Character Merchandising: The Concept And Its Growth

Character Merchandising: The Concept And Its Growth

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Disciplinary Proceedings: Dilemma and Dogmas

By Deo Prakash Singh

June 2, 2022

Disciplinary proceedings are the documented rules that define the relationship and control between a master and a servant. The power of the master to exercise control over the servant is to maintain and sustain the working environment at the workplace to achieve the dedicated goal and objectives. It signifies the obligation of the servant to obey and act in accordance with the code of conduct formulated by the master.

Disciplinary action is imposed by the employer on an employee against an act of misconduct  by ordering punishment. The proceedings are perhaps the most vast and litigated branches in India and are full of dilemmas and dogmas. Service matters have the maximum number of commentaries, statutes, rules and regulations. The author here tries to discuss disciplinary proceedings — how they are conducted in public service tribunals, the procedure through which cases filed, and how they are conducted.

The general conception that a government job, in contrast to a private job, is a safe and secure job that ensures uninterrupted pay, perks and other service benefits is a misnomer. The statement may be true to a considerable extent because of the play and importance of natural justice in conducting disciplinary proceedings in public service. But the master in this case is that the mighty state has the capacity to diminish the future prospects of a government delinquent employee. Not only this, in public service the government delinquent employee has no way except to knock the doors of the court which is a time-taking and expensive exercise that sometimes even remains undecided. During the pendency of the litigation the employee may be deprived of service benefits and promotions. It is very difficult to decide between the two — whether justice delayed is justice denied or justice hurried is justice buried. The principle of natural justice sometimes derails from its impregnated objective.

Natural Justice and Disciplinary Proceedings

The principles of natural justice, generally, are taken care of while conducting disciplinary proceedings.

Article 311 of the Constitution of India guarantees the protection of rights of civil servants against arbitrary dismissal, removal and reduction in rank. This protection is not available where the employee has been convicted of a criminal charge or the competent authority is satisfied that compliance with the rules of natural justice is not reasonably practicable or the President or the Governor is satisfied that holding of an enquiry is not expedient in the interest of the security of the state. This is one of the express exceptions referred to in Article 310 and not subject to any control by any other provision of the Constitution. This provision in the Constitution aims at providing security of tenure to a government servant. This shield is a security to the extent of providing certain safeguards which have been made conditions precedent for dismissal or removal or reduction in rank of a government servant.

It is established that the principle of natural justice mainly comprises of following two rules:

(I) no person is to be condemned without hearing

(II) no person shall be a judge of his own cause

These two are the basic features. It means that fairness in conducting the proceedings shall be the essence of practice and the delinquent employee should be treated fairly which may culminate into punishment. The fairness principle requires a tribunal to proceed and hear the aggrieved employee on the points of law and procedure of fairness to protect the rights ensconced in the law book.

Elements of Disciplinary Proceedings

The proceedings are conducted under the domestic jurisdiction of the employer. To hold an enquiry into the misconduct of the employee is the most important feature and a precondition to the imposition of any punishment on a public servant. It is a universal principle and procedure because of the fact that almost all government servants and employees of statutory corporations or government companies are governed by rules which generally provide for a detailed procedure to be followed before imposing any punishment.

A departmental proceeding is a quasi-judicial proceeding and hence the enquiry officer’s performance a quasi-judicial function. The articles of charges levelled against the delinquent employee must be found to have been proved. The enquiry officer is duty-bound to arrive at a finding upon taking into consideration the materials brought on record by the parties. The proceeding has to be conducted against any person in a strict adherence to the statutory provisions and the principles of natural justice. The charges would be specific, definite and distinct setting out the details of the incident which forms the basis of the charges. No enquiry can be sustained on vague charges. The enquiry has to be conducted fairly, objectively but not subjectively. The findings should not be unreasonable and perverse nor the same should be based on conjectures and surmises. The court is very a specific on proof and suspicion. Every act or omission on the part of the delinquent employee cannot be a misconduct. The authority must record reasons for arriving at the findings of fact in the context of the statute defining the misconduct. Evidence adduced should not be perfunctory. Even if the delinquent employee does not take the defence or raise any protest, that does not absolve the inquiring   authority from being vitiated for the reason particularly in respect of an order involving adverse or penal consequences.

Central Civil Services (Classification, Control and Appeal) Rules, 1965 under Rule 11 enumerated major and minor penalties and the procedure to conduct the disciplinary proceedings. It has also provided, under many decisions of the Government of India, the difference and definition of major and minor penalties in which major penalty shall be in case of grave and serious charges.

Administrative Tribunals

The Law provides for the establishment of Administrative Tribunal for the Union and the states specifying the jurisdiction and powers of such tribunals, procedure to be followed by the tribunals and excludes the jurisdiction of all courts except the Supreme Court.

The law also provides that the president in case of Union and the Governor in case of a state may make rules and regulations of services and posts in connection with the affairs of the state to such services.

Here it is important to include that only government servants throughout a state can file their respective cases in the tribunal to get their grievances redressed. It means that the tribunals are vested with the authority to hear the grievances of the employees of the state/Union only whereas further the employees working with private companies or organisations which are not owned by the state can only file their cases under industrial disputes in labour courts and industrial tribunals.

Preliminary Enquiry

Normally the disciplinary authority appoints a preliminary enquiry officer to look into the alleged charges against the government servant and if the preliminary enquiry officer is prima facie guilty of the alleged misconduct, he may prepare a charge-sheet of the same and produce it before the disciplinary authority. The proceeding may not be known to the delinquent employee. The disciplinary authority on the basis of the charge-sheet submitted by the preliminary enquiry officer proceed to initiate departmental enquiry and it may start afresh and may not be from the point where the preliminary enquiry officer left. It is an established rule that the preliminary enquiry officer cannot be appointed as enquiry officer in the full-fledged enquiry as he may be prejudiced to the delinquent employee because he had already framed a charge-sheet against him in the preliminary enquiry.

Procedure TConduct Enquiry ICase OMajor Penalty

The appointing authority/ disciplinary authority has to issue in order to initiate the disciplinary proceedings against the government servant. Sometimes the Governor of the state has to do the same as he is being the appointing authority of the specified government servants. The disciplinary authority may himself enquire into the charges or appoint an officer subordinate to the enquiry officer to enquire into the charges. The charge-sheet shall be approved by the disciplinary authority. The charges should be precise and clear to facilitate the government servant of the facts and circumstances against him. The documentary evidences and the names of witnesses proposed should prove the same along with oral evidence.

The delinquent government servant shall be required to submit a written statement of his defence in person within a specified time period mentioned in the book of rules preferably within 15 days from the date of issue/receipt of the order. The government servant shall have to state that whether he desires to cross examine any witness mentioned in the charge-sheet or whether he desires to produce some new or extra evidence. He shall also be informed that in case a written submission is not filed within the specified date it will be presumed that he has none to furnish and the enquiry officer shall proceed to complete the enquiry ex parte.

It has also been decided by a court judgement that after the charge-sheet is given to the employee, an oral enquiry is must and notice should be given to the employee intimating him about the date, time and place of enquiry. It has also been laid down in this case that if an opportunity to the employee to produce witnesses or to rebut the evidence against him is not given then the whole enquiry is liable to be quashed ab initio and the punishment on the basis of such enquiry report shall not be sustainable.

It is settled law that the documents relied in support of the charges have to be proved in departmental enquiry by the enquiry officer in the presence of the delinquent employee. The government servant is also at liberty to ask for documents in case they are mentioned in the charge-sheet. But is the same have not been annexed with the charge-sheet, then opportunity of inspection has to provided.

Per contra if the charged government employee admits the charges, the enquiry officer shall submit his report to the disciplinary authority without further proceedings in enquiry but where the charged government servant denies the charges, the enquiry officer shall proceed with the enquiry to call on the witnesses as per the rules framed under the law in the presence of the government employee who shall be given the opportunity to cross examine such witnesses. After recording the aforesaid evidence, the enquiry officer records oral evidence if the charged government servant desired so in his written defence submission. The enquiry officer may ask what he pleases at any time from any witness or from the person charged with a view to discover the truth or to obtain proof. The disciplinary authority may appoint a presenting officer to present the facts of charges from the government side whereas the charged government servant too can take help of a retired government employee or legal practitioner if the enquiry officer gives his consent for it.

When the enquiry is complete, the enquiry officer shall submit its enquiry report to the disciplinary authority along with all records. The report shall consist of sufficient record of brief facts, the evidence and statement of findings on each charge with reasons thereof but the enquiry officer shall not make any recommendation about the penalty. The enquiry officer shall have to submit his final report within six months from the date of issuance of the order by the disciplinary authority and he is bound to adhere to the time-limit. In any case the total time-limit to complete a disciplinary proceeding should not exceed 18 months from the date of initiation of the proceedings, i.e., from the date of issuance of the framing of charges letter.

If there is vigilance angle, the advice of CVC shall be sought and the time limit for the advice shall be maximum 30 days. For the second advice from the CVC, the same time-limit of 30 days shall be available. Similarly the time limit for concurrence from the UPSC shall be 30 days.

Stage of Tribunal

The cause of action arises due to the impugned punishment order by the disciplinary authority against the delinquent employee and here the role of lawyers come into play to represent the petitioner/the applicant under section 19 of the Administrative Tribunal Act, 1985. Before bringing a case of disciplinary proceeding to the tribunal, the aggrieved employee against whom an adverse order has been passed has to make representation to the appellate authority against the order. It is only after the representations remain unanswered by the authorities or if the delinquent employee has not been satisfied then he can bring his case to the tribunal. The government servant challenges an adverse order as bad order in the tribunal.

The aggrieved employee says in his submissions in the court that the proceeding conducted against him were unjust, unwarranted, malicious and/or arbitrary and the charges levelled against him are unjustified and against the principles of natural justice. The petitioner prays to quash the impugned order as if it had never been passed so that he may be entitled to all consequential service benefits to which he is entitled.

