Law and Legal developments

Looking back at 2011: Income tax

2012-01-04T17:34:00.000+05:30

A post looking back at some important tax issues decided in 2011 is available on the indian Corporate Law blog, here.

Public Law Symposium at NLSIU, Bangalore

2011-11-23T01:58:00.001+05:30

The National Law School of India Review, the flagship journal of National Law School of India University, Bangalore is pleased to present the first NLSIR Public Law Symposium to be held on 10 December, 2011 at the National Law School campus. The theme of the symposium is "Adjudication of Socio-Economic Rights by the Indian Supreme Court", an issue which has seen significant legal developments in the recent past. The symposium will be attended by renowned legal luminaries including Justice Muralidhar, Mr. T. R. Andhyarujina, Mr. Shyam Diwan and Mr. Arun Kumar Thiruvengadam, amongst others.

The discussion will be divided into two sessions. In the first session (scheduled between 10.30 A.M.-12.30 P.M.) the panel will discuss the substantive adjudication of socio-economic rights undertaken by the Supreme Court concerning questions of the ever-widening ambit of Article 21 and the content of the new rights so evolved. The changing nature of the relationship between Part III and Part IV of the Constitution due to such expansion will form an important part of the session. The second session (scheduled between 1.30 P.M.-3.30 P.M.) will focus on the manner in which the Supreme Court has enforced these rights and consider the variety of procedural innovations employed for the same, including PILs and continuing mandamus.

The registration fee for the symposium is Rs. 500 for professionals. There is no registration fee for students. All those interested are requested to register their attendance at the following link: <https://docs.google.com/spreadsheet/viewform?formkey=dEdkRTJua21BY2R5Snh1UWl1QXRCREE6MQ>.

For any further details regarding the symposium, please contact Krishnaprasad K.V. (Chief Editor, NLSIR) at +91-9916589670 or Ashwita Ambast (Deputy Chief Editor, NLSIR) at +91-9986478265 or email us at mail.nlsir@gmail.com.

Lifting the Veil: England & India

2011-11-05T11:09:00.000+05:30

In this post on Indian Corporate Law, I have discussed two recent judgments – one of the Bombay High Court, another of the England & Wales High Court – on lifting the corporate veil. The two judgments are Great Pacific Navigation v. M.V. Tongli Yantai and Linsen International v. Humpuss Sea Transport.

Equitable Set-off and Limitation

2011-10-07T17:39:00.000+05:30

A reader in his comments on a previous post pointed out that the 2004 Calcutta High Court decision in Peerless General Finance had stated that section 3 of the Limitation Act, 1963, does not affect an equitable set-off. This decision, however, had not taken into consideration an older line of authority (1915, Madras High Court, Chetty v. Desikar) which appears to hold that the statute of limitations does apply to equitable setoff. This contradiction raises an interesting issue: can an equitable set-off be raised in answer to a claim, even where the equitable set-off could not be pleaded as an independent claim on account of limitation?

On principle, the argument for allowing an equitable set-off to be pleaded would run thus: Limitation bars the remedy but does not extinguish the right. Equitable set-off is a substantive defence. As long as the right is not extinguished, there is no reason why equitable set-off should not be set up as a substantive defence. On the other hand, it might be contended that equitable setoff operates as a substantive defence on the basis that the two claims are so closely connected, that equity would regard them as one. Hence, when one claim is barred (as a matter of the right to recover, as opposed to a matter of the forum of recovery), equity may not regard the claims as being one. Further, equity must run according to the law and not in derogation thereof.

I have not come across any Indian authorities discussing the issue and the authorities in detail; however, there appears to be substantial discussion in relation to this issue in English law. Lord Denning MR in Henriksens Rederi v. Rolimpex (The Brede) [1974] 1 QB 233 stated, “In point of principle, when applying the law of limitation, a distinction must be drawn between a matter which is in the nature of a defence and one which is in the nature of a cross-claim. When a defendant is sued, he can raise any matter which is properly in the nature of a defence, without fear of being met by a period of limitation. No defence, properly so called, is subject to a time-bar. But the defendant cannot raise a matter which is properly the subject of a cross-claim, except within the period of limitation for such a claim.” However, in that case, the majority left this specific point open. Lord Denning’s view was, however, approved in Westdeutsche v. Islington Borough, [1994] 4 All ER 89; and then in Filross Securities Ltd v Midgeley [1998] EWCA Civ 1248.

[The decision of the House of Lords in Aries tankers v. Total Transport, [1975] 1 WLR 185, where the House held that a claim beyond time could not be pleaded as equitable set-off, is explained on the basis that in that case, the contract between the parties had incorporated Article III Rule 6 of the Hague Rules. The effect of Rule 6 is that the right itself is extinguished – so, Rule 6 is to that extent different from a mere limitation provision which only bars recovery.]

Links of Interest

2011-08-26T15:02:00.001+05:30

1. This article by Mr. V. Umakanth discusses put and call options in the context of securities regulation in India. From the abstract: “This article embarks on the modest task of mapping out the legal landscape that presently shapes the enforceability of put and call options in Indian companies. It seeks to review applicable legislation and analyze key judicial pronouncements that hold sway over the field. It finds that the current legal regime governing put and call options in investment agreements is fragmented and hazy and unnecessarily restricts the ability of investors in Indian companies to enter into such arrangements to protect their own interests. It calls for a reconsideration of the legal regime so that physically settled options that are customary in investment agreements may be treated as valid and legally enforceable…”

2. This post on the UKSC Blog discusses a recent decision of the UK Supreme Court, Belmont v BNY, where the Supreme Court has discussed the “anti-deprivation rule” in insolvency law. The rule is effectively that “There cannot be a valid contract that a man’s property shall remain his until bankruptcy, and on the happening of that event shall go over to someone else and be taken away from his creditors…” Ex p Jay; Re Harrison [1880] 14 Ch D 19. The Supreme Court has held that the rule applies only when there is a deliberate intention to evade insolvency laws, and does not hurt genuine commercial arrangements. Lord Mance’s judgment notes the background of the rules: “I am satisfied that there are, and ought to be, two principles in this area. One is the principle applied in British Eagle, which precludes a bankrupt from agreeing to distribute his, her or its property other than pari passu in bankruptcy (although it does not preclude creditors from agreeing inter se on the distribution inter se of their pari passu shares: In re Maxwell Communications Corpn plc [1993] 1 WLR 1402). The other is a concurrent principle, whereby dispositions of property on bankruptcy may be invalidated as being in fraud or an evasion of the bankruptcy laws… While the two principles are conceptually distinct, they are quite closely allied. British Eagle addresses what happens in bankruptcy. An anti-deprivation principle addresses what happens on bankruptcy. If contracting out of the statutory rule requiring pari passu distribution in bankruptcy is impermissible, it would be surprising if there were no concurrent principle capable of invalidating certain dispositions which, by removing property from the bankrupt on bankruptcy, had the same ultimate effect… “ He then laid down a three-fold test to apply in anti-deprivation cases: “The existence of a contractual scheme, which is said to create the relevant property interest, but at the same time to include provisions providing for its illegitimate deprivation on bankruptcy, raises several questions: First, how far did the scheme confer any property interest on the subsequently bankrupt party? Second, how far did it deprive him of any such property on bankruptcy? Third, in so far as it did deprive him of any such property on bankruptcy, did this amount to an illegitimate evasion of the anti-deprivation principle?”

3. In this post on Indian Corporate Law, I have discussed the judgment of the Bombay High Court in Retailers Association v Union of India, where the Court upheld the constitutional validity of service tax on renting of immovable property.

4. This post discusses a recent decision of the England & Wales High Court, where the Court held that members of an limited liability partnership do not as such owe fiduciary duties to one another.

