Materiality and Judicial Rulings

Mandar D Rane

In terms of Regulation 30 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 mandates every listed entity shall frame policy for determination of materiality based on criteria specified and it shall be approved by Board of Directors of the Company and also be disclosed on Company’s website

The question of materiality, it is universally agreed, is an objective one, involving the significance of an omitted or misrepresented fact to a reasonable investor. The General standard of materiality could be summed up as, omitted fact is material, if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding his investment decision or vote.


Judicial Decisions

a.    Zee Telefilms Ltd. vs The Adjudicating & Enquiry (2003) 2 CompLJ 282 SAT

1.    Belated Reporting

Here we analyze a reported judgement of Zee Telefilms Limited (”Appellant”) in 2003, In the said case the Appellant was issued a notice by SEBI stating that it had failed to comply with the requirements of Regulations 6(2), 6(4) and 8(3) of erstwhile Takeover Regulation 1997 and in that context penalty of five lakh rupees was imposed on the Appellant.

The Appellant had contended that it had not intentionally suppressed any material information, which was to be disclosed under the regulations and that, the Appellant on its own had disclosed the belated reporting in the letter of offer which was issued by it in the context of the public offer made by it relating to the acquisition of shares in another Company. The Appellant stated that , material information was submitted is the fact that the Appellant itself had disclosed voluntarily the default, goes to prove the bonafides of the Appellant, that if it had not so disclosed, perhaps SEBI would have never noticed the failure and proceeded against for such default. The Appellant further stated that they had not acted willfully and thus penalty shall not be imposed.


The Respondent refuted all the claims of the Appellant and stated that, no where did the Appellant disputed that reporting has not been belated and delay was substantial.

Comment: – The appellant had made willful disclosure but if they have not done that the offer letter would not have been considered proper. Such a disclosure was made due to compelling requirement and thus they cannot claim that disclosure made by them willful and voluntary.


2.    Mens Rea , Disproportionate gain or unfair advantage

Penalty is not leviable for an omission or commission not done willfully which was upheld in judgement1. Section 15-J provides various factors which are to be taken into consideration while adjudging the question of penalty under Section 15-l namely, the amount of disproportionate gain or unfair advantage whenever quantifiable, loss caused to an investor or group of investors and the repetitive nature of default. Considering said case the Appellant alleged that legislature in its wisdom had not included mens rea or deliberate or willful nature of default as a factor to be considered by the Adjudicating Officer in determining the quantum of liability to be imposed on the defaulter.

The Appellant in the said case contended that there was no mens rea on his part and nor its promoters secured any disproportionate gain or unfair advantage that the belated reporting has not resulted in wrongful loss to any investor, and the delay in reporting was an isolated one and was not of repetitive nature.

The Respondent supplemented its contention through a judgment2 and stated that it is not necessary to establish mens rea for the purpose of imposing penalty is not comparable in the present case.


Comment: – The notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea should be rejected.  The classical view that  ‘no mens rea, no crime’ has long ago been eroded and several laws  in India  and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where  the offences have been defined to exclude  mens rea3.
b.    SEBI vs Ispat Industries Limited


In the present case, Executive Director of Ispat Industries Limited4 in an interview given to CNBC in 2003 and which was reported on on the same day that, the Company has is targeting a turnover of Rs. 4000 crore , capacity expansion programme of the Company along with cost saving initiatives would result in savings of about Rs.1000 Crores a year , the contribution of long term contracts to sales would move up to 50% from the current 10% , The export target for the current fiscal had been pegged at Rs.1300 Crores.


SEBI issued a notice that aforesaid averments were not been disclosed to the Stock Exchange as required to be disclosed as required under SEBI Insider Trading Regulation 1992.


The Company had replied to notice of SEBI stating that proposed additions to their steel making capacities has been duly notified to the stock exchanges as part of details relating to quarterly financial results of the company and planned capacity expansion has been duly set out in the annual report of the Company and in this regard they have invited reference to the statement contained in the Director’s report on accounts of the company for the year ended 31.3.2003. The cost benefits have been disclosed in Annual Report and targeted exports for the current financial year were in line with capacity enhancement effected during the current financial year.


The Company reiterated that interview was general in nature and not made with a view to influence the market sentiments.


Now following questions arise that,


·         Whether the information relating to projections of turnover, cost savings, export target and capacity expansion constituted price sensitive information?


·         Whether the Company had failed to disclose the information as required by Insider Trading Regulations?


Comment: – The requirement of prompt disclosure of price sensitive information by Corporates

was introduced as a preventive measure to curb insider trading.


If we consider recent Insider Trading Regulation, Unpublished price sensitive information means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the                   following :-


(i) Financial results; (ii) Dividends ; (iii) Change in capital structure; (iv) Mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and such other transactions;

(v) Changes in key managerial personnel; and (vi) Material events in accordance with the listing agreement


Here there are two aspects, the first being, can general discussions about the company’s visionary plans and the projects being undertaken by the company and such normal conversation about visionary plans should be viewed as Price Sensitive Information and secondly misleading and and premature announcements relating to the company could be done to generate investor interest in the scrip and to shore up its stock price.


Supra of judgment of SAT5, “whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available”.


In this case, SEBI made an observation that financial statement did not contain the disclosure as stated by the Executive Director, the information is a price sensitive information and thus Company had not complied with the requirement of Disclosure as required by Regulations.


c.    DLF Limited vs Securities & Exchange Board of India & Ors.


In this case, DLF had filed Draft Red Herring Prospectus (DRHP) with the SEBI on May 11, 2006 it was indicated that Sudipti Estates Private Limited (“SEPL”) was one of the joint ventures of DLF. The said DRHP was withdrawn and a fresh DRHP was submitted, in which SEPL was not mentioned as being associated with DLF. A complainant filed with SEBI alleging that SEPL had defrauded him for sum of Rs. 34 crore (approx.) and in order to safeguard the interests of general public, the listing of DLF pursuant to the IPO be disallowed and immediate action be taken in this regard. Aggrieved by inaction of SEBI the Complainant file a writ petition which was been allowed by learned Judge and ordered for investigation.


DLF Ltd. had 3 wholly owned subsidiaries namely DLF Home Developers Ltd. (“DHDL”), DLF Estate Developers Ltd. (“DEDL”) and DLF Retail Developers Ltd. (“DRDL”) which held equity shares in SEPL, Shalika Estate Developers Private Limited (“SDPL”) and Felicite Builders & Construction Pvt. Ltd. (“FBCP”). On November 29, 2006, the entire shareholding in Felicite held by DHDL, DEDL and DRDL was sold to three persons namely, Mrs. Madhulika Basak, Mrs. Niti Saxena and Mrs. Padmaja Sanka. These three persons were wives of Mr. Surojit Basak, Mr. Joy Saxena and Mr. Ramesh Sanka, respectively who were the KMPs of DLF. On November 30, 2006, DHDL, DEDL and DRDL sold their entire shareholding in Shalika to Felicite. On the same date, DHDL and DEDL, sold their entire shareholding in Sudipti to Shalika.


The three shareholders who, pursuant to purchase of shares of Felicite from DHDL, DEDL and DRDL on November 29, 2006, became 100% shareholders of Felicite, which in turn became 100% shareholder in Shalika and which in turn became 100% shareholder in Sudipti, were spouses of KMPs of DLF.  All the three transferees were “Housewives” and they held bank accounts jointly with their respective husbands. On this basis, it was alleged that their purchases of shares in Felicite were funded by their respective husbands’ joint accounts of their respective husbands it was alleged that DLF did not lose control over these three entities.


Charges raised by SEBI against DLF:-


·         Non- Disclosure of financial details relating to subsidiaries.


·         Non- Disclosure of outstanding litigation against subsidiaries


Comment: – 


·         Sudipti, Shalika and Felicite continued to be subsidiaries of DLF consequent to the sale of shareholding by the wholly owned subsidiaries of DLF in them and on the relevant dates there was “holding -subsidiary ” relationship between DLF and those three companies. Therefore disclosure in RHP/Prospectus as per regulatory requirement was mandatory.


·         Since FIR cannot be construed as an outstanding litigation, however a FIR in question do contain material information so as to enable the investors to take an informed investment decision and since the FIR was been lodged against one of Companies subsidiaries it should have been disclosed.


4.         Matrixx Initiatives, Inc. v. Siracusano, No. 09-1156


Here we discuss, a case6 decided by US Supreme Court where the Respondent alleged that the petitioners (“Matrixx”) violated provisions of the Securities Exchange Act of 1934 and Securities and Exchange Commission by failing to disclose material adverse effect reports of a possible link between Matrixx’s leading product, Zicam Cold Remedy, and loss of smell (anosmia), rendering statements made by Matrixx misleading. Petitioner had disclosed product liability litigation generally but did not disclose the lawsuit filed against them for Anosmia which was caused by their product Zicam.


On January 30, 2004, Dow Jones Newswires reported that the Food and Drug Administration (FDA) was “‘looking into complaints that an over-the-counter common-cold medicine manufactured by a unit of Matrixx which may be causing some users to lose their sense of smell’” in light of at least three product liability lawsuits. Matrixx’s stock fell from $13.55 to $11.97 per share after the report. Matrixx issued a press release clarifying their position on this issue after which their stock price leaped to $13.40 per share




·         As all adverse effects shall not necessarily required to be disclosed and reported, the determination of materiality shall be on a case to case basis. In the instance case, Zicam the product of Matrixx was an important product and non-reporting of adverse report would substantially affect investor’s views. Thus adverse information report would be material information for disclosure.


·         Considering the said case, if any lawsuit is pending against product liability claim than the Company shall specifically disclose the same as general disclosure would not be suffice.




The test of materiality is to be determined taking into account facts and the possible impact that the information/event under consideration may have on the investor’s investment decisions.


.                                                                     .

1 – Securities and Exchange Board of India. vs Cabot International Capital 2005 123 CompCas 841 Bom


2 – R.S.Joshi V. Ajit Mills (1977) 4 SCC 98


3 – Supra of Judgement R.S. Joshi, STO v. Ajit Mills Ltd, AIR 1977 SC 2279


4 – Sebi vs Ispat Industries Limited and as decided on 31 March, 2004, Bench – T Nagarajan


5 – Ketan Parekh vs Securities And Exchange Board Of India decided on July 14,2006, Bench – N Sodhi, C Bhattacharya, R Bhardwaj


6 –  Matrixx Initiatives, Inc., ET AL. v. Siracusano No. 09–1156. decided on March 22, 2011


Different Facets of religion as a evil via the Prism of Indian Subcontinent vis-à-vis the solutions to tackle the evil.

religionTheme: Religion-the root of all Evil.

Topic: Different Facets of religion as a evil via the Prism of Indian Subcontinent vis-à-vis the solutions to tackle the evil.  

Introduction to the idea of religion.

A typical hold back sung in the twenty–first century is that religion is the underlying driver of the considerable barbarities of mankind’s history. As a general rule, more individuals passed on as a consequence of secularist philosophies in the most recent century alone than have kicked the bucket in all the religiously persuaded clashes of Western history.

When the idea of Adam and Eve was introduced to the world, people had started believing in the concept of something which is super natural and follows a set pattern of rules. This was the time when global population came across the idea of religion and this marked the inception of phenomena which was initially introduced for the betterments of the lives of the people but ended up in being the largest weapon of mass destruction. Since time immemorial religion has acted as vital part of all the lives of all mankind.[1]

The definition of the term religion has varied from mind to mind and place to place for instance the Evangelical controversialist in his definition of religion excludes what is often called as superstitions of a man. The moralists on the other hand give a negligible regard to the influence of religion on conduct of the society and individuals.[2] Looking at the concept of religion in 21st century, the need of the hour is to keep aside the variable definitions of religion and focus on something which is far basic than approaching and unfolding the sociology, philosophy, ethnology and psychology of religion since a lot of deliberation has already been made by various authors. Thus, questioning the relationship of religion with science and morality can answer the question of rational behind the actions of human race arising out in the name of religion.