The petitioner may pray for interim relief but the interim relief sought should be different from the final relief. It is prayed in the court that if the impugned order is left to stand it will do irreparable loss to the petitioner.

Conclusion 

Disciplinary action cannot be based on breach of statutory rules or administrative actions which do not supplement rules or are inconsistent with them. Before initiating any disciplinary proceeding the master must be prima facie satisfied that the employee has committed some misconduct. The misconduct must be committed during the tenure of the service. An allegation of misconduct against an officer in relation to his quasi-judicial functions cannot be made merely on the basis that he made a mistake of judgement while passing the order. This is because the administrative adjudication also requires to perform their functions without fear or favour which may be defeated by the constant threat of disciplinary proceedings. 

Disciplinary proceedings cannot be initiated only on the basis of suspicion. There must be a reasonable basis. Those disciplinary proceedings shall be quashed if the exercise of power was not bona fide, e.g. anonymous complaints, biased preliminary enquiry and disregard to the directions of the Chief Justice by the full court. Similarly, if an employee is allowed to retire on attaining the age of superannuation even after initiation of disciplinary proceedings, major management cannot be imposed on him thereafter except under rare circumstances since retirement results in severance of relationship of master and servant. 

Deo Prakash Singh an Advocate practicing at the Patna High Court.

RERA: Good News for the Third-Party Purchasers of Ex-Developer

By Pallavi Ghaisas

May 31, 2022

 A.Pre-RERA

Prior to commencement of Real Estate (Regulation and Development) Act, 2016, (“RERA”), in landmark judgment in Vaidehi Akash Housing Pvt.Ltd. Vs. New D.N. Nagar Co-op.Housing Society Union Ltd. & Ors. [2015(3)ABR270] (“Vaidehi’s Judgement”), decided on 1st December 2014 by Hon’ble Justice S C Gupte of Hon’ble Bombay High Court, inter alia, decided the rights of third party purchasers (“Allottees”) under Maharashtra Ownership Flats Act, 1963 (“MOFA”) vis-à-vis society after termination of development agreement with Developer (“Ex-Developer”). It was observed that the development agreement executed by the Ex-Developer with the society was on principal to principal basis and as per agreement executed by the Allottees with Ex-Developer, the rights of Allottees thereunder were subject to Ex-Developer’s rights and not higher than those. It was held that (i) society was not a co-promoter U/s. 2 (c) of MOFA and was merely in the position of owner vis-à-vis third party purchasers and (ii) the purchasers did not have any enforceable right, under MOFA, against the Society or the New Developer appointed by society, after termination of development agreement with Ex-Developer.

B. RERA- Regime

In the matter of Peter Almeida and Tangerine Almeida vs. M/s. Shubh Enterprises and others [Compliant No. CC006000000055575], filed by complainants therein being allottees, facts are similar to the said Vaidehi matter, the essence being the society terminates the development agreement with Developer (Ex-Developer) and appoints a New Developer for construction on land held by society. The allottees who paid monies to the Ex-Developer for securing flats under allotment letter executed with Ex-Developer sought direction from Regulatory Authority, against the society and the New Developer, for (i) executing agreement for sale and (ii) allotting flat in newly constructed building.

The Maharashtra Real Estate Regulatory Authority, Mumbai (“Regulatory Authority”) by its order dated 5thNovember 2019 directed that registered agreement for sale to be executed with complainants therein (being allottees of Ex-Developer) in accordance with the allotment letter issued by Ex-Developer. The ratio of the Vaidehi’s Judgement was not applied by the Regulatory Authority inter alia for the reason that it was before commencement of RERA and it held that after transfer of development rights in favour of the New Developer, the commitment of Ex-Developer will have to be honoured by the New Developer and society.

By common judgement dated 6th May 2022 in the appeals filed therein, the Maharashtra Real Estate Appellate Tribunal dealt with the question of- “Whether Allottees are entitled to reliefs as claimed in the complaint against the Society and New Developer” while answering the same in negative, it was inter alia reasoned as follows:

i. Since Society is not a party to contract / agreement for sale executed between Allottees and the Ex-Developer, the society cannot be held liable to any obligations that are required to be performed by Ex-Developer towards Allottees;

ii. Society has no privity of contract with the Allottees and the transaction is purely and only between the Allottees and the Ex-Developer as per settled position of law;

iii. Project registered by the New Developer does not involve the circumstances where there is a transfer in its favour as contemplated under Section 15 of RERA

iv. Neither the society nor New Developer appointed by it are under obligation to recognise claims of allottees as prayed for in the complaint therein;

v. In the absence of privity of contract, the Society and New Developer cannot be held liable to Allottees and consequently Allottees are not entitled to reliefs as claimed against the Society and New Developer;

vi. Under these circumstances, since New Developer has already taken over the project, no flat can be made available to Allottees in the project;

vii. The alternative claim of Allottees for refund, if at all, can be considered only against the Ex-Developer who has received the amount of earnest money from Allottees.

The complaint was remanded to the Regulatory Authority for considering and deciding the claim of allottees afresh to the extent of refund of the amount against Ex-Developer after hearing the concerned Parties.

Impact of RERA Judgement on Third-Party Purchasers

There are many projects halted or abandoned by Developers almost everywhere. The Society in such cases usually terminates the Development Agreement and appoints a New Developer. In such circumstances the allottees who have paid monies to Ex-Developer will now have an option to enforce their rights against Ex-Developer, before RERA authorities, for refund of amount paid by them. 

Pallavi Ghaisas is a Lawyer specialising in the field of Real Estate. She works at Federal & Company, a Mumbai-based law firm.

Bombay High Court Lays Down Guidelines For Abandoned Vessels Under Arrest

By Vikrant Shetty

May 23, 2022

On the last day of Hon’ble Mr. Justice S.J. Kathawalla’s tenure as judge of the Hon’ble Bombay High Court, the Division Bench comprising of him and the Hon’ble Mr. Justice Milind N. Jadhav, provided a huge relief to crew members who remain on abandoned vessels that are under arrest, by providing guidelines that would have to be followed by the owner, arresting party, Sheriff of Mumbai and the concerned P&I Club. In the matter of The Swedish Club vs V8 Pool Inc &Ors. and Pradeep &Ors. Vs. M.T. GP ASPHALT the Hon’ble Court considered the following questions:

Brief Background of Facts:

The subject Vessel M.T. GP ASPHALT I was arrested on 22nd December, 2020, by V8 Pool Inc.

Swedish Club was the Protection and Indemnity Club (“P&I Club”) with which the vessel was entered.On 22nd December, 2020, after receipt of emails from the crew informing that the vessel supplies were running low, FTI Consulting, the company undertaking restructuring of the owner of the Defendant vessel, arranged for enough supplies to last a month.

On 7th January, 2021, the Crew addressed an email to the Swedish Club informing them that the salaries for the month of November and December 2020 were overdue and that arrangements would have to be made for food and water.  The Swedish Club, on 21st January, 2021 filed an Interim Application,seeking leave of the Ld. Single Judge to make certain payments in respect of maintenance of the vessel and well-being of the crew and that the same be treated as “Sheriff’s Expenses”, which would allow the amounts to be reimbursed as a first charge from the eventual sale of proceeds from the Vessel. The Ld. Single Judge disallowed the application and held that the Swedish Club was obligated under the Maritime Labour Convention (“MLC”) to make the payment of the wages and was not a Volunteer. The Ld. Judge held that if the Swedish Club makes payment for the expenses post arrest (including wages), it will not be treated as Sheriff’s expenses. The Swedish Club would have to file a suit, for the recovery of the same.

Both the Swedish Club and the Crew Members appealed from the respective orders which were allowed by the Hon’ble Bombay High Court[1].

Guidelineslaid down:

For the benefit of the crew the Hon’ble Court found it necessary to frame some guidelines to be followed in the case of abandoned vessels that are under arrest. However, the Hon’ble Court clarified that these are only guidelines, and the Admiralty Court is at its liberty to use its discretion in any given case.

1. A vessel under arrest / its crew will be considered abandoned if:

a. After the arrest of the vessel, the crew addresses a communication to the owner with a copy to the P&I club, the demise/bareboat charterer (if any), the arresting party and the Sheriff of Mumbai stating that the vessel requires supplies (food/ provisions/ bunkers/ other necessaries)and/ or one or more of the crew’s wages remain unpaid for at least 2 months, with details of when the supplies are expected to run out and of the outstanding wages; and

b. The owner and the demise/bareboat charterer (if any) fails to make the necessary supplies to the vessel and make payment of the said outstanding wages within 10 days or responds stating its inability to maintain the vessel and crew.

2. The arresting party shall bring the crew’s communication to the attention of the Admiralty Court within 4 days of such communication.

a. If the owner of arrested vessel has not entered appearance in the suit, the Admiralty Court shall pass an order calling upon the owner and such demise/bareboat charterer (both) to remain present in court within 3 days. The order shall be communicated to the owner by the arresting party. If the owner remains absent, the Admiralty Court shall record that the vessel and crew have been abandoned.

b. If the owner or demise/bareboat charterer (if any) of the arrested vessel has entered appearance in the suit or appears pursuant to the order above specified, the Admiralty Court shall direct the owner and such demise/bareboat charterer (both) to make the necessary supplies to the vessel and make payment of the said outstanding wages within a further 3 days, failing which the vessel and crew shall be considered abandoned.

3. If the owner or demise/bareboat charterer (if any) of the arrested vessel has entered appearance in the suit or appears pursuant to the order above specified, the Admiralty Court shall direct the owner and such demise/bareboat charterer (both) to make the necessary supplies to the vessel and make payment of the said outstanding wages within a further 3 days, failing which the vessel and crew shall be considered abandoned.