5. This post on the Lex Arbitri blog discusses the historical development of arbitration law in India.

Call for Submissions: National Law School of India Review

2011-08-11T15:48:00.007+05:30

The National Law School of India Review is now accepting submissions for its upcoming issue - Volume 24(1).The National Law School of India Review (NLSIR) is the flagship law journal of the National Law School of India University, Bangalore, India. The NLSIR is a bi-annual, student edited, peer-reviewed law journal providing incisive legal scholarship on issues that are at the forefront of contemporary legal discourse. Over the last 20 years, the NLSIR has regularly featured articles authored by judges of the Indian Supreme Court, Senior Counsel practicing at the Indian bar, and several renowned academics.

The most recent issue of the NLSIR, Vol. 23(1), featured contributions by Mr. Justice Altamas Kabir (Judge, Supreme Court of India), Professor Christopher Forsyth (Cambridge University), Professor Julian Roberts (Oxford University), Professor Lea Shaver (Yale Law School), Professor Ariel Ezrachi (Director, University of Oxford Centre for Competition Law and policy) and Mr. K. Swaminathan (Head of the Direct Tax Practice at Lakshmikumaran & Sridharan) among several others. Moreover, in August 2009, NLSIR attained the unique distinction of being the only Indian student-run law journal to be cited by the Supreme Court of India, in Action Committee, Un-Aided Private Schools v. Director of Education. NLSIR has also recently been cited in Justice R. S. Bachawat's Law of Arbitration and Conciliation, a leading treatise on arbitration law in India.

Papers may be submitted as Long Articles (approximately 8000 words), Essays (approximately 5000 words) or Notes (approximately 2500 words). Submissions may be made to mail.nlsir@gmail.com. Queries regarding submission may be sent to the same email address. The last date for submissions is November 1, 2011. Formore information, please visit - www.nlsir.in.

Update

2011-05-23T15:22:00.000+05:30

I have posted a short note on Indian Corporate Law, dealing with some issues in MAT. The note is available here.

Event Announcement: NLSIR Symposium

2011-04-14T13:26:00.001+05:30

4th ANNUAL NLSIR SYMPOSIUM: INDIA’S TAXATION REGIME: PERSPECTIVES ON THE PROPOSED CHANGES

The Annual NLSIR Symposium has earned the reputation of being a unique forum for the consideration of contemporary legal developments having attracted leading practitioners such as Mr. Nishith Desai, Ms. Bijal Ajinkya, Mr. Sandeep Bhagat, Mr. Stephen York, Mr. Padam Khincha, Mr. Gourab Banerji, Mr. Arvind Datar, TP Ostwal and renowned academics including Mr. V. Umakanth, Assistant Professor, National University of Singapore, and Mr. Sandeep Parekh, Professor, IIM-A amongst others.

This year, the NLSIR Symposium is themed on “INDIA’S TAXATION REGIME: PERSPECTIVES ON THE PROPOSED CHANGES”. The first of the four sessions will deal with the implications of the anti-avoidance measures incorporated in the Direct Taxes Code Bill. The DTC introduces one of the most sweeping GAARs - treating tax avoidance almost on par with tax evasion. Whether the distinction between tax avoidance and tax evasion will continue to be retained after the coming into force of GAAR – and if so, how it will apply in practice – is an open question which the Symposium seeks to address as also the structuring of business transactions in light of GAARs and its impact on DTAAs. The second session aims at addressing taxation of e-commerce. Tax treatment of such transaction, i.e. whether source based or residence based taxation is to be followed assumes crucial importance. It also seeks to reflect upon issues involving taxation of software transactions and whether taxation should be in the nature of sales tax or service tax. The third session focuses on some of the contentious issues in indirect taxation today. The first is the hotly debated GST. Another controversial issue which this Session addresses is in reference to the interpretation and implications of Part XIII of the Indian Constitution and Art. 301’s interpretation and interplay with the rest of the provisions in Part XIII which has given rise to significant controversy over the years. The fourth and the final session addresses the future of India’s Tax regime. With provisions such as taxing FIIs through the capital gains, the new Branch Profit Tax etc., it is clear that the government is seeking to cast a wide net to pull in revenue from multiple fronts through DTC and such changes are sought to be analyzed in this session.

This years' Symposium is scheduled on the 16th and 17th of April 2011, and will be held at the International Training Center, National Law School of India University, Bangalore. The banquet will be at the Chancery Pavilion. The line-up of speakers includes partners of India's top law firms such as AMSS, AZB, SNR and Khaitan, senior advocates and judges.

Those interested in attending the Symposium can visit the NLSIR website (www.nlsir.in) for further details. Please register on the website (http://www.nlsir.in/symposium.html) or e-mail us (mail.nlsir@gmail.com). All registered delegates will be awarded a certificate of participation.

We look forward to seeing you at the Symposium!

Regards,

Editorial Board of the National Law School of India Review

SEBI Act: Exclusion of Jurisdiction and Tort Claims

2011-02-19T00:53:00.000+05:30

I have posted a short note on the Indian Corporate Law blog arguing that one of the claims made by Mr. Sandeep Parekh in his expert witness statement before US Courts in not correct as a matter of law. The issue is this – does the SEBI Act bar jurisdiction of civil courts to hear tort claims? In my view – no; in Mr. Parekh’s view, yes. Mr. Parekh’s reasoning is based in a large part on the judgment of the Bombay High Court in Kesha Appliances; I argue that the case is clearly distinguishable.

Mareva Injunctions revisited

2011-02-18T19:43:00.001+05:30

The legal tests for grant of a Mareva injunction or a freezing order are more detailed than the usual enquiry in grant of injunctions. These detailed factors (set out in Gee & Andrews, ‘Mareva Injunctions – Law and Practice’, 6^th edition, para 12.039) have been reaffirmed by the England & Wales High Court recently in Irish Response v. Direct Beauty Products [2011] EWHC 37 (QB).

In a sense, these may well be seen as factors which go to the ‘irreparable injury’ and ‘balance of convenience’ requirements for grant of injunctions. However, the standard interim injunction principles of American Cynamid v. Ethicon [1975] 1 All ER 504 have been held to be inapplicable to Mareva injunctions: Polly Peok International v. Nadir. In view of this, the approval of the detailed factors from Mr. Gee’s work is most helpful. As the learned Judge in Irish Response stated, “The critical difference between a decision as to whether to grant an ordinary injunction, applying the criteria identified in American Cyanamid Co. v. Ethicon Ltd., and a freezing order is that, whereas in the case of an ordinary injunction, once it has been demonstrated that there is a serious question to be tried and that damages would be an inadequate remedy, the question is where does the balance of convenience lie, in the case of a freezing injunction the issue, after "a good arguable case" has been shown and it has been demonstrated that there is a real risk that, absent the grant of an injunction, any judgment would go unsatisfied, is whether it is just and convenient to grant the injunction…”

The factors useful in this analysis of when a Mareva injunction is appropriate can be found in paras 31-33 of the judgment in Irish Response.

In Indian law, there does not appear to have been too much of discussion on the legal tests to be applied in granting a Mareva injunction. The Supreme Court in MVAL Qamar v. Tsavliris Salvage in obiter seems to have approved a couple of New Zealand decisions on the point. The Bombay High Court has recently stated, “A freezing of assets, known as "Mareva Injunction" is well known concept in English Law (Mareva Companies Naviera SA V. International Bulk Carries SA (1980) 1 All ER 213), as well as, recognized in India. (Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr., (2008) 4 SCC 190…” This Calcutta High Court judgment also has some discussion about the concept where it distinguishes a Mareva injunction from an attachment before judgment under the Code of Civil Procedure. The applicable legal tests in India are still unclear – readers are invited to point out any specific set of tests approved by the Indian courts in this regard.

