget is discussed and put before the State Legislature. 

Legislative power

• The Governor has the power to summon and prorogue both houses of the Legislature. He/She has to make sure that the maximum gap between the two sessions of the houses is 6 months.
• Under Article 192, the Governor has the authority to disqualify any legislator who fails to comply with the conditions given under Article 191.
• The Governor has to address the state legislature at the beginning of the first session every year and after the state assembly elections.
• The Governor can hold a bill and send it to the President for his consideration. Other than this, the Governor can either give assent to a bill or withhold it or send it back for reconsideration (except for money bills).

Pardoning power

According to Article 161, the Governor can grant pardons, reprieves, respites and remissions of punishment or suspend, remit and commute the sentence of any person convicted of any offence relating to matters under the state executive power, exception being cases decided by a court martial. However, in cases where a death penalty has been granted the Governor cannot pardon it. 

Is this power subject to judicial review ?

According to the Constitution, the judiciary should not encroach upon the powers of the executive. However, in certain cases this has been seen.

In the case of Epuru Sudhakar & Anr. v. Govt. of AP & Ors., the issue of whether the pardoning power of the Governor is subject to judicial review or not came up. The Hon’ble Supreme Court set aside the decision of the then Andhra Pradesh Governor, Sushil Kumar Shinde. The Governor had advised for remitting the punishment of a Congress activist in connection with the murder of two persons, one of whom was a TDP activist. The division bench consisting of Justices S.H. Kapadia and Arijit Pasayat expressly mentioned that the exercise of the pardoning power should be in compliance with the Rule of Law.

“Rule of Law is the basis for evaluation of all decisions (by the court)… That rule cannot be compromised on the grounds of political expediency. To go by such considerations would be subversive of the fundamental principles of the Rule of Law and it would amount to setting a dangerous precedent,” the bench warned.

Justice Kapadia, while concurring with the main ruling delivered by Justice Pasayat, sought to remind “exercise of executive clemency is a matter of discretion and yet subject to certain standards. It is not a matter of privilege. It is a matter of performance of official duty… the power of executive clemency is not only for the benefit of the convict but while exercising such a power the President or the Governor as the case may be, has to keep in mind the effect of his decision on the family of the victims, the society as a whole and the precedent it sets for the future.”

He also said “An undue exercise of this power is to be deplored. Considerations of religion, caste or political loyalty are fraught with discrimination”. Thus, this judgment gave a final conclusion that the settled position of law that exercise or non-exercise of the pardoning power by the Governor would not be immune from judicial review.

Ordinance making power of the Governor

Under Article 213, the Government can issue an ordinance if the circumstances compel him to do so, when either houses of the legislative assembly are not in session. However, there are two circumstances under which the Governor cannot issue an ordinance. They are:

• If the ordinance has certain provisions which the Governor would have reserved for the President in case it were a Bill.
• If the State Legislature has an act with similar provisions and the same would be declared invalid without the President’s assent.

The Council of Ministers

The Council of Ministers is appointed by the Governor. It along with the Chief Minister exercise the real power and implement policies and rules in the State. Hence, together they form the executive head of the State.

Maximum size of ministries

The total number of Ministers, including the Chief Minister, in the Council of Ministers in a State shall not exceed fifteen per cent of the total number of members of the Legislative Assembly of that State, provided that the number of ministers, including the Chief Minister in a State shall not be less than twelve; And that where the total number of Ministers including the Chief Minister in the Council of Ministers in any State at the commencement of the Constitution (Ninety-first Amendment) Act, 2003 exceeds the said fifteen per cent then the total number of ministers in that State shall be confined to such number within six months from such date. 

Disqualification of defection on the ground of split abolished

In order to protect the true essence of democracy, the Anti-defection law was introduced in the 10th schedule. It was a measure to reduce the rampant horse trading that was happening under the popular phenomenon of “Aaya Ram Gaya Ram” in the political parties. Initially, the law allowed defection if 1/3rd of the party members agreed to split their party. But this provision backfired and resulted in mass defections. So this was subsequently changed in the 91st amendment and the bar was raised to 2/3rd. Under the new provisions, a member won’t be disqualified in case of a split in the following two conditions:

• that he/she has willingly given up his membership in his original political party; or
• that he/she has voted or not voted in the House contrary to the instructions by such political party or by any person or authority authorised by it and such an act has not been condoned by such political party, person or authority within fifteen days.

Can the Governor sanction for Prosecution of Ministers under Corruption Act?

The Governor can sanction for the prosecution of the ministers but the proof for the same needs to be satisfactory. There have been many cases where the Governor has ordered a sanction for the prosecution of a Minister, sometimes with the advice of the Council of Ministers and at times on his own discretion and one such case has been discussed below. 

M.P. Special Police Establishment v. State of M.P., 2005

In this case, the issue was whether or not the Governor should give the sanction for the prosecution of the Chief Minister without the aid and advice of the Council of Ministers. The Supreme Court held that the Governor could make use of his discretionary powers in this case and is not bound by the aid and advice of the Council of Ministers. Thus, Governor sanctioned for the prosecution of the Chief Minister.

Non-legislator can be appointed as Minister

Going by the established practices, it is mostly a legislator who is appointed minister. But an exception to this rule exists under Article 164(4). This provision provides that if a non-member is appointed minister, he/she must get elected within the next 6 months. This has happened in numerous cases, for e.g., Kamaraj Nadar in Madras in 1954, T.N. Singh in U.P. in 1971.

A non-member cannot be reappointed Minister without getting himself elected 

In 2001, the then Governor of Tamil Nadu had appointed Jayalalitha as the Chief Minister of Tamil Nadu. Now, Jayalalitha was not an elected member of the house and additionally had corruption charges against her which caused her nomination papers to be rejected. 

The Hon’ble Supreme Court ruled that it would be a clear violation of the Constitution if it allowed any individual to be appointed Minister for a second term of “six consecutive months” without getting elected to the legislature. The court also held that Article 164(4) can be put to the best use when its effectiveness restricted to a short period of six consecutive months. Quoting the judgement: “The clear mandate of Article 164(4) that if an individual concerned is not able to get elected to the legislature within the grace period of six consecutive months, he shall cease to be a Minister, cannot be allowed to be frustrated by giving a gap of few days and re-appointing the individual as a Minister, without his securing the confidence of the electorate in the meanwhile.”

A convicted person cannot be appointed as Chief Minister: Constitution Superior, not mandate

After the Supreme Court verdict last year in Lily Thomas vs. Union of India, striking down Section 8(4) of the Representation of the People Act, legislators have lost their protection from immediate disqualification. In the light of this ruling, Ms. Jayalalithaa will be disqualified as an MLA the moment conviction is awarded, say legal experts. The SC held that “ a person who is convicted for a criminal offence and sentenced to imprisonment for a period of not less than two years cannot be appointed the Chief Minister of a State under Article 164(1) read with (4) and cannot continue to function as such.

Relationship between the Governor and Council of Ministers

The relationship between the Governor and the Council of Ministers is analogous to that between the President and the Council of Ministers. Article 163 says that there shall be a Council of Ministers to aid and advise the Governor. These group of ministers hold office during the pleasure of the Governor and are directly responsible to the Legislative Assembly. Under normal conditions, the Governor is bound by the advice and opinions of the Council of Ministers but there are certain circumstances under which the Governor functions according to his/her own discretion. 

Appointment of the Chief Minister

The Chief Minister is the most powerful functionary at the State Government level and is the executive head of the state. He/She is appointed by the Governor. Post the general elections, the party with the majority votes and elects its leader. 

This person is then appointed as Chief Minister. In case, no particular party secures majority support, the Governor asks the leader of the single largest party to form the Government or in case of a coalition, the group’s leader is appointed as Chief Minister.

Dismissal of a Minister

The ministers of a state holds office during the pleasure of the President. However, since the ministers are chosen by the Chief Minister, in practice it is the Chief Minister who decides whom to retain and whom to oust. Thus there are two provisions here:

• The Governor cannot dismiss a Minister against the advice of the Chief Minister.
• The Governor cannot retain a Minister against the wishes of the Chief Minister.

Dissolution of the Legislative Assembly

There are two provisions in the Constitution under which the State Legislative Assembly can be dissolved. One is under Article 174(2)(b) which states that the Governor may dissolve the Legislative Assembly from time to time. This was recently seen when the Governor of Telangana dismissed the State’s Legislative Assembly after being advised by the Chief Minister to do so. The other is under Article 365 which can be applied during a state emergency i.e., President’s Rule. Under Article 365, if the state government fails to comply with the instructions of the Union Government, then it is up to the Governor to assess the ground situation and then call for its dissolution, after approval by both houses of the Parliament. But this decision comes under the judicial review of both the High Court and Supreme Court and they can declare it invalid if it is found to be done on mala fide grounds. Since 2000, President’s Rule has been applied 15 times in the country. 

Advising the President for the Proclamation of an Emergency under Article 356

When the State Government is unable to function in accordance to the constitutional machinery, then the Governor sends a report to the President briefing him/her about the grievousness of the situation. This power has been granted to the Governor under Article 356. This may happen when there is a vote of no confidence in the house or a government breakdown in the state.

Protection of Governor 

Article 361 lays down the provisions for the protection of the Governor. The Governor shall not be answerable to any court for the performance and disposal of his/her duties. There can be no criminal proceedings against him/her during the term of his/her office. Neither can there be a process to arrest him/her during the term of his/her office. Any civil proceedings in which relief is claimed against the Governor of a State, shall be instituted during his/her term of office in any court in respect of any act done or purporting to be done by him/her in his personal capacity.

Conclusion 

The Indian Government’s structure is Quasi-Federal in nature. The President operates at the National Level, the Governor operates at the State Level. The Governor being the nominal head doesn’t possess any real power but does have some important discretionary functions. This distribution of power between the Governor and the Chief Minister helps maintain balance in a state and also to keep a check on the functioning of the individual machineries. 

References

1. https://blog.ipleaders.in/federalism-in-india-2/
2. https://blog.ipleaders.in/separation-of-powers-and-its-relevance/
3. https://www.thestatesman.com/supplements/law/dissolution-of-the-assembly-1502697823.html
4. https://economictimes.indiatimes.com/news/politics-and-nation/subramanian-swamy-seeks-delhi-l-gs-sanction-to-prosecute-arvind-kejriwal/articleshow/58581948.cms?from=mdr
5. https://www.casemine.com/judgement/in/56097923e4b014971133c603
6. https://www.business-standard.com/about/what-is-president-s-rule
7. http://rajkhushiniti.blogspot.com/2014/09/whether-convicted-person-can-be.html
8. https://www.indiatoday.in/india/south/story/governor-gives-nod-for-yeddyurappas-prosecution-127021-2011-01-21

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 The State Executive: Article 153-167 & Article 213 appeared first on iPleaders.

This article is written by Srishti Kaushal, a first-year student of Rajiv Gandhi National University of Law, Patiala, Punjab, pursuing B.A.LL.B. (Hons.). In this article, she discusses why a company should have an Employee Stock Option Plan and what are the essential clauses an ESOP must have.

Introduction

Many times employees in a company can get lethargic and feel that their efforts and creativity is not being rewarded. To motivate them and encourage them to continue with their good work, a company should formulate an Employee Stock Option Plan (ESOP). ESOP is basically an option given as a right (not an obligation) to the employees of a Company. This right enables them to purchase the Company’s shares at a fixed price during a specified period of time. 

Thus, it is an employment scheme under which the employees are encouraged to acquire ownership of a company in the form of its shares. These shares are given to the employees at a price less than the market price. It is done so that the employees can feel as a part of the company, be motivated and their productivity can be enhanced. A business that wants to implement ESOP needs to have an ESOP policy or scheme for its employees.

In this article, we will discuss who can it be granted to? Which type of corporation can issue ESOP? Why should a company have an ESOP? What are the clauses that an ESOP must have?

Laws regulating ESOP

ESOP is an employee benefit plan which enables some tax-favoured advantages under the Internal Revenue Code. To take advantage of these tax benefits, the ESOP must comply with various requirements. 

ESOP is subject to regulations set forth in the Securities and Exchange Board of India Act (for listed companies), the Companies Act 2013 (Section 62), Companies (share capital and debentures) Rules, 2014, and the Income Tax Act, 1961.

It is the Companies Act 2013, which lays down enabling provisions for issuing the ESOP.

Who can issue ESOP and to whom can it be issued?

Any unlisted company by way of an ordinary resolution, an unlisted company by way of a special resolution or an unlisted company (following SEBI ESOP guidelines) can issue ESOP.

The ESOP can be issued to the following people:

• A permanent employee of the company,
• A director of the company.

However, it can not be issued to:

• An independent director.
• An employee who is a promoter.
• A director who through himself or through any of his/her relative or a body corporate, holds more than 10% of the company’s shares.
• A consultant or an advisor.

The ESOP agreement is signed between the authorized representative of the corporation and the eligible employees and directors (called participants).

Why should you have an ESOP scheme?

Now that we understand what an employee stock option plan (ESOP) means, let’s understand the advantages issuing ESOP can have:

• A ready market for the owner’s stock: The owners of a privately held company can use an ESOP to create a ready market, consisting of employees and directors, for their shares. 
• ESOPs enables the owners to borrow money at a lower after-tax cost. 
• It provides various tax benefits as well. Some of these benefits are:
  • Contributions of stock are tax-deductible, which means that the companies can have a current cash flow advantage by issuing new shares through ESOP.
  • Contributions of cash are tax-deductible: This means that to build up a cash reserve in the ESOP for future use, a company is permitted to contribute cash on a year-on-year basis and get a tax deduction.
• The ESOP Scheme acts as a retainership instrument, which is very important for small businesses. This is because this scheme provides a lock-in period for employees to exercise their right to purchase the shares. Thus, If an employee opts for this, he/she has to serve the company within the lock-in period and cannot quit it. This allows the business to retain its employees.
• ESOP gives employees a feeling of ownership. They feel that they are not mere employees of the business, but also the owners. They are more motivated and encouraged to fulfill organisations objectives as they get a share in the profits of the company (in the form of dividends).
• It acts as a non-cash compensation tool which enables the company to compete for the best human resources.
• It also acts as a vehicle for the owners to receive the liquidity without selling the business to a competitor or other third parties.

Essentials of Employee Stock Option Plan Scheme

Now that you know why it is so essential to have an Employee Stock Option Plan, let’s see what are the essential clauses that an ESOP scheme must have.

Objectives of the ESOP scheme

The first clause that is essential in an ESOP is the clause explaining the objectives of the plan. The objectives can include: to provide an incentive to attract, recruit and retain the employees; to motivate the employees of the company with reward opportunities; to create a sense of ownership and provide the employees, with wealth creation opportunities, to achieve sustained growth of the company and align the interest of the employees and the company, etc.

Term of the scheme

This clause would provide from when and till when the ESOP plan would be effective. It may also be provided if and how this ESOP scheme can be extended.

Definitions

This clause provides all the important definitions and interpretations, in relation to the ESOP. This can include ‘n’ number of definitions and interpretations. Some words and phrases which can be defined and explained are, the applicable laws; board of directors; employees; employee stock option; exercise; exercise period; grant; option; promoter; relative; vesting; vesting period; market price, etc

Equity shares subject to the ESOP scheme

This clause will specify in detail the quantum as well as the price of the equity share.

It must provide the maximum percentage of total shares which can be issued under the ESOP scheme. It may also provide that this maximum amount can be changed by the board of directors through the appropriate procedure (like a resolution).

Besides this, the clause must provide the face value of each equity shares issued under the scheme. It may also lay down that other terms and conditions in relation to these equity shares can be determined by the board of directors.

Eligibility criteria

This clause will explain in detail, how an employee can be eligible to receive a grant or vested option. The criteria may be based on the number of years of continued service or fulfillment of certain performance goals etc. It can include seniority, length of service, merit and performance record of the employee, the future potential performance of the employee etc.

Grant of options

Grant refers to the process through which the company issues shares, options or other benefits under the employee stock option plan. The grant date is the date on which the compensation committee or any similar authority approves the grant.

This clause will specify how the employees fulfilling the criteria would be recognised and enlisted. It would also define the price at which the grant would be made and provide the method through which the price of the grant would be decided. For instance, it may provide, that in the ESOP, the price for the grant would be decided by the board of directors.

This clause should also specify the maximum amount of time, an employee gets to accept the grant. It may also specify that till the employee does not convert his/her option into a share, he/ she would have no rights in regards to it, including the right to get a dividend and/or vote in this respect etc.

Vesting of options

Vesting is the process by which an employee can apply for the shares of the company against the rights granted to him/her. Vesting period is the time period in which the employee can apply for the company’s shares against the option granted to him/her.

This clause must provide the maximum vesting period. It may also enable the directors or the compensation committee, or any other authority recognised for this purpose, to specify the lock-in period.

To understand this clause better, let’s look at an Illustration: The maximum vesting period would not be more than 1 year from the date of grant of option. Subject to this maximum period, the board of directors will have the freedom to decide the maximum vesting period for the equity shares issued in regards to this ESOP.

Option exercising plan and consideration

This clause would specify the exercise price and period. Exercise price refers to the commission paid by an employee who wishes to exercise his right to hold the shares of the company. The exercise period refers to the time period after vesting within which the employee must exercise his right to apply for the shares of the company and make all the required payments in this regard.

Illustration: This clause can specify that the exercise period would be two years from the date of vesting, and the exercise price and the method of payment would be determined by the board of directors/compensation committee etc.

If the company chooses to provide some sort of bridge financing to the employees for this purpose, it should also be mentioned in this clause.

The methodology of exercise of option

This clause would provide for the procedure for exercise of option. It would explain how the option can be exercised (whole or in part). It would also explain how the option would be exercised in case there is a separation between the employee and the company, like when the employment is terminated, or when the employee suffers disability or death etc.

Rights of an employee who owns the shares of the company under ESOP scheme

This clause would explain all the rights that an employee would have once he converts his option into the shares of the company. For instance, it may be stated that all equity shares allotted under this ESOP will be equal to all the other equity shares of the company which have been issued at that time, except with regards to transferability in certain cases. This clause would also explain in whose name the share will be issued. 

Amendment and Termination of the ESOP scheme

This clause would specify who has the right to amend the ESOP and in what circumstances. For instance, it may be provided that the Board of Directors can amend, modify and alter the ESOP, as and when required after an ordinary resolution is passed.

This clause would also provide answers to questions like can the ESOP be terminated before its lapse date? how can it be terminated? who has the authority to terminate it? etc.

Dispute resolution and jurisdiction

This clause provides that the ESOP would allow issuance of shares only in accordance with the applicable laws, as well as the Memorandum of Association and Articles of Association of the company. 

It would also provide how a dispute arising out of this ESOP would be resolved. It can be through a mediation/ arbitration/ litigation. This clause would also provide how the arbitrator/ mediator can be appointed.

Conclusion

The ESOP scheme is an essential legal documentary proof that rewards the employees for their creativity, efforts and performance while creating a feeling of trust, faithfulness and dedication in them. It motivates them to focus their efforts towards the betterment of the company, instead of focusing on their individual goals.

Thus, ESOPs are a really good tool which companies, especially startups can use to attract and retain talent. However, at the same time, it must be understood that investing in the company is a bet for the employees. For the ESOP to be successful, it is important that the employees are convinced about the growth of the company. 

An ESOP must be detailed and informative. It should provide the terms and conditions, eligibility criteria, the price of shares, the rights of the employees, dispute resolution process etc. This is to ensure that the employees are able to make a wise decision and a knowledgeable bet while investing in the company.

References

1. https://taxguru.in/company-law/esop-employee-stock-option-plan.html
2. https://www.nceo.org/articles/esop-employee-stock-ownership-plan
3. https://www.lemontreehotels.com/factsheet/Policies/Amended_ESOP_2006_21.08.2017.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 Essentials of an Employee Stock Option Plan (ESOP) Scheme appeared first on iPleaders.

This article is written by Shubhangi Upmanya, a 1st-year student of Vivekananda Institute of professional studies, Indraprastha University. In this article, she has described defamation in detail.

Introduction 

Defamation is a procedure for check and balance on the Right to freedom of speech and expression (Article 19). It is a procedure to ensure that nobody harms the reputation of any person or tend to create a wrong opinion of the person who is defamed, in the eyes of the public. 

