Read Order: Amazon Web Services India Pvt Ltd & Anr V. Income Tax Officer & Anr
Chahat Varma
New Delhi, September 19, 2023: In a recent decision, the Delhi High Court has modified an order related to tax withholding in a case between AWS (Amazon Web Services) India and AWS USA. The Court directed AWS India to withhold 8% of payments payable or paid to AWS USA and deposit the same with the Revenue authorities.
The present petition was filed to challenge an order dated 01.02.2023, passed by the Assessing Officer (AO). This order pertained to the disposition of an application filed by AWS India, under Section 195(2) of the Income Tax Act, 1961. The purpose of this application was to determine the appropriate proportion of the sum payable to AWS USA, chargeable to tax, for the purposes of withholding tax deducted at source (TDS).
In the matter at hand, AWS India operated by reselling web services to third-party customers within India. Meanwhile, AWS USA was headquartered in the United States and was primarily involved in offering web services to a global clientele, including AWS India. AWS India claimed that, in terms of the Reseller Agreement between AWS India and AWS USA, it had been appointed as a non-exclusive reseller of web services on a principal-to-principal basis. According to the said Reseller Agreement, AWS India asserted that it was authorized to resell web services to its customers in India. It maintained that it independently entered into contracts in its own name with Indian customers and raised invoices directly to such customers. It also received funds from its customers directly. AWS India made payments to AWS USA for the purchase of web services for the purpose of reselling them to its customers.
In its application, AWS India claimed that AWS USA's receipts were chargeable to the Equalisation Levy under Section 165A of the Finance Act, 2016, which was paid. It contended that the payments made by it were not chargeable to income tax under the Act either as fees for technical services (FTS) or royalty under Section 9 of the Act or under the DTAA between India and the United States of America. In view of the aforesaid claims, AWS India had sought a certificate from the AO for nil withholding of tax in respect of the reseller fee paid by AWS India to AWS USA.
The division bench of Justice Vibhu Bakhru and Justice Amit Mahajan examined the challenged order, and observed that the AO had made determinations regarding AWS India's application based on information publicly available and certain assumptions that were ex-facie erroneous.
The bench also noted that the AO had made the assumption that AWS USA was not an incorporated entity but rather a Limited Liability Company. Consequently, the AO had concluded that the Indo-US DTAA did not apply to AWS USA. However, the bench stated that this assumption was clearly incorrect on its face, and there was no supporting evidence on record to justify this perspective. The use of the suffix 'Inc.' in AWS USA's name indicated that it was indeed an incorporated entity.
The bench also determined that they could not endorse the notion that the entire sum payable by AWS India to AWS USA should be regarded as revenue associated with AWS's permanent establishment (PE), if it indeed existed in India, without considering any portion of it being attributable to entities located overseas.
The bench also added that they found it challenging to comprehend AWS India's argument that all the information concerning AWS USA was accessible through the Department's portal, and therefore, the AO should have retrieved it from there. They clarified that under Section 195(2) of the Act, it is the responsibility of the applicant to provide the essential information.
Taking into account that these proceedings were limited to determining the withholding of tax and that the financial year 2022-23 had concluded, the Court proposed to the parties that, without compromising their respective positions regarding the taxation of AWS USA's income under the Income Tax Act, a total of 10% be withheld (after deducting the 2% Equalisation Levy already paid) as withholding tax.
Read Order: M/s. Perfect Enterprise v. State of West Bengal & Ors
Chahat Varma
New Delhi, June 23, 2023: The Jalpaiguri Bench of the Calcutta High Court has granted a favourable ruling to M/s. Perfect Enterprise (petitioner), stating that the petitioner was entitled to apply for a refund of the penalty paid. The court acknowledged that there was no lack of bona fide on the part of the petitioner to state that there was wilful misconduct committed by the petitioner and found that the imposition of tax and penalty by the authorities was unjustified in relation to the transportation of goods.
In the said case, goods were being transported from Kandla Port, Gujarat to Siliguri. The e-way bill for the transportation was valid until May 2, 2022. The vehicle reached Siliguri on May 2, 2022, before the e-way bill expiration. However, upon arrival, the stockyard where the goods were supposed to be unloaded was closed. Subsequently, the next working day, the stockyard was again closed, due to the Ed-Ul-Fitr festival. Thereafter, the goods and the vehicle were detained by the authorities based on the vehicle being found in transit with an expired e-way bill. Thereafter, a show cause notice was issued, proposing a penalty each under Central Goods and Services Tax Act/West Bengal Goods and Services Tax Act. By an order dated May 12, 2022, demand of tax and penalty was served upon the driver of the vehicle claiming penalty of Rs. 4,96,390. On protest, the petitioner paid the penalty and the goods were released to them.
The single-judge bench of Justice Krishna Rao referred to Hanuman Ganga Hydro Projects Private Limited vs. Joint Commissioner, State Tax Authority, Silliguri Circle and Another [LQ//2022/1844], wherein the issue of imposing tax and penalty based on the expired e-way bill was considered by the Coordinate Bench of the Court. In the said case, the court had held that if there was no willful attempt to evade tax on the part of the petitioner, the orders passed by the Appellate Authority and the penalty should be set aside and quashed.
The bench noted that in the present case the e-way bill was valid up to May 2, 2022 and the vehicle of the petitioner reached Silliguri on May 2, 2022 before the expiry of e-way bill but due to national holiday on May 3, 2022, the stockyard was closed and in the early morning on May 4, 2022, the vehicle was intercepted at Bakuabari which was about 16/17 kilometres from the destination and that there was no other allegation against the petitioner.
“In view of the above facts and circumstances of the case, the order of the Appellate Authority dated January 31, 2023 and the order passed by the adjudicating authority dated May 12, 2022 are set aside and quashed,” held the court.
Read More: R. P. Infosystems Limited v. The Adjudicating Authority
Simran Singh
New Delhi, June 19, 2023: The Calcutta High Court, while dealing with a petition challenging the impugned order of the Prevention of Money Laundering Act, 2002 (PMLA) authority on the ground of coram non judice, held that on a comprehensive interpretation of Section 6 of PMLA, it was clear that the Chairperson not only had the discretion to constitute a Bench with only one Member, but Section 6(7) of PMLA laid down the norm stating that the Bench could consist of a single Member and, only if the case was of a critical nature, a Bench consisting of two Members would be assigned the hearing. The Court took note of the fact that the Chairperson, as a single Member, had proceeded to take up the hearing of the application under Section 17 of the PMLA which, in light of Section 6, could not be held to be vitiated on the ground of coram non judice.
In the matter at hand, the Enforcement Directorate (ED/respondent 2) objected the jurisdiction of the Court to take up the present matter and stated that the matters relating to police had been excluded by way of a notification dated 30-09-2022 issued by the order of the then Chief Justice which clarified that matters relating to CBI and Central Agencies in writ petitions under Article 226 of the Constitution were already included within the comprehensive reading of the special category ‘Police’ in the Appellate Side Rules, therefore, there was no need to mention ‘CBI and Central Agencies’ separately in the notification. Thus it was contended that since ED was a Central Agency, the said exclusion applied to the present case. It was further stated that petitioners had been repeatedly attempting to stall the proceedings under Section 17(4) of PMLA.
It was averred by the petitioner that the challenge had not been filed against any inaction or action of the Police or any Central Agency, including the ED, but the challenge had been preferred with regard to the jurisdiction of the Adjudicating Authority under the Prevention of Money Laundering Act, 2002, which was a quasi-judicial statutory authority and not a ‘central authority’. Thus, it was argued that the Court had jurisdiction to entertain and decide the matter. It was further contended that the Adjudicating Authority had bias against the petitioners since the venue of the first hearing was fixed at the ED Office who was a complainant himself and such fixation of venue vitiated the authority of the Chairperson. It was submitted that the Adjudicating Authority neither granted any opportunity of being heard nor an opportunity of filing any objections.
The Bench while dealing with the objection as to coram non judice was concerned, stated that there were two interpretations possible regarding the provisions of Section 6 of the PMLA. The one in favour of the petitioners which was on the basis of sub-section (2) of Section 6, which stipulated that an Adjudicating Authority would consist of a Chairperson and two other Members. The qualifications of the Members had also been provided in the proviso. Hence, as per the Scheme of PMLA, the Adjudicating Authority had to comprise of three Members in total, out of whom one would be the Chairperson. However, it had been argued that at present the Adjudicating Authority was functioning only with a Chairperson, without any other Member having been appointed to fill the vacancies. Thus, the question of coram non judice arose.
On the other hand, sub-section (5)(b) provided that a Bench may be constituted by the Chairperson with one or two Members, as the Chairperson of the Adjudicating Authority may deem fit. Hence, it was evident that the Chairperson had the discretion even to function with only one Member, which could very well be herself/himself. Proceeding on such premise, the objection as to coram non judice could not be accepted.
The Bench while dealing with the apprehension of bias against the petitioners noted explanation granted by the respondents stating that the CGO Complex, where the first sitting was scheduled, housed all the offices of Central Government including the ED office. Although in the Notice it was indicated that the meeting would be held in the ED office, it was held in a different Government office of the same building which was on the same floor as that of the ED.
The Bench stated that the present case was only at the preliminary stage of hearing of an application under Section 17 of the PMLA, which pertained to search and seizure. Under sub-section (4) of Section 17, the authority seizing or freezing any record or property would, within a period of 30 days from such seizure or freezing, filed an application requesting for retention of such record before the Adjudicating Authority. Moreover, the petitioners themselves had applied for examination of the records by an independent authority on the apprehension of tampering of documents, on the basis of which a revisional court had already directed the examination of the records to be done by the Central Forensic Science Laboratory. Thus, admittedly, the records were lying in the office of the ED and the administrative convenience of holding a meeting at the office of the ED could also not be brushed aside, since the records, which were the borne of contention in the present application, were admittedly lying with the ED and might be difficult to be transmitted elsewhere due to security reasons.
The Bench held that the mere selection of the ED office as a venue in the present context, in the absence of any other clinching factor to indicate bias, would not vitiate the proceeding, more so since the matter had not yet reached the final hearing stage. That apart, it was also an admitted position that the petitioners themselves participated, through counsel, in the first hearing, which was ultimately not held in the ED office but elsewhere in the same building. Thus, the objection as to venue had now turned stale, having never been agitated at the relevant point of time by the petitioners.
The Bench in regards to the rejoinder stated that the Chairperson of the Adjudicating Authority made it clear that he would not rely on the rejoinder. Hence, at this belated stage, the petitioner could not resile and agitate its perceived lack of opportunity to deal with the rejoinder. Hence, the same was also not a valid defence for the petitioners.
The Bench was of the view that the Chairperson did not commit any jurisdictional error by constituting the Bench as a single Member as himself, to entertain and proceed with the hearing of the application pending before the Adjudicating Authority. In fact, sufficient opportunity had been given to the petitioners by the Adjudicating Authority to present their case.
The Bench was of the view that repeated attempts of the petitioners to come up in challenge in connection with the pending proceeding indicated that the petitioners wanted to stall the same unnecessarily and such dilatory tactics on the part of the petitioners ought not to be encouraged.