Nomination and Succession: The Importance of the Statutory Language

2011-02-17T11:19:00.000+05:30

I had earlier highlighted a judgment of the Bombay High Court in Harsha Nitin Kokate. I had stated:

“The Bombay High Court in Harsha Nitin Kokate v. The Saraswat Co-operative Bank has held that the position of a nominee under Section 109A of the Companies Act, 1956 is not merely that of a trustee for the estate of the deceased, but “on the death of the share holder, the nominee would become entitled to all rights in the shares to the exclusion of all other persons…” Until now, the law in relation to nomination was controlled by the decision of the Supreme Court delivered in the context of Section 39 of the Insurance Act, Sarabati Devi v. Usha Devi. This judgment had then been cited by various High Courts in a non-insurance context. Kokate appears to restrict Sarbati Devi to insurance law only; and holds that Section 109A of the Companies Act lays down a different principle…”

The underlying reasoning of the High Court was based on the text of Section 109A of the Companies Act. The Supreme Court in a matter concerned with Section 45ZA of the Banking Regulation Act, 1949, has however reached a different conclusion. The Court, in Ram Chander Talwar v. Devender Kumar Talwar, Civil Appeal 1684 of 2004, (2010) 159 Comp Cas 646 (SC), has held:

“Section 45ZA(2) merely puts the nominee in the shoes of the depositor after his death and clothes him with the exclusive right to receive the money lying in the account. It gives him all the rights of the depositor so far as the depositor's account is concerned. But it by no stretch of imagination makes the nominee the owner of the money lying in the account. It needs to be remembered that the Banking Regulation Act is enacted to consolidate and amend the law relating to banking. It is in no way concerned with the question of succession…”

The question which then arises is whether this would mean that the reasoning in Kokate is no longer good law. The answer to this turns on whether there is a material difference between the relevant sections.

The Supreme Court in Talwar’s case was concerned with Section 45ZA(2) of the Banking Regulation Act, which states:

“(2) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made in the prescribed manner purports to confer on any person the right to receive the amount of deposit from the banking company, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.”

The Bombay High Court in Kokate’s case was concerned with Section 109A(3) of the Companies Act, 1956, which states:

“(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in, or debentures of, the company, the nominee shall, on the death of the shareholder or holder of debentures of the company or, as the case may be, on the death of the joint holders become entitled to all the rights in the shares or debentures of the company or, as the case may be, all the joint holders, in relation to such shares in, or debentures of the company to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.”

It is arguable that there is a material distinction in the sections – the Banking Regulation Act merely speaks of a “right to receive” and grants “all the rights of the sole depositor”. On the other hand, the Companies Act speaks of a “right to vest” and grants “all the rights in the shares”. Indeed, a large part of the reasoning of the Bombay High Court was based on the meaning of the word “vest”, which is present in Section 109A(3) of the Companies Act but is absent from Section 45ZA(2) the Banking Regulation Act. Consequently, it is submitted that the reasoning of the Bombay High Court continues to be good in law; and the ultimate result must depend on the specific language used in the particular statutes; and no general principle can be drawn to describe the effect of all nominations irrespective of the relevant statute.

United Kingdom Supreme Court: Links of Interest

2011-02-14T14:46:00.001+05:30

The UKSC Blog, created by solicitors and barristers (Olswang and Matrix Law), appears to be an extremely valuable resource for practitioners interested in developments in the UK Supreme Court. It is similar to the SCOTUS blog (US Supreme Court). I strongly recommend the blog to those interested in key developments in the Supreme Court of the UK.

Much has been said in India in recent days about judicial accountability; and Lord Phillips of the UK Supreme Court recently delivered an address on the topic from a UK perspective. The address, “Judicial Independence and Accountability: A View from the Supreme Court”, is available here.

The United Kingdom Supreme Court recently delivered its decision in Global Process Systems v. Syarikat Takaful Malasia Berhard [2011] UKSC 5. The Court dismissed the appeals from the judgment of the Court of Appeal reported in [2009] EWCA Civ 1398. The case raised interesting questions in the law of marine insurance. In particular, issues relating to causation and “inherent vice” were examined in detail. A summary is available here. The decision is available here. Lords Saville, Mance, Collins and Clark gave detailed (though in substance similar) opinions, and Lord Dyson agreed with the reasons given by all four. All the four detailed opinions contain valuable analysis of the law on the point. The Court has suggested that for an “inherent vice” defence to succeed, the sole cause of the loss must be the vice, and no external element should play a role in the loss (for an explanation of the facts and the decisions, please see this summary). Lord Clarke stated, “…the distinction is between damage caused by any external occurrence and damage resulting solely from the thing itself.” [emphasis mine] Although the Court of Appeal has been affirmed, there may be some changes in the legal tests applied by the two appellate courts. I will examine this in detail subsequently.

Event Update: Christ University Conference on Constitutional Law

2011-02-14T14:07:00.000+05:30

I received the following note which may be of interest to readers:

School of Law, Christ University is organizing a two day National Conference on the “INDIAN CONSTITUTION IN THE 21^ST CENTURY: A CONCEPTUAL AND CONTEXUAL AUDIT to be held on the 24^th and 25^th of February, 2011. The Conference is broadly structured around four themes namely:

· Reframing the Constitution: Is it really a need of the hour?

· National Security and Constitutional Challenges

· Development and Constitutional Challenges

· Challenges to the Functions of the Organs of the State

The Conference brings a unique opportunity to share and explore new ideas, concerns and suggestions among academicians, practitioner, policy makers and students. So far the conference has received an overwhelming response in that there are over fifty papers that are expected to be presented on the conference days.

Programme Details:

The first day of the conference will see participation of eminent jurists, academicians and practitioners such as Justice Santosh Hedge, Former Judge, Supreme Court of India, Justice P.P. Naolekar. Former Judge, Supreme Court of India, Prof. V.S. Mallar, Chair Professor (M.K.Nambiar Chair on Constitutional Law) at NLSIU, Shri Uday Holla, Senior Advocate, Supreme Court of India and Shri Aditya Sondhi, Advocate, Supreme Court of India.

The second day of the conference will see presentations by several academicians and students across the country. Leading scholars working in this domain will be moderating each of the sessions on the second day.

Contact

Practitioners, academicians, policy makers and students are invited to register as delegates. The conference brochure is available here. Further details will be made available on request. Interested readers can contact the Conference Organizing Committee at this email.

Registration Fee

For academicians	750 INR
For two delegates	1000 INR
For students	500 INR

Supreme Court on Section 394: Sesa v. Krishna Bajaj

2011-02-10T12:33:00.000+05:30

My note on the decision of the Supreme Court of India in Sesa Goa v. Krishna Bajaj is available on the Indian Corporate Law blog here. In brief, the Supreme Court interpreted the Provisos to Section 394(1). Under the second Proviso, on a literal reading, a report by the Official Liquidator (that the affairs of the company are not be carried on in a manner prejudicial to the members/public interest) is required before a scheme for amalgamation can be sanctioned. The Supreme Court has however allowed such a scheme to be sanctioned despite holding that the report of the OL was vitiated.

Lucasfilm v. Ainsworth: Preview to a UKSC hearing

2011-02-10T01:48:00.001+05:30

We had earlier briefly discussed the decision of the England and Wales High Court in Lucasfilm v. Ainsworth, and important decision on the interplay between intellectual property and private international law. The case was decided by the Court of Appeal subsequently (in December 2009); but what makes the issue particularly relevant at present is that the UK Supreme Court will shortly be hearing an appeal from the Court of Appeal decision. This case raises highly important issues pertaining to conflict of laws, and we will be following the UK Supreme Court decision. By way of introduction to that discussion, this post briefly looks at the Court of Appeal decision (Lucasfilm v. Andrew Ainsworth, [2009] EWCA Civ 1328).