4. If a vessel is so abandoned, and pending the sale of the vessel, any party (including a P&I club which has humanitarian obligations to the crew on board the vessel at the time of abandonment) is desirous of rendering supplies or funding expenses for the safety and/or preservation of such vessel and/or subsistence of the crew and/or payment of wages and/ or repatriation of crew and/ or reducing the crew on board to a skeleton crew and claiming the same as Sheriff’s expenses is required to do either of the following:

a. Approach the office of the Sheriff of Mumbai to urgently file a report to seek directions from the Admiralty Court for such steps to be taken as may be required and for leave of the Admiralty Court to permit that party to put the office of the Sheriff in funds for such steps and for such expenses to be Sheriff’s expenses. The office of the Sheriff shall immediately file a report before the Admiralty Court. All expenses and payments shall be routed through the Sheriff’s office.

b. Approach the Admiralty Court directly with prior notice to the arresting party concerned as well as the office of the Sheriff of Mumbai seeking leave to do any of the above for the safety and/or preservation of the vessel and/or subsistence of the crew and/or payment of wages. In such case all expenses and payments shall be routed through the office of the Sheriff of Mumbai.

c. If such an application is made, the Admiralty Court shall hear the same on an urgent basis and pass necessary orders. Unless there are serious doubts about the expenses, in the interests of the well-being of the abandoned crew members on board the arrested vessel, leave shall generally be granted for such expenses to be Sheriff’s Expenses and recoverable from the sale proceeds on an immediate basis.

d. If such an application is made, the Admiralty Court shall hear the same on an urgent basis and pass necessary orders. Unless there are serious doubts about the expenses, in the interests of the well-being of the abandoned crew members on board the arrested vessel, leave shall generally be granted for such expenses to be Sheriff’s Expenses and recoverable from the sale proceeds on an immediate basis.

5. In case of an emergent situation where the situation on board the vessel is precarious, any party may after giving at least 24 hours’ prior notice in writing to the parties to the suit as well as the office of the Sheriff may render the supplies/ incur expenses for a limited period of time i.e. 7 days. Such party must thereafter at the earliest make an application to the Admiralty Court to declare such payments made as Sheriff’s Expenses and for any further expenses it desires to incur as per the procedure laid out above.

a. Any party seeking reimbursement of such payments made, shall file an application with all relevant documents in support including proof of payments.

b. The Admiralty Court shall refer the claim of such party to the Commissioner for taking accounts or such other officer of the Court to examine and scrutinize the claims. The officer so appointed shall give a hearing to the parties and examine and scrutinize the documentation and shall prepare a Report for the Admiralty Court.

6. In the event, crew on board an arrested vessel have not been paid their wages, all such crew members shall also be entitled to approach the Admiralty Court to treat their wages accrued post arrest as Sheriff’s Expenses. The Admiralty Court shall refer the crew’s claim to the Commissioner for Taking Accounts or such other officer of the Court to examine and scrutinize the crew’s claims. The Commissioner for Taking Accounts or such other officer so appointed shall give a hearing to the parties and shall prepare a Report for the Admiralty Court.

7. There may be situations where the vessel and crew have already been abandoned prior to the arrest. A vessel/ crew will be considered to have already been abandoned before the time of arrest if the crew has addressed a communication to the owner with a copy to the P&I club stating that the vessel requires supplies (food/ provisions/ bunkers/ other necessaries) and/ or one or more of the crew’s wages remain unpaid for at least 2 months, with details of when the supplies are expected to run out and of the outstanding wages and the owner has failed to supply the vessel or make payment of the outstanding wages within ten days thereof or has responded stating its inability to maintain the vessel and crew. If an abandoned vessel is arrested, for all expenses post the arrest, the procedure above said shall be followed.

8. It is expected that the P&I clubs with which such vessels (whether abandoned before or after the arrest) are entered will promptly approach the Admiralty Court for appropriate orders. The same procedure as stated above for reimbursement of payments made above will apply.

9. The Admiralty Court shall, as far as possible, expeditiously pass orders on all applications including for immediate reimbursement of any such payments as above specified first in terms of priority from the sale proceeds of the vessel.

Implication of the Guidelines:

It is yet to be seen whether courts will apply similar principles to those who provide salvage services to arrested vessels. However, the aforesaid guidelines have brought much required clarity with respect to the rights of the crew members of an abandoned vessel under arrest and the steps that can be taken for maintenance of the vessel and its crew, including payment of wages during the period of arrest of such vessel.

The above Article is written by Vikrant Shetty, Partner of DhruveLiladhar& Co. with assistance from Associate Sakina Electricwala.

[1]Order dated 23rd March 2022, passed in Comm. Appeal No. 108 of 2021 and Comm. Appeal No. 111 of 2021

On Non-Fungible Tokens (NFTs)

By Anand Kumar Rai

April 23, 2022   

NFT stands for non-fungible token. An NFT is a digital cryptoasset that represents real-world objects, for example, artwork like music, painting, crafts, videos, game items, etc. They are sold and purchased online, frequently like cryptocurrencies, and they are generally encoded with the same underlying software as many cryptocurrencies.

Cryptocurrencies and physical money are “fungible,” which means they can be exchanged or traded for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. But, NFTs are different, each NFT has a unique digital signature that makes it impossible for NFTs to be exchanged for each other or equal to one another (hence, non-fungible). For example, two persons A and B having different denominations of notes but having equal value could exchange their money the way we exchange when we need change. But both of them having two different art pieces with different digital signatures cannot exchange the same as both are two different digital tokens having different digital signatures.  

Need for NFT:

The next question that arises is – what is the need for NFT?Anyone can view the bulk of images online for free. So why spend millions on something that could easily screenshot or downloaded? The answer is whenever we download or take screenshots, we don’t own the artwork. We don’t have rights over the artwork. NFT allows the buyer to purchase or sellthe ownership of the original item. It contains built-in authentication, which serves as proof of ownership. Collectors value these “digital bragging rights” more than the item itself.So, if we buy an oil painting via NFT, instead of getting an actual oil painting to hang on the wall, we will get a digital file instead.

Regulation and legal position of NFTs in India:

Transactions of NFT is risky business. An NFT’s value is entirely based on what someone else is willing to pay for it. Therefore, demand in the digital market will drive the price rather than the fundamental value of the asset, technical or economic indicators, which typically influence stock pricesover stock exchanges, and at least generally form the basis for investor demand. So, it is not guaranteed that if for example,we buy a piece of artwork for Rs 1000 having a perception that in future we will be able to sell it for a higher price, we will be able to do so, as there is a possibility that we will lose all of our money in case nobody wants to buy that particular artwork. 

Since it is a new form of digital trading like cryptocurrency,there is no specific regulation or law that bans the trading ofNFTs in India. Also, there is no explicit definition that classifies NFTs as a type of cryptocurrency or a type of derivative. However, the government is planning to introducea law that will ban private trading of cryptocurrencies which is more focused towards criminalising the possession, issuance, mining, trading and transferring of crypto-assets. India is further planning to build a structure for introducing official digital currency, but it is a long way to go. But, as of now, there is no definition of crypto-assets in Indian legislation, so it’s intricate to decide whether NFTs fit into this category of an asset or not and will be banned along with other cryptocurrencies.

1. NFTs under Securities Contract (Regulation) Act, 1956:

In a parallel opinion, it is suggested that NFTs will be categorised as derivatives under the Securities Contract (Regulation) Act, 1956 (“SCRA“). 

Section 2(a)(ac) of SCRA defines derivatives as:

(ac)] “derivative” includes–

(A) a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security;

(B) a contract which derives its value from the prices, or index of prices, of underlying securities]]

[(C) commodity derivatives; and]

[(D) such other instruments as may be declared by the Central Government to be derivatives;]

Section 18A of SCRA defines the condition for a derivative trading to be legal as: 

18A. Contracts in derivatives

Notwithstanding anything contained in any other law for the time being in force, contracts in derivative shall be legal and valid if such contracts are

(a) traded on a recognised stock exchange;

(b) settled on the clearinghouse of the recognised  [stock exchange; or] in accordance with the rules and bye-laws of such stock exchange.]

[(c) between such parties and on such terms as the Central Government may, by notification in the Official Gazette, specify,]

Looking into both the sections, the relevant information we take out is that contracts in derivatives will be valid and legal only if such contracts are traded on a recognised stock exchange and settled on the clearinghouse of the recognised stock exchange, in accordance with the bye-laws of such stock exchange. But in the case of NFT right now these two conditions are not being fulfilled. So, if NFTtrading is deemed to be a contract in derivative for the purposes of SCRA, then it would make the sale and purchase of NFTs in private illegal. 

So, if government include the NFTs in the category of Derivatives without having any alternative platform like a recognized exchange or indexes that regulate NFT’s pricing on that particular exchange, then It will become Illegal.

The government has also prepared a draft to regulate the cryptocurrency and is likely to adopt, the ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill’ of 2019 in 2021

The draft defines the cryptocurrency under section 2(1)(a) as:

“Cryptocurrency, by whatever name called, means any information or code or number or token not being part of any Official Digital Currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes;”

Under the above mentioned definition, it can be analysed that NFTs could be considered to be of the following value:1. Representation of value, which is exchanged with the inherent value in any business activity, for example, a proprietary code could be sold as an NFT to a business.2. As a store of value, for example, buying any artwork/art pieces. 

However, there is an exemption to this under Section 3(3) of the bill, as per Section 3(3) –  Nothing in this Act shall apply to the use of Distributed Ledger Technology for creating a network to enable the delivery of any financial or other services or for creating value, without involving any use of cryptocurrency, in any form whatsoever, for making or receiving payment.

The only problem here with the above section is that it is unable to explicitly define whether NFTs would fall under the scope of services as laid down under the above exemption or not.

2. NFTs under Sale of Goods Act, 1930: 

Unless the government doesn’t come up with an explicit definition and regulations defining NFTs, they can be considered as “goods” under the Sale of Goods Act, 1930

Section 2(7) of the Act defines the Goods as:

(7 ) “goods” means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

The definition of goods provided under the sales of goods act doesn’t explicitly exclude NFT from its scope. With appropriate regulation from the side legislature in its very right, can include this term under the provisions of this Act. 