With regard to the allegation of undue haste of the Adjudicating Authority by the petitioner, the Bench examined the Statement of Objects and Reasons of PMLA, which stressed that it was being realised, world over, that money-laundering posed a serious threat not only to the financial systems of the countries, but also to their integrity and sovereignty. “In view of an urgent need for the enactment of a comprehensive legislation inter alia for preventing money laundering and connected activities (within which serious crimes like illicit drug trafficking had also been included), confiscation of proceeds of crime, setting up of agencies and mechanisms for coordinating measures for combating money-laundering, etc. the connected Bill is introduced. The seriousness and implicit urgency involved in a proceeding to combat such grave issues would justify some amount of urgency. Thus, it cannot be said that merely because the Adjudicating Authority is trying to expedite the proceeding, it is biased against the petitioners.”
Accordingly, the Bench was of the view that there was no scope of entertaining the writ petition at this stage. However, in order to allay the apprehension of bias in the mind of the petitioners, a further opportunity of hearing ought to be given to the petitioners before closing the hearing on the pending interim applications. Thus, the Adjudicating Authority was directed to afford an opportunity of hearing to the petitioners and thereafter to pass necessary orders. As clarified by it earlier, the Adjudicating Authority would also not rely on the rejoinder filed by the ED, unless adequate opportunity was given to the petitioners to file a written objection thereto.
Read Order: Bhisham Sharma V. State of Haryana and Others
Chahat Varma
Chandigarh, June 2, 2023: The Punjab and Haryana High Court has instructed the competent authority to consider the representations submitted by the petitioner regarding the additional charges imposed by the authorities for the Stage carriage permit under the Approved City Bus Service Scheme in Municipal Corporation, Rohtak.
The petitioner had filed the writ petition seeking a mandamus, instructing the respondents not to compel the petitioner to pay an amount exceeding the agreed sum of Rs.16,100/-. The petitioner argued that they had provided five buses for use on a specific route and were required to pay Rs. 94,900/- per month (including GST) per bus. However, the authorities were additionally charging Rs. 31,350/- as Motor Vehicle taxes and Rs.14,100/- as ada fee, resulting in a total separate charge of Rs.45,450/- per month.
The petitioner stated that he had already represented before the authorities vide representations dated 20.04.2022, 20.07.2022, 27.07.2022 and 31.03.2023 and expressed before the court that he would be satisfied if his representations were directed to be decided by the competent authority within a specified timeframe and in accordance with the law.
The court directed the competent authority to make a decision in accordance with the law regarding the petitioner's case within one month of receiving a certified copy of the court's order.
Read Order: M/s Star Metal Company vs. Additional Commissioner and Ors.
Chahat Varma
New Delhi, June 1, 2023: The Allahabad High Court has ruled that the cancellation of a GST registration that has been granted, requires the respondent authority to bear a substantial burden of proof proving the existence of facts that warrant such cancellation. According to Section 29(2) of the Goods and Services Act, a registration can only be cancelled if one of the five specified statutory conditions are met. Merely describing the registered firm as ‘bogus’ does not justify the cancellation of the registration.
The present writ petition was filed challenging the order dated 01.12.2020 passed by the respondent no. 2 cancelling the GST registration of the petitioner, order dated 19.03.2021 passed by the respondent no. 2 rejecting the petitioner's revocation application for cancellation of the registration as well as the order dated 14.10.2022 passed by the respondent no. 1 confirming the rejection of the revocation application of the petitioner.
The court observed that admittedly, the registration of the petitioner was cancelled on the basis of the survey with the report that the disclosed business place of the firm was not found and therefore, the firm was bogus.
The court placed reliance on Apparent Marketing Private Limited v. State of U.P. and Others [LQ/AllHC/2022/8401], wherein it was held that, “cancellation of registration has serious consequences. It takes away the fundamental right of a citizen etc. to engage in a lawful business activity……Though the notice for cancellation of registration may not be placed on a high pedestal of a jurisdictional notice, at the same time, unless the essential ingredients necessary for issuance of such notice had been specified therein at the initial stage itself, the authorities cannot be permitted to have margin or option to specify and/or improve the charge later.”
Consequently, the court quashed the orders dated 01.12.2020, 19.03.2021 and 14.10.2022.
Read More: M.C. Baby v Sastha Home Tech
Simran Singh
New Delhi, May 29, 2023: The Madras High Court, while reiterating the settled position of law by way of multiple judicial decisions, said that in the absence of the required documents of the partnership deed along with authorisation to represent the partnership firm, the Courts below could not presume that the respondent was a partner who was duly authorised to represent the said firm. The High Court, accordingly allowed the revision petitions and set aside the impugned judgment passed by the Metropolitan Magistrate as well as the Additional Sessions Judge
In the matter at hand, two revision petitions were preferred by the accused who was held guilty of offence under Section 138 of Negotiable Instruments Act, 1881 (NI Act) by Metropolitan Magistrate, Saidapet and the same on appeal was confirmed by Additional Sessions Judge, Chennai.
Issue for consideration before the Court was whether a complaint under Section 138 of the NI Act by a partner of the firm without authorisation was maintainable.
The accused being a railways contractor had placed orders for supply of materials which were delivered to the construction site by the respondents. When the respondents demanded repayment of dues, the accused gave two cheques, dated 31-12-2004 for INR 7, 41, 923 and another dated 31-03-2005 for INR 14,20,235 to partially discharge the dues. Both the cheques were bounced on 27-06-2005 and 08-08-2005, respectively for the reason ‘insufficient funds’. The respondent therefore, had caused statutory notice on 27-07-2005 and 04-09-2005, respectively calling upon the accused to make payment of the cheque amount within 15 days. It was alleged that despite the receipt of the notice, the accused neither paid the cheque amount nor replied within 15 days. Hence the respondent had filed a case before the Metropolitan Magistrate, Saidapet.
The accused contested the case on the premise that the cheques were issued as security for the goods supplied. Though payment made, the cheques were presented and misused by the respondents. More so, no statutory notice was served upon the accused and there was no proof that the respondent was authorised to prefer the complaint against the accused. Hence, the complaints were alleged to be not maintainable.
Both the Courts below had held that the signatures on the cheques were not disputed and the business relationship was also admitted. There was no rebuttal evidence led by the accused to shift the burden of presumption. Thus, the complaints were held to be maintainable.
However, the Bench stated that the Metropolitan Magistrate had failed to address the plea of maintainability of the complaint by the respondent without the authorisation of partners. Further the Additional Sessions Judge failed to not only apply the correct law, but also erred in misquoting the facts while considering the plea of maintainability. The Court was of the view that there was no record to show that M/s Sastha Home Tech was a partnership firm and the respondent was one of the partner of the firm. It was noted that during the cross examination, the respondent had stated to have filed the partnership deed, which later he retracted and said that he will produce the required document. However, the required documents were neither produced before the Metropolitan Magistrate nor before the Additional Sessions Judge.
The Court scrutinised the complaints, and found that the respondent had signed the complaint not on behalf of M/s Sastha Home Tech, but as an individual which was contrary to the observations made by the Additional Sessions in its order, hence perverse.
The Bench while relying on BSI Limited v. Gift Holdings Private Limited stated that in the absence of the required documents of the partnership deed along with authorisation to represent the partnership firm, the Court could not presume that the responder was a partner who was duly authorised to represent the said firm.
Read Order:Rahul Vs. State Of Haryana
Tulip Kanth
Chandigarh, May 16, 2023: The Punjab and Haryana High Court has refused to grant bail to the petitioner-accused apprehending arrest for violating the provisions of Narcotics Drugs and Psychotropic Substances Act, 1985 on the allegations of indulging in drug trade and selling 900 tablets containing Alprazolam to another man from which the police had seized the same.
“The burden is on the petitioner to satisfy the twin conditions put in place by the Legislature under Section 37 of the NDPS Act”, the Bench said.
In the bail petition, the accused declared that he had no criminal antecedents and the petitioner’s counsel contended that the pre-trial incarceration would cause an irreversible injustice to the petitioner and family.
The Bench noted that the quantity allegedly involved in this case was commercial and the rigours of S. 37 of the NDPS Act would apply in the case.
The Bench took note of the fact that the police had collected sufficient evidence connecting the petitioner with the offence. The court was not dealing with a regular bail but an anticipatory bail involving a commercial quantity of intoxicants.
As per the Bench, the grounds taken in the bail petition did not shift the burden placed by the legislature on the accused under S. 37 of the NDPS Act. The petitioner had not stated anything to discharge the burden put by the stringent conditions placed in the statute by the legislature under section 37.
The High Court also referred to the judgment of the Top Court in Jai Prakash Singh v. State of Bihar and another.
Thus, the Bench concluded that the petitioner had failed to make a case for bail at this stage and dismissed the petition.
Read Order: Nagender Singh (since deceased) through his LRs. Versus State of Haryana & Others
Tulip Kanth
Chandigarh, May 15, 2023: The Punjab and Haryana High Court has dismissed a writ petition challenging an eviction Order after noting that despite several opportunities granted to the petitioner to produce evidence contrary to the one as comprised against him in the demarcation report, he failed to adduce such evidence.
The factual background of this case was such that the Gram Panchayat Bhonds in District Gurgaon, through a Panchayat Member instituted a petition under under Section 7 of the Punjab Village Common Lands (Regulation) Act, 1961, against a purported encroacher, upon, the panchayat land, one Nagendar Singh. Through a decision made thereon, the Assistant Collector decreed the said petition for eviction.
This decision resulted in the aggrieved therefrom instituting thereagainst an appeal before the competent Appellate Authority concerned. However, the competent Appellate Authority concerned, through a decision upon, appeal declined the espoused relief to the appellant and affirmed the verdict aswas previously drawn by the Assistant Collector.
The aggrieved Nagender Singh-petitioner herein, preferred a revision petition but the same was declined. This led the petitioner to institute a petition before the High Court.
The petitioner was alleged to raise a house on the disputed land which was evidently owned by the Gram Panchayat. The Orders revealed that the demarcation report was drawn in terms of the relevant rules and instructions.
The Division Bench of Justice Sureshwar Thakur & Justice Kuldeep Tiwari noted the fact that there were gross abandonments and waivers by the petitioner herein, to adduce evidence, thus, dislodging the worth of the demarcation report, either through his making a protest against its tenability or through his subsequently asking for the summoning of the demarcating officer, so that elicitations are made from him, but suggestive that he has not drawn the same in consonance with the relevant rules and instructions.
As per the Bench, the effect of such waivers and abandonments, wasthat, the petitioner was deemed to have acquiesced to the validity of the drawing of the demarcation report, which became relied upon by the statutory authorities below.
Observing that the petitioner cannot make any submission, that the concurrently made decrees of eviction against him, are flawed rather on the premise that the relevant demarcation report has not been drawn in consonance with the relevant rules and instructions.
Thus, without finding any merit in the petition, the Bench dismissed the same.