To make you understand what it really is, suppose there are two party members, Meera and Subodh standing for election. Subodh says, “Meera is a corrupt person, I have seen her taking bribes in the past, so do not give her vote”. This statement is untrue and harms the reputation of Meera, as no one in the public will give the vote to a corrupt person. This will directly hamper Meera’s winning in the election.

To prevent this, provisions regarding Defamation are available in Section 499 to Section 502 of the Indian Penal Code. In this article, we will understand them in detail.

Analysis of the offence of Defamation 

Section 499 of the Indian Penal Code talks about defamation. So, what is defamation?

Any person who by spoken or written words, signs or visible gestures creates or publishes any imputation on any person with an intention to harm the reputation of that person. The person making such imputation should have the knowledge or a reason to believe that such imputation will ruin the reputation of the person. 

However, there are many exceptions included in this Section. We will discuss them in the approaching topic.

Reputation 

To sue any person it is necessary to establish that real damage or harm has occurred to the reputation of the person. Only speaking or writing the words, picturing or gesturing does not amount to defamation until the reputation of the person has been harmed.

Harm to reputation is the only negative consequence that can arise from the act of defamation.

It could prove harmful to your professional career as well. For example, if someone pointing out to a shopkeeper says that you should not buy groceries from him as he sells low-grade things at a high rate. In this case, if the statement is found to be untrue then the reputation of the shopkeeper is being harmed as this will lead to the shortage of customers coming to his shop.

Publication 

For a person to be sued for defamation, it is required that the publication of the words he spoke or wrote must have happened. What does it mean? 

It means that damage to the reputation of the person happens when the defamatory words have reached to any third person. Publication means that the third person has read, heard or seen the written, spoken, gestured or pictured defamatory words.

If it has not happened then there is no ground to sue for defamation.

The distinction between English Law and Indian Law 

An act of defamation can occur in two forms, libel and slander.

Libel- it is a kind of defamation that is present in some permanent form such as in writing, printed or a picture.

Slander- it is a kind of defamation that is present in an unwritten form such as spoken words, gestures or representation made with hands.

In English law, there is a distinction made between both of the forms under the categories of criminal defamation and civil defamation.

Under criminal law, only libel is an offense and not slander. Whereas in civil law, libel is an offense just like in criminal law but the change here is that slander is also an offense when provided with proof.

In Indian law, both slander and libel are recognized as criminal offenses under Section 499 of IPC. Whereas, in the law of torts libel is actionable per se and slander is actionable. It means in the case of slander there has to be proof of the act of defamation.

D.P. Choudhary v. Kumari Manjulata

In this case, it was published in a newspaper that Manjulata, a 17-year-old girl belonging to a well-known family, eloped with a boy who lived closeby. After this, her reputation got tainted and she suffered a lot of disgrace, as this news was completely false and was published with irresponsibility.

Later on, the Court, in this case, ruled out the Rs. 10000, should be provided to the defendant as it amounted to defamation.

Forms of Publication

There are various forms of publication in which the act of defamation can take place, let’s look at them. 

Direct communication to the Defamed 

If any defamation is made directly to the defamed and is not heard by anybody else, then it is not defamation. It is necessary that any third party hears it through which the reputation of the defamed goes down.

Publication by Repetition 

There is a limited period to sue for defamation. It is maintainable till one year since the act of defamation took place. For a single publication, an action for libel can arise but for repetitive or multiple publications, the action can arise every time the libel is published.

The Limitation Act, 1968 makes the limitation period of the libel on the internet to 1 year. After every publication on the internet, this period will get renewed.

Khawar Butt vs Asif Nazir Mir

This case was decided in the year 2013. The Delhi High Court, in this case, ruled out to set aside the multiple publication rule on the internet and to follow only the single publication rule.

Printed Matters: Liability of editor and others 

Section 501 of the Indian Penal Code talks about the printing of defamatory things.

It says that any person who prints or engraves such a matter which he knows or has reason to believe that such matter is of defamatory nature and hence, will lower down the reputation of the person and bring ridicule and disgrace to his/her character.

This Section checks for the printed defamatory matters and provides the provision for the punishment to the person who printed it. The punishment of a maximum of two years in jail or fine or both is provided under this Section.

Now, let’s understand what is the provision for the people who further sells the defamatory printed content.

Section 502 of the Indian Penal Code says that any person who sells or offers to sell any printed content that he knows or has reason to believe that it contains defamatory matter will be punished.

The punishment will either be imprisonment which can be extended to a term of two years or could be fine. In some instances, both can be imposed.

Therefore, through both of these Sections, the printing or engraving, selling or offering to sell, such a matter which contains some defamatory content, is a crime and is punishable.

Imputations concerning ‘Any Person’ 

In Section 499 of the Indian Penal Code the ‘imputation concerning any person’, is mentioned. Imputation in general terms means accusation or claim that someone has done something wrong.

As far as the term ‘concerning any person’ is concerned, this means that defamation should be clear enough to point out the person to whom the defamation is intended to be made and if it is published to others then the third person is also able to clearly understand who is defamed by the publication.

Intention to Injure

There has to be a knowledge or reason to believe that the act will certainly cause the defamation of the character of the person. It implies the mens rea of the person, that is the person should have the intention to harm the reputation of the other person.

To win a defamation lawsuit, the defendant should prove that he had honest intentions and no malice, and it was just an honest mistake.

Analysis of provisions of Sections 499 and 500, IPC 

The provisions regarding defamation are provided in Section 499 to 502. Section 501 and Section 502 has already been explained earlier in this article. Now, let’s understand the provisions contained in Section 499 and Section 500.

Section 499 provides the definition of defamation and all the cases and exceptions of the act of defamation. This is a lengthy Section with explanations and in total 10 exceptions included in it.

Section 500 provides for punishment for the act of defamation.

Explanation l: Defamation of the Dead 

In case, a person defames another person who has passed away or is already dead, by any means that is written, spoken, by gestures or pictures.then, it will be an act of defamation, this act would have harmed the reputation of the person if he would have been still alive, or in case it harms the reputation of the family or close relatives of the deceased.

Explanation 2: Defamation of a Company or a Collection of Persons

If an act is intended to cause harm to a company or association or a group of people, then it will amount to defamation. This means under it companies or associations can slap a defamation suit against an individual.

Priya Parameshwaran Pillai v. Union of India and Ors.

In this case, Priya, a Greenpeace activist, wrote in her blog that the environment is degraded by the power project which was set up by the Essar group. After which a suit of defamation was filed by the Essar group.

Priya, in her argument, contended that the private companies should not be given the right to file a defamation suit against an individual. But her contention was set aside by the Court, not allowing any more questions and contentions to be added further.

This particular case has its roots in the previous Subramaniam Swamy v. Union of India case. Let us discuss that now.

Subramaniam Swamy v. Union of India

In the year 2014, Dr. Subramaniam Swamy alleged corruption charges on Ms. Jaylathitha. After which Ms. Jaylathitha framed defamation charges on Dr. Subramaniam Swamy. He in return challenged the constitutional validity of Section 499 and Section 500 of the India Penal Code.

The court, in this case, upheld the constitutional validity of the offense of criminal defamation.

And ruled out that Section 499 and Section 500 of the India Penal Code, impose reasonable restrictions on the right to freedom of speech and expression.

Explanation 3: Defamation by Innuendo 

Well, to be able to understand it we must first understand what innuendo in general terms means.

Innuendo is a clever way to speak negative sentences in a very sarcastic way, which may appear to be positive at the surface of it.

Under Section 499, defaming of any person by innuendo is a form of criminal defamation.

Illustration

• A says to B, pointing out to C, ‘C is a very even-handed person, I have not seen him making any discrimination against G.

This is discrimination as A intended to point at C has a discriminatory person and that he has discriminated in the case of G.

• B asks A,’ do you think someone discriminated?

A in return pointed at C and said, ‘well you know, who can’.

This is discrimination has it was said in a sarcastic way while pointing at C.

Explanation 4: What is Harming Reputation? 

Defamation is an act by which a person’s reputation is harmed, but what is harming reputation?

According to explanation 4 given in Section 499, the reputation of a person is harmed when the act injures the moral or intellectual character of the person or lowers his credit. It also hampers the reputation if the act lowers down the person’s character in the respect of his cast or his calling. 

The act of defamation which let the others believe that the body of any particular person is in a detestable condition.

All of these acts are considered to harm the reputation of the person and comes under the offense of criminal defamation.

Exceptions provided in Section 499 

As mentioned earlier, there are ten exceptions in this Section. 

We will now have a look at them one by one.

First Exception: Truth for Public Good 

This exception provides that if any information which is true and for the good of the public at large, then that is not covered under the act of defamation.

Things to be noted here is, first, the information should compulsorily be true. Second, the information should be of a kind that it benefits the public.

Also, it is compulsory to publish that information.

Second Exception: Fair Criticism of Public Servants 

This exception provides that if an act in which the public servant is criticized for discharging any of his public functions or and the act of criticizing his conduct and character when it appears to be wrong and not otherwise. Then, such an act will not amount to defamation.

Illustration 

If Ramesh mentions that the particular officer Z is very bad at his job, then this is not defamation under the following exception.

The element of Good Faith-Importance 

It is to be noted that any such comment made or views expressed must be made in good faith. That is, if it is made out of malice or in bad faith, it will be considered as an act of defamation.

The Opinion must be Fair and Honest 

Any opinion made criticizing the conduct, character or discharge of any functions of a public servant must be fair and honest. Otherwise, it will be considered as an offense of defamation.

Third Exception: Fair comment on public conduct of public men other than public servants 

If any person expresses his/her views and opinion on the conduct of any other person who discharges any kind of public functions, he will not be liable for the act of defamation. 

The condition in regards to this is that such views and opinions should be made in good faith and with honesty. If it is made otherwise then the act will fall under the offense of defamation.

Illustration

If there is a meeting taking place which requires the support of the public or if Z applies for a petition against some action or doing of the government.

Rights of the Press: Summary of principles governing Rights of Press and Media 

No direct freedom is given corning the media law, but Article 19 which gives the right to freedom of speech and expression per se provides this freedom to the media. The press is the watchdog of the public, that is why it is necessary to make certain that a positive impact is formed by the public after receiving any news and no negative opinion arises. 

The owner, editor, and publisher, all of them in the line, are responsible if any news which defames anyone is published to any third person.

Defaming again here means the news which lowers someone’s reputation or character.

Google India Pvt Ltd. v. Visakha Industries

In this case, an article was published with a caption ‘Poisoning the system: Hindustan Times’. In this article, the names of many famous politicians were mentioned which had nothing to do with the Visakha Industries.

The case ruled out that all of it does not amount to defamation. It should be noted that there is a difference of publication on the internet and publications in print media.

Fourth Exception: Report of proceedings of Courts of justice

If any proceedings of the court or the result of any case given by the court are published then that will not amount to defamation. 

The conditions pertaining to this are such that publication should be true and apt.

Fifth Exception: Comment on Cases 

If any person publishes any information regarding the merits of the case or in regard to the conduct of any person who was a witness, in that case, it will not be defamation.

It is important to note, the element of good faith is requisite here.

Illustration

If A says that B seemed to lie on the witness stand.

Here, this condition will fall under the ambit of this exception.

But if A says that B was lying on the stand, as I know him as a man who can lie.

Here, this will fall out of the exception and will amount to defamation. Why? Because he is applying his knowledge which is not included in the court proceedings.

Sixth Exception: Literary criticism 

If any person in good faith expresses his opinion in regards to the performance or character of the author, which the author has submitted to the judgment of the public or viewers, then it does not amount to defamation.

To explain this, the author must have by acts or expressly submitted her/his performance to the judgment of the public. If that is not the case, the act will amount to defamation.

Some examples:

1. An author of a book who publishes it submits it to the judgment of the public.
2. An actor who does a film submits it to the public to give its judgments.
3. A performer, who performs on the stage in front of the viewers submits it to the judgment of the public.

The thing to be noted is that any opinion which is made should be in consideration of the performance.

Illustration

X says ‘Y must be a man with the wrong mindset’. This will fall under the exception.

But if X says, ‘no wonder his book is indecent, for I know him as a man who is indecent himself’. This will not fall under this exception and amount to defamation.

Seventh Exception: Censure by One in Authority 

If any person passes censure on the conduct of any other person, then it will not amount to defamation, provided that the person applying censure should have the lawful authority or any authority arising out of a valid contract, over the person on whose matters the censure is applied.

Illustration

• Any employee being censored by the employer in good faith.
• In good faith, any teacher censures the conduct of a student in front of any other student.

Eighth Exception: Complaint to Authority 

If any person who has lawful authority over the other person, accuses him then it will not amount to defamation.

Illustration 

If A in good faith prefers any accusation regarding X to a judge.

If a warden in good faith accuses a hosteller C to the dean of the college.

Kanwal Lal v. the State of Punjab

In this case, it was noted that the defense to fall under exception 8, the publication must be made before the authority of law. The District Panchayat Officer or the Panchayat had no such lawful authority in regards to the provisions of the Punjab Gram Panchayat Act, 1952, in which the Panchayats only had the jurisdiction.

Ninth Exception: Imputation for Protection of Interests 

If any accusations or imputations are made on another person in order to protect the interests of oneself, then it is not defamation.

Illustration

An employee D, who has been told to make a monthly report on the conduct of the employee of that sector, writes about the bad conduct of one employee Z then, he will fall under this exception.

Tenth Exception: Caution in Good Faith 

If any caution is made for the good of that person or for the good of the public then it will not amount to defamation.

On the Scope of Sections 499 and 500, IPC

Distinction between Libel of Court and Contempt of Court 

This refers to the defamation of the Judge personally and the Contempt of Court. When the judge is personally defamed by any person then he can sue the person on his own personal capacity and not as a judge of the court.

On the other hand, Contempt of Court is the act that hampers the administration of justice and causes disrespect of the court. The Supreme Court and the High Court have the power to punish for contempt of itself under Article 129 and Article 215 of the Constitution, respectively. 

In Perspective Publications v. the State of Maharashtra, it was noted that there has to be a distinction made between the libel and Contempt of Court. A test has to be taken to determine what the act constitutes, a disrespect of the judge or the hampering of the due process of the administration of law.

Whether accurate and true report of Assembly Proceedings published in newspapers would amount to Defamation 

In Exception 4, it has been mentioned that true and accurate proceedings of the court will not fall under the ambit of defamation in reference to that, let’s look at a case.

In Dr. Suresh Chandra Banerjee v. Punit Goala, it was ruled out that, the reports of the proceedings of the Parliament do not fall under the exception 4.

It was discriminatory on the part of the law. Later on, it was changed when Article 361A was introduced by the 44th Amendment Act, in the year 1978.

Under the Parliamentary Proceedings Act which came in the year 1977, protection by law has been given to the publication in newspapers or broadcasts by wireless telegraphy of substantially true reports of any proceedings of either House of Parliament. Further, it is provided that it should be made in good faith.

The publication can take place with the authority given by both Houses of the Parliament under Article 105(2) and by the State Legislature under Article 194(2).

Who should in a newspaper be prosecuted for making Defamatory Imputations?

In the case of the newspaper, generally, people will think that only the editor will be held responsible for publishing defamatory matter but the fact is that the owner, author, editor, or distributor, all can be held liable for the act of defamation. It should be noted that vicarious liability will arise which will make the proprietor of the newspaper liable to pay damages arising out of it.

In the case of Narayan Singh v. Rajmal, the editor of the newspaper was absent and the defamatory matter was published by the sub-editor. The court ruled out that the editor was not responsible as he was absent with no bad intentions.

In the case, Mohammed Koya v. Muthukoya, it was ruled out that the Press and Registration of Books Act, 1867, only recognizes the editor as the legal entity and no one else, in the matter concerning the publishing of matter in a newspaper.

It was further clarified in another case of K.M. Mathew v. K.A. Abraham & Ors, the publisher of a book was charged with the offense of defamation. He moved to the High Court contending that under Section 7 of the Press and Registration of Books Act, 1867, only the editor can be held liable and not the chief editor of the newspaper. The High Court rejected his plea, then he further, sought plea to the Supreme Court that also rejected it.

The rationale of the court was that there can arise a presumption against the editor that he is responsible because he checks and selects the material which is to be published. But this is a matter which can be rebutted and under Section 7 of the Press and Registration of Books Act, the same presumption can also arise for someone else which has to be proved.

Defamation of Wife by Husband

Law considers husband and wife as one and the private communication between them is privileged, according to Section 122 of the Indian Evidence Act, 1872.

In the case of T.J. Ponnen v. M.C Verghese, the husband wrote a letter to his wife containing defamatory matter. The court held that this was under Section 122 of the Indian Evidence Act 1872.

Conclusion 

It is said that the rights of one person end where the rights of another person start to apply. 

It means that the Constitution of India has given the citizens certain rights and they should use them in limit so that they should not hamper the rights of others. There is a limit to the right of freedom of speech and expression which is regulated by the provisions of defamation.

With the court holding Dr. Swamy liable to defame Mr. Jethmalani, in the case of Ram Jethmalani v. Subramanian Swamy, the court with many such cases proves that the provisions of defamations act as a check on Article 19 of the Constitution so as to protect the reputation of the people.

Many controversies regarding press freedom and the offense of defamation arose, which are still a matter of debate. There is a need to improve this law and remove the arbitrariness leading to such controversies.

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 Defamation: Section 499 to 502 of IPC appeared first on iPleaders.

This article is written by Millia Dasgupta, a second-year student studying at Jindal Global Law School. This article discusses the High Courts of India. 

Introduction

The High Courts of India are the principal civil courts of original jurisdiction. There are present in most states. In the case of small states, a high court is present for 2 to 3 states. Their territory is merged and is under the jurisdiction of one high court. This is why we have 29 states but we only have 25 high courts.

Important Points

The first high court was the Calcutta. The Bombay and Madras High Court was established in the year of 1862. While there were 24 high courts, the number increased to 25 in 2019. This is due to the high court built in Amaravati. Delhi is the only Union Territory which has a separate high court.

Composition

The head of the High Court is the Chief Justice of the High Court. There is one Chief Justice. The number of judges is not fixed by the Constitution of India and leaves it up to the discretion of the president.

Qualifications To Become A High Court Judge

A judge of the High Court should be a:

• Citizen of India,
• Holding a judicial office for not less than 10 years in a territory of India,
• An advocate of the High Court for at least 10 years in succession.

Appointment Of Judges

The judges and the Chief Justice of the High Courts are appointed officially by the President.

The Chief Justice is appointed by the President in consultation with Chief Justice of India and Governor of the state which the High Courts jurisdiction falls under. 

For the appointment of other judges of the High Court, they are appointed by the President on the advice of the Chief Justice of India, the governor of that state and the Chief Justice of the High Court.

Oath of Office 

The Chief Justice of the High Courts and judges of the High Court take an oath before the Governor of state or some person appointed by him.

Thus while their appointment and removal are done by the President, they take an oath they take in front of the governor.

Term of Office 

A judge of the High Court holds his office until he attains the age of 62. If he wants to resign, he can resign by writing to the president. He can also be removed by the President on the recommendation of the Parliament. A High Court judge after retirement can practice either in Supreme or High Court in which he has not served.

Process of Removal of Judges 

A judge can be removed by the President on the recommendation of the Parliament on grounds of proved incapacity or misbehavior. 

A motion to remove the judge of HC can be introduced in any house of parliament. It must be introduced by at least 100 members in Lok sabha or 50 members in Rajya Sabha whenever it is introduced.

The Speaker or Chairman may reject this proposal or set up a 3 member committee to investigate the concerns.

When the committee finds him guilty, then the motion has to be passed by both houses by a special majority. Then, the President gives his assent and Judge of HC is removed. 

History 

While Calcutta might be the place where the first high court was built it was Bombay where the East Indian company had placed its first laws. This lead to the establishment of ‘Mayor Courts’ in Bombay and they were later on established in Calcutta and Madras. They established uniform jurisdiction but due to unrest among Indians, Indians were not included in the jurisdiction of the courts. 

After the Battle of Plassey, the English had to bring law and order to the state of Bengal. Warren Hasting suggested that they set up provincial courts in all the districts having civil jurisdiction. They were called Mofussul Diwani Adalats. Similar courts called the Faujdari Adalat having criminal jurisdiction were established. These courts could appeal to the Sadar Nizamat Adalats which was run by Company servants. 