The case also raises several questions in intellectual property law; for the time being, we will skip those issues and turn to one of the private international law issues: can a foreign copyright be enforced in a domestic court? More particularly, as the Court framed the issue, “Must or should this court accept jurisdiction to enforce Lucasfilm’s US copyrights against Mr Ainsworth for what he has done and threatens to do by way of sales from here to the US?” The issue turns on subject-matter jurisdiction. The relevant facts were stated to be as follows:

“The starting point here is that it is now common ground or undisputed that Lucasfilm does have US copyrights and that Mr Ainsworth has infringed them. The acts which constitute infringement by US law were all actually done in or from the UK. They consist of sales to US customers in the US by despatch of products from the UK, advertising on the internet and the placing of advertisements in US publications. It would seem that questions of where the property passes, or where the contract was made, or what law governs it and the like are irrelevant under US law. They might not be if the position were the other way round (see e.g. Badische Anilin v Hickson [1908] AC 419 – under the old law no UK patent infringement by sale and despatch from Germany). It is not necessary to examine whether the concession of infringement according to US law is correct. What is to be noted is that the extent to which US copyright law extends "a long-arm" to acts in fact done only in this country is itself a question of American, not English law. Other foreign laws might extend an even longer arm: if they did it would make no difference if jurisdiction here is automatic and compulsory. The arguments for subject-matter jurisdiction fall under three heads: a) That the judgment in Owusu, Case C-281/02 compels it; b) That this court in Pearce v Ove Arup [2000] Ch. 403 decided that the English courts have subject-matter jurisdiction over all acts of infringement of copyright committed anywhere in the world; c) That, even if subject-matter jurisdiction is not compelled, the courts here have a discretion to accept jurisdiction and should do so as a matter of forum conveniens.”

Contention (a), based on Owusu, is a matter turning on EU law. Once more, I will skip this discussion, and instead turn to contention (b). Under common law, do domestic courts have subject-matter jurisdiction in respect of all acts of copyright infringement, including those concerning a foreign copyright? Mann J. in the High Court had held in favour of such jurisdiction, holding that he was “prepared to conclude that an English court can, and in an appropriate case should, determine at least questions of infringement of foreign copyright cases. Those cases will include cases where subsistence is not in issue. I would not, however, hold that questions of subsistence can never be decided here. In land cases incidental questions of title can apparently now be considered. I can see no reason why the same should not apply to copyright…”

The answer to the question turns on decisions going back to 1893, when the House of Lords decided the case of British South Africa v. Companhia de Mocambique, [1893] AC 602. In Mocambique, an action was brought in the English Courts in respect of trespass to land in South Africa. Lord Herschell drew a distinction between “matters which are transitory and those which are local in nature.” In respect of the latter, English Courts would not have jurisdiction. The decision was summaried in Dicey & Morris (Rule 79): “Subject to the exceptions hereinafter mentioned, the court has no jurisdiction to entertain an action for (1) the determination of the title to, or the right to the possession of, any immovable situate out of England (foreign land); or (2) the recovery of damages for trespass…” How does this apply to intellectual property? This will turn on the rationale behind the rule.

Now, what is the rationale behind such a formulation? Is it a traditional “local action” rule, or is the rationale based on notions of non-interference with sovereignty of another state? It was contended before the Court of Appeal that the rationale was non-interference with sovereignty; but when validity of intellectual property itself was not in question, but merely infringement is, there is no question of interference with sovereignty. Hence, it was argued, the Mocambique rule should not be made applicable.

The Court of Appeal rejected this line of reasoning, and held that “Moçambique is not limited to claims about land, nor to claims about title or validity of the foreign right relied upon. Infringement of an IP right (especially copyright, which is largely unharmonised) is essentially a local matter involving local policies and local public interest. It is a matter for local judges…” After giving several reasons for this holding, the Court of Appeal also held that it did not find substance in the distinction made between validity and infringement in this context. It was observed:

“The supposed distinction is between a foreign court adjudicating on whether the grant of a right by a State was valid and adjudicating upon whether that right is infringed. The former is said to call in question a sovereign act, the latter not. But adjudicating on infringement will itself often require the foreign court to decide on the scope of the right granted by the foreign sovereign. In a patent case for example, the scope of the monopoly granted is often in question, quite apart from validity. Sometimes it is on the basis that if the patent is wide enough to catch the defendant it is invalid. Questioning the scope of a monopoly granted by a sovereign state in a foreign court therefore carries with it the foreign court ruling on the scope of a sovereign act, which is not different in kind from ruling on its validity”

On the basis of these (and other) reasons, it was held that English Courts had no subject-matter jurisdiction. The UK Supreme Court is likely to go into these issues in depth; and should it actually do so, one can expect a detailed conceptual analysis of interplay between the rules of conflict of laws and intellectual property.

Procedural Issues Concerning Challenge of an Arbitral Award

2011-02-06T18:53:00.005+05:30

Recourse against an arbitral award may be taken under section 34 of the Arbitration and Conciliation Act, 1996. Section 34(2) enumerates certain grounds on which an arbitral award may be challenged and restricts the basis for challenge to grounds mentioned therein. Section 34(3) prescribes the time-period for filing an application challenging an award. This post discusses several issues regarding the interpretation of section 34(3) that have come before courts.

Section 34(3) of the Arbitration and Conciliation Act reads as follows:

“An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award, or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

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 if may entertain the application within a further period of thirty days, but not thereafter.”

Evidently, the time period for filing an application challenging an award is three months and a further extension of thirty days may be granted by the Court in certain situations. An interesting issue that came for consideration was whether this period had to be strictly followed or whether an application challenging an award could be admitted after the expiry of this period, by relying on section 5 of the Limitation Act, 1963. The relevant portion of section 5 reads: “Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908) may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period...” This question was answered by the Supreme Court in Union of India v. M/s Popular Construction Co. : (2001) 8 SCC 470 : where it held section 5 of the Limitation Act to be inapplicable in instances where an application challenging an award is filed under section 34. The Court emphasised on the words “but not thereafter” used in the proviso to section 34(3), declaring that these words indicate that the application of section 5 is excluded in matters governed by section 34(3).

Thus, it is now established that an application challenging an arbitral award has to be necessarily filed within the time period prescribed in section 34(3). A crucial question that next arises is whether an application to amend the original application challenging an award, adding new grounds of challenge, can be made after the expiry of this time period. This question was first decided by the Bombay High Court in Vastu Invest & Holdings Pvt. Ltd. v. Gujarat Lease Financing Ltd. : 2001 (2) Arb. LR 315. Justice Srikrishna, delivering the judgment for the Court, held:

“In these circumstances, we are of the view that the Chamber Summons, if it was intended to raise an independent ground of challenge to the arbitral award, could not have been entertained after the period of three months plus the grace period of 30 days as provided in the proviso to sub-section (3) of Section 34. If, on the other hand, it was not intended to raise an independent ground, on the basis that the petition Itself contained the ground, the chamber summons was wholly unnecessary as necessary amplifications could be put forward during submissions.”