Read Order: Indira Jaising v Supreme Court of India
Simran Singh
New Delhi, May 13, 2023: While exercising its civil original jurisdiction, the Full Bench of Justice Sanjay Kishan Kaul, Justice Ahsanuddin Amanullah and Justice Aravind Kumar passed directions in an application which had sought modifications in the guidelines regulating the conferment of designation of Senior Advocate as laid down in its 2017 judgment Indira Jaisingh v Supreme Court of India.
“We only hope that our endeavour to simplify some aspects of the process results in the designation of more meritorious candidates. The process of improvement is a continuous one and we learn from every experience. This is one more step in the fine-tuning of this exercise and we hope it achieves the purpose. The ultimate objective is to provide better assistance to litigants and the Courts.”
In the case at hand, the issue pertained to the manner of the exercise conducted for designation of Senior Advocates and certain aspects of the 2017 judgment which Court only attempted to fine-tune and modify instead of carrying out a review or reference.
“An endeavour was made by the Union of India to reopen the 2017 Judgment itself. That however is not our remit in the present applications. We are not at the stage of a review or a reference of the matter to a larger Bench. We are only on the aspect of fine-tuning what has been laid down by this Court in the 2017 Judgment”
Voting By Secret Ballot
The method of designation prior to the 2017 Judgment, was by a discussion followed by voting by secret ballot from Judges of the Full Court. The percentage of approval required ordinarily varied from 2/3rd to 50%. In the 2017 Judgment, it was noticed that a secret ballot was supposed to be a rarity rather than the norm and may be used only under certain unavoidable circumstances.
The Court observed that the constitution of a Permanent Committee, reliance on certain objective criteria for assessment, and final decision through voting were the central aspects of the 2017 Judgment which the Court did not consider to review but only modify the criteria through experiences gained over a period of time. "While it is alleged that voting by secret ballot may not always subserve the interests of transparency, in practice judges may be reluctant to put forth their views openly. This is especially the case where the comments of a judge can have a deleterious effect on the advocate’s practice.” Thus, the Court found merit in the contention that voting by secret ballot should not be the rule but an exception. In case it had to be resorted to, the reasons for the same should be recorded.
Cut-off marks:
A grievance was raised that while the cut-off marks may have already been decided, the same were neither published in advance nor communicated to those applying for senior designation, thereby leading to speculation at the Bar. It was thus prayed that the cut-off marks be released in advance. However, the Court was of the view that it would be difficult to prescribe cut-off marks in advance.
“As designation is really an honour to be conferred, there can only be a limited number of successful applicants in one go. A decision on the number of successful applicants must be left to the Permanent Committee, depending on the total number of applicants, the marks obtained by them, and the number of people that can be invited for the personal interview.”
The Points assigned for publications
The Court stated that the allocation of 15 points for publication was high, and thus was deemed fit to reduce the available points under this category to 5 points. “Most practicing advocates find very little time to write academic articles. In any case, academic publications require a different aptitude. However, given that Senior Advocates are expected to make nuanced and sophisticated submissions, academic knowledge of the law is an important prerequisite.” Thus, stated that the said criteria would not only continue but expand what should fall under this criteria, while reducing the points of the same.
The Court stated that confining these criteria merely to the authorship of academic articles would not be enough, instead, it should also include teaching assignments or guest courses delivered by advocates at law schools which would be a more holistic reflection of the advocate’s ability to contribute to the critical development of law which also showed their interest in guiding and helping their peers at the Bar.
The Bench referred to the system adopted by the Singapore Bar where the designation of Senior Counsel was recognized as an elite group of advocates, with top tier advocacy skills, professional integrity, and knowledge of law. “Senior Counsels have a duty to leading and be an example to the rest of the Bar, especially younger members. They are also required to contribute to academic teaching, writing, and research, and to the process of continuing legal education.” Thus, the Court left it to the Permanent Committee to decide on the manner of assigning points under this category, including the possibility of taking external assistance to gauge the quality of publications which could be through other Senior Advocates or academics.
Account of Various Parameters
This category contemplated reported and unreported judgements, pro bono work, and the domain expertise of an applicant under various branches of law. The court deemed it fit to enhance the number of points under this category by 10 points, having deducted the same from publications and simultaneously increased the scope of this category. The Bench clarified that it was not the Order but the judgments that had to be considered. “In recent times, and particularly in the Supreme Court, the number of advocates present for a matter are very high. However, that is not ipso facto reflective of the assistance that they are providing to the Court. A matter may be argued by a counsel who may be assisted by others, including an Advocate-on-Record.” Thus, as assessment would have to be carried out in enquiring into the role played by the advocate in the matter they have appeared in with their role specified by them in their application and stated that merely looking into the number of appearance would not be enough.
The Court believed that the same would also take care of any perceived disadvantages arising due to the larger number of appearances by Government Counsels, as compared to Counsel who were engaged in private work. Further, the quality of synopsis filed in Court ought to be considered which could be a useful indicator for assessing the assistance rendered by an advocate to the Court. Candidates should thus be permitted to submit five of their best synopses for evaluation with their applications.
The Court turning to another aspect of ‘specialised Tribunals’ stated that several advocates have concentrated their practice before such tribunals which has led to the opening up of various specialisations. Often appeals from those Tribunals lie to this Court and, thus, such advocates also appear before this Court, although the frequency of their appearances may be less. Specialised lawyers with domain expertise should be permitted to concentrate on their fields and not be deprived of the opportunity of being designated as Senior Advocates. Thus, in the case of such advocates, a concession is required to be given with regards to the number of appearances. “This category of advocates and their expertise is also essential for the advancement of all specialized fields of law.”
The Court went on to state that due consideration should be given in the interest of diversity, particularly with respect to gender and first-generation lawyers. This would encourage meritorious advocates who will come into the field knowing that there was scope to rise to the top. “The profession has seen a paradigm shift over a period of time, particularly with the advent of newer law schools such as National Law Universities. The legal profession is no longer considered as a family profession. Instead, there are newer entrants from all parts of the country and with different backgrounds. Such newcomers must be encouraged.”
Personal Interview
The Court was of the view that an interview process would allow for a more personal and in-depth examination of the candidate which would enable a more holistic assessment, particularly as the Senior Advocate designation was an honour conferred to exceptional advocates who was also required to be very articulate and precise within a given timeframe. Thus, restricted the number of interviews to the appropriate amount as deemed feasible by the Permanent Committee, keeping in mind the number of Senior Advocates to be designated at a given time. The Bench was neither inclined to do away with or to reduce the marks assigned under this category.
Other General Aspect
The Court was of the view that the process should be carried out at least once a year so that applications do not accumulate. “In this respect, some disturbing instances have emerged from certain High Courts where the exercise of designation has not been undertaken for many years. As a consequence, meritorious advocates at the relevant time lose out on the opportunity of being considered for designation.”
The Court reiterated the observation made in the 2017 judgment that the power of suo motu designation by the Full Court was not something that was being taken away. It further clarified that the pending application for designation would not be considered under the old norms. “The exercise to be undertaken now would have to include these existing applications. However, such candidates can be given the time to update or replace their applications in light of the norms laid down by the present judgment”
Read Order: Ganesh Anandrao Ingulkar v. Assistant Director of Income-tax
LE Correspondent
Mumbai, May 11, 2023: The Mumbai bench of the Income Tax Appellate Tribunal has allowed the claim of the assessee, holding that that assessee can file Form– 67 before completion of the assessment and the assessee was entitled to Foreign Tax Credit (FTC).
In the present case, the assessee had filed Form–67 at the time of filing revised return of income and not at the time of original return of income. The CIT(a) had upheld the order of the Assessing Officer (AO), noting that since the assessee had failed to file the return of income for A.Y. 2019-20 as well as Form 67 within the due date of filing of return of income, the claim of FTC had rightly been disallowed.
The Tribunal placed reliance on Sonakshi Sinha v. CIT [LQ/ITAT/2022/4056], wherein the Coordinate Bench has observed that one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No. 67. The bench further observed that it is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory.
Read Order:David Chandekar v. Maharishi Dayanand University And Ors
Tulip Kanth
Chandigarh, May 10, 2023: The Punjab and Haryana High Court has asked Maharishi Dayanand University to look into a law student’s plea seeking directions to the respondent-University to issue Roll Number/Admit Card for 6th semester examination of 3 year LLB Course, within one week.
Justice Vikas Bahl passed such a direction while considering a Civil Writ Petition filed under Article 226 of the Constitution of India for issuance of a writ in the nature of mandamus directing the respondents to issue Roll Number/Admit Card for 6th semester examination of 3 year LLB Course so that he may take part in the Practical as well as in Theoretical Examination scheduled to be conducted from May 9, 2023 to June 12, 2023.
The admit card had been denied on account of shortage of attendance and the fact that the petitioner was in custody.
The petitioner submitted that the writ petition could be treated as a representation and the first respondent-University could consider the same as expeditiously as possible. It was also pleaded that if the first respondent finds merit in the same then petitioner may be permitted to give 6th semester examination from the date the said decision is taken.
The University’s counsel assured the Court that every endeavour would be made by it to consider the writ petition as a representation within a period of one week. It was also submitted before the Bench that if any merit is found in the plea raised by the petitioner, then necessary action would be taken in pursuance of the same.
Thus, considering such facts and circumstances, the Bench disposed of the Civil Writ Petition with directions to the University to consider the present writ petition as a representation within a period of one week.
“In case, respondent No.1 finds merit in the plea raised by the petitioner, then to take necessary action, in accordance with law, as expeditiously as possible”,the Bench ordered.
Time for judiciary to introspect and see what can be done to restore people’s faith – Justice Lokur
Justice Madan B Lokur, was a Supreme Court judge from June 2012 to December 2018. He is now a judge of the non-resident panel of the Supreme Court of Fiji. He spoke to LegitQuest on January 25, 2020.
Q: You were a Supreme Court judge for more than 6 years. Do SC judges have their own ups and downs, in the sense that do you have any frustrations about cases, things not working out, the kind of issues that come to you?
A: There are no ups and downs in that sense but sometimes you do get a little upset at the pace of justice delivery. I felt that there were occasions when justice could have been delivered much faster, a case could have been decided much faster than it actually was. (When there is) resistance in that regard normally from the state, from the establishment, then you kind of feel what’s happening, what can I do about it.
Q: So you have had the feeling that the establishment is trying to interfere in the matters?
A: No, not interfering in matters but not giving the necessary importance to some cases. So if something has to be done in four weeks, for example if reply has to be filed within four weeks and they don’t file it in four weeks just because they feel that it doesn’t matter, and it’s ok if we file it within six weeks how does it make a difference. But it does make a difference.
Q: Do you think this attitude is merely a lax attitude or is it an infrastructure related problem?
A: I don’t know. Sometimes on some issues the government or the establishment takes it easy. They don’t realise the urgency. So that’s one. Sometimes there are systemic issues, for example, you may have a case that takes much longer than anticipated and therefore you can’t take up some other case. Then that necessarily has to be adjourned. So these things have to be planned very carefully.
Q: Are there any cases that you have special memories of in terms of your personal experiences while dealing with the case? It might have moved you or it may have made you feel that this case is really important though it may not be considered important by the government or may have escaped the media glare?