3. NFTs under FEMA: 

Currently, the marketplaces over which NFT transactions are performed are operated by entities established outside India. As the Foreign Exchange Management Act, 1999 (“FEMA”)governs cross-border economic transactions in India, but there are no explicit regulatory guidelines from RBI for crypto-assets or NFTs. If we consider existing provisions of FEMA, crypto-assets and NFTs could be considered as intangible assets like software and intellectual property under FEMA. However, determining the location of an NFT is an open question, the location where its owner resides or where the asset is physically present?

Since most of the NFT’s buyers and sellers as well as the operators of marketplaces are located outside India, Indian participants in the NFT purchase or selling could be seen as performing cross-border transactions. This will put a questionunder FEMA, that whether in these transactions there is an export or import of an intangible asset. Also, for a transaction to fall under the ambit of FEMA the transaction has to have a corresponding remittance of fiat currency done through authorised banking channels. Therefore NFT transactions are in an ambiguous position under FEMA.

4. NFT under Finance Act, 2020:

The Finance Act, 2020 expanded the ambit equalization levy (“EL”) and ensures its applicability on e-commerce operators at a rate of 2 per cent on the consideration received by such e-commerce operators from ‘e-commerce supply or services’ made. Accordingly, the NFT marketplaces may be subject to EL at a rate of 2% on consideration received by them fromtransactions made, if they are also considered as ‘e-commerce supply or services’ made to a person resident in India, a person using an Indian internet protocol (“IP”) address, or a non-resident in certain specified circumstances

But, applying this provision to the purchase of NFTs would lead to certain complications. 1. The definition of an e-commerce operator under the EL provision is very wide and may extend to any electronic service which may facilitate a buyer and a seller to carry out an NFT transaction, including the blockchain operators and not just the NFT marketplace. 2. At no point during the transaction does the NFT marketplace have access to the sale consideration of the NFT. This non-custodial feature results in a situation of impossibility where the marketplace would have to pay 2% of the entire consideration, even when it does not have access to the consideration amount. 3. It is unclear whether the gas fees, which goes neither to the seller nor the e-commerce operator but directly to blockchain miners, would be considered to be part of the tax base for levy of EL in the hands of the NFT marketplace. 4. It may be impractical or unfeasible for the e-commerce operator to keep track of the IP address or the location or residency of each buyer or seller for determining the applicability of EL.

5.NFT under GST:

Having no explicit definition of NFTs under the Indian legislation makes it difficult to levy GST on NFT transactions. Under the Goods and Services Tax (“GST”) regime, the NFT classification is very important to impose GST, it should be clearly classified into intangible assets and goods, as typically, the tax treatment under GST should generally follow from the nature of the underlying asset. For example, whether a digital art as NFT will be treated as an intangible asset or good for levying income tax and Goods and Services Tax (GST). GST applicability will also depend on whether the NFT platform is located in India or outside of India.

The GST regime also obligates an electronic commerce operator to collect tax at source at a specified rate of the net value taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator (Section 52 of the CGST Act, 2017).In this regard, while the Tax Collected at Source (TCS)obligation under GST may apply to a normal marketplace wherein the consideration for the supply is collected by the marketplace. In the case of an NFT marketplace, the TCS obligation under GST should not apply, as the consideration for the supply is not collected by the NFT marketplace but, directly transferred between the parties through an automated contract.

Way forward:

In India, it is in the developing phase. It is up to the government how they have been regulated, the government has been trying to regulated cryptocurrencies also, similarly,NFTs would also expect to be regulated in a similar fashion. It is yet to see how government will react such instruments. Also, there are no guidelines from RBI for regulating NFTs and their transactions. 

As of now NFTs are billed as digital art pieces and there is no particular regulation defining the position of NFTs, so we might have to rely on regular principles of the Indian Contract Act and the Sales of Goods Act, for the sale/purchase of NFTs. 

Anand Rai is an associate at Sarvaank Associates. He advises and acts on transactions and corporate commercial work, with a special focus on corporate finance and policy. I

The Conundrum of doing the right thing and its legality

By Siddharth Narula 

April 20, 2022

Abstract

With morality at the crux of its arguments this article highlights the issue that is the ethical conundrum faced while making a choice, to do either the right thing, but go against the law, or the legally correct thing and ignore ones beliefs. Using the hypothetical scenario, the ‘trolley problem’, this article attempts at deciphering the correct course of action, while evaluating the difference between past and present opinions in the form of both, laws and ones understanding of what is correct.

Introduction

Most  people reading this would probably know of, or have at least heard of the ‘Trolley problem’. For those who are unaware, the problem describes a fictional scenario wherein ‘You’ an ‘onlooker’ sees five people tied to one side of a tram track and one person tied to the other side.  Near you is a switch that changes the direction of the main track and approaching from a distance is a tram travelling on those very tracks, heading towards the group of five. The onlooker is left with a decision to make – whether to save the lives of five people by sacrificing the single person tied to the other side, or to let those five die and spare the one.

Majority would conform to the theory of utilitarianism, ie. anything is right if done for the greater good and choose to save the five. Ironically though, if one was to judge this from a legal perspective, the person would be held accountable for manslaughter (culpable homicide) if he were to sacrifice the single individual to save the other five. Despite taking into account the theory, since the person proactively made a choice of killing the one, even if it was to save the others, it would be considered illegal. Under the common law of most English speaking countries such as the U.K and the US, there exists a rule of ‘no duty to rescue’, where a person is not compelled to help anyone in need and is not held liable as such if they fail to provide it. 

However, the way this concept is construed varies across countries. It is a legal requirement in some countries to provide assistance unless doing so would prove detrimental to oneself or others. Providing basic aid such as alerting the authorities in cases such as a car crash or a person collapsing due to health issues, is compulsory. For example, under the Danish penal code, ‘all persons are required to provide aid to any person who appears to be lifeless or in mortal danger’ provided, that in acting they would not endanger themselves. Similarly, in France, anyone who fails to render assistance will be found liable before French courts. 

Therefore, it is not as though legal systems around the world entirely abandon the concept of morality yet, it must be observed that in none of these examples is the safety of the one assisting or a third party is being jeopardised. And so, when it comes down to the matter of survival between two different parties, no explicit rules have been laid down concerning the required course of action. Even if one side has a larger number of people being put at risk, as law dictates that all subjects before it be treated equally, giving greater weightage to the larger group would tantamount to quantifying the worth of people and so in such scenarios, the legally correct thing would be to not intervene.

With the problem from before, if the same scenario would be implemented with a few changes such as replacing the one person with the onlooker’s family member or close relative or even a person of higher stature than the other five, the answers would vastly differ. Though this is not an effective test to determine one’s morality, it does allow us a peek into the inner workings of the mind and understand how people arrange the importance of others such that it does not come into conflict with their ethics.

This, then begs the question— what is the right thing to do? We are only able to exist today as a result of thousands of years of evolution, evolving not only physically but mentally as well, allowing us to think diagonally. The least we can expect is for there to be a clear distinction between what is good and what is bad. It seems that despite the purpose for which law exists— to provide justice, there is still moral uncertainty with regard to the right course of action for such matters. Does law even take morality into account? Well, if it doesn’t, should one discard their morality to be legally correct? After all, the majority would think twice about doing something if they become aware of its illegality, especially in today’s world which pushes people toward a perfect public persona. Where even a single misstep would cause the people to look askance upon them; as a result people have started to tread carefully. They have developed a more self-centered attitude abandoning their already diminishing morality.

Attempting to answer the unanswerable

What is the right thing to do? — this is a tough question. The definition of ‘right’ is far too vague. To even attempt to answer that would require a person to venture deep into the realm of philosophy and the inner workings of the human mind. This subject is something which even great philosophers such as Plato, Aristotle, Socrates and the like have barely scratched the surface of. So, what we can do is merely guess and theorise. 

Based off of what can be gathered by observing one’s surroundings, one may notice that the definition of ‘right’ varies from individual to individual. To some, doing the right thing may mean making the other suffer ten times more than the suffering that was caused to them, while to others It may mean the exact opposite. They strive to forgive and forget.  

Similarly, in a situation where one has to choose between the survival of two groups, the answer may vary. The opinion on this generally remains divided (albeit unequally), however, if one wants a straightforward answer then doing the correct thing would be to keep losses to a minimum. This is where law is introduced, but it is also where it falls short.

Law acts as a deterrent to conflict arising out of a divided opinion. By codifying opinion in the form of rules, law imposes something common on all. The end result— harmony despite divided opinions. A simple analogy to understand this is imagining law as the ‘good guy’ being forced to play the ‘bad guy’ for the greater good. Laws discourage violence between two groups of thought while setting a common rule for all to follow. Two prominent examples can be laws regarding the freedom of speech and taxation. 

Both of the aforementioned laws embody the principle – “For The Greater Good”.

Freedom of speech is a double-edged sword— While laws do allow a person freedom of speech in all forms (oral and in print), it maintains a certain bottom line in this regard. 

Article 19(2) imposes certain (reasonable) restrictions on this right which prevents its interference with the state procedures regarding law making, the security of the state, relations with foreign states, public order, or incitement to an offence. 

Similarly, taxation, more particularly, the progressive taxation system also falls within the same category. Tax is a universal concept and is imposed on all. However, the way it is imposed differs according to the economic status of those taxed. The wealthy are taxed more while the poor are taxed less. 

At a glance it may seem unfair, discriminatory even, to tax the former more. However, this discrimination helps maintain a balance in society. The idea being to patch up the ever widening gap between the rich and the poor.

On the other hand, the rigidity of law can be one of its biggest flaws. Law tries to maintain harmony and functions such that losses occurred are minimal. However, the cost of maintaining this harmony is what some believe to be a clear disregard for morality. To achieve its purpose, law needs to maintain a certain level of neutrality in order to avoid being perceived as partial. 