Religion gives space to belief is an undisputed assertion to make but the problem arises when we do not acknowledge the existence of intellectual element in the definition of the concept of religion because this narrows down the scope of religion. To understand this further, belief to religion is what sand to house i.e. we use sand for building the house but this house of sand will collapse if other important ingredients are not used while making the house. Since, belief is formulated by the present state of knowledge and which is variable, subjected to growth in and the change in the perspective of an individual therefore, making the palace of religion only on sand of belief is not fruitful for human race in long run.

Nature of Religion.

John Dewey the American Philosopher came up with a theory that religion has to be viewed as an aspect of entities and not as an independent entity. The thin line of difference between the terms religion, a religion and the religious has to be highlighted so as to avoid the wrong interpretations of the concept.

The difference between religion, a religion and the religious is that religion is can never exist in the singular form and there is only a multitude of religions.[3] On the other hand term the religious fails to denote something which is specific for instance it cannot denote anything which can exist on its own or can be categorized into a distinctive and particular form of existence rather it denotes those attitudes which may be taken towards each and every proposed ideal and end along with every object.[4] Hence to assert that religion is an aspect of entities rather than entity in its own right unless this is identified that religion as an entity can exist by itself.[5]

Jurisprudence of the major religions in India.

India was never exposed to idea of multiplicity of religions in the early centuries and the dominant religion was Hinduism but with advent of Mughals which was subsequently followed by the Dutch and the British we transformed into a nation state which had unity in diversity. But this question of unity in diversity again raised the eyebrows of all the states globally during the time of partition in the year of 1947.

The very idea of adding the word secular to the preamble of Indian Constitution[6] was because the intention of the Legislature was to incorporate the idea among its citizens that the Government of India respects all the religions equally. With passage of time and looking at the current political scenario in India and the growing intolerance of people against the people of a particular community. This idea of secularism seems to be falling apart from the intention with which it was brought in considering the radical approached shown by the actions of the government and her propagators.

Jurisprudence of Hinduism.

To understand the jurisprudence behind the Hindu laws we first need to identify the reference in which this term is widely used considering the diversity of Hindu Religion. The term Hindu means people who are by birth, conversion or reconversion Hindus, Sikhs, Jains and Buddhists.[7] Or all those people who are not Muslims, Christians, Paris or Jews and all such people who are domiciled in India and no such law is Applicable on these people.[8]

Procedure of conversion and reconversion in Hinduism has not been prescribed in any of the texts of Hindu religion although a few hints come from the Arya Samajists procedure of Shudhi.[9] The major development in the process of conversion and reconversion has been provided by the Hon’ble Supreme Court wherein the modes are as follows:

1.      If a person converts by the method prescribed by the religion he wants to enter.[10]

2.      “If a person expresses a bona fide intention to become a Hindu accompanied by a conduct unequivocally expressing that intention coupled with the acceptance of his as its member by the community or caste into the fold of which he has entered.”[11]

3.      Any bona fide declaration made by a person stating his acceptance of Hinduism as his faith he is follower of Hinduism for a considerable period of time, becomes a Hindu.[12]

Also, it was laid down in Rani Bhagwan v. J.C. bose[13] that a person still continues to be a Hindu even if he becomes an atheist, dissent or tends to deviate from the doctrines of Hinduism or anything which a Hindu will never indulge in.[14] In the modern Hindu law there is no compulsion on a child to take up the religion of his father as his own religion but the off-springs of Hindu parents are deemed to be Hindu irrespective of the facts that whether they follow Hinduism or not.[15]

For a person to be Hindu by birth two conditions are necessary:  

1.      If the parents of the child born (legitimate or illegitimate) are Hindu.

2.      If the parents of the child were at the time of the birth of the child were Hindu and the child was bought up as a Hindu.[16]

Schools of Law in Hindu Jurisprudence.

Hinduism has comprises of two schools of namely Mitakshara and Dayabhaga. The former school is further divided into 4 sub-schools namely the mithila, the banaras, the Bombay and the dravida (south). The Dayabhaga school of law prevails in eastern India majorly and rest of the India is covered by the Mitakshara school of law. Mitakshara School of law also enters the jurisdiction of Dayabhaga where the law in Dhayabhaga remains silent.[17]

The major line of difference between the two comes with respect to the laws dealing with proprietary rights to the legal heirs. The Dayabhaga Schools allow the daughters to claim the share in ancestral property whereas the Mitakshara debars women from this right.

Jurisprudence of Islam.

“In Muslim Law the term Muslim has been defined in the context of Islam, though the orthodoxy or heterodoxy of the belief is not material.”[18] Muslims can be defined for the convenience of personal laws as:

1.      Muslim by origin or

2.      Muslim by Conversion:

a.       Persons who profess Islam

b.      Persons who undergo the formal ceremony of conversion.

For a person to be Muslim he has to accept basic tenants of Islam and these tenants being: (i) there is only one God and (ii) Mohhomad is Prophet of God. Islam has not mandated for its followers to perform five prayers daily or observance of Ramzan fast and hence the non compliance of all such norms does not make person a non-muslim.[19] Merely the fact that he is born to Muslim parents is enough to establish himself as a Muslim as per Islam.

Conversion to Islam is a easy defined process wherein a person who seeks to embrace Islam as his religion has to go to the mosque. Further, the imam at the mosque questions the person about his voluntary embracement of Islam and he has to answer the same affirmatively and then he is granted with a kalma to recite. With this the conversion ceremony gets over and the person is given a Muslim name.[20]

Khan v. Habib[21] held that a convert with respect to Marriage, Dissolution of Marriage, Trust Properties, Divorce, Gifts and wakfs will be dealt by the Muslim Law. And with respect to adoptions, and wills and legacies a person converted to Islam shall be governed by his respective custom unless he voluntarily renounces his right.[22]

Islam has been divided into 2 Major Sects Shia and Sunni and the schools of law in both the sects vary. In India the most prominent schools found is the Hannafi School, one of the four schools of Sunni sect. The other prominent school in southern part of India is Shafii School again belonging to the Sunni sect. The Shias are prominently situated in the central and western part of India and are the minority group in Islam are governed by Ithana Ashari School. [23]



Chapter2: Scope for operation of Evils under the umbrella of religion

A.    Global Prespective

To start with, the Nazi logic that Jews were subhuman and that Aryans were Supermen prompted the annihilation of six million Jews. In the expressions of Sir Arthur Keith, an activist anti–Christian physical anthropologist: “The German Fuhrer, as I have reliably kept up, is an evolutionist; he has reliably looked to make the acts of Germany fit in with the hypothesis of development.” Far from religiously roused, Hitler’s “Last Solution to the Jewish issue” was grounded in the naturalistic rationality of survival of the fittest. Indeed, Hitler plainly separated himself from Christianity, broadcasting, “I should never deal with the Christian falsehood”[24] and “Our age will positively see the end of the ailment of Christianity.”[25]

Besides, the naturally agnostic idealistic logic of socialism obscured even the slaughter of Hitler’s Germany. Karl Marx saw in philosophical naturalism the logical and sociological backing for a monetary investigation that prompted the mass homicide of duplicated millions around the world. Mao Tse–tung’s socialist tyranny of China represented the passings of an expected sixty–five million individuals, while the U.S.S.R. under Stalin saw somewhere around twenty and thirty million killed as an after effect of agrarian collectivization and the Great Purge. Add to that two million Cambodians––nearly a fourth of that country’s populace—slaughtered by Pol Pot’s Khmer Rouge administration, and the loss of life coming about because of the common belief system of socialism turns into a repulsiveness past comprehension. More individuals passed on as an after effect of secularist philosophies in the most recent century alone than have kicked the bucket in all the religiously roused clashes of Western history.

At last, a third belief system of cutting edge secularism has prompted significantly all the more horrendous outcomes. In spite of the fact that not formally sorted out under an unhinged tyrant, this imperceptible holocaust keeps on killing untold millions around the world. Four thousand defenseless victims––more than the aggregate losses of 9/11––die every day in the United States alone. The secularist philosophy to which I allude, obviously, is abortionism. In fact, the cutting edge bioethical holocaust has obscured the slaughter of Nazism and socialism consolidated.

B.     Indian Perspective

Terrorism in Indian context cannot be limited only to the attacks by militants. We need to broaden the horizons and incorporate the terrorism by state and various religious practices. Terrorism in India has taken the shape of state violence in late 20th and early 21st century. Major examples such violence can be witnessed in the names of 1984 anti-Sikh riots, Ayodhya massacre, Bombay Riots, 2001 Kishtwar massacre, Godhera riots, 2002 in Gujarat, the Muzzafar Nagar riots in 2013 and the recent Una riots, 2016 in Gujarat are a few of  many.

India the major issues arise because of conflicting ideologies of majority and minority religions which are which are always trying to capture the free space of such minor religions by involving in violence. Also, Indian religion system is the father of caste system which now has resulted in the formation of various terrorist groups inside India and one such group can be seen as naxalites although this community is not a terrorist group but the actions are similar to a one. India because of his religious history and irrational caste based system has led to her own destruction by her own kids in her own name

“Hoffman argues that a religious imperative is one of the most important characteristics of contemporary terrorism. He observes that it is the nature of the violence that distinguishes religious terrorism from political terrorism. He argues that the intensity of the acts and number of fatalities created by religious terrorism somehow distinguish religious from secular violence.”[26]

Terrorism can be defined as the use of violent acts to frighten the people in an area as a way of trying to achieve a political goal.[27] The next face of religious evil in India is the personal laws of respective communities. The practice of Sati had caused a lot of atrocities on Indian women[28] and was a form of terrorism. The ratio behind this practice was based on the fallacy of protecting the purity of women. When the propagators of religion start propagating such practices at the cost of human rights the problem starts at that very point and the social practices convert into a terrorism taking the lives and human rights of many. Thus, the act of sati was a violent way to further the political goals of dominance of men in the society.

One such example in Islam is the law of Triple Talaq, wherein a husband is entitled to grant divorce to his by merely by reciting the term Talaq for 3 times in a continuation. If merely pronouncing a particular term thrice can result into divorce which is a social stigma attached for a women for her lifetime such law is nothing more than terrorism for the women of that community. Women are always at a risk of getting destroyed even if they’re at zero faults.

Ambiguity is created due to the existence of different personal laws regulating a social institution such as marriage, specifically in the case of polygamy and divorce. Also, possibility of a separate law for Muslims under the Muslim Personal Law supporting child marriage based on Shariat.[29]

The system of Khap Panchayat is another synonym of terrorism in the country like India. On 29 March, a Sessions court in Karnal, Haryana, imposed a death sentence on five people who were ordered by the khaps to kill. These five had a role in the murder in June 2007 of a young couple, Manoj and Babli, of Kaithal district.[30] The only reason why they were killed was that they belonged to the communities where revelry existed since long. A terror has been established by khaps via their existence which has stopped people from being rebel or go against the usual practices of their communities especially with regards to the marriage ceremonies.

The most famous form of terrorism prevalent in India is the cross border terrorism by its neighbor Pakistan. Pakistan is the home for world’s most wanted terrorists and leading terrorist organization. These terrorist organizations have readily accepted that the militants they train are ready to everything and everything under the duty of Jihad.[31] The neologism jihadist is often used to describe militant Muslim groups, including those deemed guilty of terrorist atrocities.[32]  This term which derives its roots form the backyard of religion because of its misinterpretation has resulted in deaths of unaccounted people who carry the batten of innocence and human race.

Thus religion and its propagators have successfully operated the actions of evil under the ambit of religion and will continue to do in the name of religion.

Chapter3: Need for change

In the present dynamics of cross border terrorism, the conventional bilateral alliance systems that underpinned most of the region’s security structure and relations are not adequate to deal with the challenge of conventional cross border terrorism.[33] Considering these scenarios there a clear need for the change in current practices with regard to religion since they’re acting as the blockage in development of the human race. Religion is that blindfold which once worn by any person becomes almost impossible to take off and the person sees nothing except the things shown by religion in the name of God.