The next step was the Regulating Act of 1733, which not only made important changes in the legislature of Bengal but also authorized that a Supreme Court of Judicature is set up in Calcutta with a bench of three judges, appointed by the king. This court was however limited to British citizens. Later on, courts of these nature were set up in Madras and Bombay.

But the Act was very vague and did not establish the extent of its powers and it influences over the East Indian Company. In the famous Nandakumar case, it was stated that these Supreme Courts did not have power over cases that dealt with revenue. Its jurisdiction was clearly mapped out as well as the jurisdiction of the Companies and the Sadar Nizamat Adalat courts.

Sadly, this dual administration did not last for long as there were clashes between the Supreme Court and the Sadar Adalat. Thus, the Indian High Court Act of 1861 was passed. It abolished the old Supreme Courts and the Sadar Nizamat Adalat that established High Courts in Calcutta, Madras, and Bombay. These courts were open to Indian lawyers who had no British qualifications could take part in the administration of the courts. They were an amalgamation of original jurisdiction (the old Supreme Courts) and the appellate jurisdiction (the Sadar Nizamat Adalats).  The judge Bench consisting of a Chief Justice and up to 15 Judges. They could either be Barristers with 5 years of experience or civil servants with 10 years of experience. 

The Government of India Act 1935 rejected the rule of the High Courts that said one-third of the judges must be barristers and one third should be members of the Indian Civil Service. 

Article 225 of the Indian constitution removed their restriction on reviewing cases relating to revenue. Their jurisdiction was also expanded to enforcing Fundamental rights through writ petitions.

Jurisdiction of the High Court

Original Jurisdiction

Article 226 defines the powers of the high court. It gives the power to the High Court to issue writs. They have the power to issue orders or writs to ‘any person, authority, or Government which falls within the territories under their jurisdiction to enforce the Fundamental Rights.

These writs are- 

Habeas Corpus

It is a writ requiring a person under arrest of illegal detention to be brought before a judge or brought into court. This is especially to ensure that the person be released if lawful grounds for detention can not be proved. 

In a recent case, the Bombay High Court stated that a writ of Habeas Corpus will not be maintainable even if the remand order was illegal if other remedies like a bail application are available to the aggrieved. The MP HC also stated that a writ of habeas corpus is not maintainable if the aggrieved has been detained under the Witness Protection Scheme 2018.

Mandamus

A writ issued as a command to an inferior court or ordering a person to perform their job or public or statutory duty.

The Supreme Court held that a writ of mandamus can not be issued to legislate or amend a law. 

Prohibition

This writ is issued as a command to prevent an inferior court or tribunal from exceeding its jurisdiction.

Quo Warranto

This writ is to inquire into the legality of the claim of a person or public office. It stops people from holding an office which they are not entitled to. This writ is applicable to the public offices only and not to private offices.

The Supreme Court held that the HC cannot issue Quo warranto unless it is based on indisputable facts. 

Certiorari  

This writ is passed to squash an order passed by an inferior court.

Appellate Jurisdiction

In civil cases, an appeal can be made against a district court’s decision. They can also make an appeal directly from a subordinate court if the dispute has a value higher than Rs 5000, or if there is a substantial question of law. 

For criminal cases, appeals can be made against the Session and Additional Session courts. This is if the sessional judge has given imprisonment for 7 years or more, or has awarded capital punishment. 

They also have jurisdiction over cases relating to State and Center law. With regards to constitutional cases, the case must have a substantial question of law in order to be considered by the high court. 

The relation between the Supreme Court and the High Court 

Problems faced by the High Court

One of the main problems of the High Courts is the issue of pending cases. In the right conscious world, people are filing many more petitions that must be reviewed and analyzed by the high court of India. The government also contributes to excessive litigation and is the largest litigant in India. While there are a number of these cases are important, a majority of their cases are usually one department suing another department due to disputes and leaving it up to the courts to decide.

Despite the increase in litigations, the current judge population is 10 to a million. And this is not because of a paucity of seats. Half the judge seats are vacant due to the judiciary and executive locking heads when it comes to the appointment of judges. 

Pending cases are a big hurdle to the path to justice. When there is a delay injustice, the common man loses his faith in the justice system. The judicial system becomes overburdened with all the cases and becomes more inefficient. 

Solutions 

It is clear that the High Courts are overburdened with cases. Some ways to help with that are setting up parallel courts that can help resolve matters at the grass-root level. Some of these courts are-

Fast Track Courts

By the recommendations of the 11th Finance Commission, these courts were sanctioned to dispose of old pending cases. It has helped to clear more than 10 lakhs cases out of 19 lakh cases.  

Mobile Courts

These courts go from door to door in rural India to help with the backlog of cases in those areas. They not only educate rural folk about their rights and responsibilities, but they also create a bond between the judiciary and the community.

Lok Adalats 

The Legal Services Act of 1987 enabled weaker sections of society to receive free and competent legal services to ensure their justice. Thus Lok Adalats were set up and are alternative dispute redressal mechanisms. Lok Adalats have no court fee and are presided over by the members of the Lok Adalat. It is their job to persuade the parties to come to an agreement.

Conclusion

In this article, we have not only discussed the history and executive structure of the High Court, but we have also tried to identify it’s problem areas and state what solutions the government has taken in order to solve them.

Reference

• https://www.livelaw.in/know-the-law/what-is-article-131-of-constitution-explainer-151792?infinitescroll=1
• https://www.clearias.com/pending-cases-in-indian-courts/
• Larby, C. J. B. “The Centenary of the High Courts of Calcutta, Bombay and Madras.” The International and Comparative Law Quarterly, vol. 12, no. 3, 1963, pp. 1044–1048. http://www.legalserviceindia.com/article/l452-Litigation-&-Delays-in-India.html
• https://www.javatpoint.com/supreme-court-vs-high-court

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This article is written by Kashish Kundlani, a third-year student of (BBA.LL.B) Ramaiah Institute of Legal Studies, Bangalore. In this article, she discusses the roles and responsibilities of the CEO, COO, and CFO.

Introduction

More often than not, a person joins a company with the aspiration of being in the top-level management one day, for example, becoming a famous CEO, COO or CFO of a company. But while all of us dream so big, we often forget that big dreams come with bigger responsibilities. It is not a cakewalk to be in the top-level management as it requires a lot of skills and experience regarding the particular position, but once you acquire these, it is not impossible to reach there.

To become a CEO, COO or CFO, one must know the roles and responsibilities, qualifications and many more things related to this which makes it clear for a person wanting to be at this position or desires to be at this position. 

Who is the CEO, COO, and CFO?

CEO

CEO is a borrowed concept from the United States of America. CEO was first defined in Section 2(18) of the Companies Act, 2013.

CEO stands for Chief Executive Officer. He/she is the highest-ranked individual or a top-level executive of a company. The CEO of a company is responsible for the overall success of a business and making the top-level managerial decisions.

CEO is the public face of the company and also a link between the board of directors and operational managers. A CEO is elected by the board of directors. For the performance of a company CEO directly reports to, and is accountable to, the board of directors

Liabilities of a CEO

CEO is personally liable for any violation of the tax or any laws.

A CEO is also liable for every offence, even the offences based on negligence, with regards to the management. For instance, where the balance sheet shows a false or misleading statement or if there is any omission, the CEO will be liable. A CEO is also not allowed to show any interest in something which is in conflict with the company’s interests whereas he is also obliged to reveal if in case the conflicts have arisen to the members of the Board of Directors.

COO

COO stands for Chief Operating Officer.

In the chain of command (hierarchy for reporting relationships) COO is at the second. In some organisations, COO is also known by other terms such as “chief operations officer”, or “operations director”, or “executive vice president of operations”.

The COO is the senior executive who has been given a job or a task for supervising the day-to-day managerial and operational function of a business. 

The COO focal point is to execute the business plans. The COO must help the company to effectively grow and ensure its financial strength. He is the person who is responsible for the management of the departments of a company which are production, marketing, and sales.

In general, COO acts as a supervisor and as a leader, his work is also to ensure that the organisation and employees are implementing the plans of the CEO.

The need for COO arises because the CEO is too busy and cannot invest his time on a day to day operations of the business. So, a COO is needed for the supervision and ensuring the smooth functioning of the day to day operations of the business and reporting it to the CEO.

CFO

CFO stands for “Chief Financial Officer”. He/She is the executive who is responsible for monitoring the cash flow, financial planning and all other financial work or activities of the organization.

The CFO is considered to be similar to a treasurer or a controller and also checks the accuracy of the financial reports of a company.

CFO assess the financial risk of a company. Also, analyse the financial strengths and weaknesses of a company and gives suggestions for its improvement. 

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What qualifications are required?

CEO or COO

To become a CEO  or a COO one needs a Bachelor’s degree in business or related subject with significant experience. Many organisations prefer choosing a person who has done an MBA.

CFO

To be a CFO a person requires a Bachelor’s degree in accounting, finance or economics and a high level of experience.

Structure of CEO, COO and CFO

There are many more in this hierarchy after CFO. But we will be dealing with only these positions except chairman.

Roles and responsibilities of CEO, COO and CFO

CEO

Roles

Is to design the strategies and policies for the organisation and to implement the plans prepared and also to guide the subordinates to accomplish the objectives of the company. 

The CEO’s role is also to organise, direct and control the goals made and also to support the strategic planning.

Responsibilities

• Planning, implementing, developing and directing the organisations operational and monetary function and performance towards the company’s vision and mission.
• Acts as a strategic partner by developing and implementing the plans and programmes of a company.
• Makes the necessary analysis and also make recommendations on a plan for the long term growth of a company.
• Takes initiatives by introducing new strategies according to the need of a company.
• Creates, improves, implements and enforces the policies and procedures of the organization that will enhance the operational and financial effectiveness of the company.
• Effectively communicates with the organisation and with the Board of Directors.
• Provides guidance and advice to others in relation to the execution of a plan or in a problematic situation.
• On a continuous basis instruct the department by improving the planning and the budgeting process.
• Evaluates the company’s financial, sales and marketing structure to plan for continual improvements and increasing of the operative efficiency.
• To encourage the members of the company he on a daily basis interacts with them and mentor them.
• Ensures that the company wherever it does business it maintains a responsibility towards the social environment.
• He/She also analyses the risk and ensures that the necessary steps are taken to minimise it. 

COO

Roles

The role of a COO varies from one organization to another. The COO often handles a company’s internal affairs. There is no well-defined list which gives a structure about the job requirements of a COO. A COO may be hired for executing strategies developed by the top management, to promote someone they can’t afford to lose or his role might be to oversee the organisations ongoing operation and procedure etc.

Responsibilities of a COO are not precisely fixed, it varies from company to company and also the nature of work company gives. Few of the common responsibilities are:-

• Analysing the productiveness of the business strategies.
• Establishing those policies where it helps to achieve the company’s vision and mission.
• Handling the issues of the staff and also supervising them.
• Developing and enacting the methods to meet the benchmarks and goals of a company.
• Ensuring the production and delivery of the products on time.
• Managing the working capital of the company.
• Ensuring inventory management of a company.

CFO

Roles

• Raising of funds- the CFO is the person who raises the funds of the company. It is up to the CFO to assess the need and find out the optimum and best way for raising funds.
• Understanding the capital market- as a lot of risks are involved while trading in the capital or securities market, it is the financial officer’s duty to assess and calculate the risk and it is also up to the financial officer regarding the distribution of profits if earned.
• Profit planning- for any business the primary objective is to earn a profit. So it is the duty of the CFO to plan about how to earn a profit and look after the judicial mix of the variable and fixed factors which can contribute to the profitability of the firm.
• Should ensure that the funds raised are properly allocated.
• Dispersal of profits- it the CFO who has to decide how much money should be retained back in the company as retained earnings and what portion is to be given to the shareholders as dividends out of the company’s profits.
• Financial control-proper evaluation of funds is required to control the finance of a company.

The responsibilities of the CFO’s are:-

• Provides the direction, leadership and management to the finance or accounting team of the company. 
• Should develop financial and tax strategies.
• Whenever it is necessary, the CFO should arrange for the debt and equity financing.
• Should participate in key decisions which are related to finance as a member of the executive management team
• Should look after the employee benefit plans with a particular emphasis towards maximisation of the cost-effective benefits packages.
• Should report the financial results to the Board of Directors.
• Should ensure that the record-keeping of the books of accounts meets the requirements of the auditors and government agencies.
• Manage the departments of accounting, compliance, legal, tax, treasury and investors.
• To look after the company’s business transaction processing systems.
• Identifies the financial risks and opportunities for the company.
• Provides strategic recommendations to the CEO and members of the executive management team related to the finance or budgeting issues. 

KMPs

“Key managerial personnel” (in short KMP) as per Section 2(51) of the Companies Act, 2013. It gives the list of the following person to be considered as KMPs:-

With respect to the company, the major managerial employees are:-

1. the Chief Executive Officer (CEO) or the Managing Director (MD) or the manager;
2. the company secretary (CS);
3. the whole-time director (WTD);
4. the Chief Financial Officer (CFO); and
5. such other officer as may be prescribed.

Key managerial personnel are the employees at the top positions in a company and KMPs have a great responsibility for the overall functioning of the company and also the duty to protect the interests of all the stakeholders.

KMPs also ensures that the company is in compliance with the various laws. They are the persons who have the authority and responsibility for planning, directing and controlling the activities of the enterprise.

CEO and CFO both are the key managerial personnel defined under Section 2(18) and Section 2(19).

COO is not considered as a KMP but in future, COO can be considered as a KMP if it prescribes. As the fifth point give the competent authority or government official to consider any officer as a part of KMP as may be considered appropriate at the time of assessment.

Pointers of Differentiation 

CEO and COO

The CEO is the one who makes plans, policies, strategies for the company and the COO is the one who helps to execute these. 

CEO is the one who communicates with the stakeholders, investors and the public. He makes all the major decisions related to the company. COO looks after the day to day operation of the business.

CEO is at the highest level and COO is after him second in the chain of command. 

CEO and CFO

Responsibilities vary between the two as the CEO is responsible for all the activities of the organisation and CFO is only responsible for the financial activities.

The position of the CEO is looked after by the Board of Directors while the CFO has to report to the CEO. 

The CEO looks after all the personnel for their development while CFO only focuses on the development of the accounts department personnel.

The CFO has an important role as it makes connections with investors, bankers, lenders, and regulators on the other CEO is the face of the company and is involved in making public speeches and meets the community leaders as needed does not make any such connection as the CFO makes.

The CEO looks after all the reports and analysis all the aspects necessary to the business and makes decisions while the CFO is the person who reports the findings related to the funds to the CEO.

CFO and COO

COO is the person in charge of the day to day operations of the business whereas CFO is in charge of the financial and economic planning of the business.

CFO decides where and when to invest and also assess the risk related to the company’s finance in order to increase the value of the company and COO is the one who executes the strategic plans made by the CEO of the company.

COO is also known as the Executive Vice President of Operations and CFO is known as the financial director.

Conclusion 

After knowing the roles and responsibilities of the CEO, COO and CFO, one can be more clear with their dreams.

If their perspectives have changed after analysing the responsibilities, they can modify their dreams and chose other top-level positions, whichever suits their abilities.

The significance of the roles and responsibilities of CEO, COO and CFO put emphasis on the theory that somehow these three positions are interlinked.

It is difficult to carry out the objectives of the company without even one of them. Though the CEO is much more burdened with the responsibilities towards the organisation, COO and CFO act as a helping hand and COO is also considered the right-hand person of the CEO. 

References

• https://www.investopedia.com/terms/c/coo.asp
• https://corporatefinanceinstitute.com/resources/careers/jobs/what-is-a-ceo-chief-executive-officer/
• https://www.ceo-search.com/ceo-job-description/
• https://www.topaccountingdegrees.org/faq/what-is-a-chief-financial-officer/
• https://www.corporateprofessionals.com/articles/key-managerial-personnel-under-the-companies-act-2013/
• https://www.internationallawoffice.com/Newsletters/Company-Commercial/Greece/Katsikis-Kalamatianou-Co/Potential-personal-liability-of-CEOs
• https://www.accountingtools.com/articles/2017/11/29/the-difference-between-ceo-and-cfo
• https://www.e-zigurat.com/innovation-school/blog/ceo-coo-cfo-cio-cmo-cto-who-is-who/

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This article is written by Millia Dasgupta, a second-year student studying BA LLB at Jindal Global Law School. This article talks about The International Court of Justice, it functions and relevant criticisms. 

Introduction 

The international community is a dynamic one. This leads to clashes between the various members of this community. States disagree on where their border is, contest islands of maritime borders, violate treaties and other rules of international law. Then to who do states turn to for help? Resolving matters of these natures is the job of the International Court of Justice (ICJ). 

The ICJ is not only needed for resolving international disputes. Even the UN seeks their help when they need an opinion on a legal question. 

The court has existed since 1946. The official languages are English and French. The United Nations Charter is an integral part of the ICJ. Thus, all UN members state automatically recognize the authority of the ICJ and can call for its help in any legal matter.

The ICJ has, up till now, dealt with 177 cases. It does not try individuals and only disputes between states can be submitted to it.

History

It is the successor court of the Permanent Court of International Justice. The Permanent Court of International Justice was created in 1922 and by the league of nations. Between 1932 and 1940, it handled 60 cases. It was dissolved after World War II. The ICJ succeeded the permanent court on the 18th of April 1946. It inherited not only its statue but also its jurisprudence and its traditions.

Composition

The court consists of 15 judges and they are elected for a term of 9 years by the General Assembly and the Security Council. Five posts are renewed every three years. Here, judges may be re-elected.

The members of the court must all be from different countries. But, we must keep in mind that they do not represent their country and they are independent judges.

The composition of the court represents the following geographic balance. 

• Three seats on the bench are occupied by African judges. 
• Two seats are occupied by judges from Latin America and the Caribbean. 
• Three are occupied by Asian judges.
•  Five judges are occupied by judges from Western Europe and other Western States. 
• Two judges are from Eastern Asia.

Usually, there is one judge from each of the countries who are permanent members.

Ad Hoc Judges

When a case is presented before the ICJ, and a state party does not have a judge on the bench from their state, then they can choose a judge, known as a judge ‘ad hoc’. These judges can be from any nationality and not necessarily have to be from the state party. They have the same rights and duties as an elected judge. 

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President and Vice President

After every three years, the court elects its President and Vice President. The president chairs all sittings of the court. He or she directs its work and supervises its administration. 

Annually, the President presents a report on the workings of the ICJ to the General Assembly.

Duties 

Like it’s predecessor, the ICJ has two roles. The first is to decide disputes between states. These are known as Contentious Cases. The second role is to analyze legal questions submitted to it by the General Assembly, the Security Council and other organisations and agencies under the UN. These cases are known as Advisory Proceedings.

Contentious Cases 

The courts first role is to judge legal disputes between states. This constitutes a large part of its work. In the past, these cases would relate to border disputes, maritime delimitation and diplomatic protection. But now cases such as human rights, environmental rights and the responsibility of states are brought in front of the court.

The court’s jurisdiction is general and can consider any issue of international law. All UN members can bring cases of contentious nature before the court. Non-member nations can also access the court but are subject to certain conditions. Thus, the court’s jurisdiction extends throughout the world. 

It must be kept in mind that states are sovereign and they can decide how to resolve their disputes. The ICJ can not ask sovereign states to act without them approaching the court. Thus, the ICJ can only hear a case if both the national parties have freely consented to it.

Procedure

Once they have appeared before the court, the proceedings take place in two steps.

First, the states submit their arguments, evidence and submissions in writing. Then, their representatives and their lawyers present oral arguments before the court.

The court then begins its deliberations. These deliberations are confidential and questions or issues of the case are decided by the judges present. On an average, deliberations last from 4-6 months. 

Once a decision is made, the judgment is released in the court’s two official languages and reproduced in several sealed copies.

All judgements of the court are final and without appeal.  By coming before the court of justice on their own consent, the state parties take an oath to comply with the judgement and such judgements are binding upon the parties. If one of the parties refuses to comply with the decision, the aggrieved party may seek recourse from the Security Council. The Security Council may then, under Article 94 of the UN Charter make recommendations or decide measures on how to give effect to the judgement.