This neutrality can often be construed as a total disregard towards human emotions;  emotions being one of the main driving forces behind an individual’s actions. The rationale is to maintain order and minimise the intervention of any third party, but by doing so, it deprives both the victim as well as any third party the chance to receive and/or give any assistance without fear of possible repercussions.

It can be argued that nothing exists without flaws and it is something that is bound to happen, however, this is precisely the reason why simply abiding by the law is not enough. Citizens need to actively participate in the lawmaking process. To be dissatisfied with any law on account of it being outdated or violative of a citizen’s rights is natural, but mere criticism is not enough. The Constitution of our country assures our rights however, it is entirely dependent upon us to assert them and prevent their violation. 

The thought behind the action

Even though an action might not be legally correct, to some not doing it might tantamount to abandoning their moral principles. They, thus abide by the ideology of ‘doing the right thing’, and would much rather be punished for doing something illegal, rather than be simply reticent. 

As such, it does make one wonder what defences would be available to such an individual. After all, their action was out of honest intentions and if not for the situation before them they would not have had to make such a choice. Having been reduced to making a choice between two evils, one would choose to do what they abhor less, although their feelings towards it may be as extreme as if it were the worse between the two. 

Setting aside the fact that an occurrence similar to the trolley problem is nearly impossible, judging it according to the standards mentioned before, the person who acted (regardless of the outcome) will be held liable for his actions. According to the procedure established by law, this person will promptly be produced before the court and will await trial. The only route to absolve him of his crime or at least reduce his sentence is for him to employ necessity as a defence. Section 81 of the IPC states that an act which is likely to cause harm, but done without criminal intent and to prevent  harm to another is not an offence.  Thus, in accordance with the above, the individual can plead not guilty and based on what the law states, it is most likely that the person will be absolved of his crime. However, as there is no concrete evidence on the outcome of such a trial, one must look to other similar instances. Cases with a common nexus, though they may have facts as different as day and night, share a common rationale. 

This can be observed in the earliest recorded case of  Regina v. Dudley and Stephens wherein necessity was used as a defence. 

The trial of Regina v. Dudley and Stephens, or more famously known as the ‘Mignonette’ trial is one which involves the same principle of necessity with not much difference from the trolley problem. The trial follows the aftermath of four shipwreck stranded individuals who, in order to sustain themselves resorted to cannibalism by killing one of their party members.

This case formed two principles that make necessity inapplicable as a defence for murder. The main principle which formed the cornerstone for the same was the presence of an urgent and immediate threat to life, only following which it could be considered appropriate to carry out an action which might break the law. The second is medical necessity. Similar to the above, any activity may be justified as appropriate or legal if it conforms to the clinical standards of care, provided, that it is proven. The court in this trial found the accused guilty of murder and ruled that cannibalising the person was not urgent. Though there was a threat of starvation, at any moment a ship could have sailed over the horizon to save them, as that was indeed the case. They were originally sentenced to death which was later reduced to just six months in prison. Though the decision in this case is a highly debated one; to decide whether or not it was appropriate, one must examine all factors before forming an opinion.

From a legal standpoint, the decision to punish the group, was the correct one. The rationale of the court, though not entirely convincing did raise some important issues. If the three were to be exempted from punishment merely because their actions were necessary to avoid starvation, it would lead to anarchy and disorder. If people were allowed to feign innocence simply because of the rule that any actions are acceptable as long as one feels that without it they would suffer, it would allow anyone to escape punishment and disregard the severity of their crime. According to this reasoning a poor person could steal without any consequences, simply because they felt they would suffer from malnutrition.

From a moral standpoint however, this decision was incorrect. In order to pass a just ruling, courts must approach the case from a psychological perspective as well. To be fair in their judgment, one must imagine themselves in the other’s place and understand the situation from their viewpoint. Though the three were fortunate enough to survive a shipwreck, what lay before them was only uncertainty. This uncertainty transformed into a fear of death which was constantly looming over their heads. Desperation was only a matter of time. 

This desperation to survive is enough for anyone to take impulsive decisions and the decision to kill the fourth member was a result of this impulse to survive. One could argue that they did what they believed was necessary to survive, after all they were not aware when or if they were going to be rescued. 

What makes us human?

Many have pondered over this question and have arrived at various conclusions. Some believe that it is our intellect which is the reason humanity was able to flourish. The ability to communicate by creating languages and thus, being able to express our needs allowing us to evolve, much like an infant that uses crying to signal that it is hungry. 

Some believe it is the ability to work. Work being the activity around which our life revolves, something which gives us a purpose, without which living would be meaningless. And so, while there are all sorts of conclusions that have been drawn over the decades, there is something that differentiates us from other sentient beings such as apes. It is something incredibly complex, yet, it is something that can be understood even by children.

That is— our morality

As opposed to animals, humans are driven not just by their instincts. All humans are imbued with the gift known as ‘conscience’, allowing them to think for themselves. The small voice at the back of our heads that berates us when we cheat our diet is what separates us from other living organisms. So, if this amazing ability is the reason why we are able to maintain our humanity, is it really worth giving up just to be legally correct? 

This question can actually be answered from both points of view. 

Law is something that is created by the people and for the people, as such it is not without reason that a particular law exists. The only purpose for its existence is the protection of the rights of the people. It is implemented solely for our benefit. When  persons are due reparation for the crimes  committed by them, it is the law which acts as an instrument for the aggrieved, allowing them to seek justice. The opinion that laws are exaggerated and often unnecessary is biased. From the point of view of a recalcitrant person, such a statement would be rather appealing. However, laws are a direct reflection of the society and by not acting in accordance there with, we do not hold true to the ideals created by us. 

That being said, it is not as though all laws are perfect creations. What is created by the majority may not always be correct. Especially, with the passage of time as a society evolves it becomes more accustomed to accept change. Laws too as a result, need to be amended. 

Section 24 of the Hindu Succession Act 2005, where originally the female heir of a coparcener was not entitled to the property in the same manner as the male coparcener; Section 377 of the IPC originally criminalised sexual acts between people of the same gender; are examples of evolution of laws as both of these were eventually amended to meet the changing societal norms. 

Therefore, for laws to remain relevant, the process of law making has to be  a dynamic one. The principle of dynamism is even reflected in the Constitution. The framers of the Constitution recognized that for drawing up a document that can withstand the changes brought by time,  making provisions for constitutional  amendments would be desirable even though the same may be made only when absolutely necessary.

Thus, laws that are dynamic as opposed to the those that remain static are able to serve the society well. In this world of ours, where most of the people have been infected by the “fast lane” mentality, if one is not able to keep up they most definitely are left behind, with no one bothering to spare even a single look.  In the absence of the ability to amend them, laws risk becoming obsolete and so to avoid such an outcome the need of review by the legislature every decade is of utmost importance.  

To conclude…

An effective way for one to improve is to learn from  past mistakes and keep evolving. Mistakes, often considered signs of incapability are in actuality, a chance for anyone or anything to bolster their capabilities. As such, it is an especially important tool to assess the interactions between people and the laws that govern them. Our current knowledge is the culmination of centuries worth of trials and errors  which have led us to instill in ourselves value for life. 

Thus, the moral of the story can be explained in the simplest way possible as, the need to value  life in all its forms, more particularly human life. For, it is something that has no equal in worth and must be protected at all costs.

ETA for delicensed frequencies in India: Adding complexity or ensuring ease of business?

By Mayank Grover & Gurleen Kaur

April 14, 2022

Wireless communication involves transmission of information by using electromagnetic waves without wires and cables. The wireless revolution began in the 1990s with the advent of digital wireless networks which sparked a social revolution and switched technology from wired to wireless.

What is ETA?

The Wireless Planning and Coordination Wing (WPC) of Government of India’s Department of Telecommunications (DoT) is the National Radio Regulatory Authority in charge of frequency spectrum management and licensing, as well as catering to the needs of all wireless users. Products with radio and/or wireless functionality which are manufactured in India or imported and function in the de-licensed frequency band / license free radio frequency band must obtain an Equipment Type Approval (ETA) certificate from the WPC under the Indian Wireless Telegraphy Act, 1933 and the Indian Telegraph Act, 1885.  This includes devices with bluetooth, wireless local area network technology (Wi-Fi), digital radios (Zigbee technology), radio frequency identification (RFID) tags etc.

Scope of Approval

The scope of ETA from WPC covers mobile phones, RFIDs, Wi-Fi and Bluetooth devices like earphones, speakers, microphones, drones etc. Some frequency bands have been assigned a license-free status and therefore, a license from WPC is not required for products operating in those frequencies. In order to obtain an ETA, a detailed test report of the equipment obtained from a well-recognized laboratory has to be submitted to WPC for evaluation. 

Documents required for ETA

Procedure to apply for ETA / WPC License

Who can apply for ETA?

Manufacturers/Importers of products with radio, wireless or both features are required to obtain ETA Certificate from WPC and Import License Certificate from the Principal Commissioner of Customs (Import). As per Public Notice No.12/2017 dated 23.08.2017 issued by the Office of the Principal Commissioner of Customs (Import), for import of wireless equipments, the Applicant has to obtain valid import licence after getting ETA.

Devices eligible for ETA

Transceivers, transmitters, receivers, all blue-tooth devices, wireless home appliances,  RFID tags and readers, wireless mouse and keypads, wireless headphones, small digital radios, wireless medical products used for patient profiling laptops, mobile phones, digital radios, remote key for entry, wireless music players, wireless remotes and any other radio frequency modules.

Exemption from ETA by filing a self-declaration

The online facility for obtaining ETA through self-declaration is available on the Saral Sanchar portal of DoT. As per Office Memorandum dated 26.02.2019 issued by DoT[1], ETA through self-declaration is permitted for:

which operate in license exemption bands as permitted in India.