A: All the cases that I did with regard to social justice, cases which concern social justice and which concern the environment, I think all of them were important. They gave me some satisfaction, some frustration also, in the sense of time, but I would certainly remember all these cases.
Q: Even though you were at the Supreme Court as a jurist, were there any learning experiences for you that may have surprised you?
A: There were learning experiences, yes. And plenty of them. Every case is a learning experience because you tend to look at the same case with two different perspectives. So every case is a great learning experience. You know how society functions, how the state functions, what is going on in the minds of the people, what is it that has prompted them to come the court. There is a great learning, not only in terms of people and institutions but also in terms of law.
Q: You are a Judge of the Supreme Court of Fiji, though a Non-Resident Judge. How different is it in comparison to being a Judge in India?
A: There are some procedural distinctions. For example, there is a great reliance in Fiji on written submissions and for the oral submissions they give 45 minutes to a side. So the case is over within 1 1/2 hours maximum. That’s not the situation here in India. The number of cases in Fiji are very few. Yes, it’s a small country, with a small number of cases. Cases are very few so it’s only when they have an adequate number of cases that they will have a session and as far as I am aware they do not have more than two or three sessions in a year and the session lasts for maybe about three weeks. So it’s not that the court sits every day or that I have to shift to Fiji. When it is necessary and there are a good number of cases then they will have a session, unlike here. It is then that I am required to go to Fiji for three weeks. The other difference is that in every case that comes to the (Fiji) Supreme Court, even if special leave is not granted, you have to give a detailed judgement which is not the practice here.
Q: There is a lot of backlog in the lower courts in India which creates a problem for the justice delivery system. One reason is definitely shortage of judges. What are the other reasons as to why there is so much backlog of cases in the trial courts?
A: I think case management is absolutely necessary and unless we introduce case management and alternative methods of dispute resolution, we will not be able to solve the problem. I will give you a very recent example about the Muzaffarpur children’s home case (in Bihar) where about 34 girls were systematically raped. There were about 17 or 18 accused persons but the entire trial finished within six months. Now that was only because of the management and the efforts of the trial judge and I think that needs to be studied how he could do it. If he could do such a complex case with so many eyewitnesses and so many accused persons in a short frame of time, I don’t see why other cases cannot be decided within a specified time frame. That’s case management. The second thing is so far as other methods of disposal of cases are concerned, we have had a very good experience in trial courts in Delhi where more than one lakh cases have been disposed of through mediation. So, mediation must be encouraged at the trial level because if you can dispose so many cases you can reduce the workload. For criminal cases, you have Plea Bargaining that has been introduced in 2009 but not put into practice. We did make an attempt in the Tis Hazari Courts. It worked to some extent but after that it fell into disuse. So, plea bargaining can take care of a lot of cases. And there will be certain categories of cases which we need to look at carefully. For example, you have cases of compoundable offences, you have cases where fine is the punishment and not necessarily imprisonment, or maybe it’s imprisonment say one month or two month’s imprisonment. Do we need to actually go through a regular trial for these kind of cases? Can they not be resolved or adjudicated through Plea Bargaining? This will help the system, it will help in Prison Reforms, (prevent) overcrowding in prisons. So there are a lot of avenues available for reducing the backlog. But I think an effort has to be made to resolve all that.
Q: Do you think there are any systemic flaws in the country’s justice system, or the way trial courts work?
A: I don’t think there are any major systemic flaws. It’s just that case management has not been given importance. If case management is given importance, then whatever systematic flaws are existing, they will certainly come down.
Q; And what about technology. Do you think technology can play a role in improving the functioning of the justice delivery system?
I think technology is very important. You are aware of the e-courts project. Now I have been told by many judges and many judicial academies that the e-courts project has brought about sort of a revolution in the trial courts. There is a lot of information that is available for the litigants, judges, lawyers and researchers and if it is put to optimum use or even semi optimum use, it can make a huge difference. Today there are many judges who are using technology and particularly the benefits of the e-courts project is an adjunct to their work. Some studies on how technology can be used or the e-courts project can be used to improve the system will make a huge difference.
Q: What kind of technology would you recommend that courts should have?
A: The work that was assigned to the e-committee I think has been taken care of, if not fully, then largely to the maximum possible extent. Now having done the work you have to try and take advantage of the work that’s been done, find out all the flaws and see how you can rectify it or remove those flaws. For example, we came across a case where 94 adjournments were given in a criminal case. Now why were 94 adjournments given? Somebody needs to study that, so that information is available. And unless you process that information, things will just continue, you will just be collecting information. So as far as I am concerned, the task of collecting information is over. We now need to improve information collection and process available information and that is something I think should be done.
Q: There is a debate going on about the rights of death row convicts. CJI Justice Bobde recently objected to death row convicts filing lot of petitions, making use of every legal remedy available to them. He said the rights of the victim should be given more importance over the rights of the accused. But a lot of legal experts have said that these remedies are available to correct the anomalies, if any, in the justice delivery. Even the Centre has urged the court to adopt a more victim-centric approach. What is your opinion on that?
You see so far as procedures are concerned, when a person knows that s/he is going to die in a few days or a few months, s/he will do everything possible to live. Now you can’t tell a person who has got terminal cancer that there is no point in undergoing chemotherapy because you are going to die anyway. A person is going to fight for her/his life to the maximum extent. So if a person is on death row s/he will do everything possible to survive. You have very exceptional people like Bhagat Singh who are ready to face (the gallows) but that’s why they are exceptional. So an ordinary person will do everything possible (to survive). So if the law permits them to do all this, they will do it.
Q: Do you think law should permit this to death row convicts?
A: That is for the Parliament to decide. The law is there, the Constitution is there. Now if the Parliament chooses not to enact a law which takes into consideration the rights of the victims and the people who are on death row, what can anyone do? You can’t tell a person on death row that listen, if you don’t file a review petition within one week, I will hang you. If you do not file a curative petition within three days, then I will hang you. You also have to look at the frame of mind of a person facing death. Victims certainly, but also the convict.
Q: From the point of jurisprudence, do you think death row convicts’ rights are essential? Or can their rights be done away with?
A: I don’t know you can take away the right of a person fighting for his life but you have to strike a balance somewhere. To say that you must file a review or curative or mercy petition in one week, it’s very difficult. You tell somebody else who is not on a death row that you can file a review petition within 30 days but a person who is on death row you tell him that I will give you only one week, it doesn’t make any sense to me. In fact it should probably be the other way round.
Q: What about capital punishment as a means of punishment itself?
A: There has been a lot of debate and discussion about capital punishment but I think that world over it has now been accepted, more or less, that death penalty has not served the purpose for which it was intended. So, there are very few countries that are executing people. The United States, Saudi Arabia, China, Pakistan also, but it hasn’t brought down the crime rate. And India has been very conservative in imposing the death penalty. I think the last 3-4 executions have happened for the persons who were terrorists. And apart from that there was one from Calcutta who was hanged for rape and murder. But the fact that he was hanged for rape and murder has not deterred people (from committing rape and murder). So the accepted view is that death penalty has not served the purpose. We certainly need to rethink the continuance of capital punishment. On the other hand, if capital punishment is abolished, there might be fake encounter killings or extra judicial killings.
Q: These days there is the psyche among people of ‘instant justice’, like we saw in the case of the Hyderabad vet who was raped and murdered. The four accused in the case were killed in an encounter and the public at large and even politicians hailed it as justice being delivery. Do you think this ‘lynch mob mentality’ reflects people’s lack of faith in the justice system?
A: I think in this particular case about what happened in Telangana, investigation was still going on. About what actually happened there, an enquiry is going on. So no definite conclusions have come out. According to the police these people tried to snatch weapons so they had to be shot. Now it is very difficult to believe, as far as I am concerned, that 10 armed policeman could not overpower four unarmed accused persons. This is very difficult to believe. And assuming one of them happened to have snatched a (cop’s) weapon, maybe he could have been incapacitated but why the other three? So there are a lot of questions that are unanswered. So far as the celebrations are concerned, the people who are celebrating, do they know for certain that they (those killed in the encounter) were the ones who did the crime? How can they be so sure about it? They were not eye witnesses. Even witnesses sometimes make mistakes. This is really not a cause for celebration. Certainly not.
Q: It seems some people are losing their faith in the country’s justice delivery system. How to repose people’s faith in the legal process?
A: You see we again come back to case management and speedy justice. Suppose the Nirbhaya case would have been decided within two or three years, would this (Telangana) incident have happened? One can’t say. The attack on Parliament case was decided in two or three years but that has not wiped out terrorism. There are a lot of factors that go into all this, so there is a need to find ways of improving justice delivery so that you don’t have any extremes – where a case takes 10 years or another extreme where there is instant justice. There has to be something in between, some balance has to be drawn. Now you have that case where Phoolan Devi was gangraped followed by the Behmai massacre. Now this is a case of 1981, it has been 40 years and the trial court has still not delivered a judgement. It’s due any day now, (but) whose fault is that. You have another case in Maharashtra that has been transferred to National Investigating Agency two years after the incident, the Bhima-Koregaon case. Investigation is supposedly not complete after two years also. Whose fault is that? So you have to look at the entire system in a holistic manner. There are many players – the investigation agency is one player, the prosecution is one player, the defence is one player, the justice delivery system is one player. So unless all of them are in a position to coordinate… you cannot blame only the justice delivery system. If the Telangana police was so sure that the persons they have caught are guilty, why did they not file the charge sheet immediately? If they were so sure the charge sheet should have been filed within one day. Why didn’t they do it?
Q: At the trial level, there are many instances of flaws in evidence collection. Do you think the police or whoever the investigators are, do they lack training?
A: Yes they do! The police lacks training. I think there is a recent report that has come out last week which says very few people (in the police) have been trained (to collect evidence).
Q: You think giving proper training to police to prepare a case will make a difference?
A: Yes, it will make a difference.
Q: You have a keen interest in juvenile justice. Unfortunately, a lot of heinous crimes are committed by juveniles. How can we correct that?
A: You see it depends upon what perspective we are looking at. Now these heinous crimes are committed by juveniles. Heinous crimes are committed by adults also, so why pick upon juveniles alone and say something should be done because juveniles are committing heinous crimes. Why is it that people are not saying that something should be done when adults are committing heinous crimes? That’s one perspective. There are a lot of heinous crimes that are committed against juveniles. The number of crimes committed against juveniles or children are much more than the crimes committed by juveniles. How come nobody is talking about that? And the people committing heinous crimes against children are adults. So is it okay to say that the State has imposed death penalty for an offence against the child? So that’s good enough, nothing more needs to be done? I don’t think that’s a valid answer. The establishment must keep in mind the fact that the number of heinous crimes against children are much more than those committed by juveniles. We must shift focus.
Q: Coming to NRC and CAA. Protests have been happening since December last year, the SC is waiting for the Centre’s reply, the Delhi HC has refused to directly intervene. Neither the protesters nor the government is budging. How do we achieve a breakthrough?