Advisory Proceedings 

The second role is of advisory procedures where they deal with legal questions given by the organisations and the agencies of the UN. A majority of these requests come from the General Assembly.

Unlike judgements, advisory opinions are not binding per se. It is up to the organisations and the agencies to follow up on them. But, regardless of them being binding or not, these opinions are important as they usually lead to the festering of international law.

Their decisions go beyond states directly involved in the cases. On many occasions, the court has helped to defuse crises and normalize relations between states and to restart deadlock negotiations, either by the settlement of disputes by judicial means or by stating the law for the issue in question.

Current Cases

The Rohingya Genocide

The Rohingya Genocide is a chain of persecutions by the Myanmar government and the Buddhist community of Myanmar against the community of Muslim Rohingyas. The Myanmar military and police cracked down on Rohingya Muslims and failed to check the growing islamophobic sentiments against them.  This resulted in thousands of Rohingyas being killed, refugees fleeing to other countries, destruction of Rohingya villages, schools and businesses, wide-scale violation of human rights by the military and gang rapes and other sexual violence against women and girls of the Rohingya community. 

The Gambia (or Republic of The Gambia) had brought a case against Myanmar for the Rohingya genocides. It was noted by the ICJ that thousands of Rohingya refugees were made stateless due to state-sponsored violence. 

The court observed that the Rohingyas were a ‘protected group’ under Article II of the Genocide Convention. They stated that despite Rohingya Muslims living in Myanmar prior to independence, they were ‘made stateless by the 1982 Citizenship Act and disfranchised in 2015 from electoral processes’.

The bench ruled that Myanmar must keep in mind the duties given under the Genocide and ensure all acts of prejudice against Rohingya Muslims are stopped. 

Criticisms

The following points are common criticisms of the ICJ- 

• The ICJ has been accused of being biased. Judges usually rule in favour of states which their own country looks favourably upon. Bias also plays a great role in voting for the President and Vice President of the bench. 
• The ICJ can only rule on cases where both the states have given their consent. Thus, even if there is a case where the authority of the ICJ is much needed, the ICJ can not do anything unless they get consent from the other states involved.
• Only states can seek recourse under the ICJ, not organisations, private enterprises or even individuals. Thus, in cases where minority groups are being exploited by their state, the individuals of these minority communities can not seek recourse under the ICJ
• Other International courts like the International Criminal Court are not under the umbrella of the ICJ. Thus, conflicting opinions from various international courts make it difficult for the international community to collectively enforce peace. 
• The ICJ does not enjoy the separation of powers and is sometimes at the mercy of the Security Council. Permanent member states can veto attempts to enforce the decision of the ICJ.   

Cases where the ICJ has failed to enforce peace 

United States occupation of Nicaragua- The Contra Rebellion

The Contra rebellion was a right-wing rebel group against the socialist government of Nicaragua. These rebels violated numerous human rights and used terrorist tactics to usurp the government. They have been accused of targeting health centres, kidnapping, torturing and even executing civilians (some were children), raping and committing other sexual crimes against women, seizing civilian property and burning civilian houses. 

Nicaragua stated that the American government had funded the Contra Rebellion against the Nicaragua government. They were also accused of planting naval mines in their territorial waters. 

There was established evidence that the Contra Rebellion was not only funded by the CIA but was also established by Ronald Reagan’s administration. To fund the rebellion, the USA sold weapons to Iran and assisted the Colombian cocaine trade. 

The ICJ held that the US had grossly violated international law as well as Nicaragua’s sovereignty. Nicaragua asked for 17 billion dollars in reparations. 

In response, the US withdrew its support of the International Court of Justice and as a permanent member, vetoed any attempt to enforce the ICJ’s judgement. 

Till this day, Nicaragua has seen no compensation. 

Israel and Palestine

One of the greatest violations of international law has to be the West Bank wall constructed by Israel that cuts through Palestine communities, homes and farmlands. Under the guise of protecting Israel against terrorism, the wall goes deep into the West Bank which is Palestine’s territory. It seeks to redefine borders by annexing Palestine and thus is a grave violation of not only Palestine’s sovereignty but international laws as well.

15 years ago, the ICJ had ruled through an advisory opinion that the wall was illegal. While such opinions are non-binding, they also said the wall violates international law and should be dismantled. It also stated that Israel should pay reparations. 

But such orders fell on deaf ears and Israel was not willing to comply. The UN General Assembly tried to force Israel to cooperate but that was a failure as well. 

Till the present date, the wall strangulates the West Bank and the present government continues to expand it, pretending like the ICJ ruling never happened. 

Conclusion

As the principal judicial organ of the United Nation, it is an important facet for promoting and maintaining peace. They regularly host visits by heads and dignitaries of states. It settles cases of extreme international complexity in less than five years. The court accounts for less than 1% of the UN’s budget. It is unique to the world. Through its judgement, opinions and orders, ICJ lends its support to the United Nations so that it can achieve its primary purpose which is to maintain and promote international peace and security.  

But despite having so much authority, it fails to achieve its purpose. In many cases, we have seen that Countries do not comply with rulings from the International Court of Justice. Thus despite being a giant in the world of International law, it seems to grow increasingly less influential on States and regulating its compliance with international law. 

To know the role of ICJ in Kulbhushan Jadhav Case, please Click Here.

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This article is written by Srishti Kaushal, a first-year student of Rajiv Gandhi National University of Law, Punjab, pursuing B.A. LLB. (Hons.). In this article, she discussed the difference between the presidential and parliamentary forms of government, along with their advantages and disadvantages.

Introduction

More than 50% of the world today has a democratic government, which allows for popular participation through the electoral process. These democratic governments can be representative or direct. 

In a direct democracy, political power is placed in the hands of all individuals in the state who come together to make a decision. In a representative democracy, on the other hand, individuals that are elected through an electoral process act as intermediaries between the people of the state and the policy decisions. Basically, a person elected by the people takes decisions on their behalf.

Now a representative democracy can be divided into Parliamentary and Presidential democracy. In this article, we will discuss the features, advantages and disadvantages of both of these types of representative governments, and the difference between them.

Presidential form of government

A Presidential system is also called a congressional system. It refers to a system of governance in which the President is the Chief Executive and is elected directly by the people. The head of the government thus exists separately from the legislature. It is a form of government where the three branches (legislature, executive and judiciary) exist separately and cannot dismiss or dissolve the other branch. While the legislature makes the laws, the President enforces them and it is the courts that are responsible for exercising judicial duties.

The origin of the Presidential form of government can be traced back to medieval England, France and Scotland, where the executive authority lay with the Monarch or Crown (King/Queen) and not the estates of the realm (Parliament). This influenced the constitutional makers of the United States of America, who created the office of President, for which direct elections were to be held. Let’s have a look at the countries where the Presidential system is followed today.

To understand this system better, let’s look at its features, advantages and disadvantages.

Features

The Presidential system of democratic governance has the following features: 

• President does not have nominal powers. He is both the head of the executive and the head of the state. As the head of the executive, he has a ceremonial position. As the head of the government, he acts as the chief real executive. Thus, the Presidential system is characterised by a single executive concept.
• President is directly elected by the people or the electoral college.
• The President cannot be removed, except through an impeachment procedure for a grave unconstitutional act.
• The President governs with the help of a small body of people. This is his cabinet. The cabinet is only an advisory body which consists of non-elected departmental secretaries, who are selected by the president. It is responsible to the President, and the departmental secretaries can be removed by him.
• The President and his cabinet are not answerable to the legislature, nor are they members of the legislature.
• The concept of Separation of powers is clearly visible in the Presidential system. The three branches are completely separated and members of one branch cannot be the members of the other branch. 
• The President can veto the acts of the legislature. He/She can also grant pardon.

Advantages

Now let’s look at the advantages of having a Presidential system:

• In most Presidential systems, the President is elected directly by the people. This creates more legitimacy than that of a leader who has been appointed indirectly.
• Since in a Presidential system the branches of the government work separately, it becomes easier to maintain the system checks and balances.
• The President, under this system, is usually less constrained and can take decisions more independently. Thus, this system allows for quick decision making. This becomes very beneficial at the time of crisis.
• A Presidential government is more stable. This is because the term of the President is fixed and is not subject to majority support in the legislative. Hence, he/she does not need to worry about losing the government. 
• Since it is the President who chooses his cabinet and the executive need not be legislators, the President is able to choose experts in various fields to head relevant departments in his government. This ensures that only the people who are capable and knowledgeable form part of the government.
• Once the election is complete and the President gains power, the whole nation accepts him/her. Political rivalries are forgotten and people look at problems from a national view, rather than a party view.

Disadvantages

There are certain disadvantages which come with the Presidential System. Let’s understand what these are:

• The Presidential form of governance is autocratic as it places a lot of power in the hands of one person, i.e., the President. Also, the President is out of the control of the legislature.
• The complete separation between the legislature and executive may lead to conflicts and a deadlock between the executive and the legislature. The legislature may refuse to accept the policies of the executive; while the executive may not agree to the Acts passed by the legislature, and the President may even veto them.
• This system gives the President the power to choose the people of his choice for his cabinet to form the government. The President may misuse this power and choose his relatives, business partners etc, which might affect the political working of the state.
• It leads to less accountability in the government and may also result in the legislature and the executive playing the blame game in time of crisis.

Parliamentary form of government

A Parliamentary form of democracy is also known as the Cabinet form of government or the ‘Responsible Government’. It refers to a system of governance in which the citizens elect representatives to the legislative Parliament. This Parliament is responsible to make the decisions and laws for the state. It is also directly answerable to the people. 

As a result of the elections, the party with the greatest representation forms the government. Its leader becomes the Prime Minister and performs various executive functions along with the members of Parliament appointed by the Prime Minister to the cabinet. 

The parties who lose the elections form the minority and serve as opposition in the Parliament. These parties challenge the decisions of the party in power. The Prime Minister may be removed from power in case the members of Parliament lose confidence in him.

Attempts to create a system of Parliamentary democracy were seen in the European Revolution of 1848 but these did not lead to any consolidated system. Parliamentary democracy came to be in 1918 and developed throughout the twentieth century.

Let’s look at the countries which have a Parliamentary democracy.

Now let’s look at the features, advantages and disadvantages of Parliamentary form of government to understand it better.

Features

• The head of state and the head of government are different under the Parliamentary form of government. The head of the state is usually the President or monarch. He/she has only ceremonial powers. The head of the government is generally the Prime Minister and he/she is vested with real power.
• It can be either bicameral (with two houses) or unicameral (with one house). A bicameral system usually consists of a directly elected lower house, which in turn elects the upper house.
• The powers of government are not completely separated. The lines between the legislature and the executive are blurred as executive forms part of the legislature.
• This system is also characterised with the majority party rule. But no government can be a hundred percent majority, and the Parliament also consists of the opposition.
• The council of ministers, in this system, are collectively responsible to the Parliament. The lower house of Parliament can even dismiss the ruling government by passing a no confidence motion in the house.  
• Most of the time, in this form of government the cabinet proceedings are kept secret and are not meant to be divulged to the public.

Advantages

Adopting a Parliamentary system of governance has certain advantages. Let’s look at these in detail:

• There is better coordination between the legislature and the executive. This is because executive is part of the legislature and most members of the lower house support the government . Thus, in Parliamentary system, there is lesser tendency of disputes and conflicts, which makes it comparatively easier to pass legislation and implement it.
• This type of government is more flexible as, if required, the Prime Minister can be changed. For instance, in the UK  during the Second World War, Prime Minister Neville Chamberlain was replaced by Winston Churchill. 
• A Parliamentary democracy allows representation of diverse groups. This system gives opportunities to various diverse ethical, racial, linguistic and ideological groups to share their views and enable making of better and suitable laws and policies.
• Since, the executive is responsible to the Parliament, it has the power to keep a check upon the activities of the executive. Moreover, the members of the Parliament can move resolutions, discuss matters and ask questions of public interest to put pressure on the government. This enables responsible governance. 
• Parliamentary system prevents autocracy. This is because the executive is responsible to the legislature, and it is possible to vote out the Prime Minister through a no confidence motion. Thus, power does not get concentrated in the hands of only one person.
• In case, the no confidence motion is passed, the leader of the state invites the opposition to form the government. Thereby, this system provides an alternate government. 

Disadvantages

The Parliamentary system also has certain disadvantages. These are:

• Because of party fragmentation, the legislators cannot exercise their free will and vote as per their own understanding and opinions. Rather, they have to follow the party policy.
• The system might lead to legislators who intend to enter the executive only. They are largely unqualified to legislate, which can hamper the working of the government.
• Since the executive is formed of the members of the winning party, it is not the experts who head the departments.
• Since, in the Parliamentary system, tenure of the council of ministers is completely dependant upon their popularity, there is no fixed tenure. Because of this they often hesitates to take bold and long-term policy decisions.
• Such governments might prove to be unstable. This is because the government exists only as long as they maintain majority support in the house. Many a times, when coalition parties come into power, the government is short lived and disputes arise. Because of this, the executive puts all of its focus upon staying in power, rather than  worrying about the welfare of people and state of affairs.

In India

In India, the system of democracy which exists is the Parliamentary Democracy. This model has been borrowed from the UK, but there are certain differences:

• While in the UK, the Prime Minister can only be from the lower house, in India, the Prime Minister can be from both Lok Sabha or Rajya Sabha.
• While in the UK once a person is appointed as the speaker, he/she ceases to be a member of his/her party, in India, the speaker continues to be a member of his/her party but must make sure that he/she is impartial in the proceedings.

Difference between the Parliamentary and Presidential forms of the Government

Conclusion

The system of governance in countries differs depending on whether a country has a Presidential or Parliamentary system. There are some countries who have adopted a mixture of both these types as well. These systems have multiple differences based on separation of powers, accountability, executives etc.

Both of these systems come with their own advantages and disadvantages. A country chooses the system which suits it the most. The Parliamentary system  allows representative governance, which is suitable in a diverse country like India.

References

• https://www.sciencedirect.com/topics/social-sciences/Parliamentary-democracy.
• https://byjus.com/free-ias-prep/Presidential-and-Parliamentary-form-of-government/.
• https://www.jagranjosh.com/general-knowledge/Parliamentary-system-in-india-1437202137-1.
• https://www.lawteacher.net/free-law-essays/administrative-law/the-Presidential-and-Parliamentary-governance-forms-administrative-law-essay.php. 

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This article is written by Aniket Tiwari, a student of Law School, Banaras Hindu University. In this article, he explained various aspects of Cyber Insurance Policy. He also explained the need for Cyber Insurance Policy. 

Introduction

Insurance can be defined as the means of protection from financial losses against the risk of contingent or uncertain loss. Here a person or entity who takes such insurance is known as a policyholder and the entity that provides insurance is known as an insurance carrier or underwriter. 

A cyber insurance policy, also referred to as cyber risk insurance or cyber liability insurance coverage (CLIC), is designed to help an organization mitigate risk exposure by offsetting costs involved with recovery after a cyber-related security breach or similar event. Like any other insurance product, it is also used to protect businesses and individual users from the risk relating to information technology infrastructure and activities. Such risks are generally excluded from traditional commercial liability policies or it can be also said that these are not specifically defined in traditional insurance products. 

Why is it needed?

Cyber insurance, as the name suggests, insulates one’s company or individual from damages incurred during a cybersecurity incident. Here the main idea behind this is to shift some of the risks damages to the insurance company.

In today’s age and time, cyber risks have drawn significant attention. Whether it is corporate or individual, digitization has touched all the entities. Digitization generates a huge amount of DATA, which when used prudently can become a coveted asset. However, these information are misused and cyber-attack has become very common. Cyber risk has become more pertinent nowadays as it elevates attacks from an individual level to that of a ‘State’.

According to the World Economic Forum Risks Perception Survey, 2018-2019 puts the “Cyber Attack: Theft of data or money” fourth in the list and there is 82 percent probability of such attacks on system. “ Cyber Attacks: disruption of operations and infrastructure” is also fifth in the list and there are 80 percent chances of such incidents. 

Impact of security breaches

Apart from monetary losses, there are various hidden costs of a data breach, which includes lost businesses, partnerships, and reputation. This could be more debilitating, necessitating a better risk management strategy. 

Apart from these, there are several other impacts of cybersecurity breaches and these are as follows:

• Losses relating to Intellectual Property.
• It will lead to legal engagements that are hectic.
• It will affect business supplier relations.
• It degrades the company’s reputation.
• Financial losses.
• It becomes difficult to retain the customers of the company.

Also, the “Cyber Risks” are increasing in India. India has even become the second most affected country due to cyber-attacks (from 2016-2018). The average monetary loss due to breach in cybersecurity has raised by 7.9%. According to Allianz Risk Barometer 2019 also, ‘Cyber Incidents’ is defined as the top risk for businesses in India. 

Cyber Liability Coverage

Cyber liability insurance primarily covers those breach of events where personal identifying information is lost, stolen or disclosed. Some examples of Personal Identifying Information (In Europe it is called Personal Data) are as follows:

• Account Numbers of persons
• Credit Card information
• Social Security patterns like passwords
• Driver’s License number
• Healthcare data of anyone

Cyber Insurance includes breach of these personal identifying information. It even covers the smallest incident, like disclosing a single customer record to the wrong party (it should be noted that this type of incident should happen accidentally). There is a requirement to report these breaches to appropriate authorities but every incident does not rise to the level of reporting. Basically, the cyber insurance policy covers the legal fees and expenses associated with such kinds of breaches. In addition, it also includes:

• Assisting with customer notifications following an incident, 
• Working to restore the personal identities of affected customers, 
• Recovering data that was lost during such incidents,
• Repairing computer systems and networks that were damaged in such incidents.

Many insurance policies also offer affected customers credit monitoring services. This helps to rebuild the company or organisation’s reputation after a cyber breach.

The cyber insurance policy covers economic losses that result from data breaches and other cyber incidents. Most of the cyber insurance policies include first-party and third-party coverages. Some coverages are included automatically while others can be available ‘a la carte’. So let’s discuss the first party coverages and third party coverages. 

First-party coverages

First-Party insurance is between the policyholder (the first-party) and the company providing such insurance (the second-party). An example of first-party insurance coverage would be a computer owner who suffers from any cybersecurity breach. Here, in this case, the computer owner will make a claim with the insurance company to cover damages and repairs. The insurance company will compensate the computer owner according to the insurance policy. 

However, there are certain categories that are covered under first-party coverage. Here is a list of some of such categories that are covered under such coverages:

• Damage to electronic data- It covers the cost to replace or restore electronic data or programs destroyed or stolen in any kind of data breach. However, it should be noted that the losses must result from a covered peril such as a hacker attack, a denial of service attack, or a virus. The cyber insurance policies also include the cost of hiring experts or consultants to help preserve or reconstruct data.
• Loss of income and extra expenses- Cyber insurance policies also cover the income losses which a company or individual suffers due to cyber attack. It also covers extra expenses that one incurs after his/her computer system fails due to a covered peril. Some insurance policies cover the income losses which one suffered when his/her network provider’s system has been breached.
• Cyber extortion- Cyber insurance also applies when a hacker breaks into the computer system of the policyholder and threatens him/her to commit a criminal/ wicked act like damaging one’s data, introducing a virus, releasing confidential data, or initiating a denial of service attack unless one pays a specified amount of money. Coverage usually extends to any extortion payments that the policyholder makes and expenses that he/she incurs in responding to the demands.
• Damage to one’s reputation- Some of these policies also cover costs that the first party incurred for marketing and public relations to protect them from damage to one’s reputation following a data breach. This coverage may be known as ‘Crisis Management’. 

Third-party coverages

In a third party insurance claim, there are three parties. The first one is the policyholder or insured individual, the second is the insurance company and the third party is another individual. The third-party insurance claim is made by someone who is neither the policyholder nor an insurance company. The most common type of third party insurance claim is the liability claim (they are called so because someone else is liable for the injuries suffered by the third party). Example of third party cyber insurance policy is as follows. Suppose due to some cyberattack on the computer system of a company, personal information of its customer is leaked. Then the customer can claim money from the company and it would be covered under the third party coverage.