A self-declaration from an importer/authorized Indian representative is sufficient for wireless equipments operating in license exempt bands with low transmission power for clearance by the Customs and Central Excise Authorities.

ETA through self-declaration is applicable to the products which meet two conditions:

These products may be imported by submitting a self-declaration to Custom Authorities and informing WPC via email.

As per another Office Memorandum dated 26.02.2019 of DoT[2], the requirement of ETA is exempted for R&D/ testing/ demo/ prototype/ pre-launch devices in the categories of mobiles, laptops, electronic notepads, smart watches, Short Range devices (including accessories), microphones, speakers, headphones, earphones, printers, scanners, cameras etc. and Test & Measurement equipment operating in license exempt bands as permitted in India.   

A self-declaration from an importer/authorized Indian representative is sufficient for clearance by the Customs and Central Excise Authorities permitting 1000 units per model. The importer is also required to undertake that after completion of test/prototype exercise, equipments would either be exported back to the country of origin or destroyed as per destruction guidelines of WPC and may not be sold in the Indian market.    

Thus, ETA clearance is required for wireless equipments which operate in license exempt frequency bands in India. With the introduction of self-declaration mechanism and exemption for prototypes, the process to obtain ETA license has been simplified by WPC to expedite launch of new devices and ensure ease of doing business in India.

[1]https://dot.gov.in/sites/default/files/ETA%20through%20Self%20declaration%20for%20Certain%20Categories%20of%20Wires%20Equipment%20dt%2026-02-2019_0.pdf

[2]https://www.tuv.com/content-media-files/master-content/rs/Attachments/1075_WPC%20Notification_Exemption%20ETA-Test-Prototype%20dt%2026-02-2019.pdf

Mayank Grover is a Partner and Gurleen Kaur is an Associate at Seraphic Advisors, Advocates & Solicitors in New Delhi.

Sec. 34 of the Arbitration and Conciliation Act, 1996: Appellate proceedings in substance?

By Kumar Shashwat

March 3, 2022

In this article, I argue a proposition that a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 [“the Act”] though not inform, but in substance assumes the flavour of appellate proceedings.

Section 34(2) (a) of the Act mentions certain grounds on account of which the Court can set aside the arbitral award, if the party proves that:

Moreover under section34(2)(b) of the Act the court may set aside the Award if:

Despite specific grounds mentioned in Section 34 of the Act,the proceedings under the said section assumes the nature of an appellate court. The reasons in support of this argument are elaborated herein below:

Reasoning:

In support of my argument, I have relied upon three classes of cases on propositions that (i) the qualitative nature of the appreciation of the material on record in an adjudication under Section 34 of the Act, (ii) instance where the Arbitration Court has upheld a minority Award of the Ld. Arbitrator Tribunal, and (iii) permissibility for the Arbitration Court to examine material not propounded before the Ld. Arbitrator.

The proceedings under Section 34 of the Act being of a first instance before a Court is only legal fiction since the same assumes existence of Arbitral Award, arrived at, at least theoretically, pursuant to a rigorous judicial process, akin to a civil trial, which is the first marker of an appellate proceeding.

The qualitative nature of appreciation of the Award, as well as pleading and material relied upon therein, i.e., of award being arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter is when interference of the Court is warranted. Though the burden to discharge may be high, however, the qualitative nature of appreciation of material is no different from appreciation in appellate proceedings.

Ordinarily, the appellate court assumes the jurisdiction as the court of first instance in the manner of appreciation of evidence, facts, law, etc.

While, the Arbitration Court under Section 34 of the Act undertakes the same qualitative nature of analysis. However, statutorily, its jurisdiction is limited to arrive at only a singular finding that the Award is liable to be set aside.

In fact, curiously Courts have departed from the outcome mandated under Section 34 of the Act of setting aside the majority Award and have upheld award of the minority of the Tribunal.(Ssangyong Engineering And Construction Co. Ltd v. National Highways Authority Of India). This was premised on the logic under the scheme of Section 34 of the Arbitration Act, the disputes that were decided by the majority award under challenge would have to be referred afresh to another arbitration once the said award would be set aside, the Court held that adopting the said procedure would cause considerable delay. It was further observed that the same would be contrary to the objectives of the Act, namely, speedy resolution of disputes by the arbitral process.

However, in ONGC Ltd v. Interocean Shipping (India) Pvt. Ltd., 2017;ONGC Ltd v. Schlumberger Asia Services Ltd, the High Courts also adopted the course of setting aside the majority Award and upholding award of the minority, but sans any reasoning adopted for such course of action.

The Courts have also adopted a course of action, though as an exception rather than rule that ordinarily it will not examine material beyond the record of the Ld. Arbitrator. However, in the event that there are facts not stated in such record, and are relevant to the determination of issues, the Court may permit the parties to bring such facts on record by way of affidavits, wherein cross examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both the parties (Emkay Global Financial Services Ltd v. Girdhar Sondhi)

Similarly, if certain facts were concealed, having a causative link with the facts constituting or inducing the award, such facts become relevant for the purpose of deciding adjudication under Section 34 of the Act proceedings. If such facts are discovered after the filing of challenge proceedings (underSection34),they maybe brought on record by way of amendment. (Venture Global Engineering v. Satyam Computer Services ltd and Ors.)

Thus, proceedings under Section 34 of theActhave the colour of appellate proceedings.

Conclusion

In view of the fact that (i) the Arbitration Court under Section 34 of the Act is a Court of First Instance but only as a result of a legal fiction since it assumes existence of ‘judicially’ arrived at Award (ii) the qualitative nature of the proceedings in terms of appreciation of evidence, pleadings, Award, etc, (iii) the assuming of jurisdiction to uphold “minority view” of the Tribunal, while setting aside the “majority view” (iv) permissibility of the parties to bring fresh material on record before the Arbitration Courts, germane for the issues in the Award, leads to a conclusion that a proceeding under Section 34 of Act is though not inform, but in substance, in the nature of appellate proceedings.

Kumar Shashwat is Partner, Kumar & Singh Associates, New Delhi. 

Analysis of the report on the Data Protection Bill, 2021 by the Joint Parliamentary Committee

By Krishnamohan Menon

February 12, 2022

On December 11, 2019, the Joint Parliamentary Committee on the Personal Data Protection Bill, 2019 (“JPC”) was established to investigate and examine the Personal Data Protection Bill, 2019. The JPC was supposed to give its report to Parliament during the 2020 Budget Session, but after receiving a two-year extension, the JPC tabled its report in both houses of Parliament on December 16, 2021.

The JPC report includes a list of policy recommendations, an examination of key sections of the 2019 Bill, and a draft bill titled the Data Protection Bill, 2021, among other things. The JPC report focused on answering questions and clarifying issues relating to public policy concerns about data protection in India, as well as making recommendations in that regard while taking into account the Honourable Supreme Court’s decision in Justice K.S. Puttaswamy (Retd.) v. Union of India and the Justice B.N. Srikrishna Committee’s recommendations.  Read on to find out the recommendations provided by the JPC on the PDP Bill.

One of the JPC’s first recommendations is to alter the bill’s name from ‘Personal Data Protection’ to ‘Data Protection,’ because it is impossible to distinguish between personal and non-personal data, and thus it is necessary to have a single law that covers both datasets. But the stakeholders are concerned that integrating both personal and non-personal data in the same legislation may weaken the PDP Bill’s goals, which were to provide a framework for personal data protection.

According to the PDP Bill, only members of the Ministry of Legal Affairs and the Ministry of Electronics and Information Technology were allowed to participate in the DPA selection process. However, the Report recommends that the DPA selection committee should include more technical, legal, and academic expertise, as well as the bureaucrat officers who make up the selection committee. As all members of the selection committee are nominated at the Central Government’s request, the DPA members will be indirectly in control of the Central Government.

According to the report, social media intermediaries should be scrutinized more strictly. The Report recommends that all user accounts on social media intermediaries should be verified in order to combat the threat of fake news and accounts. Further, the report suggests that social media intermediaries be recognized as “publishers” in certain circumstances, particularly when it comes to content from unverified accounts. Furthermore, it has been suggested that no social media platform should be permitted to operate in India until the parent company behind the technology establishes an office in the country.

With the object of protecting the national interest, the PDP Bill granted the government an exemption for compliance with the proposed legislation. The Report adds restrictions to this exemption, recommending that the government only be exempted from the provisions after following a fair, just, reasonable, and proportionate method. This is in keeping with the Supreme Court’s ruling in the Right to Privacy Case, which established the legality, legitimate goal, proportionality, and procedural safeguards that must be met for the government to infringe on people’s right to privacy under the exemptions available to it.

Companies must report personal data breaches when they cause harm to the data principal, according to the PDP Bill. In addition, the Report not only compels the keeping of a log of all types of data breaches, regardless of whether the breach involves personal or non-personal data, and regardless of the possibility of harm to the data principal, but also sets a 72-hour reporting deadline for such breaches. As a result, in addition to reporting obligations for personal data breaches, the keeping of a log will be required for both personal and non-personal data, and will not be contingent on the data principal suffering any harm.

The PDP Bill included special safeguards for the protection of children’s data. The notion of a guardian data fiduciary was described in the PDP Bill as a data fiduciary who maintains commercial websites or online services aimed towards children or processes vast amounts of personal data about children. The PDP Bill exempted such a guardian data fiduciary from taking approval of the child’s parent or guardian. However, the Report recommended that the concept of a guardian as a different class of data fiduciary should be eliminated,  because it may undermine the goal of protecting children. Further, the Report recommends that all data fiduciaries should be prohibited from profiling, tracking, or behavioral monitoring of children, or targeted advertising intended at children, as well as processing personal data that may cause serious harm to children. Previously, this bar only applied to guardian data fiduciaries.