A: It is for the government to decide what they want to do. If the government says it is not going to budge, and the people say they are not going to budge, the stalemate could continue forever.
Q: Do you think the CAA and the NRC will have an impact on civil liberties, personal liberties and people’s rights?
A: Yes, and that is one of the reasons why there is protest all over the country. And people have realised that it is going to happen, it is going to have an impact on their lives, on their rights and that’s why they are protesting. So the answer to your question is yes.
Q: Across the world and in India, we are seeing an erosion of the value system upholding rights and liberties. How important is it for the healthy functioning of a country that social justice, people’s liberties, people’s rights are maintained?
A: I think social justice issues, fundamental rights are of prime importance in our country, in any democracy, and the preamble to our Constitution makes it absolutely clear and the judgement of the Supreme Court in Kesavananda Bharati and many other subsequent judgments also make it clear that you cannot change the basic structure of the Constitution. If you cannot do that then obviously you cannot take away some basic democratic rights like freedom of assembly, freedom of movement, you cannot take them away. So if you have to live in a democracy, we have to accept the fact that these rights cannot be taken away. Otherwise there are many countries where there is no democracy. I don’t know whether those people are happy or not happy.
Q: What will happen if in a democracy these rights are controlled by hook or by crook?
A: It depends upon how much they are controlled. If the control is excessive then that is wrong. The Constitution says there must be a reasonable restriction. So reasonable restriction by law is very important.
Q: The way in which the sexual harassment case against Justice Gogoi was handled was pretty controversial. The woman has now been reinstated in the Supreme Court as a staffer. Does this action of the Supreme Court sort of vindicate her?
A: I find this very confusing you know. There is an old joke among lawyers: Lawyer for the petitioner argued before the judge and the judge said you are right; then the lawyer for the respondent argued before the judge and the judge said you’re right; then a third person sitting over there says how can both of them be right and the judge says you’re also right. So this is what has happened in this case. It was found (by the SC committee) that what she said had no substance. And therefore, she was wrong and the accused was right. Now she has been reinstated with back wages and all. I don’t know, I find it very confusing.
Q: Do you think the retirement age of Supreme Court Judges should be raised to 70 years and there should be a fixed tenure?
A: I haven’t thought about it as yet. There are some advantages, there are some disadvantages. (When) You have extended age or life tenure as in the United States, and the Supreme Court has a particular point of view, it will continue for a long time. So in the United States you have liberal judges and conservative judges, so if the number of conservative judges is high then the court will always be conservative. If the number of liberal judges is high, the court will always be liberal. There is this disadvantage but there is also an advantage that if it’s a liberal court and if it is a liberal democracy then it will work for the benefit of the people. But I have not given any serious thought onthis.
Q: Is there any other thing you would like to say?
A: I think the time has come for the judiciary to sit down, introspect and see what can be done, because people have faith in the judiciary. A lot of that faith has been eroded in the last couple of years. So one has to restore that faith and then increase that faith. I think the judiciary definitely needs to introspect.
‘A major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013.’- Aakash Parihar
Aakash Parihar is Partner at Triumvir Law, a firm specializing in M&A, PE/VC, startup advisory, international commercial arbitration, and corporate disputes. He is an alumnus of the National Law School of India University, Bangalore.
How did you come across law as a career? Tell us about what made you decide law as an option.
Growing up in a small town in Madhya Pradesh, wedid not have many options.There you either study to become a doctor or an engineer. As the sheep follows the herd, I too jumped into 11th grade with PCM (Physics, Chemistry and Mathematics).However, shortly after, I came across the Common Law Admission Test (CLAT) and the prospect of law as a career. Being a law aspirant without any background of legal field, I hardly knew anything about the legal profession leave alone the niche areas of corporate lawor dispute resolution. Thereafter, I interacted with students from various law schools in India to understand law as a career and I opted to sit for CLAT. Fortunately, my hard work paid off and I made it to the hallowed National Law School of India University, Bangalore (NSLIU). Joining NLSIU and moving to Bangalorewas an overwhelming experience. However, after a few months, I settled in and became accustomed to the rigorous academic curriculum. Needless to mention that it was an absolute pleasure to study with and from someof the brightest minds in legal academia. NLSIU, Bangalore broadened my perspective about law and provided me with a new set of lenses to comprehend the world around me. Through this newly acquired perspective and a great amount of hard work (which is of course irreplaceable), I was able to procure a job in my fourth year at law school and thus began my journey.
As a lawyer carving a niche for himself, tell us about your professional journey so far. What are the challenges that new lawyers face while starting out in the legal field?
I started my professional journey as an Associate at Samvad Partners, Bangalore, where I primarily worked in the corporate team. Prior to Samvad Partners, through my internship, I had developed an interest towards corporate law,especially the PE/VC and M&A practice area. In the initial years as an associate at Samvad Partners and later at AZB & Partners, Mumbai, I had the opportunity to work on various aspects of corporate law, i.e., from PE/VC and M&A with respect to listed as well as unlisted companies. My work experience at these firms equipped and provided me the know-how to deal with cutting edge transactional lawyering. At this point, it is important to mention that I always had aspirations to join and develop a boutique firm. While I was working at AZB, sometime around March 2019, I got a call from Anubhab, Founder of Triumvir Law, who told me about the great work Triumvir Law was doing in the start-up and emerging companies’ ecosystem in Bangalore. The ambition of the firm aligned with mine,so I took a leap of faith to move to Bangalore to join Triumvir Law.
Anyone who is a first-generation lawyer in the legal industry will agree with my statement that it is never easy to build a firm, that too so early in your career. However, that is precisely the notion that Triumvir Law wanted to disrupt. To provide quality corporate and dispute resolution advisory to clients across India and abroad at an affordable price point.
Once you start your professional journey, you need to apply everything that you learnt in law schoolwith a practical perspective. Therefore, in my opinion, in addition to learning the practical aspects of law, a young lawyer needs to be accustomed with various practices of law before choosing one specific field to practice.
India has been doing reallywell in the field of M&A and PE/VC. Since you specialize in M&A and PE/VC dealmaking, what according to you has been working well for the country in this sphere? What does the future look like?
India is a developing economy, andM&A and PE/VC transactions form the backbone of the same. Since liberalization, there has been an influx of foreign investment in India, and we have seen an exponential rise in PC/VA and M&A deals. Indian investment market growth especially M&A and PE/VC aspects can be attributed to the advent of startup culture in India. The increase in M&A and PE/VC deals require corporate lawyersto handle the legal aspects of these deals.
As a corporate lawyer working in M&A and PE/VC space, my work ranges from drafting term-sheets to the transaction documents (SPA, SSA, SHA, BTA, etc.). TheM&A and PE/VC deal space experienced a slump during the first few months of the pandemic, but since June 2021, there has been a significant growth in M&A and PE/VC deal space in India. The growth and consistence of the M&A and PE/VC deal space in India can be attributed to several factors such as foreign investment, uncapped demands in the Indian market and exceptional performance of Indian startups.
During the pandemic many businesses were shut down but surprisingly many new businesses started, which adapted to the challenges imposed by the pandemic. Since we are in the recovery mode, I think the M&A and PE/VC deal space will reach bigger heights in the comingyears. We as a firm look forward to being part of this recovery mode by being part of the more M&A and PE/VC deals in future.
You also advice start-ups. What are the legal issues or challenges that the start-ups usually face specifically in India? Do these issues/challenges have long-term consequences?
We do a considerable amount of work with startupswhich range from day-to-day legal advisory to transaction documentation during a funding round. In India, we have noticed that a sizeable amount of clientele approach counsels only when there is a default or breach, more often than not in a state of panic. The same principle applies to startups in India, they normally approach us at a stage when they are about to receive investment or are undergoing due diligence. At that point of time, we need to understand their legal issues as well as manage the demands of the investor’s legal team. The majornon-compliances by startups usually involve not maintaining proper agreements, delaying regulatory filings and secretarial compliances, and not focusing on proper corporate governance.
Another major issue for startups, especially during fund raising, is their compliance with extant RBI foreign exchange regulations, pricing guidelines, and the Companies Act 2013. Keeping up with these requirements can be time-consuming for even seasoned lawyers, and we can only imagine how difficult it would be for startups. Startups spend their initial years focusing on fund-raising, marketing, minimum viable products, and scaling their businesses. Legal advice does not usually factor in as a necessity. Our firm aims to help startups even before they get off the ground, and through their initial years of growth. We wanted to be the ones bringing in that change in the legal sector, and we hope to help many more such startups in the future.
In your opinion, are there any specific India-related problems that corporate/ commercial firms face as far as the company laws are concerned? Is there scope for improvement on this front?
The Indian legal system which corporate/commercial firms deal with is a living breathing organism, evolving each year. Due to this evolving nature, we lawyers are always on our toes.From a minor amendment to the Companies Act to the overhaul of the foreign exchange regime by the Reserve Bank of India, each of these changes affect the compliance and regulatory regime of corporates. For instance, when India changed the investment route for countries sharing land border with India,whereby any country sharing land border with India including Hong Kong cannot invest in India without approval of the RBI in consultation with the central government,it impacted a lot of ongoing transactions and we as lawyers had to be the first ones to inform our clients about such a change in the country’s foreign investment policy. In my opinion, there is huge scope of improvement in legal regime in India, I think a stable regulatory and tax regime is the need for the hour so far as the Indian system is concerned. The biggest example of such a market with stable regulatory and tax regime is Singapore, and we must work towards emulating the same.
Your boutique law firm has offices in three different cities — Delhi NCR, Mumbai and Bangalore. Have the Covid-induced restrictions such as WFH affected your firm’s operations? How has your firm adapted to the professional challenges imposed by the pandemic-related lifestyle changes?
We have offices in New Delhi NCR and Mumbai, and our main office is in Bangalore. Before the pandemic, our work schedule involved a fair bit of travelling across these cities. But post the lockdowns we shifted to a hybrid model, and unless absolutely necessary, we usually work from home.
In relation to the professional challenges during the pandemic, I think it was a difficult time for most young professionals. We do acknowledge the fact that our firm survived the pandemic. Our work as lawyers/ law firms also involves client outreach and getting new clients, which was difficult during the lockdowns. We expanded our client outreach through digital means and by conducting webinars, including one with King’s College London on International Treaty Arbitration. Further, we also focused on client outreach and knowledge management during the pandemic to educate and create legal awareness among our clients.
‘It’s a myth that good legal advice comes at prohibitive costs. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.’ – Archana Balasubramanian
Archana Balasubramanian is the founding partner of Agama Law Associates, a Mumbai-based corporate law firm which she started in 2014. She specialises in general corporate commercial transaction and advisory as well as deep sectoral expertise across manufacturing, logistics, media, pharmaceuticals, financial services, shipping, real estate, technology, engineering, infrastructure and health.
August 13, 2021:
Lawyers see companies ill-prepared for conflict, often, in India. When large corporates take a remedial instead of mitigative approach to legal issues – an approach utterly incoherent to both their size and the compliance ecosystem in their sector – it is there where the concept of costs on legal becomes problematic. Pre-dispute management strategy is much more rationalized on the business’ pocket than the costs of going in the red on conflict and compliances.