Therefore, the view adopted was that additional grounds for challenging an award could not be added after the time period prescribed in sub-section (3) had elapsed. This was followed in several other judgments of the Bombay High Court (Maharashtra Industrial Development Corporation v. Govardhani Construction Co., Jigar Vikamsey v. Bombay Stock Exchange). The issue came up before the Supreme Court in State of Maharashtra v. Hindustan Construction Co. : AIR 2010 SC 1299 in the context of an appeal under section 37 of the Arbitration Act. In this case, new grounds for challenge to an award were sought to be added in the memorandum of appeal. The High Court had dismissed the application for an amendment to the memorandum of appeal, holding that a ground not raised initially in the petition cannot be raised later - after the period prescribed in section 34(3) had expired. On appeal, the Supreme Court held:

“There is no doubt that application for setting aside an arbitral award under Section 34 of 1996 Act has to be made within time prescribed under Sub-section (3) i.e., within three months and a further period of thirty days on sufficient cause being shown and not thereafter. Whether incorporation of additional grounds by way of amendment in the application under Section 34 tantamounts to filing a fresh application in all situations and circumstances. If that were to be treated so, it would follow that no amendment in the application for setting aside the award howsoever material or relevant it may be for consideration by the Court can be added nor existing ground amended after the prescribed period of limitation has expired although application for setting aside the arbitral award has been made in time. This is not and could not have been the intention of Legislature while enacting Section 34.”

Interpreting Vastu, the Court said:

“...in our view, by `an independent ground' the Division Bench [in Vastu] meant a ground amounting to a fresh application for setting aside an arbitral award. The dictum in the aforesaid decision was not intended to lay down an absolute rule that in no case an amendment in the application for setting aside the arbitral award can be made after expiry of period of limitation provided therein.”

On facts, the Court dismissed the appeal and its observations in this regard are pertinent to note:

“The grounds sought to be added in the memorandum of arbitration appeal by way of amendment are absolutely new grounds for which there is no foundation in the application for setting aside the award. Obviously, such new grounds containing new material/facts could not have been introduced for the first time in an appeal when admittedly these grounds were not originally raised in the arbitration petition for setting aside the award.” (emphasis supplied)

According to Hindustan Construction's interpretation of Vastu, a situation may arise where new grounds may be added after the expiry of the 34(3) period if they do not amount to filing a fresh application. An amendment to the petition adding new grounds would be refused only in instances where the grounds sought to be added are ‘absolutely new grounds’. However, a correct reading of Vastu suggests that it only contemplated a situation where amplifications could be made to the existing grounds, that too "during submissions". Therefore, Hindustan Construction’s interpretation of Vastu is questionable.

Further, it is possible to argue that the observations of Justice Lodha in Hindustan Construction regarding the amendment to an application filed under section 34 constitute obiter dictum since the issue before the Court was amendment to the memorandum of appeal and not an amendment to the petition filed under section 34. In fact, the Apex Court upheld the High Court’s ground for dismissal viz. “the grounds of appeal which are now sought to be advanced were not originally raised in the arbitration petition and that the amendment that is sought to be effected is not even to the grounds contained in the application under Section 34 but to the memorandum of appeal”.

However, in light of the decision in Venture Global Engineering v. Satyam Computer Services : AIR 2010 SC 3371 : such a contention is difficult to sustain. In Venture Global, a Division Bench of the Supreme Court made a passing observation to this effect: “[T]his Court in Hindustan Construction made it clear that it cannot be the intention of the Legislature to shut out amendments, as a result of which incorporation of relevant materials in a pending setting aside proceeding is prevented... this Court opined that where application under Section 34 has been made within the prescribed time, leave to amend grounds, in such an application, if the peculiar circumstances of the case and the interest of justice so warrant, can be granted”.

Consilience 2011: Law and Technology Conference at NLSIU

2010-12-19T00:49:00.005+05:30

The Law and Technology Committee (elTek) of the National Law School of India University, Bangalore is hosting ‘Consilience’, a conference where contemporary issues of critical relevance in the field of law and technology are addressed. Past editions of the conference have engaged with a vast spectrum of cutting edge issues such as “Legal Aspects of Business Process Outsourcing”, “Biotechnology and the Law” and “Free and Open Source Software" drawing in on the rich experience of luminaries like Mr. Montek Singh Ahluwalia (Deputy Chairman, Planning Commission), Mr. R. Ramraj (MD and CEO, Sify Technologies Ltd.,), Mr. Richard Stallman (Founder – GNU Project). Last years' conference, the theme for which was "Internet Intermediary Liability in India" has been hailed to have made rich contribution to the evaluation of status quo and the future trajectory of intermediary liability in India by bringing in diverse perspectives from the academia, the industry and other important stakeholders. Some of the keynote speakers at the Conference included Wendy Seltzer (Founder, Chilling Effects Clearhouse and Fellow, Berkman Centre for Internet and Society), Gavin Sutter (Lecturer, University of London ) and Sunil Abraham (Executive Director, Centre for Internet and Society, Bangalore). Conference videos from last year's conference are available at www.consilience.in.

The 2011 edition of Consilience will focus on the theme of privacy and how it affects individuals and organisations. Consilience 2011 thus seeks to explore the interface between privacy and technology, the effect technology has on our understanding of privacy, and how technology shapes the contours of privacy and is in return shaped by privacy. Specific dimensions that the conference will engage with include privacy in the context of e-commerce transactions, social networking sites, upcoming gadgets, its equation with the State, (with a special focus on the UID project). Updates regarding the schedule of the conference will be posted on www.consilience.in.

Supreme Court on the Validity of Amendment to the Ninth Schedule

2010-12-16T20:27:00.006+05:30

The Supreme Court in Glanrock Estate (Pvt.) Ltd. v. State of Tamil Nadu : MANU/SC/0689/2010 : was called upon to examine the validity of the Constitution (Thirty- fourth Amendment) Act, 1974. This Act inserted the Gudalur Janmam Estates (Abolition and Conversion into Ryotwari) Act, 1969 into the Ninth Schedule to the Constitution.

Section 3 of the Janmam Act was declared as unconstitutional by the Supreme Court in Balmadies Plantations Ltd. v. State of Tamil Nadu : (1972) 2 SCC 133. Subsequently, it was inserted into the Ninth Schedule vide the 34^th Constitutional Amendment and thus protected under Article 31B. It was contended by the petitioners that this amendment violated the principles of separation of powers, equality and rule of law. Since Section 3 of the Act allowed the State to acquire forest land by paying nominal compensation, it would lead to ‘confiscation of property’. Further, they argued that acquisition of land without resorting to the provisions of the Land Acquisition Act, 1894 would amount to violation of Articles 14 and 300A of the Constitution.

A two-step test to judge the validity of amendments to the Ninth Schedule was laid down by a nine Judge Constitution Bench in I.R. Coelho v. State of Tamil Nadu : (2007) 2 SCC 1 : as follows:

1. Whether the law inserted in the Ninth Schedule violates any Right enshrined in Part III of the Constitution?

2. If the answer to the above question is in the affirmative, whether the right violated forms a part of basic structure of the Constitution?

Kapadia C.J. and Radhakrishnan J. gave separate but concurring judgments. Based on the facts, the primary question as framed by Radhakrishnan J. was “whether the vesting of private forest in the State, by virtue of Section 3 of the [Janmam] Act, in any way, violates any of the fundamental rights guaranteed to the petitioner under Part III of the Constitution and, if that be so, whether that provision abrogates or destroys the basic structure of the Constitution, which exercise has to be undertaken in the light of the principles laid down by the Constitution Bench in Coelho's case.”

Radhakrishnan J. rejected the challenge made on grounds of violation of Articles 14 and 300A and said: “In my considered view, the plea raised alleging violation of Articles 14 and 300A cannot stand, since the petitioner is holding private forest in the Gudalur Taluk by way of janmam, which are rights of hereditary proprietorship and those rights are like the rights created by grant of jagir or inam relating to land. The object and purpose of Janmam Act is to do away with such hereditaryship. Janmam estate which takes in forests, mines and minerals, quarries, rivers and streams, tanks and irrigation work, fisheries and so on stood vested in the State free from all encumbrances. Janmies are also entitled to get ryotwari patta in respect of all lands, if they establish they have been cultivating lands for a continuous period of three agricultural years immediately before the 1st day of June, 1969. Provision for payment of compensation has also been provided under the Act.”