Since by now this has been established that Cross-border terrorism is one of the off-springs[34] of religion thus, the time has come to either start abandoning the concept of religion or to start interpreting the same in its true essence. Religion acts as a fear for a person to undertake his actions with caution or else he shall be punished by Bhagwan or Allah or God. When this clause is added before taking up any action, this acts a bar on fundamental rights of a human being because then the person is deprived of his right to choose, right to express etc. for example: A person belonging to Islam wants to consume alcohol but merely because this has been interpreted by the propagators of Islam that consuming alcohol is criticized by Quran he has to kill his will and abide by the same because of the fear of sanction.

Steps which can be adopted by the Government of India in order to curb cross border terrorism are as follows:

1.      Nexus of intelligence of security agencies at the centre and states has to be relooked upon and coordinated accordingly with minimum hindrances.

2.      These intelligence agencies to keep a close eye on various national and international militant groups and identify their potential recruits from India and take actions thereof.

3.      Increase the intakes in police force to control internal security of the country.

4.      Strict regulations with respect to immigrants have to be adopted.

5.      Strengthen the security of our Costal Areas.

6.      Effective use of NATGRID.[35]

7.      Rising of the issues of Cross-Border Terrorism in every one of its appearances incorporating its financing in different multi-sidelong showing her policy of zero tolerance.

Formulation of a Uniform Civil Code (UCC) to curb terrorism by personal laws of different religions.

The need for a UCC was felt as soon as the Constitution came into force. Indeed, even following 54 years, this order couldn’t be actualized for reasons better known not those worried with this mandate. The UCC additionally plans to overcome the particularistic and regularly reactionary parts of individual laws of different religious groups. The target accordingly is additionally to bring a social change and elevating the status of ladies. The UCC is famously alluring in light of a legitimate concern for modernization of society and for a typical arrangement of Justice for all.[36]

The absence of UCC gives rise to piquant, unwarranted and ugly situations. In the words of court: Marriage is the very foundation of civilized society. The relation once formed, the law steps in and binds the parties to various obligations and liabilities there under. Marriage is not an institution in maintenance of which the public at large is deeply interested. It is the foundation of the family and in turn of society without which no civilization can exist.[37]

Indian Judiciary has appreciated the need of the UCC by various landmark judgments. Justice Y.V. Chandrachud while delivering the judgment in the matter of Mohd. Ahmed Khan v. Shah Bano Begum[38] said that the uniform civil code will help in the process of national integration by removing the lacunas in all the conflicts of personal laws and the never lasting tussel between the ideologies of two religions. Again in the case of Sarla Mudgal[39] the Hon’ble Supreme Court of India had reiterated the need to a Uniform Civil Code to further the cause of pan nation integration on personal laws front and end the conflict of ideologies of various religions.

Abandon the Institutions of Khaps

The punishments under the system of Khap Panchayats are granted in the name of Honour killing which has been recognized as illegal[40] by the Hon’ble Supreme Court in various judgments. Thus, any institution furthering an illegal object by illegal means shall be declared illegal and the institution should be demolished with immediate effect so as to rebuilt the new structure of faith and uniformity in the socities that face atrocities because of irrational actions of such institutions.


Religion has done the work of dividing people in the name of faith and has lead to massive genocides in human communities by their fellow brothers. It has also worked as a friction for development of a particular community which by the virtue of being a minority religion was always oppressed. Also, religion has curbed the personal freedoms of an individual by inserting the clause of sanction to every act of his/hers in non compliance with the route of religion and hence making the society static. This results in failure of growth of that particular religion and people of the same religion.

Indeed, even separated from the continuous genocide of the unborn, more than one hundred million individuals kicked the bucket on account of secularist administrations amid the twentieth century. Combined with acknowledgment of the incalculable compassionate guide endeavors spurred by religious responsibilities, these measurements ought to rouse secularists toward humble thoughtfulness, as opposed to haughty inculpation of religion.

Thus the hypothesis of the research paper that Religion is one of the many reasons to blame for harbouring all evil. Rest all evils evade from this very own reason has been proved and satisfied to the best of Author’s knowledge.


[1] Young, Lavada J., What Is Religion?, 3.2 Social Science pp. 138-45 1928.
[2] Ira W. Howerth, International Journal of Ethics, Vol. 13, No. 2, pp. 185-206 (Jan., 1903).
[3] Williams, J. Paul, and Friess Horace L. “The Nature of Religion.” Journal for the Scientific Study of Religion 2.1 pp. 3-17 (1962).
[4] 5 John Dewey, A Common Faith Yale L.J., pp. 3, 7, 9 (1934).
[5] supra note  3, at 3.
[6] 42nd Constitutional Amendment, 1976.
[7] Hindu Marriage Act, § 2(1) clauses (a) and (b) and explanation.
[8] Hindu Marriage Act, § 2(1) (c).
[9] Dr. PARAS DEEWAN, Family law, pg. 4 (10th ed. 2015).
[10] Kusum v. Satya, ILR (1930) 30 Cal. 99.
[11] Peerumal v. Poonuswami, AIR 1971 SC 2352.
[12] Mohandas v. Devasan Board. 1975 KLT 55.
[13] ILR (1903) 30 IA 249.
[14] Chandra Shekar v. Kundandaivelu, AIR 1963 SC 185.
[15] supra note  9, at 4.
[16] Ram Prakash v. Debnab, ILR (1942) Pat. 152.
[17] supra note  9, at 4.
[18] Narantakath v. Parakkal, ILR (1922) 42 Mad. 225.
[19] Id.
[20] supra note 9, at 4.
[21] ILR, (1933) 14 Lah. 518.
[22] Sharia Act, § 3.
[23] supra note 9, at 4.
[24] Adolf Hitler, mein kamph, pg. 339,
[25] Id.
[26] BADEY, THOMAS J., “The Role of Religion in International Terrorism.”, Sociological Focus 35.1 81-86(2002).
[27] Anonymous, definition of terrorism,
[28] I clement, Atrocioties on women, Sociology for Nurses,
[29] Ahmed, Shabbeer, and Ahmed Shabeer. “Uniform civil code (article 44 of the constitution) a dead letter.” The Indian Journal of Political Science 67.3: 545-52 (2006).
[30] Anonymous, “Khaps, Castes and Violence.” Economic and Political Weekly 45.18 pg. 7 (2010).
[31] G Marranci, Jihad: Beyond Islam; L Napoleoni, ‘Modern Jihad: the Islamist Crusade’ (2003) 23 Sais Review 2, pp.53, 65(Berg, New York, 2006).
[32] Turner, Colin. “Reconsidering Jihad: The Perspective of Bediüzzaman Said Nursi.” Nova Religio: The Journal of Alternative and Emergent Religions 11.2 pp. 94-111 (2007).
[33] Acharya, Arabinda. “India and Southeast Asia in the Age of Terror: Building Partnerships for Peace.” Contemporary Southeast Asia 28.2 pp. 297-321 (2006).
[34] Id.
[35] Government has established the National Intelligence Grid (NATGRID) with an intention to link data bases for collecting actionable intelligence to combat terrorism and internal security threats.
[36] Ahmed, Shabbeer, and Ahmed Shabeer. “Uniform civil code (article 44 of the constitution) a dead letter.” The Indian Journal of Political Science 67.3 pp. 545-52 (2006).
[37] Id.
[38] 1985 2 SCC 556.
[39] 1995 3 SCC 635.
[40] Arumugam Servei v. State of Tamil Nadu, 2011 6 SCC 405.

AFSPA : a delusion or a dilemma?

BY- Hardi Himanshu Goradia

NOTE: – By expressing my views about the following topic, neither am I commenting against the Government nor the provisions enacted by the Legislature. The content posted is purely for the public views and any rash comments would not be appreciated.

Even before I begin with this rather heated topic, I’d like to clearly state that over here by presenting the following post to the audience, I’m under no circumstances being answerable to any Government entity or persona as a whole. I’m by means of the post, which is to follow, trying to generate awareness about such practices which are getting highly prevalent in modern day India. My intention here is not at all to blame the Legislature or the respected Indian Army, which puts across its heart and soul to serve us and make India a better country. Over here I’m to tell about that strata of the medical fraternity who take patients as their business, my intention here is only to express my views duly and to exercise my power to raise my voice against the issues that bother me.


 AFSPA: – 
2The Iron Lady of the largest democracy of the world, Irom Chanu Sharmila finally ends her more than 500 weeks which is 11 years of hunger strike, against a protest for repealing AFSPA. No wonder it has been declared to be the world’s longest hunger strike till date. She had pledged not to look in the mirror, not to comb her hair, nor eat, drink or meet her mother unless the Act stands repealed. She was jailed a number of time thereto, and the Government made her compulsorily intake food and water by way of nasogastric incubation to eep her alive while in arrest.

Her giving up on her bequest does not tend to surprise me, what does surprise me is the never ending politics that the region of seven sisters that is the North-Eastern region of India, the contiguous States of Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura is facing since time immemorial. Let’s face it, how many of us even knew about the names of these seven States if asked impromptu? I bet more than 80% cannot and would not be able to name more than four of the Seven Sister States.


Also it is a state of terrible disgrace that more than 80% of us, the concerned citizens do not know about AFSPA. The only way concern is shown is through the rising grocery prices, teamed up with concerns about team India winning the championship trophy and the like. I have been on a quest to change the ongoing scenario and to support the same, views about the above mentioned topic will be the expressed herewith.

Post-independence, India has witnessed many secessionist movements and has long suffered from extremist attacks. The very notion of secessionism disturbs the territorial integrity and unity of a country. In order to curb the secessionist activities of the militants, the Indian government under Nehru in 1958 implemented the Armed Forces Special Powers Act (AFSPA).

 1AFSPA is an acronym for ARMED FORCES SPECIAL POWERS ACT, 1958. The said Act had been bought into force and enacted in the year 1958. It was first implemented in the North-Eastern Region and then to Punjab and finally to Jammu and Kashmir. In the case of Armed Forces Special Powers Act, 1958 (Manipur and Assam), the Government used Article 355 of the Constitution to confer powers on the Governors of the States. The Act is applicable only after an area has been declared, “Disturbed”. The power to declare a territory,“Disturbed” initially lay with the States, but this power was passed to the Centre in 1972. Section 3 of AFSPA (in J&K), says that an area can be declared disturbed if it is the, “Opinion of the Governor of the state or the central government which makes the use of armed forces in aid of the civil power necessary”. Under the provisions of the Act, the “Armed Forces” may shoot to kill or destroy a building on mere suspicion. A non-commissioned officer or any one of equivalent rank and above may use force based on opinion and suspicion, to arrest without warrant, or to kill. He can fire at anyone carrying anything that may be used as a weapon, with only, “Such due warning as he may consider necessary”. Once AFSPA is implemented, “No prosecution… shall be instituted except with the previous sanction of the central government, in respect of anything done or purported to be done” under this Act.
The Supreme Court found the Act constitutionally valid. However the draconian powers the Act gives to the armed forces, particularly Section 4 which allows a soldier to shoot at sight under certain circumstances, can result in abomination, if misused. The basis for giving life to this otherwise dormant enactment is the notification by the Home Ministry declaring an area “Disturbed.” Failing to maintain law and order with vast resources such as the para-military and the police it has under its command, the MoH declares an area disturbed and hands over the situation to the Ministry of Defence. The armed forces, trained to protect the borders, are deployed to restore normalcy. There can be no two opinions that rape and murder committed by soldiers must be dealt with firmly.  The crux of the problem is the prolonged deployment of the army in internal security duties in a particular area. The Government must first withdraw the notification declaring an area disturbed and let the soldiers return to the barracks. Overwhelming presence of insurgents causes grave insecurity to the common people. It creates a situation where people have to live under constant fear and anxiety. Frequent declaration of bandh, forcible extortion and shelter by militants are sources of insecurity to the people. On the other hand, widespread protest by people against the Act clearly shows their discontent towards it. Adversaries of the Act argue that the increased militarization of the area creates a detrimental atmosphere that ends up creating people’s protests against the State. On the other hand, the protagonists of the Act believe that extraordinary conditions demand extraordinary measures. According to them, there is no denying the fact that AFSPA gives special powers to the security forces but it, also, has to be understood that there’s no other simple way to fight the insurgents. When the enemy penetrates within the civilian population it is he who has curbed the liberty of the people and not the security forces who are, in fact, trying to ensure that the right to life and dignity of the civilian population is not compromised by. AFSPA is the need of the hour.