Corporates often focus on business and let go of backend maintenance of paperwork, raising issues as and when they arise and resolving conflicts / client queries in a manner that will promote dispute avoidance.
Corporate risk and compliance management is yet another elephant in India, which in addition to commercial disputes can be a drain on a company’s resources. It can be clubbed under four major heads – labour, industrial, financial and corporate laws. There are around 20 Central Acts and then specific state-laws by which corporates are governed under these four categories.
Risk and compliance management is also significantly dependent on the sector, size, scale and nature of the business and the activities being carried out.
The woes of a large number of promoters from the ecommerce ecosystem are to do with streamlining systems to navigate legal. India has certain heavily regulated sectors and, like I mentioned earlier, an intricate web of corporate risk and compliance legislation that can result in prohibitive costs in the remedial phase. To tackle the web in the preventive or mitigative phase, start-ups end up lacking the arsenal due to sheer intimidation from legal. Promoters face sectoral risks in sectors which are heavily regulated, risks of heavy penalties and fines under company law or foreign exchange laws, if fund raise is not done in a compliant manner.
It is a myth that good legal advice comes at prohibitive costs. Promoters are quick to sign on the dotted line and approach lawyers with a tick the box approach. A lot of heartburn can be avoided if documents are entered into with proper legal advice and with due negotiations.
Investment contracts, large celebrity endorsement contracts and CXO contracts are some key areas where legal advice should be obtained. Online contracts is also emerging as an important area of concern.
When we talk of scope, arbitration is pretty much a default mechanism at this stage for adjudicating commercial disputes in India, especially given the fixation of timelines for closure of arbitration proceedings in India. The autonomy it allows the parties in dispute to pick a neutral and flexible forum for resolution is substantial. Lower courts being what they are in India, arbitration emerges as the only viable mode of dispute resolution in the Indian commercial context.
The arbitrability of disputes has evolved significantly in the last 10 years. The courts are essentially pro-arbitration when it comes to judging the arbitrability of subject matter and sending matters to arbitration quickly.
The Supreme Court’s ruling in the Vidya Drolia case has significantly clarified the position in respect of tenancy disputes, frauds and consumer disputes. It reflects upon the progressive approach of the court and aims to enable an efficient, autonomous and effective arbitration environment in India.
Law firms stand for ensuring that the law works for business and not against it. Whatever the scope of our mandate, the bottom line is to ensure a risk-free, conflict-free, compliant and prepared enterprise for our client, in a manner that does not intimidate the client or bog them down, regardless of the intricacy of the legal and regulatory web it takes to navigate to get to that end result. Lawyers need to dissect the business of law from the work.
This really involves meticulous, detail-oriented, sheer hard work on the facts, figures, dates and all other countless coordinates of each mandate, repetitively and even to a, so-called, “dull” routine rhythm – with consistent single-mindedness and unflinching resolve.
As a firm, multiply that effort into volumes, most of it against-the-clock given the compliance heavy ecosystem often riddled with uncertainties in a number of jurisdictions. So the same meticulous streamlining of mandate deliverables has to be extrapolated by the management of the firm to the junior most staff.
Further, the process of streamlining itself has to be more dynamic than ever now given the pace at which the new economy, tech-ecosystem, business climate as well as business development processes turn a new leaf.
Finally, but above all, we need to find a way to feel happy, positive and energized together as a team while chasing all of the aforesaid dreams. The competitive timelines and volumes at which a law firm works, this too is a real challenge. But we are happy to face it and evolve as we grow.
We always as a firm operated on the work from anywhere principle. We believed in it and inculcated this through document management processes to the last trainee. This helped us shut shop one day and continue from wherever we are operating.
The team has been regularly meeting online (at least once a day). We have been able to channel the time spent in travelling to and attending meetings in developing our internal knowledge banks further, streamline our processes, and work on integrating various tech to make the practice more cost-effective for our clients.
Right to Disclosure – Importance & Challenges in Criminal Justice System – By Manu Sharma
Personal liberty is the most cherished value of human life which thrives on the anvil of Articles 14 and 21 of the Constitution of India (“the Constitution”). Once a person is named an accused, he faces the spectre of deprivation of his personal liberty and criminal trial. This threat is balanced by Constitutional safeguards which mandate adherence to the rule of law by the investigating agencies as well as the Court. Thus, any procedure which seeks to impinge on personal liberty must also be fair and reasonable. The right to life and personal liberty enshrined under article 21 of the Constitution, expanded in scope post Maneka Gandhi[1], yields the right to a fair trial and fair investigation. Fairness demands disclosure of anything relevant that may be of benefit to an accused. Further, the all-pervading principles of natural justice envisage the right to a fair hearing, which entails the right to a full defence. The right to a fair defence stems from full disclosure. Therefore, the right of an accused to disclosure emanates from this Constitutional philosophy embellished by the principles of natural justice and is codified under the Code of Criminal Procedure, 1973 (“Code”).
Under English jurisprudence, the duty of disclosure is delineated in the Criminal Procedure and Investigations Act, 1996, which provides that the prosecutor must disclose to the accused any prosecution material which has not previously been disclosed to the accused and which might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused, except if such disclosure undermines public interest.[2] Fairness ordinarily requires that any material held by the prosecution which weakens its case or strengthens that of the defendant, if not relied on as part of its formal case against the defendant, should be disclosed to the defence.[3] The duty of disclosure under common law contemplates disclosure of anything which might assist the defence[4], even if such material was not to be used as evidence[5]. Under Indian criminal jurisprudence, which has borrowed liberally from common law, the duty of disclosure is embodied in sections 170(2), 173, 207 and 208 of the Code, which entail the forwarding of material to the Court and supply of copies thereof to the accused, subject to statutory exceptions.
II. Challenges in Enforcement
The right to disclosure is a salient feature of criminal justice, but its provenance and significance appear to be lost on the Indian criminal justice system. The woes of investigative bias and prosecutorial misconduct threaten to render this right otiose. That is not to say that the right of an accused to disclosure is indefeasible, as certain exceptions are cast in the Code itself, chief among them being public interest immunity under section 173(6). However, it is the mischief of the concept of ‘relied upon’ emerging from section 173(5) of the Code, which is wreaking havoc on the right to disclosure and is the central focus of this article. The rampant misuse of the words “on which the prosecution proposes to rely’ appearing in section 173(5) of the Code, to suppress material favourable to the accused or unfavourable to the prosecution in the garb of ‘un-relied documents’ has clogged criminal courts with avoidable litigation at the very nascent stage of supply of copies of documents under section 207 of the Code. The erosion of the right of an accused to disclosure through such subterfuge is exacerbated by the limited and restrictive validation of this right by criminal Courts. The dominant issues highlighted in the article, which stifle the right to disclosure are; tainted investigation, unscrupulous withholding of material beneficial to the accused by the prosecution, narrow interpretation by Courts of section 207 of the Code, and denial of the right to an accused to bring material on record in the pre-charge stage.
A. Tainted Investigation
Fair investigation is concomitant to the preservation of the right to fair disclosure and fair trial. It envisages collection of all material, irrespective of its inculpatory or exculpatory nature. However, investigation is often vitiated by the tendencies of overzealous investigating officers who detract from the ultimate objective of unearthing truth, with the aim of establishing guilt. Such proclivities result in collecting only incriminating material during investigation or ignoring the material favourable to the accused. This leads to suppression of material and scuttles the right of the accused to disclosure at the very inception. A tainted investigation leads to miscarriage of justice. Fortunately, the Courts are not bereft of power to supervise investigation and ensure that the right of an accused to fair disclosure remains protected. The Magistrate is conferred with wide amplitude of powers under section 156(3) of the Code to monitor investigation, and inheres all such powers which are incidental or implied to ensure proper investigation. This power can be exercised suo moto by the Magistrate at all stages of a criminal proceeding prior to the commencement of trial, so that an innocent person is not wrongly arraigned or a prima facie guilty person is not left out.[6]
B. Suppression of Material
Indian courts commonly witness that the prosecution is partisan while conducting the trial and is invariably driven by the lust for concluding in conviction. Such predisposition impels the prosecution to take advantage by selectively picking up words from the Code and excluding material favouring the accused or negating the prosecution case, with the aid of the concept of ‘relied upon’ within section 173(5) of the Code. However, the power of the prosecution to withhold material is not unbridled as the Constitutional mandate and statutory rights given to an accused place an implied obligation on the prosecution to make fair disclosure.[7] If the prosecution withholds vital evidence from the Court, it is liable to adverse inference flowing from section 114 of the Indian Evidence Act, 1872 (“Evidence Act). The prosecutor is expected to be guided by the Bar Council of India Rules which prescribe that an advocate appearing for the prosecution of a criminal trial shall so conduct the prosecution that it does not lead to conviction of the innocent. The suppression of material capable of establishment of the innocence of the accused shall be scrupulously avoided. [8]
C. Scope of S. 207
The scope of disclosure under section 207 has been the subject of fierce challenge in Indian Courts on account of the prosecution selectively supplying documents under the garb of ‘relied upon’ documents, to the prejudice of the defence of an accused. The earlier judicial trend had been to limit the supply of documents under section 207 of the Code to only those documents which were proposed to be relied upon by the prosecution. This view acquiesced the exclusion of documents which were seized during investigation, but not filed before the Court along with the charge sheet, rendering the right to disclosure a farce. This restrictive sweep fails to reconcile with the objective of a fair trial viz. discovery of truth. The scheme of the code discloses that Courts have been vested with extensive powers inter alia under sections 91, 156(3) and 311 to elicit the truth. Towards the same end, Courts are also empowered under Section 165 of the Evidence Act. Thus, the principle of harmonious construction warrants a more purposive interpretation of section 207 of the code. The Hon’ble Supreme Court expounded on the scope of Section 207 of the Code in the case of Manu Sharma[9] and held that documents submitted to the Magistrate under section 173(5) would deem to include the documents which have to be sent to the magistrate during the course of investigation under section 170(2). A document which has been obtained bona fide and has a bearing on the case of the prosecution should be disclosed to the accused and furnished to him to enable him to prepare a fair defence, particularly when non production or disclosure would affect administration of justice or prejudice the defence of the accused. It is not for the prosecution or the court to comprehend the prejudice that is likely to be caused to the accused. The perception of prejudice is for the accused to develop on reasonable basis.[10] Manu Sharma’s [supra] case has been relied upon in Sasikala [11] wherein it was held that the Court must concede a right to the accused to have access to the documents which were forwarded to the Court but not exhibited by the prosecution as they favoured the accused. These judgments seem more in consonance with the true spirit of fair disclosure and fair trial. However, despite such clear statements of law, courts are grappling with the judicial propensity of deviating from this expansive interpretation and regressing to the concept of relied upon. The same is evident from a recent pronouncement of the Delhi High Court where the ratios laid down in Manu Sharma & Sasikala [supra] were not followed by erroneously distinguishing from those cases.[12] Such “per incuriam” aberrations by High Court not only undermine the supremacy of the Apex Court, but also adversely impact the functioning of the district courts over which they exercise supervisory jurisdiction. Hopefully in future Judges shall be more circumspect and strictly follow the law declared by the Apex Court.