It is interesting to note that while applying the test laid down in Coelho, the Janmam Act was not tested on grounds of violation of Article 19(1)(f). The constitutional amendment which inserted the Janmam Act into the Ninth Schedule was made in 1974 whereas the Forty-fourth amendment (which repealed Article 19(1)(f)) was brought about in 1978. It is settled that the validity of a law is tested on the basis of the law in force at the time the impugned law came into force. However, both Kapadia C.J. and Radhakrishnan J. emphasized on the fact that the fundamental right to property had been repealed and that it was merely a constitutional right.

It is submitted, with respect, that the Janmam Act should have been subjected to challenge on grounds of violation of Article 19(1)(f). Though it would not have made any difference to the conclusion arrived at by the Court. This is because assuming the Janmam was held to be violative of Article 19(1)(f), it would have survived the second test of the Coelho principle as the right to property was held to be outside the ambit of basic structure in Kesavananda Bharti v. State of Kerala : (1973) 4 SCC 225.

Further, the refusal of the Court to subject the Janmam to Article 19(1)(f) challenge may have implications on the applicability of the doctrine of eclipse to Ninth Schedule related amendments. It is established that the doctrine of eclipse applies only to pre-constitutional laws and not to post-constitutional laws (Bhikaji Narain Dhakras v. State of Madhya Pradesh : AIR 1955 SC 781 : and Mahendra Lal Jaini v. State of Uttar Pradesh : AIR 1963 SC 1019). However, based on Glanrock, it can be argued that the doctrine applies to post-constitutional laws inserted in the Ninth Schedule. For instance, assume that a law is declared to be violative of Articles 14, 19 and 21 of the Constitution but is inserted in the Ninth Schedule and thus validated under Article 31B. Subsequently, Articles 19 and 21 are repealed. A challenge to the constitutional amendment inserting the act into the Ninth Schedule is then made on the ground that it violates the basic structure of the constitution. Going by the precedent in Glanrock, it can be argued that the law inserted in the Ninth Schedule cannot be subjected to challenge under Article 19 and 21 as they have been repealed. Therefore, even though there may be a violation of Article 14, there may be no violation of basic structure and the constitutional amendment would be held valid.

Updates

2010-12-07T23:51:00.000+05:30

In an earlier post, Mr. Padmanabhan had discussed the challenge to the Copyright Board order by SIMCA before the Madras High Court. The Madras High Court has now stayed the order, as explained in this post on Spicy IP.

V. Niranjan’s Indian Corporate Law post on the decision of the Supreme Court in BSNL v. Reliance on penaltiy and liquidated damages in Indian contract law is available here.

Does Section 14A apply when no Exempt Income is actually earned?

2010-12-07T23:47:00.000+05:30

The Bombay High Court will shortly be hearing an interesting question of law in relation to Section 14A of the Income Tax Act – does disallowance under Section 14A arise when exempt income has not actually been earned? If certain expenditures have been incurred for the purpose of earning exempt dividend (for example), but if for some reason dividend is not actually earned, can that expenditure be disallowed under Section 14A?

The position of Section 14A after the decision in Godrej & Boyce is that for 14A disallowance there has to be a nexus between the exempt income and the expenditure. Can there be a nexus between two things when one of those does not actually exist?

A Special Bench of the Tribunal in Cheminvest had previously held that Section 14A disallowance would arise even when there is no exempt income actually earned. The Tribunal had noticed the decision of the Supreme Court in Rajendra Prasad Mody’s case, 115 ITR 522, where in the context of Section 57(iii) of the Act, the Court had held that for expenditure to be allowed, it was not necessary for any income to have actually been earned. The Tribunal applied the converse of this to hold that accordingly, for expenditure to be disallowed, it need not be necessary for any exempt income to have actually been earned. However, the relevant part of Section 57 uses the words “for the purposes of making or earning” – there, the language supports the conclusion that the only requirement is that the objective should be for making or earning income. Whether that objective is in fact successful or not is irrelevant. However, Section 14A uses the words “expenditure in relation to income which does not form part of total income”. The language in the two sections is thus different.

On the other hand, the weakness of the purely textual pro-assessee argument is magnified when one considers this. If the assessee’s argument is correct, even if a nominal sum is earned as exempt income, the entire expenditure will be disallowed. Thus, if dividend of Rs. 100 is earned, the whole expenditure incurred for earning that income is admittedly to be disallowed. What is the rational basis for saying that when that sum of Rs. 100 is not earned there should not be any disallowance whatsoever? Further, there is mild obiter in Godrej Boyce as well, saying that what matters is that the expenditure should be incurred ‘for earning’ exempt income.

This is an interesting, and close, issue; and the decision of the Bombay High Court in the next few weeks will be of interest.

When Tribunals make law - the Overarching Powers of the Copyright Board

2010-11-24T00:06:00.000+05:30

[This post is contributed by Mr. Ananth Padmanabhan. Mr. Padmanabhan is also the lawyer for the South Indian Music Companies Association (SIMCA). SIMCA has presently challenged the order of the Copyright Board dated 25^th August, 2010. His views in general, and this post in particular, should be understood with this background in mind. He can be contacted at ananthdevadevan[at]gmail[dot]com for all feedback and responses.]

Judges do not make law, they merely declare it

– Attributed to some wise soul who didn’t have the clairvoyance to see what was coming.

On 25^th August, 2010, the Copyright Board, without a single judicial member in its constitution (the term “judicial member” being understood in the context of the NCLT judgment – Union of India v. R. Gandhi), has passed an order fixing the rates of royalty payable to all music providers by various FM radio broadcasters. The Order raises serious concerns about the tribunalisation of justice, the manner in which complex questions of law are decided by bodies such as the Copyright Board, and the ease with which mandatory statutory limitations on the exercise of power are overlooked.

It was in 2002 that the first complaint under Section 31 of the Copyright Act, 1957, for grant of a compulsory license was filed. The complainant was Music Broadcast Pvt. Ltd., better known to the world as “Radiocity 91.1 FM”. Mr. Nikhil Krishnamurthy, a product of the National Law School of India, Bangalore, was a chief architect of this first draft, which has now become the template for a Section 31 complaint. As Mr. Krishnamurthy later told me, there wasn’t, and still isn’t, any prescribed form under the Copyright Rules for a complaint under S.31 that seeks compulsory license for the broadcasting of sound recordings. Interestingly, the fee payable for this complaint as per the 2^nd Schedule to the Copyright Rules is Rs. 200/- per work but the radio broadcasters got away with paying the same amount for the entire repertory of works belonging to the respondent.

Which in turn brings us to the identity of the respondent. The respondent in all the complaints (subsequently complaints were filed by the RadioMirchi and RadioOne stations as well) was the Phonographic Performance Ltd. (PPL), the only registered copyright society under Section 33 of the Act that is authorized to carry on the business of licensing copyrights in sound recordings and distributing the revenues to their members. In its status as a copyright society, and as part of its obligation, PPL had formulated a tariff scheme with the needle hour [“needle hour” is the actual time for which music is played in one hour, after excluding the advertisements, radio jockey talk etc. – internationally, the convention for radio broadcasting is that 38 minutes in an hour would be for the music and the rest for the excluded component] rate of royalty for prime time [conventionally, between 8 to 10 in the morning and 6 to 8 in the evening] fixed at Rs. 2400. The prayer in all these complaints was, short of all legalese, a direction to the Registrar of Copyrights to grant compulsory licenses in respect of all the sound recordings belonging to the repertory of PPL. The allegation was that Rs. 2400 was way too high. An interim order soon followed where the Board applied its “best judgment assessment”, akin to that in taxation law, and fixed the interim rate of royalty at Rs. 1200 per needle hour for the prime time.