The liability coverages afforded by a cyber policy are usually claims-made. Here the coverage applies to damages that result from the covered claims as well as the cost of the security of the one. Here it should be noted that the defense costs may reduce the limit of insurance. Now we will see some areas that are covered by third party insurance:

• Network Security and privacy liability- It covers claims against the negligent actions of firms, for errors or omissions of the firm or individuals that result in the cyberattack, unauthorized access, introduction of a virus, or other security breaches of a system of the policyholder. It also covers the claims alleging that policyholder has failed to properly secure sensitive data stored in his/ her system.
• Electronic Media Liability- Third-party insurance coverage also covers the lawsuits against the first party for acts like libel, slander, defamation, invasion of privacy, copyright infringement or domain name infringement. These acts are covered only if they result from the publication of electronic data on the internet by the policyholder.
• Regulatory Proceedings- It also covers the fines or penalties imposed on first-party by regulatory agencies that oversee data breach laws. It also covers the cost of hiring an advocate to assist in response to a regulatory proceeding.

Factors insurance that company look while deciding coverage

All the above-mentioned categories for giving insurance to policyholder needs to be checked by the insurance company before actually giving financial assessment to the policyholder. An insurance company or second party wants to see that the policyholder has assessed its vulnerability to cyber attacks and he/she follows the best precautionary step by enabling defenses and controls to protect against cyber attacks as much as possible. The firms should hold seminars and workshops for their employees about security awareness, especially about phishing and social engineering, and this would be part of a protection plan. The other factors which are looked upon while deciding the coverage amount include the use of threat intelligence services for the latest information on zero-day and targeted attacks by the policyholder.

Here the cyber insurance company may also request an audit of organisation processes (policyholder). The policy granting company also looks at the governance of the policyholder before granting any coverage. 

What to look for as a cyber insurance buyer

There are lots of well-known insurance policies in India, such as Bajaj Allianz General, HDFC ERGO General, ICICI Lombard, etc. and it becomes difficult for the customers to go with anyone cyber insurance policy. Insurance industry analysts believe that clients/consumers will soon expect a cyber insurance policy to be part of every business insurer’ product line. When the person is going to have a cyber insurance policy he/she must compare various policies. The customer must find out whether the policy covers all of the items listed in the previous section. He/ she must inquire about the following special circumstances:

1. Does the insurance company offer more than one type of cyber insurance policies or is the coverage policy simply an extension to an existing policy? A stand-alone policy is considered to be more comprehensive. Also, the customer needs to find out if the insurance policy is customisable to an organisation.
2. One should always compare the deductibles among the insured, just like he/she does with the health, facility and vehicle policy.
3. One should look at how do limits and coverage apply to a first and third party? For example, does the given policy covers the third-party service provider.
4. The next thing which an individual or a firm must look at is whether the insurance policy covers any attack to which policyholder falls victim or it covers only the targeted attack against the policyholder in particular.
5. The person who is looking for cyber insurance must also look at whether the insurance policy covers non- malicious action by an employee of the company.
6. It should be clear that the policy covers social engineering as well as network attacks. Social engineering plays a role in all kinds of attacks, including phishing, spear-phishing and advanced persistent threats (APTs).

Sub-limits

Every cyber insurance policy has certain clauses mentioned in it. For example, in Bajaj Allianz Individual Cyber Safe Insurance Policy there are 10 clauses mentioned in it, and each of these clauses has a sub-limit. The claim for phishing, email spoofing, and social media cover will have a maximum limit of 25%, 15%, and 10% respectively. In addition to this, the insurer pays for IT Consultant Service Cover cost.

Similarly in cybersecurity insurance of HDFC ERGO, there are sub-limits but protection from malware attack has been kept optional and thus will be charged extra. 

Types of Cyber Insurance every business should have

Many business owners think that data breaches can only take place in a big multinational company. But the reality is that most data breach first starts from small and pop up businesses. For this reason, only it becomes important for these businesses owner to have a cyber insurance policy.

Three main types of Cyber Insurance Coverage that each business owner should have are Cyber Security, Cyber Liability, and Technology Errors and Omission Insurance. Here the first two insurance policies deal with risks relating to a Data Breach, while the third one deals with the company that provides technology products and services. 

Conclusion

As a user, one needs to take adequate precautions even though there is cyber insurance for the breach of security. In cyber insurance, there will be a subjective situation as monetary compensation varies from claim to claim, also it will depend on various factors as to how has the cyberattack took place and what were the circumstances under which the loss has triggered. Also, it is important to know that cybersecurity is a pretty young sector and data about the risks are changing very rapidly. Business companies and individuals are still having doubts about whether they need such a policy or not. This is because they do not know whether they are at risk of a cyber breach or not. 

References

1. https://www.cio.com/article/3065655/what-is-cyber-insurance-and-why-you-need-it.html
2. https://economictimes.indiatimes.com/wealth/insure/what-to-consider-while-buying-cyber-insurance-plans/articleshow/66445845.cms
3. https://www.myinsurancequestion.com/cyber-insurance/
4. https://www.dsci.in/ucch/resource/download-attachment/13/Cyber%2520Insurance%2520in%2520India+&cd=5&hl=en&ct=clnk&gl=in

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This article is written by Arushi Chopra, a first-year student pursuing BBA.LLB from Symbiosis Law School, Noida. This article deals with the legal rules regarding consideration in the English law as well as the Indian Law and the debate around the doctrine of privity of contract.

Introduction

In English Law, a promise becomes an agreement when it is supported by some consideration. Agreements are not enforceable in the court of law if it is not backed by some consideration. Thus, consideration becomes an important element in the formation of contracts. However, it is not only the English law wherein consideration is a peculiar element. In some civil law countries, promises without consideration are not enforceable and binding in nature unless they are made in some special form. “Consideration means something which is of some value in the eyes of the law, moving from the plaintiff. Without consideration, the transaction is merely a voluntary gift.” It is based on the idea of reciprocity.

Consideration has been defined as:

“When, at the desire of the promisor, the promise or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called consideration of a promise.”

Essentials of a valid consideration

With the help of the above definition, we can identify the following essentials to be fulfilled to form a consideration that is valid in the eyes of law.

1. Consideration should be done at the promisor’s desire. This is called Promissory Estoppel.
2. Consideration should always be of some value in the eyes of law. So, if a party is already under a legal obligation towards another then the act done to fulfill that legal obligation would not be considered as a valid consideration to become a basis of the contract which is enforceable in the eyes of law.
3. According to Indian law, the act of consideration can be done by the promisor or any other person.  Therefore, it becomes immaterial who has furnished the consideration as long as there is a consideration. However, this is not the case in English law. In English law, the fundamental propositions state that the consideration should be furnished by the promisee only and not by any other person.
4. There must be the performance of an act, abstinence or promise by the promisee.

Legal rules to the concept of consideration

1. Consideration must be at the promisor’s desire

The act or omission to do or not to do something should be at the desire of the promisor. An act done at the desire of the third party does not constitute consideration. In Durga Prasad v. Baldeo [1], a promise to pay the plaintiff commission on the articles sold not at the will of the defendant but through the agency is void as consideration does not move at the desire of the promisor.

2. Consideration can be from promisor or from any other person

In the Indian Contract Act, it has been clearly stated that the consideration can be provided by the promise himself or by any other person. According to this, it is not relevant who has furnished the consideration as long as consideration has provided. An important case to be taken into account here is Chinnaya v. Ramayya [2].

3. Consideration can be past, executed or executory.

According to Section 2(d) of the Indian Contract Act, 1872, the types of considerations for a contract are as follows:

Past Consideration

Past consideration refers to the act that has been done before a promise is made. According to the Indian Law, this type of consideration is valid in the eyes of law, if all other conditions for a valid consideration is fulfilled. However, according to the English law, past consideration is not recognized as valid consideration for a contract. It is considered to be a form of a gift or gratitude.

Executed Consideration

When one party to the contract performs his part of the promise and has given his part of the consideration to the other party and now only the part of the promise on the side of the other party is left to be performed is referred to as an Executed consideration. It is also called present consideration.

Executory Consideration

Before the formation of a legally binding contract, when a person makes a promise after the other person has also promised then it is termed to be an executory consideration, wherein both the parties are yet to perform their part of the act. This is also called future consideration.

Consideration is not required to be adequate

It is not necessary for consideration to be in an adequate amount as per the promise. This is because it becomes difficult to establish what is adequate consideration for a given promise. It was provided in the landmark case of Bolton v. Madden [3] that “The adequacy of the consideration is for the parties to consider at the time of making the agreement, not for the court when it is sought to be enforced.”

Performance of the legal obligations does not constitute a consideration

If a party is already under a legal obligation towards another then the act done to fulfill that legal obligation would not be considered as a valid consideration to become a basis of the contract which is enforceable in the eyes of law.

Consideration must be real and not unsubstantial.

According to the law, consideration should be real and not unsubstantial. For example, in the case of White v. Bluett [4], the father promised to his son that if he stopped complaining about the share of property given to him, he would release him of his debts. However, it was held by the court that the consideration was not a good consideration and hence the son was found to be liable for the debts.

Consideration must not be unlawful, immoral or opposed to public policy

According to Section 23 of the Indian Contract Act, in an agreement where consideration is unlawful, the agreement becomes void. Section 23 declares what considerations are unlawful and would render an agreement void. A consideration forbidden by law can be understood in two sense:

1. The promise is of something which is considered unlawful in the eyes of law;
2. Though the promise is not unlawful, the law will not enforce the promise keeping in mind the public policies.

Privity of Contract

The doctrine of privity of contract states that only the parties to the contract can enforce the contract or take action against it. A person who is not a party to the contract but perceives some benefits from the contracts is not entitled to take any enforcement action.

“The doctrine of privity means that a contract cannot, as a general rule confer rights or impose obligations arising under it on any person other than the parties to it.”

For example, if a party ‘A’ promised ‘B’ to pay Rs.100 to the third party ‘C’.  Thus, ‘A’ and ‘B’ can sue each other in case of a breach of contract. However, ‘C’ cannot sue the parties. This is known as the privity of contract.

Different courts in India have different views regarding the concept of privity of contract. There have been cases where the third party is not able to sue in case of a default due to the operation of the rule of privity of contract while there are some cases where the rule of privity of contract is completely disregarded. Hence, the rule of privity of contract is a topic of great debate amongst scholars. 

Privity of consideration states that only a person who has provided consideration can enforce the contract and take action against it. In the above case, ‘C’ cannot sue the parties as he has not provided any consideration for the contract.

Exceptions to the Doctrine of Privity of Contract

There are some exceptions to the doctrine of privity which makes the third party capable of enforcing the contract. These are as follows:

1.   Agency

In case of a principal-agent relationship between the third party and the contracting party, wherein the third party i.e. the principal party has expressly consented that the other has to act on his behalf and the contracting party i.e. the agent consents to act in that manner, the third party, being the principal party, can also enforce the contract.

2.   Trust

In case one party ‘A’ promises the other party ‘B’ for the benefit of ‘C’, although being the third party, ‘C’ can enforce the contract as ‘B’ is the trustee of ‘C’. ‘A’ person can become a trustee of the other person if he fulfills the following criterion:

• The party should have the intention of creating trust.
• This intention should be to benefit a particular third party and not all the third parties.

A landmark case for the defense of trust in the privity of contracts is Rana Uma Nath Baksh Singh v. Jang Bahadur. The facts of the case were that Rana Uma Nath Baksh Singh was given the possession of the entire estate by his father. In return, Rana Uma Nath Baksh Singh was required to pay a certain some of the money and a village to Jang Bahadur, the illegitimate child of his father. It was held in this case that a trust was created for the benefit of Jang Bahadur and hence he is entitled to enforce the contract.

3.   Collateral contract

In case of a contract is accompanied by a collateral contract, then the party to the collateral contract can enforce the contract. For example, when a party ‘A’ purchases goods from ‘B’, there is a contract between A and the manufacturer of that good.

The doctrine of privity of contract is subject to various debates despite being accepted in many jurisdiction. In the case Debnarayan Dutt vs Chunilal Ghose “The Indian Contract Act is unlike the English Contract Act and the limits with which the doctrine of privity of contracts operates in English law cannot, with the same vigor be applicable to the Indian Contract Act.” As given in the definition of consideration in Section 2(d), as long as there is a consideration it does not matter who has furnished it.

Conclusion 

Consideration is an essential feature of a valid contract without which, generally a contract is not enforceable in the court of law. Consideration has been defined under Section 2(d) of the Indian Contract Act, 1872. This article deals with the legal rules regarding consideration and the one of the most debatable aspects regarding a valid contract that is the concept of privity of contract. 

Privity of contract is a legal rule which states that only parties to a contract can sue for breach of contract and this right to sue does not extend to the third party.

However, the above principle is not well established in India and is subject to a lot of debates and discussions among scholars and professionals. There have been Indian cases which have been discussed in this article, where in a given circumstance the rule of privity of contract was not applied while in other cases of similar nature and circumstances the rule of privity of contract is applied. The article also deals with the exceptions to the rule of privity of contract. 

Also, the rule of privity of consideration is discussed briefly in this article. Unlike the rule of privity of contract, the rule of privity of consideration is well established and clear with a statutory backing. It has been explicitly mentioned in the definition of consideration provided under Section 2(d) that the consideration can be furnished by any person. The judicial interpretation as well as legislative enactments have also been provided.

References

• The Indian Contract Act, 1872 by Fredrick Dinshaw Mulla
• Contract and Specific Relief by Avatar Singh
• Indiankanoon.org
• Legalbites.in
• GH Treitel, The Law of Contract
• https://indiankanoon.org/doc/171398/
• https://legaldictionary.net/consideration/

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This article is written by Arushi Chopra, from Symbiosis Law School, Noida. This article deals with a major issue of Beef Ban. 

Introduction

Beef ban has been a topic of debate amongst many scholars for a long period of time now. Some scholars are in favour of this decision while some are against it. The views of the people differ variably in this context which makes it one of the most controversial topics in debate prevalent today.

Those who are in favour of the banning of beef argue that non-violence is the greatest principle of humanity according to various religious texts and all people should adhere to this principle to the best of their capabilities. According to them, slaughtering of cows, buffaloes or other animals is considered to be a violent and cruel act and thus should be banned.

Those against the banning of beef argue that eating beef is healthy for human beings and according to the laws of nature, human beings can eat the flesh of other animals. They argue that plants are also living organisms and the act of eating those plants by human beings is not considered as being violent and acting against the principles of humanity. Likewise eating the flesh of animals should also not considered to be a violent Act. 

Views of The Religious Texts

Hindu Religion

According to various authors, Hindu religious texts supports the act of animal sacrifice and eating beef should also be considered to be a part of this sacrifice and hence should not be banned. The counter-argument given for this statement is that Hindu religious texts support sacrificing the animals and not the killing of animals as these texts are strictly against killing any living being.

The reality, however, is that the Hindu religious texts are contradicting each other and there were mentions of both consuming beef as a good and a bad deed.

However, the slaughtering and consumption of cows, in particular, were considered immoral and unethical in the Hindu religion as cows are worshipped as idols in the Hindu religion even today.

The Hindu religion believes in the principle of Ahimsa or non-violence and killing animals for consumption is against this principle.

Jainism

The Jaina Sutras tell us that Jainism was against violence and the people were of the view that as all the living creatures living on this earth are fond of life, none of the creatures should engage in killing other creatures as this very act results in ecological imbalance and destruction of life forms.

According to the Jain tradition, eating plants give the right amount of nutrition to human beings and they should not make the animals suffer pain due to their own selfish motives.

Buddhism

According to the Buddhist texts, cattle is one of the forms of reborn human beings and killing of cattle for consumption is considered to be bad karma. In order to secure a good rebirth, one should protect animals and not engage in their killing according to Buddhism.

However, Richard Gombrich believes that there is a difference between what the Buddhists practice and what they preach. There are some Buddhists who engage in killing these animals on a regular basis defying the principles given in their own religious texts.

Most Hindus generally avoid consuming beef as it is considered to be unethical and immoral. This is because a cow is a sacred animal in the Hindu religion and is worshipped by the people. However, Muslims and Christians engage in the consumption of beef very often. It is also ironic that though a large population of our country consists of Hindus who are against cattle slaughtering and consumption, India is the second-largest exporter of beef in the world only after Brazil which is the largest beef exporter in the world.

There is a constant demand from the people to ban consumption and selling of beef in India but this has not been implemented in many states till now due to the secular nature of our country.

However, a number of states have successfully banned the consumption of beef in the state. There are some states wherein slaughtering, consumption and killing of cows are banned but there is no mention about the consumption of other forms of cattle. This means that in these states slaughtering of buffaloes and all other forms of cattle except cows is allowed. Also, some states allow the slaughtering of old and diseased cows but have banned the slaughtering of the young and healthy cows. Some states require the slaughtering houses to obtain a certificate of fit for slaughtering before carrying on their operations. The Northeastern part of India has not put up any such conditions and people do not require any certificate or permissions before carrying out the activities like the killing of cattle for consumption. Thus, the north-Eastern part of the country is the highest consumer of beef in India.

Incidents and protests related to the consumption of beef

The Dadri Lynching Incident 

A Muslim family was attacked and a person was murdered by a mob on 28 September 2015 in Dadri because it was suspected that the family was consuming beef. This was accompanied by a storm of protests and anger displayed on social media. It was, later on, found that the meat that they were eating was not beef.

The Maharashtra Controversy

A legislature was passed by Bharatiya Janata Party, the ruling party in the state, banning the possession and import of beef in the state. This decision took away the livelihood of many of the Muslims who were engaged in the trade of beef. According to some people, this decision was taken by the BJP due to the pressure created by the Rashtriya Swayamsevak Sangh to ban beef trade. The Rashtriya Swayamsevak Sangh was a Hindu group that was strictly against killing cattle and consumption and trade of beef in the state.

The Prevalent Issues in India

Does the banning of beef consumption take away the food rights of people?

Every human being has the right to eat any kind of food that he wants and he should not be objected if he is exercising this right. If the government bans the consumption of beef, it would according to me, infringe on the rights of the people who consume beef. Beef is also cheaper as compared to the other food products and it thus becomes a source of survival for the poor people who cannot afford to buy other expensive products to eat.

Also, India is a secular country and banning the food products consumed by one sect of the society would be both legally and morally incorrect according to me. The Muslim and Christian minorities consume beef very often and banning beef would not be taken by them in a positive manner.

This issue relating to the food rights of the people and banning of beef is taken up as a topic of discussion by the author Kancha Ilaiah in the article published by the Economic and Political Weekly, Volume 31 page 144-145. The author is completely against banning beef in India as it is a source of livelihood for many. The author states that the SCs, STs, and OBCs are the ones who depend on the less expensive beef for their consumption. According to the author, it would be morally incorrect to ban beef which is eaten by the Muslims and the Christian community and also by many other people. It would also be against the fundamental right to equality and would also result in the infringement of the right to food of their choice to the people.

India is a multicultural country wherein the concerns and views of all the communities are taken into consideration and hence banning the consumption of beef would result in injustice to the minority communities consuming meat. This is what is talked about by the author in the article. According to the author, the food rights of the people are their democratic rights and banning a particular religious food product just because consuming that particular food product is immoral in another religion is not a valid argument for banning the product.

Is it ethically correct to propose to ban beef which is a religious food product for the minority communities and take forward the opinions of the majority of the people in order to secure majority votes?  

Beef is a religious food product eaten by the Muslim and Christian communities very often. It is bread and butter for various people who are economically weak and cannot afford other expensive food products. Banning beef just to win the elections by taking away the majority of votes may look appealing but it is morally and ethically incorrect. Banning beef would give rise to a lot of protests and violence and would escalate the problems between the different religious groups.

BJP had proposed to ban beef in its manifesto in order to attract the votes of the Hindus who constituted a majority of the population leaving the pleas of the other sections of the society unheard. This step taken by the BJP is strongly opposed by the author Kancha Ilaiah in his article that was published in the Economic and Political Weekly, Volume 31 page 144-145. The author is completely against this act done by the BJP. The author elaborates on this issue by saying that BJP thinks that the very act of killing cows, buffalo or cattle is non-Indian and thus should be banned. The author strongly opposes this statement by saying that in the earlier times, the Brahmins also consumed beef and thus calling consumption of beef a non-Indian act is out of the question.