D. Pre-Charge Embargo
Another obstacle encountered in the enforcement of the right to disclosure is the earlier judicial approach to stave off production or consideration of any additional documents not filed alongwith the charge sheet at the pre-charge stage, as the right to file such material was available to the accused only upon the commencement of trial after framing of charge.[13] At the pre-charge stage, Court could not direct the prosecution to furnish copies of other documents[14] It was for the accused to do so during trial or at the time of entering his defence. However, the evolution of law has seen that at the stage of framing charge, Courts can rely upon the material which has been withheld by the prosecutor, even if such material is not part of the charge sheet, but is of such sterling quality demolishing the case of the prosecution.[15] Courts are not handicapped to consider relevant material at the stage of framing charge, which is not relied upon by the prosecution. It is no argument that the accused can ask for the documents withheld at the time of entering his defence.[16] The framing of charge is a serious matter in a criminal trial as it ordains an accused to face a long and arduous trial affecting his liberty. Therefore, the Court must have all relevant material before the stage of framing charge to ascertain if grave suspicion is made out or not. Full disclosure at the stage of section 207 of the code, which immediately precedes discharging or charging an accused, enables an accused to seek a discharge, if the documents, including those not relied upon by the prosecution, create an equally possible view in favour of the accused.[17] On the other hand, delaying the reception of documents postpones the vindication of the accused in an unworthy trial and causes injustice by subjecting him to the trauma of trial. There is no gainsaying that justice delayed is justice denied, therefore, such an approach ought not to receive judicial consent. A timely discharge also travels a long way in saving precious time of the judiciary, which is already overburdened by the burgeoning pendency of cases. Thus, delayed or piecemeal disclosure not only prejudices the defence of the accused, but also protracts the trial and occasions travesty of justice.
III. Duties of the stakeholders in criminal justice system
The foregoing analysis reveals that participation of the investigating agency, the prosecution and the Court is inextricably linked to the enforcement of the right to disclosure. The duties cast on these three stakeholders in the criminal justice system, are critical to the protection of this right. It is incumbent upon the investigating agencies to investigate cases fairly and to place on record all the material irrespective of its implication on the case of prosecution case. Investigation must be carried out with equal alacrity and fairness irrespective of status of accused or complainant.[18] An onerous duty is cast on the prosecution as an independent statutory officer, to conduct the trial with the objective of determination of truth and to ensure that material favourable to the defence is supplied to the accused. Ultimately, it is the overarching duty of the Court to ensure a fair trial towards the administration of justice for all parties. The principles of fair trial require the Court to strike a delicate balance between competing interests in a system of adversarial advocacy. Therefore, the court ought to exercise its power under section 156(3) of the Code to monitor investigation and ensure that all material, including that which enures to the benefit of the accused, is brought on record. Even at the stage of supply of copies of police report and documents under section 207 of the Code, it is the duty of the Court to give effect to the law laid down by the Hon’ble Supreme Court in Manu Sharma (supra) and Sasikala (supra), and ensure that all such material is supplied to the accused irrespective of whether it is “relied upon” by the prosecution or not.
IV. Alternate Remedy
The conundrum of supply of copies under section 207 of the code abounds criminal trials. Fairness is an evolving concept. There is no doubt that disclosure of all material which goes to establish the innocence of an accused is the sine qua non of a fair trial.[19] Effort is evidently underway to expand the concept in alignment with English jurisprudence. In the meanwhile, does the right of an accused to disclosure have another limb to stand on? Section 91 of the Code comes to the rescue of an accused, which confers wide discretionary powers on the Court, independent of section 173 of the Code, to summon the production of things or documents, relevant for the just adjudication of the case. In case the Court is of the opinion that the prosecution has withheld vital, relevant and admissible evidence from the Court, it can legitimately use its power under section 91 of the Code to discover the truth and to do complete justice to the accused.[20]
V. Conclusion
A society’s progress and advancement are judged on many parameters, an important one among them being the manner in which it administers criminal justice. Conversely, the ironic sacrilege of the core virtues of criminal jurisprudence in the temples of justice evinces social decadence. The Indian legislature of the twenty first century has given birth to several draconian statutes which place iron shackles on personal liberty, evoking widespread fear of police abuses and malicious prosecution. These statutes not only entail presumptions which reverse the burden of proof, but also include impediments to the grant of bail. Thus, a very heavy burden to dislodge the prosecution case is imposed on the accused, rendering the right to disclosure of paramount importance. It is the duty of the Court to keep vigil over this Constitutional and statutory right conferred on an accused by repudiating any procedure which prejudices his defence. Notable advancement has been made by the Apex Court in interpreting section 207 of the Code in conformity with the Constitutional mandate, including the right to disclosure. Strict adherence to the afore-noted principles will go a long way in ensuring real and substantial justice. Any departure will not only lead to judicial anarchy, but also further diminish the already dwindling faith of the public in the justice delivery system.
**
Advocate Manu Sharma has been practising at the bar for over sixteen years. He specialises in Criminal Defence. Some of the high profile cases he has represented are – the 2G scam case for former Union minister A Raja; the Religare/Fortis case for Malvinder Singh; Peter Mukerjee in the P Chidambaram/ INX Media case; Devas Multimedia in ISRO corruption act case; Om Prakash Chautala in PMLA case; Aditya Talwar in the aviation scam case; Dilip Ray, former Coal Minister in one of the coal scam cases; Suhaib Illyasi case.
**
Disclaimer: The views or opinions expressed are solely of the author.
[1] Maneka Gandhi and Another v. Union of India, (1978) 1 SCC 248
[2] S. 3 of the Criminal Procedure and Investigations Act, 1996
[3] R v. H and R v. C, 2004 (1) ALL ER 1269
[4] R v. Ward (Judith), (1993) 1 WLR 619 : (1993) 2 ALL ER 577 (CA)
[5] R v. Preston, (1994) 2 AC 130 : (1993) 3 WLR 891 : (1993) 4 ALL ER 638 (HL), R v. Stinchcome,
(1991), 68 C.C.C. (3d) 1 (S.C.C.)
[6] Vinubhai Haribhai Malaviya and Others v. State of Gujarat and Another, 2019 SCC Online SC 1346
[7] Sidhartha Vashishth alias Manu Sharma v. State (NCT of Delhi), (2010) 6 SCC 1
[8] R. 16, part II, Ch. VI of the Bar Council of India Rules
[9] Manu Sharma, (2010) 6 SCC 1
[10] V.K. Sasikala v. State, (2012) 9 SCC 771 : AIR 2013 SC 613
[11] Sasikala, (2012) 9 SCC 771 : AIR 2013 SC 613
[12] Sala Gupta and Another v. Directorate of Enforcement, (2019) 262 DLT 661
[13] State of Orissa v. Debendra Nath Padhi¸(2005) 1 SCC 568
[14] Dharambir v. Central Bureau of Investigation, ILR (2008) 2 Del 842 : (2008) 148 DLT 289
[15] Nitya Dharmananda alias K. Lenin and Another v. Gopal Sheelum Reddy, (2018) 2 SCC 93
[16] Neelesh Jain v. State of Rajasthan, 2006 Cri LJ 2151
[17] Dilwar Balu Kurane v. State of Maharashtra, (2002) 2 SCC 135, Yogesh alias Sachin Jagdish Joshi v. State of Maharashtra, (2008) 10 SCC 394
[18] Karan Singh v. State of Haryana, (2013) 12 SCC 529
[19] Kanwar Jagat Singh v. Directorate of Enforcement & Anr, (2007) 142 DLT 49
[20] Neelesh, 2006 Cri LJ 2151
Disclaimer: The views or opinions expressed are solely of the author.
Validity & Existence of an Arbitration Clause in an Unstamped Agreement
By Kunal Kumar
January 8, 2024
In a recent ruling, a seven-judge bench of the Supreme Court of India in its judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, overruled the constitutional bench decision of the Supreme Court of India in N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. and has settled the issue concerning the validity and existence of an arbitration clause in an unstamped agreement. (‘N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III’)
Background to N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
One of the first instances concerning the issue of the validity of an unstamped agreement arose in the case of SMS Tea Estate Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. In this case, the Hon’ble Apex Court held that if an instrument/document lacks proper stamping, the exercising Court must preclude itself from acting upon it, including the arbitration clause. It further emphasized that it is imperative for the Court to impound such documents/instruments and must accordingly adhere to the prescribed procedure outlined in the Indian Stamp Act 1899.
With the introduction of the 2015 Amendment, Section 11(6A) was inserted in the Arbitration & Conciliation Act 1996 (A&C Act) which stated whilst appointing an arbitrator under the A&C Act, the Court must confine itself to the examination of the existence of an arbitration agreement.
In the case of M/s Duro Felguera S.A. v. M/s Gangavaram Port Limited, the Supreme Court of India made a noteworthy observation, affirming that the legislative intent behind the 2015 Amendment to the A&C Act was necessitated to minimise the Court's involvement during the stage of appointing an arbitrator and that the purpose embodied in Section 11(6A) of A&C Act, deserves due acknowledgement & respect.
In the case of Garware Wall Ropes Ltd. v. Cosatal Marine Constructions & Engineering Ltd., a divisional bench of the Apex Court reaffirmed its previous decision held in SMS Tea Estates (supra) and concluded that the inclusion of an arbitration clause in a contract assumes significance, emphasizing that the agreement transforms into a contract only when it holds legal enforceability. The Apex Court observed that an agreement fails to attain the status of a contract and would not be legally enforceable unless it bears the requisite stamp as mandated under the Indian Stamp Act 1899. Accordingly, the Court concluded that Section 11(6A) read in conjunction with Section 7(2) of the A&C Act and Section 2(h) of the Indian Contract Act 1872, clarified that the existence of an arbitration clause within an agreement is contingent on its legal enforceability and that the 2015 Amendment of the A&C Act to Section 11(6A) had not altered the principles laid out in SMS Tea Estates (supra).
Brief Factual Matrix – N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.
Indo Unique Flame Ltd. (‘Indo Unique’) was awarded a contract for a coal beneficiation/washing project with Karnataka Power Corporation Ltd. (‘KPCL’). In the course of the project, Indo Unique entered into a subcontract in the form of a Work Order with N.N. Global Mercantile Pvt. Ltd. (‘N.N. Global’) for coal transportation, coal handling and loading. Subsequently, certain disputes arose with KPCL, leading to KPCL invoking Bank Guarantees of Indo Unique under the main contract, after which Indo Unique invoked the Bank Guarantee of N. N. Global as supplied under the Work Order.
Top of FormS
Subsequently, N.N. Global initiated legal proceedings against the cashing of the Bank Guarantee in a Commercial Court. In response thereto, Indo Unique moved an application under Section 8 of the A&C Act, requesting that the Parties to the dispute be referred for arbitration. The Commercial Court dismissed the Section 8 application, citing the unstamped status of the Work Order as one of the grounds. Dissatisfied with the Commercial Court's decision on 18 January 2018, Indo Unique filed a Writ Petition before the High Court of Bombay seeking that the Order passed by the Commercial Court be quashed or set aside. The Hon’ble Bombay High Court on 30 September 2020 allowed the Writ Petition filed by Indo Unique, aggrieved by which, N.N. Global filed a Special Leave Petition before the Supreme Court of India.