In the AFSPA controlled areas, human rights are being violated both by state and non- state actors. Counter- terrorism operations undertaken in good-faith, at times, lead to collateral damage. Proposals have been made to been made to amend section 4 which gives Army powers to search premises and make arrests without warrants, use force, even to extent of causing death, destroy arms dumps, hideouts and to stop, search and seize any vehicles.

The controversial AFSPA has been extended by six months in entire Assam and the 20km-wide belt in Meghalaya bordering the state with the Centre declaring that the “disturbed area” status, which has been in force since 1990, will continue. In a gazette notification, the Home Ministry said the law and order situation in Assam has continued to be a matter of concern due to the violent incidents by underground outfits and during January-Septembe r 2016, different militant groups were involved in 66 incidents of violence in Assam, which resulted in killing of 29 people.
3Emerging Status: –
The AFSPA debate has been a long sparring bout conducted in the latter half of 2011. The main boxing bout is still to be fought. Shadow boxing matches were carried out between political parties at the state level (NC, PDP and Congress); at the National level (Cong, NC and BJP); the J&K Government and State Administration against the Army within the state; the Chief Minister of J&K discussed the issue with the Army Chief, the National Security Advisor, the Home Minister, the Raksha Mantri and the Prime Minister. The media, both print and electronic, had a field day bringing defence analysts, political luminaries, and experts on Kashmir, separatist leaders face to face for debates with no possible conclusion. The Lokpal Bill and related issues overtook the prolonged AFSPA debate and buried it under the welcome snowfall in Kashmir.

Nevertheless, the least we could conclude is to each his/her own, and these opinions thus expressed do not necessarily mean to harm the image, reputation or otherwise of the nation or the Defence, without whose help, we would never be able to breathe peacefully.

I’d like to thank Indian Defence Review.


Administrative Law In India

Administrative Law In IndiaThe basic principles of natural justice and fair play were followed by the kings and officers in the name of dharma, which was a word with a scope wider than “rule of law” or “due process of law”. This shows that administrative law was in existence in India even in ancient times. Under the Mauryas and Guptas there was a well organised and centralised administration in India. Though there was no administrative law in existence in the sense in which it exists today. Therefore, the evolution of administrative law in India can be divided into 3 phases:





I.            1850-1900


With the establishment of East India Company and the British Rule in India the power of government increased. Many Acts, statutes, legislations were passed by British Government to regulate labour relations, safety, health, morality and transport. The practice of granting administrative licence began with the State Carriage Act, 1861. The first public corporation was established under the Bombay Port Trust Act, 1879. Delegated legislation was accepted by the Northern India Canal and Drainage Act, 1873 and the Opium Act, 1878. Proper and effective steps were taken to regulate the trade and traffic in explosives by the Indian Explosives Act, 1884. Many statutes and provisions were made regarding holding of permits and licences and for the settlement of disputes by the administrative authorities and tribunals.


II.            1900-1947


In the 20th century, social and economic policies of the government had significant impact on private rights of citizens. Government looked upon the subjects such as housing, employment, planning, education, health, service, pension, manufacture of goods, etc. Traditional legislative and judicial system could not effectively solve these problems and thus gave rise to delegated legislation as well as tribunalisation.

During the World War II, there was a tremendous surge in the scope of executive power. The Defence of India Act, 1939 and the rules made thereunder conferred ample powers on the executive to interfere with life, liberty and property of an individual with less or no judicial control. The government issued many orders and ordinances covering several matters by way of administrative instructions.


III.            1947-onwards


Since the independence, the activities and the functions of the government have further increased. The philosophy of a Welfare State has been specifically embodied in the Indian Constitution. In the constitution itself provisions are there to secure social, economic and political justice, equality of status and opportunity to all citizens. The ownership and control of material resources of the society should be so distributed as to best sub serve the common good. The operation of the economic system should not result in the concentration of wealth and means of production with a few. For the implementation of all these objects, the State is vested with the power to impose reasonable restrictions even on the fundamental rights guaranteed by the constitution. To secure these objects, several Acts have been passed by the Parliament, such as:

The Industrial (Development and Regulation) Act, 1956;

The Maternity Benefit Act, 1961;

The Payment of Bonus Act, 1965;

The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969;

The Equal Remuneration Act, 1976;

The Urban Land (Ceiling and regulation) Act, 1976;

The Beedi Workers Welfare Fund Act, 1976, etc.


Even while interpreting all these Acts and the provisions of the Constitution, the judiciary started taking into consideration the objects and ideals of social welfare.


In Joseph Kuruvilla Vellukunnel v. RBI[1], the Supreme Court held that under the Banking Companies Act, 1949, the Reserve Bank of India was the sole judge to decide whether the affairs of a banking company were being conducted in a manner prejudicial to the depositors interest and the court had no option but to pass an order of winding up as prayed by the Reserve Bank. In Gujarat v. M.I. Haider Bux Imam Razci[2], the Supreme Court held that under the provisions of the Land Acquisition Act, 1894, ordinarily, the government is the best authority to decide whether a particular purpose is a public purpose and whether the land can be acquired for that purpose or not. In Raja Ram Pal v. Speaker, Lok Sabha[3], the Supreme Court held that if a Member of Parliament is found guilty by the House of improper conduct and is expelled, a court of law would not interfere with such action.


Now that the activities and powers of the government and administrative authorities have increased, there is a greater need for the enforcement of the rule of law and judicial review over these powers, so that the citizens are free to enjoy the liberty guaranteed to them by the Constitution. Remedies as to right to appeal, revision, etc. are given under Article 32, 136, 226 and 227 of the Indian Constitution. Order passed by the administrative authorities can be quashed and set aside if they are mala fide, dehors the Act or against the provisions of the Constitution. If the rules, regulations or orders passed by these authorities are not within their powers, they can be declared ultra vires, unconstitutional, illegal or void. Principle of judicial review is held to be part of “basic structure” of our Constitution.





Krupa Gajjar


[1] AIR 1962 SC 1371: 1962 Supp (3) SCR 632
[2] (1976) 3 SCC 536: AIR 1977 SC 594
[3] (2007) 3 SCC 184

Doctrine of ‘Per Incuriam’: Critical Analysis based on Precedents

Meaning: According to the Black’s Law Dictionary (Fourth Edition, 1891) per incuriam
means through inadvertence. The word ‘incuria’ literally means ‘carelessness’.1 The purport
of the doctrine of per incuriam is that, a decision should be treated as given per incuriam
when it is given in ignorance of the terms of a statute, or of a rule having the force of a
‘Per incuriam’ means ‘through want of care’; a decision of the court which is
mistaken. A decision of the court is not a binding precedent if given per incuriam, that is,
without the Court’s attention having been drawn to the relevant authorities or statutes.3 The
‘per incuriam’ rule is strictly and correctly applicable to the ratio decidendi and not to obiter
dicta. An important caveat that is required to be borne in mind at all times is that, the nonreference
of earlier decisions in the judgment does not indicate non-consideration of those
cases in the judgment.4
When a decision/judgment can be stated to be ‘per incuriam’?
A decision/judgment can be per incuriam any provision in a statute, rule or regulation, which
was not brought to the notice of the court. A decision/judgment can also be per incuriam if it
is not possible to reconcile its ratio with that of a previously pronounced judgment of a coequal
or larger bench; or if the decision of a High Court is not in consonance with the views
of the Supreme Court.5
It is a settled rule that if a decision has been give per incuriam the court can ignore it.

6. In the case of, Buta Singh v. Union of India

7, it was held that, when a
two-judges bench without noticing or ignoring the binding decision of a three-judges bench
renders a decision, then such a decision is per incuriam. Similarly, in the case of K.H. Siraj v.
High Court of Kerala

8, it was held that, when a decision is rendered by the High Court
without having regard to the relevant line of decisions rendered by the Supreme Court, then
such a decision of the High Court is per incuriam.
In the case of, Punjab Land Development & Reclamation Corporation Ltd. v. Presiding
Officer, Labour Court (Chandigarh)

9, it was held that, the problem of judgment per incuriam
when it actually arises should present no difficulty as the Supreme Court of India can lay
down the law afresh, if two or more of its earlier judgments cannot stand together. It is
important to note that, the non-consideration of an irrelevant provision cannot make the ratio
of the decision per incuriam.
10 Lastly, in the case of, Fuerst Day Lawson Ltd. v. Jindal
Exports Ltd