According to me, the act done by the BJP was not ethically correct as this act brought a lot of protests and bloodshed in the country. It is also ironic to note that whenever the government has made an effort to ban the killing of cattle for consumption, it has resulted in violence and bloodshed of the human race.

Is it correct for the Indian government to take sides in the matters regarding the beef ban and give out different judgements in a similar case rather than promoting the coexistence of all citizens?

Beef ban has been very controversial topics and the cases relating to beef when comes to the hands of the court, it is very difficult to arrive at a solution. This is because there are logical and clear sets of arguments for both sides of this situation, i.e. one opposing beef consumption and one supporting beef consumption.

It becomes all the more difficult to arrive at a decision because the constitution of India defines India as a secular country which respects all religions and believes in equality to all its citizens despite the religion that they belong to. Also, there are no set laws and principles governing the matters relating to beef consumption and sale which often leads to a bad decision by the court and hence this results in injustice to one party.

The above situation has been taken up by the author Imtiaz Ahmad in his article published in the Economic and Political Weekly Vol. 40 Page: 1989-1991. The author first takes up the two cases which were dealt with differently by the same high court. He focuses on the point that India is a secular country and this principle sometimes creates problems like the laws relating to beef consumption and its sale in the Indian markets.

Secularism poses problems for the judicial bodies to give judgements on these cases and as a result serves injustice to one party. There is a difference in views of the Hindu community and the Muslim and Christian communities in matters relating to beef consumptions and trading. While the Hindu religion opposes the killing of cattle, beef is a religious food in the Muslim and Christianity community which is eaten on various festivals. Though there is a difference in the opinions, all these communities live together in India and hence should be treated equally and fairly and the government should take into account the concerns of all the communities and provide a solution to their problems.

Conclusion

Beef ban is a controversial subject with many viewpoints and ideologies. It is taken up differently by the different sections of the society and one wrong decision by the government regarding this subject elevates this problem to a great extent.

Consumption of beef is not considered to be good practice in the Hindu religion while Muslims and Christian minorities are often seen eating beef on festivals and special occasions.

Though there is a ban on beef consumption and trading in some states of India, there are some states which have still not considered banning beef as a viable option. The government has not been able to make this law regarding beef ban applicable centrally in the country due to the secular nature of the country. India is a multi-cultural community and thus one of the beliefs and practices of one religion cannot be just kept aside and forgotten. This is a major factor due to which beef consumption has still not been banned entirely.

Different religious texts have different perspectives related to this issue and hence this has been a hot topic for debate amongst many scholars. The government cannot take out any baseless rule against any particular section of the society relating to this issue as it would result in bloodshed and violence. 

 References  

1. https://indianexpress.com/
2. https://www.jstor.org
3. https://www.mapsofindia.com

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This article is written by Millia Dasgupta, from Jindal Global Law School. This article discusses reciprocal promise, the types of reciprocal promises and rules regarding it.

Introduction

Contracts are the founding stone of many agreements. When we think of contracts we think of one party agreeing to do something and the other party doing an act in return. I.e, I give you an apple and you pay for it. But many times in contracts, parties just agree to do things or they promise to do certain acts. 

Unlike an act, promises are not tangible. Thus, due to its nature, many doubts can come up. What happens when the two promises of the parties are dependent on each other, or the promises become impossible to perform later on? In this article, we will discuss such intricacies. 

Definition of a Promise 

Section 2 of the Indian Contract Act of 1872 defines what promises are-

• When someone expresses his willingness to do (or not to do) something, he is said to make a proposal.
• When the other person (to whom the proposal is made) accepts the proposal, the proposal becomes a promise.
• Here, the person who made the proposal is the ‘promisor’, and the person to whom the proposal is made is called the ‘promisee’. 
• When, at the desire of the promisor, the promisee does something, does not to something or promises to do something; this act of the promise is called ‘consideration of the promise’. 
• These promises (that the promisee does to form the consideration) form an agreement. 
• Such promises that form an agreement are called reciprocal promises.

Illustrations:

• Navya expresses her willingness to pay for some coats to Ashok. (proposal)
• Ashok accepts Navya’s proposal to pay through the word (Now Navya has promised to pay).
• Now Navya is the promisor and Ashok is the promisee.
• Now, due to Navya’s promise to pay, Ashok promises to supply the coat. (Ashok’ promise to provide the coat is a consideration).
• Ashok’s promise to supply sets the agreement in place.
• Ashok’s promise to supply is a reciprocal promise. 

What are reciprocal promises?

Section 2(f) of the Indian Contract Act, 1982 talks about what are reciprocal promises. Reciprocal promises which form are a part of the consideration.

Click Here

Types of Reciprocal Promises

Mutual and independent

This concept has evolved through jurisprudence. It states that the two promises of the parties are independent of each other and they do not have to rely on each other for performance. Suppose there is a contract where A will give chocolates to B and B will give Pokemon cards to A.

A can fulfil his promise even if B does not give him the pokemon cards i.e- the absence of Pokemon cards does not make the performance of his promise impossible. The same goes for B. Thus while the acts are binding, they are mutually exclusive and are thus independent of each other.  

However, if the contract states the acts must be done in a certain order then that clause should be upheld. 

In Mrs Saradamani Kandappan vs. Mrs S. Rajalakshmi and Ors, Sadarmani was paying for a piece of land to Rajalakshmi in instalments. Before the payment of the last instalment, Sadarmani wanted to see the title document  Rajalakshmi failed to show it and Saradamani thus did not pay the last instalment.

Thus, Rajalakshmi terminated the contract. Sadarmani moved to the court and argued that failure to show the title document was the reason she could not pay the last instalment. The court ruled that these two promises (the promise to show the title document and the promise to pay for the last document) were exclusive as Sadarmani could pay the last instalment without showing the title document. Thus, Sadarmani should have paid the last instalment. 

Conditional

This is when the performance is dependent upon the prior performance of the other party. If the first party fails to perform his promise, then it will be impossible for the second party to perform his side of the contract. 

Suppose the contract if A promises to give money to B, if B promises to buys Maggi for A. If A defaults, i.e- he fails to pay B, then it will be impossible for B to hold up his side of the contract as he won’t be able to buy the Maggi if A does not pay him. Thus, this type of contract is considered a conditional contract. 

In M/s Shanti Builders vs. CIBA Industrial Workers’ Co-Operative Housing Society Ltd., the defendant, CIBA alleged that they suffered losses as Shanti builders did not do their work on time. On the other hand, Shanti builders contested they were not given plots of land (as per payment for construction).  Since this plot of land was not given to them, they were not able to complete construction.

The court held in favour of Shanti Builders and stated that if the nature of the transaction states that certain promises must be performed first before others, then that order must be followed. They also stated that in regards to conditional promises, the first party can not ask for the performance of the second party without performing their act first. 

Concurrent

Here, parties promise to do acts that have to be performed simultaneously. A  party will be exempted from doing their promise if the other party is not ready or willing to do their promise. Here ‘readiness’ means financial abilities and ‘ willingness’ is perceived through the action of the party. 

For example, P is supplying coats to R. P will only supply the coats if R financially can and is willing to, and R will only pay if P is willing to and has the goods.  

In J.P. Builders vs. A. Ramadas Rao, the court stated the definitions of readiness and willingness.  

Rules Regarding Performance of Reciprocal Promises

Section 51– Simultaneous Performance

Like we had discussed in concurrent promises, if the other party is not ready or willing to perform their promise, then the other party does not need to perform their side of the promise.

Thus, if Ashok and Navya are in a contract, Ashok need not pay for the goods unless Navya is willing and ready. Similarly, Navya need not give the goods unless Ashok is willing and ready. 

In Pushkarnarayan S. Maheshwari vs Kubrabai Gulamali, it was held that the burden of proof is on the Plaintiff to prove that he performed or remained ready and willing to perform the contract.

Section 52– A sequence of Performance

If the contract calls for an order in which the acts promised should be performed, then the acts should be performed in that order. Otherwise, the sequence of the order is determined by the nature of the promises.

For example, if B cannot build a road he promised to build without providing material, then A’s promised act should be performed first, then B’s.

Section 53– One party preventing the other to perform their promise 

If one party prevents, or makes it impossible for the other party to perform their job, then the affected party has the option of voiding the contract. They also have the option of asking for compensations for the damages.

For example, Ashok is willing to supply coats to Navya, but on the day of delivery, Navya does not show up or locks Ashok in his shop; then Ashok can void the contract or collect compensation.

Section 54– Reciprocal and dependent promises

When the nature of the promise is conditional, the first party (the party who has to perform in order for the other party to perform) can not ask the other party to perform their promise, if they do not perform first.

The second party can also ask for compensation if they face damages due to the non-performance of the first party.

For example, Aaryan is a carpenter and Sara provides wood. They have a contract that Sara will provide wood to Aaryan and then he will make a table for her. If Sara refuses to provide the wood, then she can not expect Aaryan to make the table. If Aaryan faces any loss due to the fact Sara failed to provide wood, then he can ask for compensation. 

Section 55– Failure to perform in stipulated time 

If performing an act in a specific time frame is essential to the contract, and the promisor fails to do so, then the aggrieved party or the promisee can either void the contract and ask for compensation for losses. 

If time is not essential to the contract then the promisee can not void the contract, he can also ask for compensation of losses that were suffered due to the delay.

In M/S Citadel Fine Pharmaceuticals vs M/S Ramaniyam Real Estates Pvt. Ltd. and Ors. (2011), it was stated that the intentions of the parties expressed in the contract are imperative to signal whether the time is of the essence when the nature of the transaction does not make it very clear. 

Section 56– Impossible or unlawful act 

If the promisor promises to do something which is impossible to do, then the contract is void. This section, thus, deals with the ‘Doctrine of Frustration’.

The conditions that should be satisfied in order to invoke this section are –

1. The cause should not be a result of a default of the parties.
2. The cause must be unforeseeable and inevitable.
3. The cause must render the entire contract impossible to do.

There are two scenarios which are illustrated below-

Initial impossibility

This is when the promisor and promisee enter into a contract to do any act which they both know is impossible to do then the contract is void.

If the promisor promises to do an act that he knows can not be done, then he is liable to pay compensation for the losses suffered by the promisee due to his incapability to perform the act.

Thus, Ashok promises to supply Navya a coat made of bear fur. Navya wishes to wear this coat for a television interview. But, Ashok is aware that it is impossible for him to supply a bear coat to her in this season, but he still promises to sell her one and enters into a contract with her. In this situation, Navya can void the contract and can ask compensation for the losses she suffered. 

Subsequent Impossibility

At the time of making the contract, the act might have been possible and lawful, but later on, it became impossible to do due to some reasons. In this case, the contract becomes void when the act becomes impossible to do. 

Taking from the previous example, at the time that Ashok enters the contract, he will be able to provide a coat made of bear fur to Navya. But after he enters the contract, the Government puts a ban on the supply of products made of bear fur. Now Ashok can not supply Navya with the coat she wanted. Thus, the contract becomes void when the Government passes the law. 

Section 57– Reciprocal promises or legal and illegal acts

The parties may have entered the contract to do legal acts.  But after the contract was established, under specific conditions, they agreed to do illegal acts. In this case, the previous legal acts are valid and the preceding illegal acts are held void. 

For example, Ashok promises to supply coats to Navya. Navya then promises to sell such coats on the black market for more profits. Here Ashok’s promise to supply coats to Navya is valid but Navy’s promise to sell such coats on the black market is invalid. 

Section 58– Alternative promise of legal and illegal acts 

Parties may promise to do legal acts that branch off into illegal acts. 

For example, Preeti promises to pay back her loan to Rohit. But this loan shall be paid with black money. Thus, while Preeti’s promises to pay back the loan is valid, the promise to pay with black money is invalid. 

Conclusion 

In this article, we have defined what a reciprocal promise is. We have also discussed the various types of reciprocal promises (mutual and independent, conditional and concurrent). We have also talked about the various rules that need to be followed with regards to reciprocal promises which are Sections 51-58 of the Indian Contract Act, 1872. 

Reference

• https://www.mondaq.com/india/CorporateCommercial-Law/679214/Reciprocal-Promises-An-Overview 
• https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-ii/performance-of-reciprocal-promise/

To know about General Principles of Contract, please Click Here.

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This article is written by Jessica Kaur, from Rajiv Gandhi National University of Law, Punjab. Here, she examines whether a partnership firm can be dissolved through arbitration.

Introduction

Being a partner in a firm is a tough job: you’ve got to work with your fellow partners on all matters, reach consensus on decisions, be responsible for each other’s actions, and bear the burden of losses together. It comes as no surprise that the stress and work involved can create tensions between partners, which sometimes reach irreversible levels and call for a dissolution of the partnership. This could either mean a radical change in the relationship between the partners, or the complete termination of the business. Usually, a partnership is dissolved by a unanimous decision of the partners or by an order of the court, or through any other means agreed upon in the Partnership Deed. 

Nowadays, a field that is gaining traction in the legal arena is arbitration. A lot of firms use arbitration to resolve disputes and settle issues. It’s faster, easier, and often cheaper, and does not involve the hassles that a court procedure does. But, can an arbitrator also bring about the dissolution of a firm? In this article, we shall answer this question.

Scope of arbitration

Arbitration makes use of an unbiased third party to resolve disputes and settle differences between the two parties who have entered into an agreement or a contract. However, can an arbitrator make a decision on all sorts of disputes and issues? The answer is no, and the specific scope of arbitration as talked about in the case of Booz-Allen & Hamilton Inc vs Sbi Home Finance Ltd. & Ors (2011). Here, the Supreme Court of India held that all civil and commercial disputes based on a contract or otherwise within the jurisdiction of civil courts can be resolved through arbitration. The main principle established in this case was that all disputes relating to rights in personam i.e. right attached to a specific individual would generally be arbitrable, while those relating to rights in rem would not, as they affected the world at large and involved public interest and so could not be decided privately by an arbitrator. Thus, non-arbitrable matters include disputes involving criminal offences, matrimonial disputes, etc. 

Can a partnership firm be dissolved through arbitration?

There can be two situations where an arbitrator is involved in the dispute resolution between partners: either the partners have themselves engaged an arbitrator according to the arbitration clause in their partnership deed, or the court has specially appointed an arbitrator to look into matters brought before it in the form of a suit. The second situation has been talked about in Section 8 of the Arbitration and Conciliation Act, 1996.

Now, the question arises as to whether the dissolution of a partnership firm comes within the ambit of arbitration discussed in the previous section. Logically, the decision of an arbitrator to dissolve a partnership would affect the parties to the arbitration agreement and not the world at large. Since it is a private matter and relates to rights in personam, it should fall under the scope of arbitration.

To affirm this reasoning, let’s have a look at the important case laws where the court declared that arbitration could be used to dissolve a partnership. 

Before that, we must talk about the case of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999). While this case involved winding up of a company and not the dissolution of a partnership, it is relevant to our discussion. In this case, the Supreme Court said that the power to wind up a company rests in the hands of the court as given by the Companies Act and therefore, an arbitrator does not have jurisdiction in this matter. This case was cited by the petitioner in Mahendra Kumar Poddar v. Bansal Builders and Ors. (2000), which we shall take a deeper look at.

Mahendra Kumar Poddar v. Bansal Builders and Ors. (2000)

Facts

This case involved the issue of dissolution and winding up of the firm M/s Bansal Distributors. The High Court referred the dispute to an arbitrator. The petitioner, citing the above-mentioned case of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999), claimed that just as winding up of a company could not be decided by an arbitrator, similarly he could not make a decision regarding the dissolution of a partnership firm too. Therefore, only the part of the dispute relating to accounts could be brought before an arbitrator.

Issue

Can it be said that the dispute in respect of the partnership accounts can be resolved by the arbitrator but the dissolution of a firm can be done by a court of law alone? 

Judgement

The Calcutta High Court held that dissolution of a firm cannot be equated to winding up of a company. Partners of a firm are individuals who are responsible for the firm, and dissolution of the firm is a private action between them- unlike the winding up of a company. Since this makes it related to a right in personam, the dispute of dissolution of partnership firm can also be raised before the arbitrator.

Thus, the reasoning behind allowing an arbitrator to decide dissolution, which we discussed above, has been confirmed by the court in this case. Finally, this disputed principle was properly established within certain boundaries in another case in the same year, which can be seen below.

M/S V.H. Patel & Company & Ors vs Hirubhai Himabhai Patel & Ors (2000)

Facts

In this case, members of the Patel family came together to form a partnership firm which manufactured, sold and marketed different varieties of tobacco. Their agreement said that any questions regarding the rights and obligations of the parties and the use of the firm’s trademarks would be referred to the sole arbitration of a certain retired Judge of the Bombay High Court. 

On 1st August 1987, a Deed of Retirement was executed between the partners, ordering the retirement of the respondent H.H. Patel. The respondent filed a suit challenging this deed and claimed that he was still a partner of the firm. A dispute also arose between the two parties regarding the use of the firm’s three trademarks. In light of these disputes and the close relation of the parties, the court suggested them to go for arbitration as provided by their agreement.

The arbitrator held that the retirement deed was invalid and the respondent continues to be a partner. However, he denied considering the respondent’s claim seeking dissolution of the firm, saying that it was beyond the scope of his reference.

Issue

Whether it is permissible for an arbitrator to decide the question of dissolution of a firm?

Judgement

The Supreme Court held that where the partnership deed or agreement directs disputes and differences to be referred to an arbitrator, the arbitrator has the power to examine these issues, including dissolution. The power of the arbitrator depends upon the arbitration clause in the partnership deed and the reference made by the court to it. If the reference states that all disputes and differences between the parties have to be referred to arbitration, the arbitrator will be able to deal with dissolution too. There is no provision of law that prohibits an arbitrator to examine the dissolution of a partnership.

Clearly, an arbitrator can decide the dissolution of a firm. An arbitrator might award dissolution on the grounds that it is “just and equitable” to do so. This can occur in various different situations, like when the dispute between the partners is severe and beyond repair, or when the business is not being carried on as per the provisions of the agreement between the partners. However, don’t we always assume that the court will decide what is just and equitable? The Partnership Act too, says in Section 44(g) that the court has the power to dissolve a firm if it finds it “just and equitable” to do so. Can we expect an arbitrator to take the right decision on a relatively ambiguous basis as this, and understand it to be binding on the parties? This question was raised in the case of Yogendra N. Thaker v. Vinay Balse and Anr. (2018).

Yogendra N. Thaker v. Vinay Balse and Anr. (2018)

Facts

In this case, 5 persons formed a partnership firm together on 21st February, 1968. After several changes, the last deed of the partnership was executed on 24th April, 2000. It said that the partnership would be “at-will” and could be dissolved only through unanimous consent of all the partners. It also said that all disputes and questions relating to the partnership would be referred to an arbitrator.

On 1st October 2003, the respondents issued a notice seeking to suspend the petitioner as a partner of the firm. The petitioner challenged this in an arbitration petition.

The arbitrator held that the business was being carried out against the provisions of the Partnership Deed and that the firm should be dissolved. The petitioner issued a notice for dissolution. The respondents challenged this saying that an arbitral court could not decide dissolution under Section 44(g) of the Indian Partnership Act, 1932, i.e. because it was “just and equitable” to do so. They claimed that only Courts had the power to make this decision on this basis.

Issue

Whether the power to dissolve a partnership firm under Section 44(g) of the Partnership Act rests only with the court and cannot be exercised by an arbitral tribunal?

Judgement

The Bombay High Court held that under the arbitration clause of a partnership agreement, the arbitrator has the power to decide whether the firm should be dissolved or not, even though no express provision regarding the same has been given in the Partnership Act. The respondents had already accepted that an arbitral tribunal has the power to dissolve a partnership under subsections (a) of Section 44 of the Partnership Act and so their argument that it couldn’t do so under Section 44(g) did not make sense, as dissolution on just and equitable grounds is also a form of dissolution. 

Also, their argument would go against the wide arbitration clause given in their partnership agreement which said that all disputes and issues could be resolved by arbitration, which therefore included dissolution.

Conclusion 

Thus, there are two important takeaways from our discussion on arbitration and dissolution: first, that where the partnership agreement of a firm provides a wide arbitration clause and states that all disputes between partners shall be resolved through arbitration, it also involves the question of dissolution of a firm; and second, an arbitrator or arbitral tribunal can award dissolution of a firm which will be legally binding on the parties and its authority to do this has been backed by the court. 