When this order was taken on appeal to the Bombay High Court, the Hon’ble Court found the methodology adopted by the Board to be unacceptable. The Board was found to have ignored various relevant factors including the existing license agreements that had been entered into voluntarily between some of the radio broadcasters, including All India Radio, and PPL and its members. Subsequently, the matter went on appeal from Bombay to the Supreme Court, where the Hon’ble Court refused to fix any principles of valuation and left that to the Board’s discretion. The case was remanded to the Board after settling the law on the effect of Section 31(2) on the licensing scheme under 31(1)(b). The Supreme Court also categorically observed that the owner of the copyright had to be heard before any order was passed by the Board directing the grant of a compulsory license.

The battleground shifted to the Board with both sides leading extensive evidence on practices all over the world, the impact of radio on audio and CD sales, the profitability of FM radio stations and music companies, and various other factors that could have a bearing on the final royalty fixed. Without any incisive reasoning, the Board has fixed the royalty now at 2% of the net advertisement revenue, after excluding municipal taxes, and deducting commission paid to procure these advertisements, with a cap of 15% of the gross revenue on this deduction. Honestly, it is difficult to figure out from this order as to how this percentage can even be worked out in a transparent manner.

The order also discloses very little on how exactly the 2% was arrived at. My only guess is that 2% is somewhere between the 0.25 to 4 %, which is what the international evidence pointed to as being the rates of royalty. Quite a different matter that the structure of the industry is so very different abroad. In the West, royalty payments are the norm at every link in the chain. To illustrate, a music composer or songwriter enters into an agreement with the publisher whereby they share the royalties received from all modes of exploitation of the music. Subsequently, the recording artist, the radio broadcaster, the businessman who uses this music as part of his advertisement or even the actual product, all enter into revenue sharing arrangements with the publisher. Thus, there is no acquisition of music for a lumpsum at a huge risk. In India on the other hand, the producer pays lakhs or even crores to the music producer to create the music, and gets the copyright in the work assigned to him. Subsequently, the producer looks to recovering nearly 15% of the film’s total cost of production by selling the audio rights to the sound recording label. The sound recording label therefore assumes a huge risk on its head by acquiring the audio rights for a lumpsum, and this in turn has to be recouped from various avenues including FM radio broadcasting. For this reason, a needle hour rate is much more suited to the Indian music industry.

Regardless of all this, my fundamental problem with the Board’s order is with the manner in which the Board has ignored its statutory limitations. The two pre-conditions under Section 31 are i) an unreasonable refusal by the owner of the sound recording to permit its broadcasting; and ii) a complaint by the radio broadcaster alleging how the rates are unreasonable. Despite both these conditions not being satisfied, the Board has fixed the rate of royalty for several music providers who were not members of PPL and went unrepresented before the Board. On the ground of violation of principles of natural justice, the Delhi High Court has now stayed the Board’s order on a writ petition filed by T-Series. A slew of appeals are also pending before the Madras High Court challenging this order, including appeals by PPL and SIMCA.

This case is to be viewed in a larger setting, being that of increasing tribunalisation. The reasons given often enough to justify the vesting of extensive powers with tribunals are specialized justice, expeditious disposal and docket explosion in the Courts. Unfortunately, the specialized Copyright Board has passed an order ignoring the most fundamental principle of adjudication, which is that the aggrieved person must be heard. Section 31 confers this right of hearing to the owner of the copyright and yet, the Board has ignored its limited mandate to fix the royalty for the entire nation without hearing all the stakeholders. It is time the Ministry of Human Resource and Development takes serious note of such orders that only lead to more litigation and consider re-constituting the Copyright Board with members who possess judicial expertise and experience.

New Contributor - Mr. Ananth Padmanabhan

2010-11-23T23:58:00.000+05:30

I am delighted to welcome Mr. Ananth Padmanabhan as a contributor to this blog. Mr. Padmanabhan, an Advocate, is a graduate of the National Law School of India University. After working with a litigation firm in Bangalore, he read in the Chambers of Mr. Arvind Datar, Senior Advocate, Madras High Court. He is now an independent practitioner. Mr. Padmanabhan appears in cases involving (among others) intellectual property rights, general commercial law, constitutional law matters.

Links of Interest

2010-11-23T19:19:00.005+05:30

The Supreme Court’s order in Pepsico India Holdings v. Food Inspector, quashing the prosecution of Pepsico under the Prevention of Food Adulteration Act, 1954 can be found here. On the issue of statutory criminal liability of directors and the averments in the complaint, the Court reiterated the stance taken in S.M.S. Pharmaceuticals and noted:

"It is now well established that in a complaint against a Company and its Directors, the Complainant has to indicate in the complaint itself as to whether the Directors concerned were either in charge of or responsible to the Company for its day-to-day management, or whether they were responsible to the Company for the conduct of its business. A mere bald statement that a person was a Director of the Company against which certain allegations had been made is not sufficient to make such Director liable in the absence of any specific allegations regarding his role in the management of the Company."

Supreme Court on the Human Rights Act

2010-11-20T22:31:00.000+05:30

A judgment of the Supreme Court in Ramdeo Chauhan v. Bani Kant Das (Review Petition 1378 of 2009, judgment dated November 19, 2010) has discussed in detail issues in human rights law. On a first glance through this judgment, it seems to have considerable implications on several areas of public law.

The facts as detailed in the judgment are that the petitioner was accused of a crime u/s 302 of the Indian Penal Code on the basis of an FIR lodged by the first respondent. The trial court held the accused guilty, and also held that the death penalty was warranted in the circumstances of the case. The plea was raised on behalf of the accused that at the time of commission of the crime, he was below 16 years of age. The Trial Court rejected this plea. The High Court confirmed the conviction and sentence of death against the accused. Before the High Court, the Counsel for the accused specifically submitted that he was not challenging the finding of the trial Court as to the age of the accused- petitioner. The appeal from the judgment of the High Court was dismissed by a bench of the Supreme Court without going into the issue of the age of the accused-appellant at all.

A review petition was filed against the order; and in that review petition it was held that while the question of conviction could not be gone into, the question of age of the petitioner could be looked at, in view of a legal prohibition against sentencing a juvenile. The matter was referred to a three-Judge Bench of the Supreme Court. The three-Judge Bench held, per Justice Sethi that, "From the evidence produced and the material placed before the courts below, there is not an iota of doubt in my mind to hold that the petitioner was not a child or near or about the age of being a child within the meaning of the Juvenile Justice Act or the Children Act." Justice Phukan, concurring, held that the question of death penalty could not be reviewed. However, he went on to say, "the factors which have weighed with my learned Brother Mr. Justice Thomas can be taken note of in the context of section 432(2) of the Code." It appears that Justice Phukan was thus of the view that the facts stated in the dissenting judgment had force; but in law, a review petition was not the appropriate remedy. Justice Thomas, dissenting, held that the age of the accused at the relevant time was not conclusively established to be above 16, and consequently, in view of the small doubt, the death sentence should not be awarded.

Meanwhile, before the judgment in the review petition, the petitioner had also filed a mercy petition before the Governor for commutation of sentence. While this mercy petition was pending, a scholarly article appeared in a journal, asking whether a child was about to be executed. This article came to the notice of the National Human Rights Commission. After the judgment in the review petition, but before a decision on commutation, the NHRC opined, "The Commission is of the view that the above opinion of Thomas, J. in the judgment disposing of the review petition and the above quoted observations of Phukan, J. are very strong reasons to support the view and this is a fit case for commutation of the sentence... This Commission is of the considered view that the case, placing reliance on the views of Thomas, J. and Phukan, J., who were two of the three learned Judges, constituting the Bench deserves the highest consideration by the executive authority while considering the question of commutation of sentence..."