11, it was held that, unless it is a glaring case of obtrusive omission, it is not
desirable to depend on the principle of judgment per incuriam; it has to be shown that some
part of the decision was based on a reasoning which was demonstrably wrong, for applying
the principle of per incuriam.
Thus, an order delivered without argument, without reference to the relevant provisions of the
Act and without any citation of authority is per incuriam.
12 Can a ‘per incuriam’ decision operate as ‘res judicata’?
Per incuriam decisions are those decisions which do not state the law correctly and hence are
not to be followed.13 In the case of, Union of India v. Indian Railway SAS Staff Association14
it was held that, ‘per incuriam’ decision does not operate as res judicata.
Can a ‘per incuriam’ decision operate as a precedent?
In the case of, Hyder Consulting (U.K.) Ltd. v. State of Orissa15, it was held that, a prior
decision of the Supreme Court on identical facts and law binds the court on the same points
of law in a later case. In exceptional circumstances, where owing to obvious inadvertence or
oversight, a judgment fails to notice a plain statutory provision or obligatory authority
running counter to the reasoning and result reached, the principle of per incuriam may apply.
In the case of, State of Assam v. Ripa Sarma16, it was held that, a judgment rendered in
ignorance of earlier judgments of benches of co-equal strength would render the same per
incuriam, and thus, such a judgment will not be elevated to the status of precedent. Further, in
the case of, State of M.P. v. Narmada Bachao Andolan17, it was held that, the courts have
developed the principle of per incuriam in relaxation of the rule of “stare decisis”; thus, the
“quotable in law” is avoided and ignored if it is rendered in ignorance of a statute or other
binding authority. Moreover, in the case of, Central Board of Dawoodi Bohra Community v.
State of Maharashtra18, it was held that, a ruling making a specific reference to an earlier
binding precedent may or may not be correct but it cannot be said to be per incuriam.
Lastly, in the case of, Chauharya Tripathi & Ors v. L.I.C. of India & Ors19, it was held that,
there can be no cavil over the proposition that once a judgment has been declared per
incuriam, it does not have the precedential value. However, it is worth noting that, in the case
of, Mukesh K. Tripathi v. L.I.C.20, it was held that, even though a case may not have been
expressly over-ruled but once it has been held that it has been rendered per incuriam, it
cannot be said that it lays down good law.
Doctrine of ‘per incuriam’ and Judicial Discipline:
In the case of, Jai Singh v. M.C.D.21, it was held that, judicial discipline and propriety
demands that, there should be consistency in the views as regards the decisions rendered by
co-equal benches on the same issue; however, subsequent bench is to follow the decision
rendered by the earlier co-ordinate bench, except in compelling circumstances, such as where
the order of the earlier bench can be said to be per incuriam. Further, in the case of, U.P.
Power Corporation Ltd. v. Rajesh Kumar22, it was held that, it is the duty of the court to
acknowledge the fact that, a judgment which erroneously appreciates or construes a binding
precedent is not per incuriam.
It is important to take note of the ratio laid down in the case of, K.G. Derasari v. Union of
India23, in this case the Supreme Court of India categorically observed that, if the tribunal has
not looked into previous decision of the Supreme Court which is the law of the land and by
which it was bound, the remedy available to the aggrieved person was to file an application
for review.
In the case of Chandra Prakash v. State of U.P.24, it was held that, in case a two-judge bench
finds fault with the decision rendered by a three-judge bench, then, in that case, the two-judge
bench must restrain itself from referring the matter to the Constitution Bench, as judicial
discipline and propriety as also the doctrine of binding precedent demands that a two-judge
bench must follow the decision given by a three-judge bench.25
Citing per incuriam decisions at Bar:
In the case of, State of Orissa v. Nalinikanta Muduli26, the Supreme Court of India coming
down heavily on the members of the bar, took occasion to state that, advocates are officers of
the court and they have a bounden duty to assist the court and not to mislead it; citing an
over-ruled decision before a court without disclosing the fact that it has been over-ruled is a
matter of grave concern, and the falling standards of the advocates citing over-ruled decisions
at bar has become a dreadful reality, which needs to be curbed as early as possible.
From the above analysis we draw the following conclusion:
a. Principle of res judicata does not apply to decisions given per incuriam;
b. Decisions given per incuriam do not have any precedential value;
c. If ‘Case X’ did not consider a binding decision i.e. ‘Case Y’, but did consider another
case i.e. ‘Case Z’, which had considered the said binding precedent i.e. ‘Case Y’, then
in such a case, the view taken in ‘Case X’ cannot be said to be per incuriam;
d. When no relevant provision of the Constitution or any statute is left out for
consideration as regards a judgment delivered, then, in such a case, the judgment
delivered, cannot be termed as per incuriam.
1 See: State of U.P. v. Synthetics & Chemicals Ltd., (1991) 4 SCC 139
2 See: Municipal Corporation of Delhi v. Gurnam Kaur, AIR 1989 SC 38; Union of India v. Manik Lal
Banerjee, (2006) 9 SCC 643
3 P. Ramanatha Aiyar’s Concise Law Dictionary, Fifth Edition, Lexis Nexis Publication, p.937
4 See: Gupta Sugar Works v. State of U.P., AIR 1987 SC 2351
5 See: Sundeep Kumar Bafna v. State of Maharashtra, Criminal Appeal No. 689 of 2014, Supreme Court of
India, Judgment delivered by: Vikramajit Sen, J.
6 See: Rattiram & Ors. v. State of M.P. (Through Inspector of Police), Criminal Appeal No. 223 of 2008,
Supreme Court of India
(1995) 5 SCC 284
(2006) 6 SCC 395
(1990) 3 SCC 682
10 (1999) 3 SCC 176
11 (2001) 6 SCC 356
12 See: M.C.D. v. Gurnam Kaur, (1989) 1 SCC 101
13 See: A. Srimannarayana v. Dasari Santakumari, (2013) 9 SCC 496
14 (1995) Supp (3) SCC 600
15 (2015) 2 SCC 189
16 (2013) 3 SCC 63
17 (2011) 7 SCC 639
18 (2005) 2 SCC 673
19 Civil Appeal Nos. 5690-5691 of 2010, Supreme Court of India, Judgment dated: 11.03.2015
20 (2004) 8 SCC 387
21 (2010) 9 SCC 385
22 (2012) 7 SCC 1
23 (2001) 10 SCC 496
24 AIR 2002 SC 1652
25 See: Union of India v. Raghubir Singh, 1989 (2) SCC 754 (Para 27)
26 (2004) 7 SCC 19
27 See: Usha Bharti v. State of U.P., (2014) 7 SCC 663

Model Shops and Establishments Bill, 2016

Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016: An Analysis

Model Shops

Ayush Yadav

The Union Cabinet approved the Model Shops and Establishment (Regulation of Employment and Conditions of Service) Bill, 2016 on June 29, 2016.1 The bill is a welfare legislation aimed at bringing uniformity in regulation of employment and conditions of service throughout the country. As this subject falls within the State List, States have been granted autonomy to adopt and modify this Model bill as per their requirement. This Model Bill was finalized after detailed discussions with public, through internet and with employees/labour representatives, employer’s association/fede rations and State Governments through Tripartite Consultations process. This bill would be applicable to shops and establishments employing ten or more workers except manufacturing units
Some of the major reforms this bill seeks to propose are:
Working Hours of Employees: Establishments are permitted to operate on all days in a year and can also decide their opening and closing timings. The Model Bill puts a cap that employees can work for a maximum of 9 hours a day and 48 hours a week, and up to a maximum overtime of 125 hours in a quarter. Highly skilled workers (for e.g. workers employed in IT, Biotechnology and R&D division) are exempted from these provisions of maximum working hours.
Non Discrimination of Female Employees: There shall be no discrimination against female employees in matters of recruitment, training, transfers, promotion or wages. Women would be allowed to work during 6 AM and 9 PM. The Model Bill also grants liberty to women to work in a night shift only if employer provides facilities like night crèche, ladies toilet, protection from sexual harassment, transportation from establishment to their residence doorstep.
Employee Welfare provisions: The Model Bill seeks to propose a number of welfare provisions including provisions for drinking water, lavatory, crèche, first – aid and canteen facilities and employer’s responsibility for health and safety of the workers.
Employees Leave: The Model Bill entitles every employee to 8 days casual leave, one day of leave for every 20 days of work for every worker who has worked 240 days in a subsequent year and 8 days of paid leave for festival holidays.
In addition to the abovementioned reforms, online registration through a simplified procedure and other reforms have also been proposed by this Model Bill.
Conclusion: The Model Bill is truly a welfare legislation and much awaited reform, aimed at protecting the interest of the employees. This bill is indeed an applaudable step by Central Government towards employment generation. One of the most noteworthy reforms of this bill is the provision of non-discriminati on against women, since it would enable women to work during the night shift with sufficient security and safety provisions aimed at enhancing the gender diversity and creation of more employment opportunities. The retail sector especially the shopkeepers stand to benefit most out of this model bill as it would result in elimination of licencing bureaucracy and bribery, thus resulting in decline of corruption. The Model bill is certainly a positive one and would improve the working conditions, creation of more employment opportunities and provide favorable environment for doing business. The Union Cabinet has given nod to this Model Bill taking into account the spirit of cooperative federalism and it would be sent to the States to adopt the bill as it is or modify it to suit their requirement.2 We hope that this Model Bill would be enforced soon and sees light of the day to bring uniformity in regulation and conditions of service across the country.

1 “Cabinet considered the Model Shops and Establishment (Regulation of Employment and Conditions of Service) Bill, 2016”, Press Information Bureau, Ministry of Labour and Employment, June 29, 2016.
2 “Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 to Boost Employment Generation in General, Specially for Women: Shri Bandaru Dattatreya”, Press Information Bureau, Ministry of Labour and Employment, July 1, 2016.

United Nations Organization : Promoting Equality of States or Inequality?

unoUnited Nations Organization, today, is the most powerful organization across the world constituting nearly all the states as member countries except a few of them. The aims and objectives behind the formation of such a large institution are contained beautifully in the preamble of the UN Charter. The Charter contains all the required provisions which aim to establish world peace and security across the globe. The earlier World Wars (World War I & II) had caused immense destruction all over the world leading to a huge loss of life and property. But before we look forward to the various aspects of the United Nations Organization, it is very important to know the history behind formation of such an organization. After World War I, keeping in mind the huge devastation  caused through wars between different nations , some countries took an initiative to form the ‘League of Nations’ which aimed to prevent the further chances of wars between nations across the world or aimed to prevent a second world war. But such an association involved a much less participation of nations than what was required. As we all know, this organization was a very big failure and could not prevent from happening of another big war, World War II which obviously had much more devastating results than World War I. The nuclear attacks over the two major cities of Japan, Hiroshima and Nagasaki had shaken the roots of human life and property over a very large scale. After the war ended, it was highly important to bring an end to such wars for not only few, but all the nations of the world. This necessity of saving human life and property was the most essential priority of nations all across the world, and so the nations decided to combat the failure of the ‘League of Nations’ and the reasons behind such a failure. They came up with the United Nations Organization in the year 1945 which involved a huge participation of the nations as the member states of the organization. The organization functions on its two very important organs namely General Assembly and the Security Council. The General Assembly is an organ of the UNO which holds its meeting of all the member states after a fixed specified period of time. The issues faced by different countries all around the world are debated upon an international platform; the problems as well as solutions to such problems are discussed in the General Assembly. The other organ is called the Security Council which consists of the five permanent members across the world. These member states are permanent members of the Security Council and hence subject to no change in its position. Obviously, the Security Council enjoys more powers and privileges when compared to the General Assembly. Also in the Charter, any decisions taken by the General Assembly are subject to its finalization by the Security Council. Hence, this creates a lot of inequality between the two organs of the same institution. Being members of the international community, in principle, all the states (nations) are equal due to their individual international personality despite the dissimilarity between the states in respect of territories, population, power, civilization, prosperity e.t.c but when we talk about reality, such principles of law and equality fail to establish in practicality. The UN Charter is based on the principle of sovereign equality of states but in reality great powers are unequal to the smaller or less powerful states. When the entire concept is based upon one such important aspect of sovereign equality, even the smaller or less powerful countries of the world must have an equal voice and status on such a big international platform. The special privileges or rights enjoyed by the five permanent members curtail the rights enjoyed by the other states of the world and hence promote inequality among the world’s most powerful states and the less powerful ones. Enjoyment of certain special privileges and rights by these permanent five members compared to the other member states has created an inequality of states all over the world on an international platform. If states do not promote equality on such a big platform, how are other communities all around the world expected to do the same. These international forums must function in order to inspire states and  communities all over the world and not in itself create barriers which serve threat to principles of humanity.

Harleen Kaur


Alliance University


Corporate Social Responsibility


What goes around comes around. Everything is connected to everything else. A man will receive only the yield which he deserves a fruit of his snow. This is how the virtue of responsibility drives one to do what is not harmful to another. A good citizen has the duty to return what he gets from the society. Likewise, a company also has the duty to take the responsibility of the activities which have an impact on the society and the environment.

Companies have responsibilities like protecting the environment and employing persons from the minority groups. But, these duties were questioned by the companies as they did not hold themselves responsible. It was in 1972, that United Nations in Conference on the Human Environment in Stockholm, Sweden while discussing its relationship between business activities and their impact on community adopted various principles, one of which was that, “ in order to achieve a more rational management of resources and thus to improve the environment, countries should also adopt an integrated and coordinated approach to their development planning so as to ensure that development is compatible with the need to protect and improve the environment for the benefit of their position.”1 And that’s how came the idea of Corporate Social Responsibility (CSR).


A company is responsible for the repercussions its activities have on the community and it has to take the initiatives as responsibility to make good for the harm done by it. The term corporate social responsibility is synonymous with Corporate Citizenship. Corporate social responsibility may also be referred to as “corporate citizenship” and can involve incurring short term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environment change.2 The initiatives and efforts that a company takes as part of corporate social responsibility are more than what is required by environmentalist .3

Companies (Corporate Social Responsibility Policy) Rules, 2014 defines Corporate Social Responsibility as: “Corporate Social Responsibility (CSR)” means and includes but is not limited to (i) Projects or programs relating to activities specified in Schedule VII to the Act or (ii) Projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule Vll of the Act4

The World Business Council for Sustainable Development defined Corporate Social Responsibility as, “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”5

The World Bank defines Corporate Social Responsibility (CSR) as “the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.”6


When one evaluates social responsibility from the point of view of corporate, one can decipher three levels of corporate social responsibility.7

The first level is the minimum compliance. Here the managers comply with the minimum social requirements of the law. The corporate undertakes its business initiatives within the ambit of law and does not go beyond that. This is guided by transaction ethics.