References

• https://www.lawweb.in/2018/07/whether-arbitrator-has-power-to.html

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This article is written by Sachi Ashok Bhiwgade, B.A.LLB (Hons.) student of Hidayatullah National Law University, Raipur. This article discusses the key findings, Anti-trust issues and the observations made by the Competition Commission of India in its report ‘Market Study on e-commerce in India: Key Findings and Observations’. 

Introduction

The Competition Commission of India (CCI) has recently released a complete report on Market Study on e-commerce in India: Key Findings and Observations on 8th January 2020. The CCI launched this study in April 2019. This report mainly relies upon the surveys, stakeholder interaction, focused group discussion (FDG), one-on-one meetings, workshop deliberations and written submissions of the stakeholders covering 3 broad categories of e-commerce that include consumer goods, accommodation services and food services. This study gives an insight into the conceptual and analytical questions that are relevant to the enforcement of the Act. The report is only restricted to the findings relating to competition matters although issues relating to non-competition matters also tend to come up during the study. This report discusses issues that may directly or indirectly have a bearing on competition or hinder the full pro-competitive potential of e-commerce. 

Objective 

The objective of this study was to gain a better understanding of how e-commerce in India is functioning and the implications it has on the markets and competition. 

The study focuses on: 

• Trends and features of e-commerce;
• Competition issues; and
• The observations of the CCI.

Key Trends and features of the Market

Trends and Features are discussed in Chapter 2 of the study. They are: 

• Revenue in the e-commerce sector expected to increase to USD 120 million in 2020 from USD 13 billion in 2017 that is growing at an annual rate of 51%.
• Mobile phone subscriber base increased from 904.51 million in March 2014 to 1173.75 million in September 2019.
• Increase in the number of internet users from 445.96 million in 2017 to 665.31 million in 2019. 
• Other factors such as cash on delivery, fast delivery including one-day delivery, discounts and deals, access to a large range of products, revolutionized retail, service delivery has also enabled the growth of e-commerce.
• There has been an increase in investment in the e-commerce sector. Since 2009, funding of USD 13,338 million in 904 rounds has been received. Due to the increase in investment, new companies have entered the market. Presently around 4754 e-Commerce startups are active in India.
• In the goods category, A compound annual growth rate (CAGR) of 57% has been observed in the last 7 years. A growth of 18.6% is expected until 2022. 
• The food-tech industry is expected to grow at more than 12% CAGR between 2016 to 2021.
• Online travel booking(OTAs) sales are likely to reach USD 39.09 billion by 2021. 

Key findings

Importance of digital commerce

The CCI report mentions that there has been a rapid growth of online trade in India and online trade is gaining significance across the various sectors of e-commerce.

• Goods category: As per the findings, the share of online distribution and its relative importance as a sales channel in regards to the offline channels significantly differ across products. 
• Hotel Category: As per the study, the hotels in the budget and mid-market section prefer distribution through online travel agencies (OTA) as an important access route to customers. 
• Foodservice category: 83% of the restaurants reported to have an online presence with the online sale on an average of 29 % of the restaurant’s revenue. Between 2016 to 2018, around 69% of these restaurants have gone online.

Increasing price commerce 

Online commerce has improved price transparency and price competition. The report mentions that most of the retailers and hoteliers track the prices of the competitors and accordingly adjust their own prices. In fact, the retailers in the goods category were found to vary prices several times a day. While some reported revising the prices on a weekly basis and during promotional events and only a few restaurants were found to track the prices of the competitors. A majority of the consumers reported using price comparison tools for hotel booking to find the best deals.

Strategic response to e-commerce

Businesses in these sectors are gearing up to avail the opportunities of e-commerce. The retailers are considering ways to expand their online presence in order to engage with the online consumers. Some of them (the large brick and mortar retailer) have launched their own website. The report mentions that the manufacturers and distributors have inserted specific clauses in their contracts relating to online sales. A trend of cloud kitchen (online-delivery only) in the service sector has been observed. The OTAs have started programs where they lend their brand names to some selected hotels which go about as a sign of value to the customers.

Role of the online marketplace platform

The study mentions that the third-party marketplace platform sees an estimate of 64% of digital retail, through online platforms. The study also confirmed that due to the development of e-commerce, there has been an expansion of markets for the products of small-scale enterprises. The shift of businesses from offline to digital space is happening rapidly. 

Search Ranking

The report says that access to customers of the sellers or service providers on an online platform depends mostly upon the ranking of the website of the platform in response to related search queries. 

Payment System

The study includes payment system providers such as payment aggregators, UPI, providers of prepaid payment instruments that facilitate online transactions on e-commerce platforms.

Competition issues in the e-commerce sector

Chapter 3 of the study talks about anti-trust issues that directly and indirectly have an effect on the competition identified by the market study. These are platform neutrality and unfair platform to business contract terms, price parity clauses, exclusive contracts and deep discounts. 

Platform neutrality

According to the report, platform neutrality concerns emerge when the online platform act as both marketplaces and as a competitor of that marketplace they have the incentive to leverage their control in favour of their preferred vendors or private label products to the disadvantage of other service providers as the platforms have mechanisms by which they use to act upon such incentive. 

Platform to business contracts

The imposition of unfair contract terms and unilateral revision in contract terms by major platform leads to an environment which results in undermining the trust of these businesses. The business users are unable to have a substantial relationship with the platforms causing harm to their business interests. The findings mention that a platform does not make a standard contract for all business users but a customized one that addresses the individual needs of service providers that are not similarly placed. It further mentions that a customized contract does not mean that they were mutually negotiated. By this, the platforms were able to impose any terms and conditions as per their interest. The commission rates that were paid by the service providers to the platforms were arbitrarily increased without negotiation.

Platform price parity clauses

A price parity clause is imposed by the platform on the service provider which means that a service provider cannot offer his goods or services at a lower rate on other platforms. This enables the platforms to control the competition in the market and discourages entry. 

Exclusive agreements

The exclusive agreements between the service providers and the online platforms are of two types: 

1. First, where a certain product will be launched exclusively on a single online platform, and
2. Second, where a platform will list only one brand in a certain product category.

Deep discounts

Pressing concerns were raised by the service providers regarding deep discounting practices by the platforms leading to permanent value erosion of their products and their market position. The study identified that many platforms operating as pure marketplaces offer discounts above the prices that have been set by the service providers. The selling price at these marketplace platforms sometimes is even below the cost price. Because of this, they either have to match online discounts or otherwise, there would be a reduction in their search rankings. 

Observations of the Commission based upon the findings

Chapter 4 presents the observations made by the CCI on the competition issue identified by the study. The CCI mentioned that most of the issues will have to be determined on a case-by-case basis in accordance with the relevant provisions of the Competition Act, 2002.

Platform neutrality

It was observed by the commission that there are limits on the amount of information that can be made explicit. It also acknowledged that by sharing certain information, there may be a risk of providing businesses an opportunity to game the system. But this does not restrict platforms from balancing between minimizing risks and addressing the issue of opacity while putting in place a framework that confirms transparency.

Platform to business contract terms

The study revealed that an imbalance of bargaining power and asymmetry of information between platform and business users prejudice the interests of the business users. It is also stated in the report that unilateral revision and unfair terms of the contract by major platforms has led to a tension between the platform-business relation. 

A platform, in order to foster trust and to have a sustainable relationship with the business users, must devise ways to protect the interest of all the contracting parties by: 

1. Negotiating framework for basic contract terms;
2. Discount policy;
3. Penalty; and
4. Conflict resolution.

The commission can on a case-by-case basis interfere in situations where there is an imposition of unfair conditions or price by a dominant enterprise in the relevant market under Section 4 of the Act. In case of contract terms having an exclusionary effect on the competition while also being unfair to the business users the commission can examine such contracts under Section 3(4) of the Act. 

Platform price parity clauses

The commission observed that if there is no price parity restriction, then it may lead to service providers taking advantage of these features of a superior platform so that they can draw the attention of the customers to its product and sell it through its website or through another platform at a lower price. This will in turn lead the customers to search and compare products on qualitative superior platforms and make transactions from a website or platform where they are being offered a lower price. If this behaviour of the service providers and customers continues then the platform may factor the same and lose the incentive to invest in superior features. 

Price parity clauses help in protecting investment incentives by preventing free-riding. The commission under Section 3(4) can examine parity clauses and if the parity clause imposed by the platform is found to be dominant in the relevant market, the commission under Section 4 can examine such conduct.

Exclusive Agreements

The commission observed that exclusive agreements are not per se anti-competitive and have to be analysed on a case to case basis. The commission stated that exclusive agreement will only be a concern when used as an exclusionary strategy in order to prevent competition. The commission can examine exclusive contracts under Section 3(4) and Section 4 of the Act. 

Deep discounts

It was observed that deep discounts for a short period of time are justifiable but such a discount beyond a certain period of time would need a fact-intensive exercise done on a case-by-case basis. The commission under Section 3(4) can evaluate agreements to assess whether the discount offered is used as a mechanism to induce exclusivity or whether it leads to an adverse effect on competition. The commission under Section 4(2) can examine the issue of discriminatory discounts in the case of a dominant platform in the relevant market. 

Transparency measures indicated by the Commission

On the basis of the study findings, the CCI has indicated self-regulatory guidelines for the e-commerce marketplace platforms to ensure transparency, create an incentive for competition and promote information symmetry. These transparency measures are: 

Search Ranking

• To set out in the terms and conditions of platforms, a general description of the main search ranking parameters in a plain and intelligible language and keeping it up to date. 
• To set out a description of the possibilities if the main parameters influence the ranking against any direct or indirect remuneration aid by business users and the effect of such remuneration on the ranking.

Collection, Use, and Sharing of Data

• To set out a clear and transparent policy on data collected on the platform.
• To set out the use of such data by the platform.
• Potential and actual sharing of such data with the third party or related entities. 

User Review and Rating mechanism

• Transparency to be maintained in publishing and maintaining user reviews, rating with business users.
• Reviews should be published only for verified purchases.
• To devise mechanisms preventing fraudulent reviews and ratings.

Revision in terms of the contract

• To provide notification of any proposed changes/revision in the terms and conditions of a contract to the concerned business user.

Discount policy 

• To bring out clear and transparent policies on discounts and to explain the basis on which the platform funds the discount rates. 

References

• https://www.cci.gov.in
• https://www.cci.gov.in/sites/default/files/whats_newdocument/Market-study-on-e-Commerce-in-India.pdf
• https://indiacode.nic.in/
• https://economictimes.indiatimes.com/industry/services/retail/cci-recommends-transparency-about-discounts-to-e-commerce-players/articleshow/73159450.cms

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This article is written by Kashish Kundlani, from Ramaiah Institute of Legal Studies, Bangalore. In this article, she discusses the principle of quantum meruit.

Introduction

When parties enter into a contract there is a possibility for the breach of the contract and breach of a contract can happen due to many reasons. For any breach of a contract to happen, it is necessary that the remedies should also be made or should be given by any Court. Out of five remedies which are available to the aggrieved party, one is a suit upon quantum meruit.

Applying this remedy in a suit requires a thorough understanding and essence of quantum meruit. Also, one should be aware of the usage of quantum meruit as to when and where can this be applied or when it can be used by the aggrieved party.  

Meaning of Quantum meruit

Quantum meruit is a Latin phrase and is related to the Indian Contract Act, 1872.

It means “what one has earned” or “as much as he has earned”. In simpler terms, it refers to the actual value of the services rendered or performed. 

Even if there is no specific contract this law implies a promise to pay a reasonable amount for the labour and material furnished.

The Black Law Dictionary states that quantum meruit means “as much as one deserves”.

Theory of quantum meruit

Quantum meruit involves cases where someone gets a benefit while the other party gets nothing. In contracts, this refers to the benefit or enrichment which one party receives as a result of the other party’s actions.

In other words, it means that the other party who has received the services is unjustly benefited and must return it to the party who provided such benefit.

For example, ‘S’ is the daughter and ‘M’ is the father. They entered into an agreement where ‘M’ asked ‘S’ to provide medical care for him while he was sick. In return, ‘M’ agreed not to write a will and agreed to give his estate to ‘S’ after he dies with an intent to give her a fair portion for the services rendered. However, ‘M’ soon died, leaving all of the estates for his brother and nothing for ‘S’. Here ‘M’ was unjustly enriched as he received the services but in return ‘S’ received nothing.

In this example, ‘S’ seeks to recover a portion of “M’s” estate by claiming the remedy of quantum meruit. This principle is based upon the idea that recovery should be granted to one party where they have not received the value for the services they rendered or when another party was unfairly and unjustly enriched.

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Suit upon quantum meruit

Quantum meruit is a claim under quasi-contract. The remedy to a party in a breach of contract is the suit upon quantum meruit. The suit upon quantum meruit arises where a part of a contract is performed by one party and then there is a breach of contract or it is discovered that the contract is void or becomes void.

The aggrieved party may file a suit upon quantum meruit and may claim payment in proportion to work done or goods supplied in the following cases:- 

• Where work has been done by one party in the execution of a contract but the other party refuses to perform his part. Or prevents the person to perform the contract.

For example, Seema was the owner of a music publishing house and she engaged in a contract with Veer to compose a music series which will be published by the music publishing house. The first music album was released but before the publication of the second music album the music publication house was closed. Here Veer can claim quantum meruit for the part already published. He is entitled to a claim because he was somehow prevented by the other party to perform his part and the other party has violated the terms of the contract by not paying him the amount he deserves. 

• Section 65 of the Indian Contract Act, 1872 talks about the circumstance that where work has been done in the execution of the contract but later it is discovered that the contract is void or it becomes void.
• Where a person enjoys the benefit of a non-gratuitous act (given or received without payment but where the party was obliged to pay) despite the fact that there is no express agreement between the parties, then the person who has enjoyed the benefit has to compensate the other party or restore the thing so delivered.

For example, ‘D’ a vendor leaves his goods at “J’s” shop by mistake and ‘J’ treats them as his own goods without paying anything. Here ‘J’  is bound to pay ‘D’ for the goods he left.

• When the contract is implied or expressed to render services but there is no agreement with regard to remuneration – In such a case, a reasonable remuneration is payable and what is a reasonable remuneration will be determined by the Court and this reasonable remuneration is the quantum meruit. This concept is explained under Section 70 of the Indian Contract Act,1872.

• Where the contract is divisible, and a party to the contract has done its part, he may sue other parties who have not performed for quantum meruit.

This rule even applies to a person who is claiming quantum meruit and himself is guilty of the breach of the contract, but the following two conditions should be fulfilled for that:-

• The contract must be divisible
• The other party must have enjoyed the benefit of the part which has been performed, although he had the option of declining it.

For example, Chena agreed to construct a house for David for ₹10,00,000 but in midway, she abandoned the contract after having done the work worth ₹4,00,000. Afterwards, David somehow got the work completed. Here, Chena could not recover anything for the work she has done, as she was entitled to the payment only on completion of the work which apparently she could not do.

Where the contract is indivisible and performed in a bad way- the party at default can claim a lump sum amount and can reduce the amount for the bad work done if the following conditions are fulfilled:-

• The contract should be indivisible,
• The contract should be for a lump sum,
• The contract should be completely performed and,
• The contract was performed badly.

For example, Raju agreed to construct a house for Pinku for a lump sum of ₹5,00,000. Raju did complete the work but Pinku complained of fault in the work done by him. It cost Pinku another ₹1,00,000 as a remedy to the defect. In this example, Raju could only recover ₹4,00,000 from Pinku by reducing the amount of bad work done.

Quantum Meruit vs. Unjust Enrichment

It is very common for people to get confused between the two concepts. Both the concepts discuss the aim of preventing one party to perform the contract and the person preventing the other takes advantage of the services received without even paying for their values.

The difference between the two concepts is that the unjust enrichment deals with issues where there is a failure to pay for the services and quantum meruit deals with such issues where the fair or reasonable amount should be paid.

To be successful in a suit upon quantum meruit, the service provider i.e. plaintiff must prove that the receiver of the services i.e. defendant agreed to the provided services, knowing that he has to pay the plaintiff for the services provided and that the defendant was unjustly enriched, which means he received something for nothing. In simpler terms, it means that he received for the services but did not pay in return, which was not the agreement. 

The amount given in a suit upon quantum meruit, especially where there is no written contract specifying an amount, is generally based on the fair market value for the services rendered. 

Case laws

Planche vs Colburn [1831] EWHC KB J56

In this case, the plaintiff entered into an agreement to write a book for the defendant.

On completion of the work, 100 pounds was agreed to be paid. The plaintiff started writing the book and completed a large portion of it. Afterwards, the defendant decided not to proceed with the work and refused to pay money to the plaintiff, even though the plaintiff was ready and willing to perform the work.

It was held that the plaintiff is entitled to claim the money as the defendant has refused to perform his part of the contract.

Craven-Ellis v. Cannons Ltd [1936] 3 All ER 1066

In this case, Craven Ellis was appointed as the managing director of a company under an agreement in which his remuneration was fixed. But it was found that the contract is void because neither Crave Ellis nor the directors seem to execute the contract as they did not obtain the qualification shares (a share of common stock that a candidate for a company’s Board of Directions (BOD) is required to own) within two months after the appointment which was required as per the Articles of Association.

The plaintiff continued to render the services even though the contract was void. His suit upon quantum meruit is a valid one as the contract being void does not disentitle him to claim for his services rendered. Since the company had accepted the benefits of services rendered by Craven Ellis knowing that the services were not intended to be gratuitous, it was held that Craven Ellis, for his services rendered, is entitled to receive reasonable remuneration.

Sumpter v. Hedges [1898] 1 QB 673

Facts of the case

The plaintiff was a builder. He entered into a contract to build two houses and stables on the defendant’s land for approx £560. While the buildings were still in an unfinished state he informed the defendant that he is having no money. Hence, he refused to work and only approx £300 work was completed. The plaintiff asked for the money of half of the work done from the defendant. The defendant refused and the plaintiff filed a case.

Judgement

It was held that the defendant had no choice apart from accepting the building like this and he couldn’t keep the building like this forever so he completed the work. In this case, the contract stated that the money had to be paid in lump sum after the completion of the work and so the plaintiff could not be granted the payment after only doing part of the work. And also as there was no fresh contract so the plaintiff cannot recover on the basis of quantum meruit.

The relevance of this case was that a person can only recover a part of his work when the contract is not a lump sum and the owner freely accepts the work.

Here it was not free, instead, he did not have any choice. 

Hoenig v. Isaacs [1952] 2 All ER 176

Facts of the case

The plaintiff is an interior decorator who entered into a contract with the defendant to perform the decorative and furnishing work. A lump sum of £750 was to be paid for the work.

On completion of the work, the outstanding balance was £350 for the contractor’s work and labour. The defendant refused to pay the balance amount on the grounds that there were certain defects regarding the wardrobe and bookshelf and the cost for the defects was £56. The plaintiff brought a suit for the refusal.

Judgement

The Court held that the plaintiff has completed most of the work which was agreed between the two and was therefore entitled to the remuneration which was agreed in between them by reducing the price of the defects.

Conclusion 

After a proper analysis of the remedy of quantum meruit, it is clear that the law requires it to be fair and reasonable. The theory supports equality of the parties and helps to ensure that if a person provides a service or a good, then he should receive the benefit of the contract and in corollary, if that person receives nothing, then that person can avail the remedy by filing a suit upon quantum meruit.

References

• http://contractlawsandpractice.blogspot.com/2015/09/quantum-meruit.html
• https://mercantilelaws.blogspot.com/2012/09/suit-upon-quantum-meruit.html
• https://legaldictionary.net/quantum-meruit/
• https://study.com/academy/lesson/quantum-meruit-definition-theory.html

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 This article is written by Millia Dasgupta, a second-year student, studying BA LLB at Jindal Global Law School. This article covers the difference between extradition and asylum, their processes, the various rules they are subjected to, and how they are executed in India. 

Introduction

Extradition is needed when an individual charged with a crime in one state flees to another. In this case, the requesting state requests its citizen to be sent back so that he/she can stand trial for their crimes.

Asylum is when a person, who is afraid of being prosecuted in his home state, runs away to another state for protection.

In the case of Colombia vs Peru (1950), it was held by the court that they are exclusive. There is either extradition or asylum.                                        

What is Extradition?