N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. – I
The issue in the matter of M/s N.N. Global Mercantile Pvt. Ltd. v. M/s Indo Unqiue Flame Ltd. & Ors. came up before a three-bench of the Supreme Court of India i.e. in a situation when an underlying contract is not stamped or is insufficiently stamped, as required under the Indian Stamp Act 1899, would that also render the arbitration clause as non-existent and/or unenforceable (‘N.N. Global Mercantile Pvt. Ltd. v. Indo Flame Ltd. – I’).
The Hon’ble Supreme Court of India whilst emphasizing the 'Doctrine of Separability' of an arbitration agreement held that the non-payment of stamp duty on the commercial contract would not invalidate, vitiate, or render the arbitration clause as unenforceable, because the arbitration agreement is considered an independent contract from the main contract, and the existence and/or validity of an arbitration clause is not conditional on the stamping of a contract. The Hon’ble Supreme Court further held that deficiency in stamp duty of a contract is a curable defect and that the deficiency in stamp duty on the work order, would not affect the validity and/or enforceability of the arbitration clause, thus applying the Doctrine of Separability. The arbitration agreement remains valid and enforceable even if the main contract, within which it is embedded, is not admissible in evidence owing to lack of stamping.
The Hon’ble Apex Court, however, considered it appropriate to refer the issue i.e. whether unstamped instrument/document, would also render an arbitration clause as non-existent, unenforceable, to a constitutional bench of five-bench of the Supreme Court.
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II
On 25 April 2023, a five-judge bench of the Hon’ble Supreme Court of India in the matter of N. N. Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. held that (1) An unstamped instrument containing an arbitration agreement cannot be said to be a contract which is enforceable in law within the meaning of Section 2(h) of the Indian Contract Act 1872 and would be void under Section 2(g) of the Indian Contract Act 1872, (2) an unstamped instrument which is not a contract nor enforceable cannot be acted upon unless it is duly stamped, and would not otherwise exist in the eyes of the law, (3) the certified copy of the arbitration agreement produced before a Court, must clearly indicate the stamp duty paid on the instrument, (4) the Court exercising its power in appointing an arbitration under Section 11 of the A&C Act, is required to act in terms of Section 33 and Section 35 of the Indian Stamp Act 1899 (N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II).
N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – III
A seven-judge bench of the Supreme Court of India on 13 December 2023 in its recent judgment in re: Interplay between arbitration agreements under the Arbitration & Conciliation Act 1996 and the Indian Stamp Act 1899, (1) Agreements lacking proper stamping or inadequately stamped are deemed inadmissible as evidence under Section 35 of the Stamp Act. However, such agreements are not automatically rendered void or unenforceable ab initio; (2) non-stamping or insufficient stamping of a contract is a curable defect, (2) the issue of stamping is not subject to determination under Sections 8 or 11 of the A&C Act by a Court. The concerned Court is only required to assess the prima facie existence of the arbitration agreement, separate from concerns related to stamping, and (3) any objections pertaining to the stamping of the agreement would fall within the jurisdiction of the arbitral tribunal. Accordingly, the decision in N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. – II and SMS Tea (supra) was overruled, by the seven-judge bench of the Supreme Court of India.
Kunal is a qualified lawyer with more than nine years of experience and has completed his LL.M. in Dispute Resolution (specialisation in International Commercial Arbitration) from Straus Institute for Dispute Resolution, Pepperdine University, California.
Kunal currently has his own independent practice and specializes in commercial/construction arbitration as well as civil litigation. He has handled several matters relating to Civil Law and arbitrations (both domestic and international) and has appeared before the Supreme Court of India, High Court of Delhi, District Courts of Delhi and various other tribunals.
No Safe Harbour For Google On Trademark Infringement
By Mayank Grover & Pratibha Vyas
October 9, 2023
Innovation, patience, dedication and uniqueness culminate in establishing a distinct identity. A trademark aids in identifying the source and quality, shaping perceptions about the identity's essence. When values accompany a product or service's trademark, safeguarding against misuse and infringement becomes crucial. A recent pronouncement of a Division Bench of the Delhi High Court dated August 10, 2023 in Google LLC v. DRS Logistics (P) Ltd. & Ors. and Google India Private Limited v. DRS Logistics (P) Ltd. & Ors. directed that Google’s use of trademarks as keywords for its Google Ads Programme does amount to ‘use’ in advertising under the Trademarks Act and the benefit of safe harbour would not be available to Google if such keywords infringe on the concerned trademark.
Factual Background
Google LLC manages and operates the Google Search Engine and Ads Programme, while, Google India Private Limited is a subsidiary of Google that has been appointed as a non-exclusive reseller of the Ads Programme in India. The Respondents, DRS Logistics and Agarwal Packers and Movers Pvt. Ltd. are leading packaging, moving and logistics service providers in India.
On 22.12.2011, DRS filed a suit against Google and Just Dial Ltd. under provisions of the Trademarks Act, 1999 (‘TM Act’) inter alia seeking a permanent injunction against Google from permitting third parties from infringing, passing off etc. the relevant trademarks of DRS. The core of the dispute revolved around Google’s Ads Programme. DRS claimed that its trade name 'AGARWAL PACKERS AND MOVERS' is widely recognized and a 'well-known' trademark. Use of DRS’s trademark as a keyword diverts internet traffic from its website to that of its competitors and they were entitled to seek restraint against Google for permitting third parties who are not authorized to use the said trademark. DRS further argued that Google benefits from these trademark infringements. This practice involved charging a higher amount for displaying these ads, constituting an infringement of their trademarks. Whereas, Google contended that the use of the keyword in the Ads Programme does not amount to ‘use’ under the TM Act notwithstanding that the keyword is/or similar to a trademark. Thus, the use of a term as a keyword cannot be construed as an infringement of a trademark under the TM Act, and being an intermediary, it claimed a safe harbour under Section 79 of the Information Technology Act, 2000. (‘IT Act’).
In essence, the dispute between the parties was rooted in DRS’s grievance concerning the Ads Programme. The Learned Single Judge vide judgment dated 30.10.2021interpreted relevant provisions of the TM Act and drew on multiple legal precedents to arrive at the decision that DRS can seek protection of its trademarks which were registered under Section 28 of the TM Act and issued directions to investigate complaints alleging the use of trademark and/or to ascertain whether a sponsored result has an effect of infringing a trademark or passing off.
Being aggrieved, Google LLC and Google Pvt. Ltd. filed appeals before the Division Bench. Google LLC argued that the Single Judge’s findings were erroneous and the directions issued were liable to be set aside. Google India claimed that it doesn’t control and operate the Search Engine and the Ads Programme making it unable to comply with the directions passed in the impugned judgment.
Analysis & Decision of Court
The Division Bench found Single Judge’s rationale for assessing trademark infringement through keywords and meta-tags valid. Meta-tags are a list of words/code in a website, not readily visible to the naked eye. It serves as a tool for indexing the website by a search engine. If a trademark of a third party is used as a meta-tag, the same would serve as identifying the website as relevant to the search query that includes the trademark as a search term. The use of keywords in the Ads Programme also serves similar purpose. The Division Bench was unable to accept that using a trademark as a keyword, even if not visible, would not be considered trademark use under the TM Act.
Google placed heavy reliance on the decisions rendered by Courts across jurisdictions of United Kingdom, United States of America, European Union, Australia, New Zealand, Russia, South Africa, Canada, Spain, Italy, Japan and China; in the cases of Google France SARL and Google Inc. v. Louis Vitton SA & Ors.[1], Interflora Inc. v. Marks & Spencer Plc.[2], and L’Oreal SA v. eBay International AG[3] in support of the contention that the use of trade marks is by the advertiser and not by Google. However, the Division Bench rejected Google’s passive role; highlighting its active involvement in recommending and promoting trademark keywords for higher clicks in its Ads Programme. Division Bench referred to a few judicial decisions rendered in the United States of America that captured the essence of the controversy for perspective, concluding that Google actively promotes and encourages trademarks associated with major goods and services, rather than having a passive role.
It was held that the contention that the use of trademarks as keywords, per se constitutes an infringement of the trademark is unmerited; the assumption that an internet user is merely searching the address of the proprietor of the trademark when he feeds in a search query that may contain a trademark, is erroneous.
The Doctrine of 'Initial Interest Confusion' addresses trademark infringement based on pre-purchase confusion. The doctrine is applied when meta-tags, keywords, or domain names cause initial confusion similar to a registered trademark. If users are misled to access unrelated websites, trademark use in internet advertising may be actionable and reliance was placed on US precedents. Referring to Section 29 of the TM Act, it was directed that Section 29 does not specify the duration for which the confusion lasts but, even if the confusion is for a short duration and an internet user is able to recover from the same, the trade mark would be infringed and would offend Section 29(2) of the TM Act.
It was held that the Ads Programme is a platform for displaying advertisements. Google, being an architect and operator of its own programme makes it an active participant in the use of trademarks and determining the advertisements displayed on search pages. Their use of proprietary software makes them utilize trademarks and control the distribution of information related to potentially infringing links, ultimately leading to revenue maximization. Hence, a substantial link exists between Google LLC and Google India, rendering it impossible for Google India to deny its role in operating the Ads Programme. It was further held that Google sells trademarks as keywords to advertisers and encourages users to use trademarks as keywords for ads. It is contradictory for Google to encourage trademark use while claiming data belongs to third parties for exemption. After 2004, Google changed policies to boost revenue and subsequently, introduced a tool that searches effective terms, including trademarks. Google's active involvement in its advertising business and online nature does not necessarily qualify it for benefits under Section 79 of the IT Act. The Division Bench agreed with the view of the Single Judge that Google would not be eligible for protection of safe harbour under Section 79(1) of the IT Act, if its alleged activities infringe trademarks.
Conclusion
This is a seminal decision governing (and rather, restricting) the operations of intermediaries and redefining the jurisprudence of safe harbour under the IT Act. The decision is well-reasoned and establishes a significant precedent for safeguarding trademarks by uniquely holding Google accountable under its Ads Programme. The same will prevent usage of tradenames as a third-party trademark in keyword search or metatags by advertisers on Google’s search engine. While keywords and meta-tags have different levels of visibility, their purpose is similar i.e. advertising and attracting internet traffic. The use of trademarks as meta-tags by a person who is neither a proprietor of the trademark nor permitted to use the same leads to confusion amongst public at large due to the automated processes of search engines and consequently, constitutes trademark infringement.
About the Authors: Mayank Grover is a Partner and Pratibha Vyas is an Associate at Seraphic Advisors, Advocates & Solicitors
[1] C-236/08 to C-238/08 (2010) [2011] All ER (EC) 41
[2] [2014] EWCA Civ 1403
[3] 2C- 324/09 (2010)
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