The second level is enlightened self-interest. Corporate Social Responsibility is used here as a strategic weapon to inform the marked that they are bigger and better than their competitors. Investments in Corporate Social Responsibility today is said to bring long term benefits to the company with an understanding that the consumers the community and the society at large would be more-happy to transact with an organization that is engaged in social activities. This is guided by recognition ethics and enlightened self-interest.

The third level of aims to actively improve society in general. This level of CSR is usually seen in highly matured organizations. It is not dependent upon direct benefit to business. The firm positions itself to CSR because it firmly believes it is in their DNA to be socially responsible to the society in which they are engaging. This is guided by change ethics.


In India, the concept of corporate social responsibility has developed in phases. In the 19th century, business families like Tata, Birla, Godrej and others were inclined towards social causes and they continue to do the same now that too in a larger scale. Between 1960-80, when the Indian companies were facing high taxes, licensing and restrictions, private companies got involved in corporate malpractices. This is the time when legislations on corporate governance, labour and environment issues were enacted. CSR was also given a try to be implemented. Post 1980, when licensing was reduced to a certain extent, companies became more willing to contribute towards the social causes as corporate social responsibility. The Companies Act, 1956 had clear provision for CSR but the new Companies Act, 2013 makes CSR mandatory for companies which fall within the ambit of section 135(1).8 The said section is to be read with the Schedule VII and Companies (Corporate Social Responsibility) Rules, 2014.

CSR in India has evolved through different phases, like community engagement, socially responsible production and socially responsible employee relations. Its history and evolution can be divided into four major phases9.

● PHASE 1 (1850 TO 1914): The first phase of CSR is known for its charity and philanthropic nature. CSR was influenced by family values, traditions, culture and religion, as also industrializatio n. The wealth of businessmen was spent on the welfare of society, by setting up temples and religious institutions. In times of drought and famine these businessmen opened up their granaries for the poor and hungry. With the start of the colonial era, this approach to CSR underwent a significant change. In pre-Independence times, the pioneers of industrializatio n, names like Tata, Birla, Godrej, Bajaj, promoted the concept of CSR by setting up charitable foundations, educational and healthcare institutions, and trusts for community development. During this period social benefits were driven by political motives.10.

●PHASE 2 (1910 TO 1960): The second phase was during the Independence movement. Mahatma Gandhi urged rich industrialists to share their wealth and benefit the poor and marginalized in society. His concept of trusteeship helped socio-economic growth. According to Gandhi, companies and industries were the ‘temples of modern India’. He influenced industrialists to set up trusts for colleges, and research and training institutions. These trusts were also involved in social reform, like rural development, education and empowerment of women.11

● PHASE 3 (1950 TO 1990): This phase was characterized by the emergence of PSUs (Public Sector Undertakings) to ensure better distribution of wealth in society. The policy on industrial licensing and taxes, and restrictions on the private sector resulted in corporate malpractices which finally triggered suitable legislation on corporate governance, labor and environmental issues. Since the success rate of PSUs was not significant there was a natural shift in expectations from public to private sector, with the latter getting actively involved in socio-economic development. In 1965, academicians, politicians and businessmen conducted a nationwide workshop on CSR where major emphasis was given to social accountability and transparency.12

●PHASE 4 (1980 ONWARDS): In this last phase CSR became characterized as a sustainable business strategy. The wave of liberalization, privatization and globalization (LPG), together with a comparatively relaxed licensing system, led to a boom in the country’s economic growth. This further led to an increased momentum in industrial growth, making it possible for companies to contribute more towards social responsibility. What started as charity is now understood and accepted as responsibility.13


For decades, companies in India has been regulated and governed by the outdated Companies Act, 1956. After years of debate and contemplation, The Indian Parliament passed the New Companies Act, 2013. It is divided into 7 schedules, 29 chapters and 470 sections.

It has brought various new features to corporate legislation which include but are not limited to mandatory spending on Corporate Social Responsibility of at least of 2% of net profit, curbing corporate delinquency by introducing punishment for falsely including a person to enter into an agreement with a bank or a financial institution to obtain credit facilities, introduction of new entity called ‘one person company’, simplified the procedure for mergers and acquisitions, limitation on the number of companies in which the same auditor may be appointed, strengthening the role of women by stipulating appointment of at least one women director in the board room, limit in the number of maximum partners etc.

The Companies Act, 2013 came into force on 12th September, 2013. But the provisions of section 135 relating to CSR came into effect on 1st April, 2014. The features of Section 135 read with Schedule VII and (Corporate Social Responsibility Policy) Rules, 2014 are described as below:


As per Section 135(1) of The Companies Act, 2013, “every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crores or more or net profit of rupees five crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the board consisting of three or more directors, out of which one director shall be an independent director.” Thus every company having net worth of rupees 500 crore or more or turnover of rupees 1000 crore of more or a net profit of rupees 5 crore or more in a financial year shall fall within the ambit of CSR provisions. This particular provisions is applied to all Indian Companies as well as Foreign Companies.


The Policy recognizes that corporate social responsibility is not merely compliance; it is a commitment to support initiatives that measurably improve the lives of underprivileged by one or more of the following focus areas as notified under Section 135 of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014:

Eradicating hunger, poverty & malnutrition, promoting preventive health care & sanitation & making available safe drinking water;
Promoting education, including special education & employment enhancing vocation skills especially among children, women, elderly & the differently unable & livelihood enhancement projects;
Promoting gender equality, empowering women, setting up homes & hostels for women & orphans, setting up old age homes, day care centers & such other facilities for senior citizens & measures for reducing inequalities faced by socially & economically backward groups;
Reducing child mortality and improving maternal health by providing good hospital facilities and low cost medicines;
Providing with hospital and dispensary facilities with more focus on clean and good sanitation so as to combat human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;
Ensuring environmental sustainability, ecological balance, protection of flora & fauna, animal welfare, agro forestry, conservation of natural resources & maintaining quality of soil, air & water;
Employment enhancing vocational skills
Protection of national heritage, art & culture including restoration of buildings & sites of historical importance & works of art; setting up public libraries; promotion & development of traditional arts & handicrafts;
Measures for the benefit of armed forces veterans, war widows & their dependents;
Training to promote rural sports, nationally recognized sports, sports & Olympic sports;
Contribution to the Prime Minister‘s National Relief Fund or any other fund set up by the Central Government for socio-economic development & relief & welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities & women;
Contributions or funds provided to technology incubators located within academic institutions, which are approved by the Central Government;
Rural development projects, etc.
Slum area development.
Explanation: For the purposes of this item, the term slum area ‘shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.’



Improves Public Image: Positive social responsibility improves a company’s public image and relationship with consumers. Companies that demonstrate their commitment to various causes are perceived as more philanthropic than companies whose corporate social responsibility endeavors are nonexistent. A corporation’s public image is at the mercy of its social responsibility programs and how aware consumers are of these programs. Remember, consumers feel good shopping at institutions that help the community. Clean up your public image (and broadcast it to the world!). Corporations can improve their public image by supporting nonprofits through monetary donations, volunteerism, in-kind donations of products and services, and strong partnerships. By publicizing their efforts and letting the general public know about their philanthropy, companies increase their chances of becoming favorable in the eyes of consumers.
Increases Media Coverage: Having a strong CSR program can increase the chances that your company gets news coverage. It doesn’t matter how much a company is doing to save the environment if nobody knows about it. Companies need to form relationships with local media outlets so they’ll be more likely to cover the stories that particular company has to offer them. On the other hand, if a corporation participates in production or activities that bring upon negative community impacts, the media will also pick this up. Unfortunately, bad news spreads quicker than good news. Media visibility is only so useful in that it sheds a positive light on your organization.
Boosts Employee Engagement: Corporate social responsibility helps attract and retain engaged and productive employees. Employees like working for a company that has a good public image and is constantly in the media for positive reasons. Happy employees almost always equal better output. Nearly 60% of employees who are proud of their company’s social responsibility are engaged at their jobs. When companies show that they are dedicated to improving their communities through corporate giving programs (like matching gifts and volunteer grants!), they are more likely to attract and retain valuable, hardworking, and engaged employees. If a corporation is philanthropicall y minded, job-hunting individuals are more likely to apply and interview for available positions. Once hired, employees who are engaged will stay with a company longer, be more productive on a daily basis, and will be more creative than disengaged workers.
Attracts & Retains Investors: Investors care about corporate social responsibility and so should companies. Investors who are pouring money into companies want to know that their funds are being used properly. Not only does this mean that corporations must have sound business plans and budgets, but it also means that they should have a strong sense of corporate social responsibility. When companies donate money to nonprofit organizations and encourage their employees to volunteer their time, they demonstrate to investors that they don’t just care about profits. Instead, they show that they have an interest in the local and global community. Investors are more likely to be attracted to and continue to support companies that demonstrate a commitment not only to employees and customers, but also to causes and organizations that impact the lives of others.

Funding Via Matching Gift Programs: Matching gift programs have the potential to double, and sometimes even triple, an organization’s fundraising revenue. Corporations that offer matching gift programs essentially double the donations that their employees are giving to eligible nonprofits. What more could an organization want? Truthfully, matching gifts are a bit more complicated than that. Each company has a different set of guidelines, deadlines, and requirements that must be met before they’ll match an employee’s contribution to a nonprofit. However, the opportunity to receive twice as many donations still hangs in the air for organizations looking to benefit from corporate social responsibility programs.
More Volunteer Participation: Matching gift programs have the potential to double, and sometimes even triple, an organization’s fundraising revenue. Corporations that offer volunteer grants are outsourcing helping hands to eligible nonprofit organizations. A corporation with this kind of program might offer (for example) $250 to a nonprofit once an employee has volunteered at least 10 hours with the organization. There are also pay-per-hour grants that many corporations offer that pay a certain amount per hour volunteered. This kind of socially responsible program is a win-win for every party involved. Employees of corporations are seen volunteering and donating their time to important causes in the community, and nonprofits are receiving free time and volunteer work, which are essential for the success of so many nonprofits.
Forging Corporate Partnerships: CSR brings nonprofits and companies together, creating strong partnerships between the two. Yet another positive impact corporate social responsibility has on nonprofit organizations is the possibility of corporate partnerships. These partnerships are vital to the work a corporation can do in the local community and important to a nonprofit that may not have the resources for major marketing campaigns. For a nonprofit organization, a partnership with a local or national corporation puts its name on tons of marketing materials that otherwise could not have been afforded on tight budgets. A key benefit is that the partnership brings additional awareness to the nonprofit’s cause.
Varied Sources of Revenue: Corporate social responsibility programs can be another source of revenue for nonprofits. Nonprofits cannot solely rely on individual donations for support. Granted, individuals make up roughly three-fourths of an organization’s total monetary contributions, but this doesn’t mean that nonprofits should discount corporations and businesses as viable sources of revenue. In fact, companies with strong corporate social responsibility programs are looking for nonprofits to be the recipient of grants, matching gift programs, and volunteer grant programs. CSR initiatives can help nonprofits make up that left over 25% after they’ve looked to individual donors.

Tata Power16: A subsidiary of Tata Power Company, Coastal Gujarat Private Limited (CGPL), has their 4000MW Ultra Mega Power Plant in Kutch and the company, being highly involved in Corporate Social Responsibility, set out to discover the crux of the issue and go about fixing it. In 2012, in partnership with Aga Khan Rural Support Programme, India, CGPL launched a community-based sustainable livelihood programme. This initiative, called Sagarbandhu, was focused in the villages of Modhva and Trigadi in Mandvi Taluka which are the major areas where the fisher folk live and return to when the fishing season ends, and do their alternative jobs, which are highly seasonal.
The Sagarbandhu programme went beyond just looking for way of providing the fisher folk alternative employment for the rest of the year, but also inspired to help develop the community and a sense of ownership and independence within the villagers. Activities undertaken include VDAC formation, value chain analysis, revolving fund at the start of the season, roof rain water harvesting, exposure visits, regular meetings, SHG formation, drinking water and sanitation facilities, school-level interventions, and distribution of boat lights, fishing nets and marketing equipment. Local institutions designed to help with the development of the community were set up. These included Self Help Groups (SHGs) and a Village Development and Advisory Council (VDAC). Through these, the fisher folk and villagers are offered training on new and different fishing techniques. There has also been improvements made to the infrastructure in the villages to provide easier access to local markets.