Extradition is the process of bringing back a criminal to the state where he has committed the crime when he has absconded for such a country. 

Many may ask the question of why it is important to bring him back to the country where he has committed the crime. Why can’t he just be tried in the country he has been caught in? The reason, it is important to bring him back is because there are different legal proceedings in different countries.

The country in which he has committed the crime may try him differently. It may also be the case that he had absconded or run away in the middle of legal proceedings. Thus it is essential to bring him back in order to finish the trial. The evidence and the witnesses are also present in that country.

This is also to prevent the trend of international criminals. Some criminals hop from country to country committing crimes. Through extraditions, justice can be brought by bringing them back to the countries they have committed the crime and punishing them.

It is also imperative for that country to get rid of that certain individual for security. 

Difference between Expulsion and Extradition

It was the case of Hans Muller of Nuremberg vs. Superintendent Presidency jail Calcutta and others (1955) that stated extradition and expulsion are two different processes. The courts also held that the government has the right to reject a request for extradition. If also have the right to choose the less cumbrous process of expulsion to remove a foreigner from the country.  

No extradition of a Political Criminal

The trend of no extradition of political criminals started during the French revolution. After that, other countries followed suit.

No commission or organization has defined what a political crime is. This word is also not defined under international law. But in our own words, we can say that if a person commits a crime with political motives, then that crime can be said to be a political crime.

In the case of Re Castioni case (1891), a prisoner was charged with the murder of Luigi Rossi. The murderer escaped from Switzerland to England. The government of England rejected Switzerland’s request for extradition. The court held that the accused murdered in order to cause political disturbance and is thus a crime of political nature. Due to the fact, he was a political criminal and England was not obliged to extradite him. 

But on the contrary, In Re Meunier 1894, a fugitive who blasted a bomb in a public place in Paris, fled to England. Paris wanted him back but England refuses their request to extradition. The court ruled his intentions were not purely political and he had thus, not committed a political crime. 

D’attentat clause

The d’attentat or the clause Belge states that murders of heads of governments or states will not be considered as a political crime and they can be extradited for such a crime. 

Rule of Speciality

The doctrine of speciality is a doctrine under international law. It states that a person who is extradited to a country to stand trial for certain criminal offences may be tried only for those offences and not for any other pre-extradition offences.

This principle was restated in the case of U.S. vs Rauscher (1886), which stated that he can only be tried for offences which have been criminalised by the treaty and/or the offence for which extradition has been requested for. 

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Double criminality 

Double criminality is a principle that states that a criminal can only be extradited to another country if the offence he has committed is criminalized by the laws of both the countries involved. For example, if a murderer has run away from Bangladesh and is hiding in India, he can be extradited as the laws of both the countries criminalize murder. 

Position of the State in International Law

It must be noted that the state has no duty to extradite an individual. But, there can be a treaty between that states that they will extradite any criminals that run away to their country and vice versa. They can also voluntarily extradite a person without any treaty. States should keep in mind that during extradition, they should not violate their own municipal laws i.e- the laws of their own countries and international conventions. 

However, countries do not have to give the fugitive back if proper extradition procedure was not followed. In the case of Sarvarkar (1911), Mr Vinayak Donador Savarkar was under french navy custody. He was then extradited to England, but England obtained him through incorrect extradition procedures. Due to the violation of procedures, the French wanted him back. The court held that there is no provision under international law that states if extradition procedures are not followed then the country must return him back.

The state can also not extradite citizens of their own state. So, if a citizen of England comes to India and commits a crime and then runs off to England then it is very difficult to get the citizen back. They usually ensure that they will punish the criminal according to their own laws.

In Regina vs Wilson (1878), a treaty can happen between the two states, states will not extradite people and the fugitive that will be punished according to their own laws.

India

Usually, each country has its own laws regarding the process of extradition. In India, The Extradition Act of 1962 governs the process of extradition. It was amended in 1993 by Act 66. 

Section 2(d) of the Act talks about treaties fo extradition and allows foreign states to make such arrangements with India. These treaties are usually bilateral in nature i.e- they are between two countries, not more. These treaties embody five principles-

• Extradition of a fugitive will happen for offences set down by the treaty.
• The offence must be criminalized under the laws of both countries, not just one.
• There must be a prima facie case made.
• The country should try the criminal for only the offence he was extradited for. 
• He must be tried under a fair trial. 

Usually, requests for extradition on behalf of India can only be made by the Ministry of External Affairs and not anyone in the public.

Countries who have a treaty with India can request for extradition of someone from India. A non- treaty country must follow the procedures set down by Section 3(4) of the Extradition Act of 1962. 

According to the page of The Ministry of External Affairs, below are the following bars or restrictions to extradition- 

• India is not ‘obliged’ to extradite someone unless there is a treaty.
• India is not ‘obliged’ to extradite someone unless that offence constitutes a crime under the treaty. 
• Extradition may be denied for purely political and military offences. 
• The offence must constitute a crime in both India and the country requesting extradition. 
• Extradition may be denied when the procedure set down by Section 3(4) of the Extradition Act of 1962 is not followed. 

Asylum

What is asylum?

Asylum is when a country gives protection to individuals who are being prosecuted by another sovereign authority. Most of the times, it is their own government. While everyone has the right to seek asylum, asylum seekers do not have the right to receive it. 

It must be noted that asylum deals with refugees (individuals who are being prosecuted by their own government).

Article 14 of the Universal Declaration of Human Rights

Article 14 of the Universal Declaration of Human Rights recognises the right of individuals to seek protection from prosecutions of the sovereign authorities. Everyone can go to another country and seek asylum. This right is also available for fugitives who have committed political crimes. But this is subjected to the condition that if your crime is against the principles of the UN, then you do not have the right to asylum. It also must be noted that one has the right to seek asylum but you do not have the right to receive asylum.

Types of asylum

Territorial Asylum

Territorial asylum is granted within the territorial boundaries of the country offering asylum. This is most commonly used for people accused of offences of political nature such as treason and sedition. It must be noted that murderers of heads of states, criminals accused of certain terrorist activities and people accused of war crimes are some examples where one can not be offered asylum.

Extra-Territorial or Diplomatic Asylum

Extraterritorial asylum refers to asylum granted in embassies, legations, consulates, warships, and merchant vessels in foreign territory and is thus granted within the territory of the state from which protection is sought.

International law has not recognised diplomatic asylum as a right as it can be areas for dispute.  For example, the asylum was granted to József Cardinal Mindszenty during the uprising against the communist government in 1956. He refused to Roman Catholic schools to be secularized which prompted him to be arrested but he got protection from the government of the United States for 15 years. This caused great controversy. 

Neutral Asylum

This type of asylum is shown by neutral states during times of war. These countries may be considered asylum places for prisoners of war. It provides asylum to troops of countries who are a part of the war. This is under the condition that they are subject to internment during the time. It is important to note that while troops may be allowed, airforces of such countries cannot land in these areas and will be subjected to interrogation.

Asylum in India

Different countries have different laws about asylum-seeking. India has laws regarding immigration and asylum-seeking. The most recent law with asylum seeking that has caused the most controversy is the Citizen Amendment Act with regards to refugees.

Organisations like the UNHCR, help individuals register for asylum. People who wish to apply must come for registration with all of your family members who are present in India. According to them, the following documents are needed-

• Case numbers of immediate family members who have been registered with UNHCR (in India or elsewhere),
• Passport/nationality document/identity document,
• Birth certificates/vaccination cards for children,
• Marriage/divorce/death certificates,
• Any other documents you may have.

The candidate will be asked to explain why you left your country and why you cannot go back on a form. They will be interviewed by a Registration Officer. 

Conclusion

Thus, in this article, we have discussed the difference between extradition and asylum, their processes, the various rules they are subjected to, and how they are executed in India. These processes play a great part in international relationships. The topics discussed above are also very essential to understand international law.

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This article has been written by Kavita Chandra, from Vivekananda Institute Of Professional Studies, affiliated to Guru Gobind Singh Indraprastha University, Delhi. She has discussed the provisions relating to Proclamation of National Emergency.

Introduction

Black law’s dictionary defines emergency “as a failure of the social system to deliver reasonable conditions of life”. An emergency may be defined as “circumstances arising suddenly that calls for immediate action by the public authorities under the powers granted to them.”

In India, the emergency provisions are such that the constitution enables the federal government to acquire the strength of unitary government whenever the situation demands. All the pacific methods should be exhausted during such situation and emergency should also be the last weapon to use as it affects India’s federal feature of government.

There are three types of emergencies under the Indian Constitution namely-

• National Emergency
• State Emergency
• Financial Emergency

National Emergency

Article 352 of the Constitution provides for the provision of National Emergency which can be applied if any extraordinary situation arises that may threaten the security, peace, stability and governance of the country. 

Whenever any of the following grounds occur, an emergency can be imposed:

1. War,
2. External aggression; or 
3. Internal rebellion.

Article 352 provides that if the President is ‘satisfied’ on the grounds that the security of India is threatened due to outside aggression or armed rebellion, he can issue a proclamation to that effect regarding the whole of India or a part thereof.

However, sub-clause (3) states that when a piece of written advice is given by the Union Cabinet then only the President can make such a proclamation. Such a proclamation must be placed before each house of the parliament and must be approved within one month of the declaration of the proclamation otherwise it will expire.

Furthermore, it is not necessary that for the proclamation of National emergency, external aggression or armed rebellion should actually happen. Even if there is a possibility that such a situation can arise, a national emergency can be proclaimed. 

In Minerva Mills vs Union of India, it has been held that there can be no bar to judicial review of determining the validity of the proclamation of emergency issued by the President under Article 352(1). The court’s powers are limited only to examining whether the limitations conferred by the Constitution have been observed or not. It can check if the satisfaction of President is on valid grounds or not. If the President is satisfied that grounds for national emergency exist but the same is based on absurd, malafide or irrelevant grounds then it won’t be considered that the President is ‘satisfied’.

Procedure for revoking emergency

If the situation improves then the President can revoke the emergency through another proclamation. The 44th Amendment of the Constitution provides that a requisition for the meeting can be made by ten per cent or more members of the Lok Sabha and in that meeting; it can disapprove or revoke the emergency by a simple majority. The emergency will immediately become inoperative in such a case.

Territorial Extent of Proclamation

The President may make a Proclamation of Emergency in respect of the whole India or any part of India, as required.

Duration of Emergency 

If approved by both houses of Parliament then National Emergency can continue for 6 months and it can be renewed by approval of Parliament after every 6 months.

But if the dissolution of Lok Sabha takes place in that 6 months and resolution for renewal of National Emergency is under consideration then emergency exists till 30 days from the first sitting of newly elected LS provided that it is approved by Rajya Sabha.

Until 44th amendment 1978, if Parliament approves proclamation of National Emergency then it remains in operation on pleasure or desire of cabinet or executive.

Any of the above resolution related to proclamation or renewal of National Emergency must be passed by both houses of Parliament by a special majority (i.e. the majority of the total membership of that house or not less than 2/3rd of members present and voting). This provision is added by 44th amendment 1978 and before that such resolution can be passed by simple majority i.e. more than total members present and voting.

Effects of Proclamation of Emergency

The following are the effects of Proclamation of emergency:

Extension of Executive Powers of the Centre 

According to Article 353, the Union can use its executive power to the extent of giving directions to the State relating to the manner in which the executive powers shall be exercised by the State. 

As per Article 353 (b), the Union Parliament can make laws relating to the matters in the State List.

According to Article 354, the distribution of revenue between the Union and the State can be altered by the Centre.

As per Article 83(2), the normal life of the Lok Sabha may be extended by the President by a year each time up to a period not exceeding 6 months after the proclamation ceases to operate.

As per Article 358, during a national emergency, the fundamental rights under Article 19 shall be suspended. However, in any case, the fundamental rights under Article 20 and Article 21 will not be affected.

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Effects of Proclamation of Emergency 

There are serious consequences, once emergency is proclaimed. It results in adverse effects on the enforcement of fundamental rights of people. Consequences of proclamation of emergency are explained below:

1) Executive

While a Proclamation of Emergency is in operation, Union can use its executive power to the extent of giving directions to the State relating to the manner in which the executive powers shall be exercised by the State. The Constitution (42nd Amendment) Act 1976 made a consequential change in Article 353.

It states that the executive power of the Union to give directions and to make laws shall extend to other States too apart from the state where an emergency has been proclaimed and is in operation. The above-mentioned power shall be exercised if the security of India or any part of its territory is threatened by the activities in the part of the territory of India in which emergency has been proclaimed and is in operation.

In normal times, the power of the executive does not extend to giving such directions subject to certain exceptions.

2) Legislative 

When an emergency has been proclaimed, the Parliament shall have the power to legislate as regards to State List (List II) as well. The emergency suspends the distribution of legislative powers between the Union and State and not the state legislature.                       

3) Financial

The centre is empowered to alter the distribution of revenue between the Union and the State. 

While a Proclamation of Emergency is in operation, the President may, by order define the financial arrangement between the State and the Union as provided by Articles 268 to 279. Such order shall be laid before each House of Parliament and when the Proclamation of Emergency ceases to operate, such order shall too come to an end.

4) Extension Life of Lok Sabha

The normal life of Lok Sabha can be extended while a proclamation of emergency is in operation. Such an extension can be done by the Parliament for a period not exceeding one year at a time and not beyond a period of six months in any case after the Proclamation has ceased to operate.

5) Suspension of Fundamental Rights guaranteed by Article 19

Article 358 of the Indian Constitution provides for Suspension of fundamental freedoms guaranteed to the citizens by Article 19 of the Indian Constitution.

It provides that when an emergency has been proclaimed and is in operation, the provisions contained in article 19 shall not restrict the power of the State relating to the making of any law or taking any executive action which abridges or takes away the rights guaranteed by Article 19.

It means that the freedom guaranteed by Article 19 automatically stands suspended once the Proclamation of Emergency is made. Once the proclamation of emergency ceases to operate, Article 19 which stood suspended during the emergency automatically comes to life.

Suspension of the right of enforcement of fundamental rights (Art. 359) 

A.D.M. Jabalpur v. S. Shukla, AIR 1976 SC 1207

This case is also known as the Habeas Corpus (to produce the body) case as whenever someone is arrested, this is the writ filed in the Supreme Court by the arrested person. Earlier, when the Proclamation of Emergency was made, this writ was not considered as a fundamental right under Article 21 and remained suspended.

The facts of the case were that on 26th June 1975 emergency was proclaimed by the President of India due to internal disturbances. The said proclamation was followed by another proclamation on 27th June 1975 where the President enforced the powers conferred by Article 359(1) of the Constitution. In exercise of these powers, the right of any person including a foreigner to move to the court for the enforcement of Article 14, 21 and 22 of the Constitution and the proceedings pending in any court relating to the enforcement of the above-mentioned articles will be curtailed.

The main issue involved in this case was “Whether the High Court can entertain a writ of Habeas Corpus filed by a person where he challenges the ground for his detention, in the case where such person has been detained in the execution of the Presidential Orders.

In this case, four judges – Chief Justice A.N. Ray, along with Y.V. Chandrachud, Justices M.H. Beg and P.N. Bhagwati arrived at the conclusion, that is, while a proclamation of emergency is in operation under Article 359 (1), the writ of habeas corpus is not maintainable.

The four judges observed that no authority or powers lie with the courts to challenge the detention made under Sec 16A(9)b of the Maintenance of Internal  Security Act (which provides that the person against whom a detention order is passed under Section 3 shall not be entitled to the communication or disclosure of any such ground, information or material as is referred to in clause (a) or the production to him of any document containing such ground, information or material) as it is clearly stated under the Act that the disclosure of grounds of detention need not be done.

Hence the court cannot challenge the order and can not question the state or the executive body to validate the detention. Hence no locus standi exists, so the party can not move to any court for maintaining suit on fundamental rights.

Justice Khanna gave a dissenting opinion and observed that while the proclamation of emergency is in operation, the person can not move to the court for enforcement of fundamental rights but that does not prevent him from exercising his legal remedy through the statute. 

Justice Khanna exclusively relied on the judgment delivered in the case of Makhan Singh v. State of Punjab in which he specified: If a person while challenging the validity of his detention order, pleads any right which is outside the scope of rights mentioned in the order, his right to move to any court is not suspended, as it is outside the rights specified in the order as well as the Presidential order itself. Let’s suppose a case where a person has violated the mandatory provisions of this Act, and due to this violation, he has been detained.

So, the detenu can contend that he has been illegally detained on the ground that the mandatory provisions of the Act have not been contravened. Such a plea is outside Article 359(1) and the right of the detenu to move for his release on such a ground cannot be affected by the Presidential order”. Curtailment of Article 21 leads to deprivation of the right to life and personal liberty which is against the fundamental right ensured to every citizen of India since birth, along with the rights guaranteed by the Universal Declaration of Human Rights.

Duty of the Union to protect the States

It is the duty of the Union to ensure that the State remains protected from disturbance and external aggression, while the Proclamation of Emergency is in operation. The Union shall ensure that the State Government works according to the provisions of the Constitution.

State Emergency

As per Article 356, if the President after receiving a report from the Governor of a State or otherwise is satisfied that such a situation exists where the Government of a State cannot be carried in accordance with the provisions of the Constitution, he may issue a Proclamation.

Duration

When a Proclamation is issued under Article 356, it shall be first laid before each House of the Parliament. Such Proclamation shall remain in operation for 2 months unless before the expiry of the said period it has been approved by both Houses of the Parliament according to Article 356(3). Suppose in a case where the Lok Sabha has been dissolved during the issuance of a proclamation of emergency or its dissolution takes place within the above said period of two months and the Rajya Sabha has approved the Proclamation but the Lok Sabha has not approved it.

In such a case, the said proclamation shall not operate unless before the expiry of 30 days it has also been passed by the Lok Sabha after its reconstruction. The Proclamation will remain in operation for 6 months after it has been approved by the Parliament. The duration of an emergency can be extended for 6 months at a time but it cannot remain in operation for more than 3 years.

Revocation 

By a subsequent Proclamation, a proclamation of State Emergency can be revoked.

Effects

State Emergency shall have the following effects:

• The President shall have all the powers that are exercisable by the Governor in the State.
• The President shall declare that the State shall exercise its Legislative powers by or under the authority of the Parliament.
• If the President deems fit that necessary provisions shall be made to serve the purpose of the Proclamation, then he may make such provisions. 

Difference between Articles 352 and 356

Under Article 352, the State Legislature and Executive continue to function but the Centre gets the concurrent powers of the legislation and administration in the matters of the State. Under Article 356, the executive, as well as legislative power, is vested in the Centre and the State Legislature is dissolved.

Under Article 352, the relationship between the Centre and all the States changes but in the case of Article 356 the relationship between the Centre and the State in which President’s Rule is applied undergo a change.

Financial Emergency 

As per Article 360, a Proclamation of Financial Emergency may be issued, if the President is of the opinion that such a situation exists where the financial stability of India or any part of the territory is threatened.

Duration

The Proclamation of Financial Emergency shall cease to operate after 2 months unless it has been approved by both the Houses of Parliament. In a case where during the issuance of Proclamation the Lok Sabha has been dissolved or its dissolution takes place within the said period of 2 months and the Rajya Sabha has approved the proclamation but the Lok Sabha has not approved it. Then, such a proclamation shall not operate unless before the expiry of 30 days Lok Sabha has passed a resolution approving proclamation.

Revocation

By a subsequent Proclamation, Proclamation of Financial Emergency can be revoked.

Effects

Financial Emergency has the following effects:

• The executive authority of the Union shall give directions to the State regarding the maintenance of financial stability.
• It may include provisions for reduction of salaries and allowances of all or any class of persons serving in the State. This includes Judges of the High Court and the Supreme Court.
• The Money Bills shall be reserved for the approval of the President.

Conclusion

Having dealt with all emergency provisions, it is easy to understand the purpose behind the enforcement of such provisions. But it is important to note that even when these provisions are provided for the nation’s security and protection of the people, the provisions in themselves give drastic discretionary powers in the hands of the Executive. This affects the federal structure of the nation and essentially turns it into a unitary one.

Therefore, the courts should be given the power to expand the powers of the Centre, as the same will act as a built-in mechanism to check if the discretionary powers are being used arbitrarily by the Parliament and the Executive.

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