While measures for data localization were previously included in the PDP Bill, the JPC has strongly recommended that all data be stored in India for national and security considerations. According to the report, the government should bring back mirror copies of all sensitive and vital personal data that is now housed outside of India, and all organizations operating in India should gradually move toward data localization. In addition to data localization, the Report recommends that the Central Government should draft a comprehensive data localization policy aimed at developing adequate infrastructure for local data storage and aiding start-ups in complying with localization requirements, all while keeping the Government’s ‘ease of doing business’ objectives in mind.

Several members of the Lok Sabha have dissenting opinions against the Report’s recommendations. The following are the key issues about the Report’s recommendations and the proposed “Data Protection Bill”:

While the JPC Report and the 2021 Bill are positive steps forward towards addressing various difficulties that people face in today’s digital world, they have also been faced with criticism. Critics of the 2021 Bill believe that in its current form, the bill is prone to be misapplied by the state, jeopardizing people’s fundamental rights. Privacy and data protection assume primacy in the digital era, and both must be protected to the same extent. The way the powers provided in the 2021 Bill are used will determine whether they are necessary for state function or whether they leave digital data rights unsecured and diminish the code’s aim.

Krishnamohan Menon is Managing Partner, Mimansa Law Offices

Flat Buyers Landing Into Rich Troubles- By Chaitanyashil Priyadarshi


January 27, 2021

Real Estate is one of the most up-and-coming sectors in India. It has become the second highest employment generating industry after the agriculture sector. The real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will contribute 13% to the country’s GDP. With the ever-rising population, the demands for commercial and residential spaces haveincreased in not only major cities such as Mumbai, Delhi, Bangalore etc. but smaller developing cities as well. The provisions of real estate have undergone major changes since the advent of liberalization and have seen many amendments in the recent years. There is no doubt that excellent acts, amendments and precedents have been set out in the real estate laws.However, due to the contemporary nature of the area,there is a lack of protection to homebuyers, builders and developers. More than anyone it is the homebuyers or flat buyers who land in trouble due to the subservient position.    Working class and low-pay families are by all account not the only casualty of slowed down land projects in Mumbai. Around Rs.13,000 crores paid by high total assets people to the manufacturer of India’s tallest under-development private pinnacle is stuck for 10 years.

The National Company Law Tribunal (NCLT) is a semi-legal authority joined for managing corporate debates that are of common nature emerging under the Companies Act, relating to cases of abuse and botch of an organization, ending of organizations and any remaining powers endorsed under the Companies Act. The Central Government has formed the NCLT under section 408 of the Companies Act, 2013 (18 of 2013) in June 2016.

Real estate is a significant area for the public economy, one of the significant work generators. But it has a ton of issues. In 1973, when the Maharashtra Ownership Flats Act (MOFA) came up, the preface of the Act said there are various maltreatments, acts of neglect, data unevenness. Disregarding those issues way back in the mid-seventies and raising regulation to amend it, things didn’t change a lot. Infringements proceeded and the complaint redressal component for investigating these infringements was an extremely muddled one.

It will require some investment for us to get over that. Who can be an engineer — there were no limits or section obstructions earlier. Particularly with the execution of different plans like the stopped structure redevelopment, Maharashtra Housing & Area Development Authority, 1977 (MHADA) redevelopment to Slum Rehabilitation Authority (SRA), you would have a large group of individuals who have no expert ability. They go there and get 70% assent and turn into a designer. I’m not projecting defamations on anyone.However, at that point you have issues of tasks, particularly redevelopment projects, mulling for quite a long time. Then, at that point, individuals race to MHADA or SRA to say they need this engineer out yet that makes more serious issues in light of the fact that at that point the designer has likewise made outsider freedoms. In any case, since it is a RERA-enrolled project, it necessitates that for a difference in designer needs go through Section 15, which implies the new engineer takes on every one of the liabilities of the task. Like I said, progress is an agonizing interaction and how much is the aggravation I actually don’t have the foggiest idea. We’re equipped to perceive how we will support ourselves in the agonizing system and emerge from this.

Homebuyers’ dream to reside in their homes is as yet a fantasy for themselves. Some homebuyers are not excessively monetarily solid and presently thumping at the entryway of legal executive to get equity. Assuming the firm goes for liquidation, they might not get anything – no level or discount. All returns of Liquidation are to stream to Banks and Financial Institution.

There are different instances of the families living in stopped properties and there are gigantic numbers of buildings which are re-creating or immature including more than great many tenants without a rooftop over their heads.

It is high time that the public authority should take the matter into consideration. One such milestone judgment will help level the buyers by setting a genuine model against defaulting manufacturers and will be recollected in future.

Chaitanyashil Priyadarshi is Partner, Mimansa Law Offices.

The Enforceability Quandary – To Grant Extension or Not? – By Anant Garg & Sreejita Mitra

January 21, 2022

The Hon’ble Supreme Court of India on March 23, 2020(“Order”) took suo moto cognizance of the pandemic due to Covid-19 in Suo Moto Writ Petition (Civil) No. 3/2020) and passed an order vide which the period of limitation in filing petitions, applications, suits, appeals and all other proceedings, irrespective of the period of limitation prescribed under the general or special laws was extended with effect from March 15, 2020 till further orders. Thereafter, on March 8, 2021, it was noticed that the country was returning to normalcy and since all the courts and tribunals had started functioning either physically or virtually, extension of limitation was brought to an end by the Supreme Court in March, 2021.However, on an application being filed by the Supreme Court Advocate on Record Association vide Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020, the Apex Court restored the Order till further orders, on April 27, 2021.Thereafter, on September 23, 2021 the Miscellaneous Application No. 665/2021was disposed of by the Hon’ble Supreme Court with the order that with effect from October 2, 2021, the limitation period will not be extended any further, due to imminent normalcy. Presently, the Hon’ble Apex Court has again restored the Order, on January 10, 2022 passed in Miscellaneous Application No. 21 of 2022 in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020, by virtue of which the period from March 15, 2020 to February 28, 2022 shall stand excluded for the purpose of limitation in respect of all judicial or quasi-judicial proceedings. 

The bone of contention here is the impact of this Order on the Arbitration & Conciliation Act, 1996 (“Act”), which is a special statute, especially on the timelines envisaged under Sections 34(3) and 36 of the Act. Section 34(3) of the Act provides that an application for setting aside an Arbitral Award has to be preferred within a period of three months from the date the award was received or if an application for correction or modification of an award has been preferred, three months from the period on which such application was disposed of by the Arbitral Tribunal. The proviso to Section 34(3) furnishes an additional 30 days to challenge an award provided the applicant shows reasonable cause.

Section 36 of the Act deals with enforcement of arbitral awards passed in India. As per Section 36(1) of the Act, after the time prescribed for making an application to set aside an award under Section 34 has elapsed, an award is to be enforced as a decree of a court. From a conjoint reading of Sections 34 and 36 of the Act, it clearly emerges that an arbitral award is to be enforced as a decree of the civil court upon the expiration of three months or in the event the proviso has been invoked, 120 days from the date the award was received. Sections 34 and 36 are set out hereunder for the sake of convenience:

“Section 34 – Application for setting aside arbitral award

…………………..

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

……………

“Section 36 – Enforcement

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).

Provided further that where the Court is satisfied that a prima facie case is made out that,-

Explanation.–For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).”

The Supreme Court had explained the importance of Section 34(3), while interpreting it strictly and had held in Dakshin Haryana Bijli Vitran Nigam Ltd. Vs Navigant Technologies Pvt. Ltd. that the phrase “but not thereafter” used in the proviso to Section 34(3) would amount to an express bar on the application of Section 5 of the Limitation Act, 1960. The Apex Court also held that –

“To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose.”

The Court further referred to its decision in Simplex Infrastructure Vs Union of India wherein it had held that “the phrase “but not thereafter” provided under Section 34(3) of the Act makes it evident that the statutory period of limitation for filing an application for setting aside is three months, which is extendable by thirty days, if sufficient cause is made out. No further period of time can be granted for the filing of an application under Section 34.”

In simple words, the period of enforcement of an Award commences as soon as the period for filing objections provided under Section 34(3) is over. Even a mere petition under Section 34(2) for setting aside the arbitral award shall per se not render the award unenforceable, unless the court grants an order of stay of the operation of the arbitral award in accordance with Section 36(3)on a separate application made for such purpose. This was enunciated by the Calcutta High Court in Kolkata Metropolitan Development Authority Vs South City Projects (Kolkata) Ltd. and Ors. while expounding that, “…Sub-Section (2) of Section 36 has recognised that, an application for setting aside of the arbitral award by itself shall not render the award unenforceable, unless the Courts grants an order of stay of the operation of the arbitral award in accordance with the provisions of sub-section (3) of Section 36 of the Act of 1996, on a separate application made for such purpose. …”

However, the pandemic, and the subsequent ruling of the Supreme Court, have left parties befuddled about whether to file an application for enforcement after 90/120 days are over or whether to wait for further orders of the Apex Court. There is not much precedential basis to take a stand on this, although the Calcutta High Court in SREI Equipment Finance Limited Vs Marg Limited has adopted the Supreme Court’s order stricto sensu. The High Court held that an award cannot be enforced until the period of limitation for filing a Section 34 application has not expired in the following terms:

“11. The question in the present case is whether the time for the award-debtor to apply under Section 34 for setting aside of the award has elapsed or continues to run. The answer to the question then must entirely turn on the effect of the order of the Supreme Court dated 27th April, 2021. The portion set out above makes it clear that the earlier order of 23rd March, 2020 was being restored as an extraordinary measure to lessen the difficulties faced by litigants in the upsurge of the pandemic. The order clarifies that the period of limitation whether under general or special laws or in respect of judicial/quasi judicial proceedings, shall stand extended till further orders. The intention of the Supreme Court is to preserve the rights of litigants who would otherwise have missed the statutory deadlines for instituting proceedings in the courts. The applicant’s time to file the Section 34 expired on 7th December, 2020 and the applicant hence comes within the zone of benefit given to litigants commenced from 15th March, 2020 and continued to run as on the date of filing the present application – 21st June, 2021. Simply put, the time to apply for setting aside of the award dated 31st August, 2020 has still not expired.