The communities have been greatly encouraged by the initiative of CGPL and Aga Khan Rural Support Programme and have responded with great enthusiasm. They then decided to launch a second phase of Sagarbhandu in 2013 to help widen the scope of the programme and reach more villages in the area. Once again, they were successful in their endeavors garnering praise and enthusiasm from the fisher folk.

Cognizant17: ‘The Cognizant foundation’ registered in 2005 as a “Charitable Company” under the Indian Companies Act, the Cognizant Foundation helped underprivileged members of Indian society gain access to quality education & healthcare by:
Providing financial and technical support
Designing and implementing educational and healthcare improvement programs
Partnering with Non-Government Organizations (NGOs), educational institutions, healthcare institutions, government agencies and corporations to raise the quality of life for people across India
Outreach was launched in the year 2007 when Cognizant crossed the second billion dollar revenue mark and decided to celebrate this achievement by giving back to the society. This programme is focused on using a combination of voluntary efforts from Cognizant associates and funding from Cognizant to promote the cause of education. As part of this programme, Cognizant adopts orphanages and educational institutions catering to underprivileged children and helps them raise the required infrastructure and meet their training needs
A team of Cognizant associates under the banner of Outreach, Cognizant’s volunteer CSR group that aims to make a difference to the education of underprivileged children, had started raising funds to donate notebooks to underprivileged students in a government school in Chennai. Today, this ‘spirit of giving’ has spread to over 44 schools across India.

Infosys18: As a leading software company, Infosys is into the providing language and computer education. Company has special program for unprivileged children by which the company teaches them various skills and change their outlook too. Company also donates carom, chess board, chocolates etc. to the needy ones. One of the Infosys team works with Kaliyuva mane that is an informal school for droupouts. The company’s CSR activities include blood donation camp, eye donation camp, foundation has been working in the sectors of health care, education, environment preservation and social rehabilitation.
Infosys had spent a total of 239.54 Crores out of the mandated 243 Crores in 2014-15. According to the Annual Report, the balance amount was spent in April 2015. Out of total 15% of contribution was to Akshaya Patra Foundation towards eradicating malnutrition and hunger. Next top 5 grantees also include Chennai Mathematical institute, Ramakrishna Mission, IISC Bengaluru, Infosys Science Foundation and Spark IT Training Program run by the Infosys Foundation. Other allocations include donations to IIT Bombay under healthcare and medical facilities and to Banerghatta National park towards destitute care and rehabilitation.19

Tata Consultancy Services (TCS): TCS is India’s largest software company and has also won the Asian CSR award for initiating community development work and implementing various programs and devoting leadership and sincerity as ongoing commitment in incorporating ethical values.
Most focus of the company is on education sector. Company is working upon literacy program that cares TCS designed computer based literacy model to teach adults and this program is knows as adult literacy program. Company is also working upon environment policy and has been developing environment friendly products and services.

TCS has also taken some footprints into the health sector too i.e. its actively supporting children’s hospital in Mumbai. Success of all these CSR practices is shared by company with a three dimensional framework that comprises employees, management and workplace.

More than 220 Crores were spent in 2014-15 against a mandated 285 Crore. 70% of the expenditure was made through TCS foundation. The foundation does not have a separate website and the details of implementing agencies of the foundation are also not given. Some of the supported activities include Tech support for hospitals and child line software to track missing children.20

MRF: MRF is a public limited company having main objective to attain global standards with ongoing continuous improvement by improving the quality of products and survives. Its CSR focus areas are health care and education Centre. Company having its own coaching center and career guidance seminars, for children of the weaker section of the society. Also awards academic scholarships to the students of local government schools. Main objective behind initiating educational initiatives is to ensure better quality of life to the future citizens of India. Special focus is on women empowerment and social awareness. MRF also works with the motto of prevention of diseases rather than cures and covers sections like gynecology, dubieties, dental clinic, organizes awareness program for aids, alcoholism and de-addiction etc.
Oil and Natural Gas Limited (ONGC)21: ‘Oil and Natural Gas limited’ is India’s largest and most active company involved in exploration and production of oil. It contributes 77% of India’s crude oil production and 81% of India’s natural gas production.
ONGC actively participates in CSR practices. Company has also received ‘Golden Jubilee Award’ for practicing and initiating new corporate social responsibility. Company had and has been working towards water management. ‘Project Saraswati’ was launched by ONGC in North-West of Rajasthan in the year 2005. The basic aim of this project was to locate fresh water unexploited deep ground water resources. Company also undertook education activities in Dehradun, Andhra Pradesh and North- Eastern States. Its educational initiatives includes activities like financial support for Bal Bhavan, Tamanna, school for computer education for disabled children, giving of Bralle Machine for blind children.

ONGC has won ‘Golden Peacock Award’ for excellence in corporate social responsibility in emerging economies’ in the year 2006- by world council for corporate governance, UK

In the year 2014-15, ONGC has spent only 75% of the budget is utilized. The project outlay of Rs.660 Crore has been divided equally across five areas – Education including Livelihood, Health, Environment, Infrastructure support near ONGC areas and Promotion of artisans and sports. ONGC has registered a Foundation and recruitment is ongoing to build the Foundation as an effective tool for implementing CSR policy.22


There are number of issues and challenges to the successful implementation of corporate social responsibility in India. They are enumerated as follows:-

Lack of Awareness of General Public: In CSR Activities there is a lack of interest of the general public in participating and contributing to CSR activities of companies. This is because of the fact that there exists little or no knowledge about CSR. The situation is further aggravated by a lack of communication between the companies involved in CSR and the general public at the grassroots.
Need to Build Local Capacities: There is a need for capacity building of the local nongovernmental organizations as there is serious dearth of trained and efficient organizations that can effectively contribute to the ongoing CSR activities initiated by companies. This seriously compromises scaling up of CSR initiatives and subsequently limits the scope of such activities.
Issues of Transparency: Lack of transparency is one of the key challenge for the corporate as there exists lack of transparency on the part of the small companies as they do not make adequate efforts to disclose information on their programmes, audit issues, impact assessment and utilization of funds. This negatively impacts the process of trust building among the companies which is a key to the success of any CSR initiative.
Non-Availability of Well Organized Non-Governmental Organizations: There is non-availability of well-organized nongovernmental organizations in remote and rural areas that can assess and identify real needs of the community and work along with companies to ensure successful implementation of CSR activities.
Visibility Factor: The role of media in highlighting good cases of successful CSR initiatives is welcomed as it spreads good stories and sensitizes the population about various ongoing CSR initiatives of companies. This apparent influence of gaining visibility and branding exercise often leads many non-governmental organizations to involve themselves in event based programmes, in the process, they often miss out on meaningful grassroots interventions.
Narrow Perception towards CSR Initiatives: Non-governmental organizations and Government agencies usually possess a narrow outlook towards the CSR initiatives of companies, often defining CSR initiatives more as donor-driven. As a result, corporates find it hard to decide whether they should participate in such activities at all in medium and long run.
Lack of Consensus on Implementing CSR Issues: There is a lack of consensus amongst implementing agencies regarding CSR projects. This lack of consensus often results in duplication of activities by corporate houses in areas of their intervention. This results in a competitive spirit between implementing agencies rather than building collaborative approaches on issues. This factor limits company’s abilities to undertake impact assessment of their initiatives from time to time.

The following recommendations are listed for serious consideration by all concerned stakeholders for their effective operationalizati on to deepen CSR in the company’s core business and to build collaborative relationships and effective networks with all involved.

It is found that there is a need for creation of awareness about CSR amongst the general public to make CSR initiatives more effective. This awareness generation can be taken up by various stakeholders including the media to highlight the good work done by corporate houses in this area. This will bring about effective change in the approach and attitude of the public towards CSR initiatives undertaken by corporate houses.
It is noted that partnerships between 0all stakeholders including the private sector, employees, local communities, the Government and society in general are either not effective or not effectively operational at the grassroots level in the CSR domain. This scenario often creates barriers in implementing CSR initiatives. It is recommended that appropriate steps be undertaken to address the issue of building effective bridges amongst all important stakeholders for the successful implementation of CSR initiatives. As a result, a long term and sustainable perspective on CSR activities should be built into the existing and future strategies of all stakeholders involved in CSR initiatives.
It is found that corporate houses and non-governmental organizations should actively consider pooling their resources and building synergies to implement best CSR practices to scale up projects and innovate new ones to reach out to more beneficiaries. This will increase the impact of their initiatives on the lives of the common people. After all, both corporate houses and non-governmental organizations stand to serve the people through their respective projects and initiatives. It is recommended that the projectisation, scaling up and sustainability of CSR projects need to be safeguarded at all costs for their efficiency and efficacy.
It is found that many CSR initiatives and programs are taken up in urban areas and localities. As a result, the impact of such projects does not reach the needy and the poor in the rural areas. This does not mean that there are no poor and needy in urban India; they too equally suffer from want of basic facilities and services. While focusing on urban areas, it is recommended that companies should also actively consider their interventions in rural areas on education, health, girl child and child labor as this will directly benefit rural people. After all, more than 70 per cent people still reside in rural India.
It is noted that the Government should consider rewarding and recognizing corporate houses and their partner non-governmental organizations implementing projects that effectively cover the poor and the underprivileged.
It is noted that CSR as a subject or discipline should be made compulsory at business schools and in colleges and universities to sensitize students about social and development issues and the role of CSR in helping corporate houses strike a judicious balance between their business and societal concerns. Such an approach will encourage and motivate young minds, prepare them face future development challenges and help them work towards finding more innovative solutions to the concerns of the needy and the poor. It is recommended that involvement of professionals from the corporate sector, non-governmental organizations and business schools would be key in ensuring youth participation in civic issues.


Society’s expectations are increasing towards the social development by the companies. So, it has become necessary for the companies to practice social responsibilities to enhance their image in the society. Even though companies are taking serious efforts for the sustained development, some critics still are questioning the concept of CSR. There are people who claim that Corporate Social Responsibility underlies some ulterior motives while others consider it as a myth. The reality is that CSR is not a tactic for brand building; however, it creates an internal brand among its employees. Indulging into activities that help society in one way or the other only adds to the goodwill of a company. Corporate Social Responsibility is the duty of everyone i.e. business corporations, governments, individuals because of the reasons: the income is earned only from the society and therefore it should be given back; thus wealth is meant for use by self and the public; the basic motive behind all types of business is to quench the hunger of the mankind as a whole; the fundamental objective of all business is only to help people. CSR cannot be an additional extra – it must run into the core of every business ethics, and its treatment of employees and customers. Thus, CSR is becoming a fast-developing and increasingly competitive field. Being a good corporate citizen is increasingly crucial for commercial success and the key lies in matching public expectations and priorities, and in communicating involvement and achievements widely and effectively.

After the enactment of the Companies Act-2013, it is estimated that approximately 2,500 companies have come in the ambit of mandated CSR; the budget could touch approximately INR 15,000 – 20,000 crores. It is very likely that the new legislation will be a game-changer, infusing new investments, strategic efforts and accountability in the way CSR is being conceived and managed in India. It has opened new opportunities for all stakeholders (including the corporate sector, government, not-for-profit organizations and the community at large) to devise innovative ways to contribute to equitable social and economic development. Currently, CSR in India is headed in a positive direction as there already exists a multitude of enabling organizations and regulatory bodies such as the Department of Public Enterprises (DPE), Ministry of Corporate Affairs (MCA), and Indian Institute of Corporate Affairs (IICA). These institutions have already set the wheels in motion and are playing an important role in making CSR a widespread practice and in ensuring success in reducing inequalities without risking business growth.