The Governor on the basis of this commuted the death sentence. A writ petition was filed by the relatives of the victims under Article 32 of the Constitution; challenging the order of the Governor. The NHRC was also made a party to this writ. A Bench of the Supreme Court set aside the order of the governor, holding that the NHRC proceedings were not in accordance with the Protection of Human Rights Act, 1993; and consequently, could not have formed the basis of the Governor's order commuting the death sentence. The Governor was directed to consider the matter afresh. Another review petition was filed; and was disposed off in the judgment dated November 19, 2010.

Article 137 of the Constitution provides, "137. Review of judgments or orders by the Supreme Court: Subject to the provisions of any law made by Parliament or any rules made under article 145, the Supreme Court shall have power to review any judgment pronounced or order made by it." The relevant Rules are the rules framed under Article 145 of the Constitution. Relevant to review proceedings is Part VIII Order XL of these rules. Order XL Rule 1 provides that in reviewing the judgment in a civil proceeding, the Court will go by the grounds as in Order XLVII Rule 1 of the CPC. However, it is also provided that in case of criminal proceedings, no review is permissible except on the ground of error apparent on the face.

The Supreme Court found that in the impugned judgment under review, the Court had come to the conclusion that (a) the NHRC had no jurisdiction to interfere in the matter and make any recommendation, and (b) The order of the Governor in commuting the death sentence was bad in law. The Court disagreed with both these conclusions.

The Court referred to Section 2(d) of the Human Rights Act, 1993, which defines 'human rights' to mean "the rights relating to life, liberty, equality and dignity of the individual guaranteed by the Constitution or embodied in the International Covenants and enforceable by courts in India." Taking this into account, and also considering that the NHRC is given wide powers under section 12 of the Act, the Supreme Court held that "The NHRC has been constituted to inquire into cases of violation of and for protection and promotion of human rights. This power is an extensive one, which should not be narrowly viewed." The Court then described what its approach in human rights cases should be. The Court observed:

"It must be jurisprudentially accepted that human right is a broad concept and cannot be straitjacketed within narrow confines. Any attempt to do so would truncate its all- embracing scope and reach, and denude it of its vigour and vitality. That is why, in seeking to define human rights, the Legislature has used such a wide expression in section 2(d) of the Act. It is also significant to note that while defining the powers and functions of NHRC under section 12 of the Act, the said broad vision has been envisioned in the residuary clause in Section 12(j). Therefore, it is imperative that while interpreting the powers and jurisdiction of NHRC, the Court construes section 2(d) of the 1993 Act along with its long title and also the Statement of Objects and Reasons of the said Act. The relevant portion of the statement of objects and reasons are excerpted below: "2. However, there has been growing concern in the country and abroad about issues relating to human rights. Having regard to this, changing social realities and the emerging trends in the nature of crime and violence, Government has been reviewing the existing laws, procedures, and system of administration of justice; with a view to bringing about greater accountability and transparency in them, and devising efficient and effective methods of dealing with the situation." ... What was said by Alexander Hamilton, the great constitutional expert and political philosopher, way back in 1775, is poignant still today for having a clear perception of what human rights are. The words of Hamilton still resonate with a strange relevance and immediacy, and are quoted below: "The sacred rights of mankind are not to be rummaged for, among old parchments, or musty records. They are written, as with a sun beam in the whole volume of human nature, by the hand of divinity itself; and can never be erased or obscured by mortal power." Keeping those broad principles in our mind if we look at Section 12(j) of the 1993 Act, we find that it confers on NHRC "such other functions as it may consider necessary for the promotion of human rights." It is not necessary that each and every case relating to the violation of human rights will fit squarely within the four corners of section 12 of the 1993 Act, for invoking the jurisdiction of the NHRC. One must accept that human rights are not like edicts inscribed on a rock. They are made and unmade on the crucible of experience and through irreversible process of human struggle for freedom. They admit of a certain degree of fluidity. Categories of human rights, being of infinite variety, are never really closed. That is why the residuary clause in sub-section (j) has been so widely worded to take care of situations not covered by sub- sections (a) to (i) of Section 12 of the 1993 Act. The jurisdiction of NHRC thus stands enlarged by section 12(j) of the 1993 Act, to take necessary action for the protection of human rights. Such action would include inquiring into cases where a party has been denied the protection of any law to which he is entitled, whether by a private party, a public institution, the government or even the Courts of law. We are of the opinion that if a person is entitled to benefit under a particular law, and benefits under that law have been denied to him, it will amount to a violation of his human rights."

The approach of the Court thus far appears to be clearly correct; both as a matter of constitutional law and as a matter of statutory interpretation. On this basis alone, the Court could have said that there was an error apparent in the judgment under review.

However, the Court also went ahead with some bold observations. It stated, "The assumption in the judgment under review that there can be no violation of a person's human right by a judgment of this Court is possibly not correct..." Furthermore, "There is no doubt that the majority judgment of this court in the ADM Jabalpur case violated the fundamental rights of a large number of people in this country. Commenting on the majority judgment, Chief Justice Venkatachalliah in the Khanna Memorial Lecture delivered on 25.2.2009, observed that the same be `confined to the dustbin of history." Factually, these propositions are hard to argue against. However, as a matter of law, does this mean that fundamental rights can be violated by judicial orders? Where does that leave the whole debate as to whether judiciary is state under Article 12 of the Constitution? If so, can such order be challenged by way of a writ petition under Article 32 (notwithstanding the availability of curative/review petitions, appeals etc., considering that Article 32 gives a right to judicial remedies)? Again, undoubtedly, the judgment in the Habeas Corpus case was clearly incorrect. However, is it open to a 2 Judge Bench effectively to say so? To my knowledge, the judgment of ADM Jabalpur has never been specifically overruled – there has been no need to do this given subsequent constitutional amendments. Are readers aware of any such decision specifically overruling ADM Jabalpur? (Of course, as I already stated above, the Court's decision itself is on much sounder footing.)

Coming back to the NHRC issue, the Court also clarified that "NHRC cannot function as a parallel seat of justice to rectify or correct or comment upon orders passed by this Court or any other Courts of competent jurisdiction. For correcting an order in a judicial proceeding, the aggrieved party has to avail of the well established gamut of the corrective machinery of appeal, revision, review, curative petition and so on..." It was held that on the facts of the case, the NHRC had acted within its jurisdiction; as it was simply making a recommendation to the Governor for commutation, and was not subverting the judicial hierarchy in any manner. Accordingly, the review petition was allowed; and the order of the Governor was upheld. The Court went on to clarify that the Court was not making any specific finding on the applicability of the Juvenile Justice Act; as the issue in the review proceedings was solely limited to those issues which were considered in the original proceedings.

It is submitted that the Court's decision is based on a detailed interpretation of the Human Rights Act and is in accordance with the principles of review of judgments; however, some of the observations (as highlighted above) do require to be understood in their context. It is perhaps time for a fresh consideration of the issue of whether judiciary is state under Article 12. Independent of that, the judgment offers strong guidance on the interpretation of human rights legislation.

Links of Interest

2010-11-20T20:38:00.001+05:30

1. The ITAT Bar Association Digest of Cases for September 2010 along with the Consolidated Digest of Cases (January 2010 to September 2010) can be downloaded from this link.

2. Two Supreme Court orders on transfer pricing in Coca Cola v. ACIT and Maruti Suzuki India v. ACIT can be found here and here. The Supreme court judgment has not laid down any principle of law; but has remanded the matter back to the assessment officer/TPO; and directed that the matters should be disposed off uninfluenced by the observations in the impugned High Court judgments.