12. Any other interpretation of the orders passed by the Supreme Court would lead to an absurd result. If the Supreme Court orders were construed as not limiting an award holder from enforcing the award under Section 36(1) and (2) of the Act, it would in effect take away the benefit given to litigants who failed to institute proceedings within the period of limitation. It would lead to a scenario akin to opening a window but drawing the curtains to prevent the sunlight from coming in; a more topical analogy would be lifting of travel curbs but shutting down places where people may visit. This surely cannot be what the Supreme Court intended.”

As such, the award cannot be enforced. However, the Calcutta High Court’s decision was not unconditional. While applying the Supreme Court’s decision to extend the limitation periods to challenging an arbitral award under Section 34, the High Court also added that the rights of the award holder cannot be kept in abeyance indefinitely and thus, the award debtor was directed to take requisite steps under the Act within 10 days from the date of the judgment, as the law protects litigants who are vigilant and not those who take their rights for granted indefinitely.

The authorsdo not completely concur with this decision of the Hon’ble Calcutta High Court, as Section 36 enables a party to apply for enforcement of award when the period for challenging an award under Section 34 has expired and it cannot be deemed that the period would stand extended for an uncertain period by the orders of the Hon’ble Supreme Court. It is essential to note that the Supreme Court’s intent was to pass a welfare ruling to diminish the inconvenience of the stringent limitation periods. But if the Calcutta High Court’s proposition were to be accepted, then enforcement of an arbitral award can be delayed by an award debtor taking recourse to the order of the Supreme Court, thereby, defeating the ethos of speedy alternative dispute redressal enshrined in the Act.

This is reinforced by a recent decision of the Hon’ble Delhi High Court in Bharat Kalra Vs Raj Kishan Chabra wherein the following observation was made with respect to the Order:

“13.  While it is true that the power to condone delay is intended to advance substantive justice, nevertheless, procedure cannot be given a complete go by. The powers of the court to condone delay is to be used in appropriate cases. No litigant can assume that, as a matter of right, the delay in taking steps would be condoned, because procedure is the handmaiden of substantive justice. Rights accruing to the opposite party on account of the delayed action need to be also kept in mind. The reasons given for explaining the delay are of paramount importance and not the length of the delay. The shortness of delay alone ought not to suffice for exercise of discretion to condone it. Cogent and clear explanations have led the courts to condone the delay, even of five years in filing the pleadings. …

…15. It was thus made clear that the benefit of the order dated 23rd March, 2020 would be available only to those who were vigilant of their rights and not lethargic.”

Although the Hon’ble Supreme Court expressly mentioned in its order dated July 10, 2020 (Cognizance for extension of limitation, In Re) that all periods of limitation under the Act shall stand extended as the Order will be deemed applicable to the Act as well, however, the dubiety regarding the enforcement of award is still an open-ended question and is yet to be decided finally by the Hon’ble Supreme Court but until then, in the humble submission of the Authors, the perk of the Hon’ble Supreme Court’s order should not be misused to cause inconvenience to award holders.

Anant Garg is Partner, and Sreejita Mitra is Associate, at L&L Partners Law Offices.

White-Collar Crimes: A Broad Overview and Legislations- By Nitesh Rana

January 13, 2022

A crime is an act or omission declared to be crime by the State. A crime or offence is hazardous not only to an individual but also to the society at large or the state. In recent years, the crimes, based on their nature, objective, modus operandi and consequences, have been classified as ‘blue-collar crimes and ‘white-collar crimes’.

Blue-Collar Crime:

General cluster of crimes is widely referred to and categorized as ‘blue-collar crime’, though that is not an official legal classification. For the ease of understanding, a crime which is committed for immediate benefit or gain to the individual or a group involved is referred to as blue-collar crime.

The term ‘blue-collar crimes’ was originally coined to loosely define those crimes committed by someone from the working or lower echelons of society. It is understood that generally the people belonging to the lower-echelons of society are more likely to be pushed into crime due to their quest of survival than for greed or power. During the1910s in America, manual laborers who were from society’s lower-segment often opted for blue shirts so that stains gained from days at work were less visible. The term ‘blue-collar workers’ was attributed to them as defining low income earners.

Mostly blue-collar crimes are those crimes that are considered to be triggered by passion, rage or other emotions, unemployment etc. Crimes that cause injury to people or property, such as burglary, property crimes, theft, murder and other violent crimes, assault, sex crimes, breaking and entering and drug crimes are considered to be blue-collar crimes.

White-Collar Crimes:

In contrast to blue-collar crimes, ‘white-collar felony’ refers to financial shenanigans, non-violent crimes committed by persons who, often by virtue of their occupations, exploit social, economic, or technological power for personal or corporate gain. Typically, it includes fraud, bribery, ponzi schemes, insider trading, embezzlement, cybercrime, copyright violation, money laundering, forgery, corruption etc.

A white-collar criminal belongs to the upper socio-economic class who is skirting the law for economic gain while performing his professional assignments. White-collar crimes are committed with a cool mind, planned calculation and deliberate design. In general, the fundamental cause of white-collar crime is economic greed. It is often said “white-collar crimes are committed for greed, not for need”.

There are other contributory causes as well, such as opportunity to commit crime, situational pressure on the individual etc. Some offenders, in fact, do not really consider it a crime because the acts involved do not resemble street crimes. Some business people feel justified in committing white-collar crimes because they believe that government regulations do not really understand the business world or their activities or the problems of competing in the free enterprise system. These crimes are committed by persons who are socially, economically and occupationally well established as well as influential in society. Usually common people cannot make out these types of crimes, although they can perceive the effect of such crimes on them.

One of the prime causes of white-collar crime is ignorance of people about such crimes as their nature is totally different from traditional blue-collar crimes. Rationalizing greed is a common trait of white-collar criminals. Some white-collar criminals believe that everyone violates business laws, so it is not so bad if they also do so. Most white-collar crimes are, directly or indirectly, connected with distribution of wealth, encouraging growth of monopolies, the rise of a managerial class and intricate institutional mechanism.

The concept of white-collar crimes has seen phenomenal growth after colonization and industrialization in the eighteenth century. White-collar criminality has become a global manifestation with advancement of commerce and technology and the reason for its monumental growth is a meteoric rise in economies and industries in past decenniums.

White-collar crimes are dangerous to wider sections of society as these crimes directly affect the financial condition of the country itself by putting the nation into great financial hardship.They have a serious impact on society and thus they are serious offences. The methods by which taxes are evaded or black money is floated in the market and money laundered are all examples of such offences, which are committed purely for personal gains at the cost of heavy loss to the State.

White-collar crimes’ cause economic misbalance, which impacts society in the form of poverty, unemployment, economic slowdown, inflation etc. As a result, there is an artificial economic crisis in the market and the price of goods ultimately rises. When white-collar criminals evade taxes, partially or as a whole, the entire fiscal policy of the Government is disturbed. Therefore, due to the malpractice, the society is affected in many ways.

Legislations on White-Collar Crimes:

The Parliament from time to time brought legislations to deal with white-collar crimes and it has proved to be deterrent to an extent.

The Criminal Law (Amendment) Ordinance, 1944 (XXXVIII of 1944) was brought to prevent the disposal and concealment of properties procured by means of corruption, breach of trust and cheating. However, not all crimes under the Indian Penal Code are covered by the said Law.

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 covers penalty of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith and incidental thereto.

The Narcotic Drugs and Psychotropic Substances Act, 1985 provides for the penalty of property derived from, or used in illegal traffic in narcotic drugs.

The Prevention of Corruption Act, 1988 and The Lokpal and Lokayuktas Act, 2013 are also legislations aimed at curbing white-collar crimes, though in a specific categories of persons.

The Fugitive Economic Offenders Act, 2018 covers the acquisition of properties, in India and abroad, which are Benami in nature or are covered under the concept of Benami transactions. The act works in coherence with the Prevention of Money Laundering Act, 2002 since the enforcing agency is the Enforcement Directorate. It lays down that a person would be qualified to become a fugitive economic offender only when a non-bailable warrant has been issued with regard to the scheduled offences as mentioned in the Act against the individual and in order to avoid criminal prosecution, the aforesaid individual has left India; or he is refusing to return to India to face the criminal prosecution. The Act has been accompanied by a schedule which provides a list of exhaustive offences under which a Fugitive Economic Offender can be booked. Further, the Fugitive Economic Offender must have committed a fraud or a crime of over Rs 100 crores to be booked under this Act. Lately, the Special courts have declared as fugitives Vijay Mally, Nirav Modi, Asif Iqbal Menon, Junaid Iqbal Menon and Hajra Iqbal Menon (Late Iqbal Mirch’sf amily), Nitin Sandesara, Chetan Sandesara, Dipti Sandesara and Hitesh Patel (Directors of M/s Sterling Biotech Ltd) among others.

The Prevention of Money Laundering Act, 2002 (PMLA) forms the core of the legal framework put in place by India to combat money laundering and obviate white-collar crimes. It has dual parallel provisions: firstly, provision for attachment and confiscation of property, secondly prosecution before the criminal court which has a maximum sentence of 7 years and in exceptional cases it is 10 years.

The Enforcement Directorate (ED) is a law enforcement agency responsible for enforcing economic laws and fighting economic crime in India. One of the main functions of the Enforcement Directorate is to investigate offences of money laundering under the provisions of PMLA and to take actions like attachment of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under PMLA, and to prosecute the person involved in the offence of money laundering. India is a full-fledged member of the Financial Action Task Force and follows the guidelines of the same.

The evolving threats of white-collar crime and money laundering supported by the emerging technologies need to be addressed with equally advanced anti-money laundering mechanisms and laws.

Nitesh Rana is Counsel for the Enforcement Directorate.