1 Declaration of United Nations Conference on the Human Environment Principle 13, 1972.
2 Corporate Social Responsibility Definition Investopia.www.investopia.c om/term/e/corp-s ocialresponsibility.A sp
3 Corporate Social Responsibility Definition Investopia,www.investopia.c om/term/e/corp-s ocialresponsibility.A sp
4 Companies (Corporate Social Responsibility Policy) Rules, R,2 © (2014)
5 http://www.wbcsd .org/work-progra m/business-role/ previous-work/co rporate-social-r px
6 http://www.ifc.o rg/ifcext/econom ics.nsf/content/ csr-intropage
7 Stahl and Grigsby, 1997
8 Companies Act, 2013.
9 http://www.soula ce.htm/
10 http://www.janal ntent/uploads/ev olution_of_csr_i n_india.pdf
11 http://www.janal ntent/uploads/ev olution_of_csr_i n_india.pdf
12 http://www.janal ntent/uploads/ev olution_of_csr_i n_india.pdf
13 http://www.janal ntent/uploads/ev olution_of_csr_i n_india.pdf

14 https://doubleth y-corporate-soci al-responsibilit y-is-important/
15 https://doubleth y-corporate-soci al-responsibilit y-is-important/
16 http://www.csrwo er-Mundra-UMPP-P roject-Sagarband hu-for-the-fishe rmen-community.a sp
17 http://www.csrwo t-csr.asp
18 http://www.idosi .org/ajbas/ajbas 4(3)12/6.pdf
19 https://factly.i n/how-are-variou s-companies-spen ding-csr-money/
20 https://factly.i n/how-are-variou s-companies-spen ding-csr-money/
21 http://www.idosi .org/ajbas/ajbas 4(3)12/6.pdf
22 https://factly.i n/how-are-variou s-companies-spen ding-csr-money/
23 http://www.ijset .net/journal/444 .pdf
24 https://www.acad /Corporate_Socia l_Responsibility _Issues_and_Chal lenges_in_India

Doctrine of Equitable Set-Off: Critical Analysis

Doctrine of Equitable Set-OffIntroduction: Set-Off- Meaning and Characteristics:

According to the Black’s Law Dictionary (Seventh Edition, 1999), a set-off is nothing but a debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor. In the case of, Union of India v. Karam Chand Thapar and Bros (Coal Sales) Ltd and Ors, referring to the concept of set-off and quoting from ‘A Treatise on the Law of Set-Off, Recoupment, and Counter Claim’, by Thomas W. Waterman, the Hon’ble Supreme Court of India held that, set-off signifies the subtraction or taking away of one demand from another opposite or cross-demand, so as to distinguish the smaller demand and reduce the greater by the amount of the less; or, if the opposite demands are equal, to extinguish both. Set-off, broadly speaking, means ‘stoppage’, much because the amount due to be set-off is stopped, or, is deducted from the cross-demand.

According to Order VIII, Rule 6 of the Code of Civil Procedure, 1908, set-off means the deduction of one demand from another cross-demand. It is the demand that the defendant makes as against the plaintiff for the purpose of liquidating the whole or part of his claim.1 Order VIII, Rule 6 of the Civil Procedure Code, 1908 which deals with the doctrine of legal set-off is in fact restricted to only an “ascertained sum”. The conditions that must exist for the applicability of a legal-set-off are the following:

Suit must be for the recovery of money;

The claim demanded to be set-off must be an ascertained sum of money2;
The ascertained sum of money must be legally recoverable from the plaintiff3;
The ascertained sum of money legally recoverable from the plaintiff must not surpass the pecuniary jurisdiction of the court in which along with the written statement, the defendant has filed the set-off;
When the defendant pleads set-off, he is put in the position of a plaintiff as regards the amount claimed by him. A defendant can claim set-off even if the plaintiff’s suit is dismissed;
It is essential that both, the claim and the set-off must be for debts due from and to the same parties in the same right;
The claim must be made at the first hearing unless it is permitted by the court to do even afterwards.
In nutshell, set-off means reciprocal acquittal of debts between two persons. As per Order VIII, Rule 6, where in a suit for recovery of money by the plaintiff, the defendant finds that he also has a claim of some ascertainable amount against the plaintiff, then the defendant can claim set-off in respect of the said amount as against the money claim of the plaintiff. A plea of set-off is a request that the debt to be found due to the plaintiff shall be treated as extinguished or reduced pro tanto by being set-off against the debt to the defendant.4 It is pertinent to note that, in both Rule 6 and Rule 6-A of Order VIII of the Code of Civil Procedure, 1908, a set-off or counter-claim cannot travel beyond the scope and the limit of the suit with which it is concerned; and it cannot bring out something, which is completely foreign to the suit.5

A claim of set-off is based on an independent cause of action which the defendant has, as against the plaintiff, and the cause of action of the plaintiff and the defendant should have arisen in the same transaction or different transaction. It is pertinent to mention here, that, both claims (that of the plaintiff as well as that of the defendant) are decided vide the same judgment and the decree is drawn-up after adjusting the set-off claim, in favour of the person whose amount is greater.

Where the defendant relinquishes (that is, forgoes) a part of his claim in the set-off then in a subsequent suit for relinquished claim, the bar of Order II, Rule 2 shall apply.6

A claim of set-off is put to an examination which is akin to an independent suit and therefore, the rules of examination of a plaint, bar of limitation, res judicata and Order II, Rule 2 are applicable pro tanto.

According to Section 3(2) (b) (i) of the Limitation Act, 1963, for the purpose of the Limitation Act, 1963, any claim by way of a set-off is to be treated as a separate suit and it shall be deemed to have been instituted on the same date as the suit in which the set-off is pleaded.7 Generally speaking, the rules relating to a written statement to be filed by a defendant, apply to, a written statement in answer to a claim of set-off.8

Doctrine of Equitable Set-Off:

There have been cases where by the defendants were allowed to set-off even an unascertained sum of money by the Courts of Equity in England, on the premise that, if the plaintiffs’ claim and the defendants’ claim arise out of the same transaction, then, it would be inequitable to drive the defendants to a separate suit. This legal ideology later came to be known as the doctrine of equitable set-off.

Right to equitable set-off is recognised only if the claim arises out of the same transaction which is the foundation of the plaintiff’s claim and the claim has not become time-barred.9 Plea in the nature of equitable set-off is not available when the cross demands do not arise out of the same transactions.10 When a plea in the nature of equitable set-off is raised, then it is not done as a matter of right and the discretion lies with the court to entertain and allow such plea or not.11

In the case of Clark v. Ratnavaloo Chetti12, it was held that, so far as equitable set-off is concerned, the right of set-off exists not only in cases of mutual debits and credits, but also where cross-demands arise out of the same transaction.13 Further, in the case of, Raja Bhupendra Narain Singha Bahadur v. Maharaj Bahadur Singh & Ors14, it was held that, a plea in the nature of equitable set-off is not available when cross-demands do not arise out of the same transaction and are not connected as regards their nature and circumstances. In the case of, M/s. Lakshmichand and Balchand v. State of Andhra Pradesh15, the Hon’ble Supreme Court of India took occasion to rule that, when a claim is founded on the doctrine of equitable set-off, all cross-demands are to arise out of the same transaction, or, the demands are to be so connected in the nature and circumstances that they can be looked upon as a part of one transaction.

In the case of, Jitendra Kumar Khan v. Peerless General Finance & Investment Co. Ltd, (2013) 8 SCC 769, it was held that, an equitable set-off is different from a legal set-off, for an equitable set-off is independent of the provisions of the Code of Civil Procedure, 1908. The concept of equitable set-off is based on the fundamental principles of justice, equity and good conscience; the discretion is with the court to adjudicate or not to adjudicate, as regards the claim, which is in the nature of an equitable set-off; the court has to exercise the discretion sparingly with application of judicial mind and sound legal principles.

Requirements of Equitable Set-Off:

In case of an equitable set-off, the original suit has to be a money-suit just like in case of a legal set-off; but, however, unlike the legal set-off, the amount claimed in case of an equitable set-off can be for ascertained or even an unascertained sum of money.
In case of an equitable set-off, the set-off claimed should arise in the same transaction in which the cause of action for the main suit arises.
A claim by way of an equitable set-off can be allowed even if it is time-barred when there is a fiduciary relationship between the parties. In the case of, Mackinnon Mackenzie & Co. (P) Ltd. v. Anil Kumar Sen & Anr16, it was held that the provisions of the Limitation Act, 1963 do not necessarily bar an equitable set-off and provisions of Order VIII, Rule 6 do not do away with the principles of equitable set-off.
Section 3 of the Limitation Act, 1963 does not at all relates to an equitable set-off.
For payment of court-fee there is no distinction between a legal set-off and an equitable set-off. Both attract applicability of Schedule I, Article 1 of the Court Fees Act, 1870.17
Equitable set-off is not specifically referred to in the Code of Civil Procedure, 1908, however, Order XX, Rule 19(3) which deals with the case of drawing of a decree when set-off or counter-claim is allowed mentions that, “provisions of this rule shall apply whether the set-off is admissible under Rule 6 of Order VIII or otherwise”. The word “otherwise” therefore can be construed to imply equitable set-off.
It was held in: Dobson & Barlow v. Bengal Spinning & Weaving Co.18; and, Girdharilal Chaturbhuj v.Surajmal Chauthmal Agarwal19, it was held that, an equitable set-off is not to be allowed where protracted (or usual) enquiry is needed for determination of the sum due.


The essence of set-off is that the defendant should have a cause of action against the plaintiff apart from the suit and not merely as a defence to the plaintiff’s claim. Set-off is in the nature of a cross-action which can be entertained separately.20 On the other hand, the concept of equitable set-off is not defined in any procedural law or otherwise. This concept of equitable set-off comes from the broad principles of justice, equity and good conscience. Equitable right to set-off exists only when both the claims, that is, of the plaintiff as well as the defendant, arise out of the same transaction. For example, in the case of, M/s Anand Enterprises (Bangalore) v. Syndicate Bank21, in a suit by the bank on a term loan, damages for the loss on account of delay in giving/sanctioni ng the loan was claimed by the defendant in the written statement. It was held that, the claim of the defendant was in the nature of an equitable set-off and not a counter-claim.

Thus, when the claim of the defendant is in the nature of mutual debits and credits as against the plaintiff, arising from the same transaction, between the same parties then, equitable set-off can be claimed by the defendant as against the plaintiff, without complying with rigours of Order VIII, Rule 6 of the Code of Civil Procedure, 1908 and Section 3 of the Limitation Act, 1963. Grant or non-grant of equitable set-off is the discretion of the court.

1*Authored by: Shivam Goel (Associate, S.G. & Co); LL.M. (WBNUJS); Author of: Corporate Manslaughter & Corporate Homicide: Scope for a New Legislation in India, Penguin-Partridg e, Bloomington, 2015; and Concept of Rights in Islam, Lambert Publications, Germany, 2014. See: Sudipto Sarkar & V.R. Manohar, Code of Civil Procedure, 1908, Volume 1, Tenth Edition (2005), Wadhwa & Company Nagpur, p.1045
2 See: Thanjavur P Bank v. Dharmasamvardhan i, AIR 1964 Mad 108
3 Note: A sum the recovery of which is barred under Section 11 of the Code of Civil Procedure, 1908, or Order II, Rule 2, or by the law of limitation at the time of plaintiff’s suit is not a sum legally recoverable; but it has been held in some cases that this rule as to limitation does not apply in the case of an equitable set-off.
4 See: Andhra Paper Mills v. Anand, AIR 1951 Mad 783, 786
5 See: Aninda Saha v. Amal Saha, AIR 2001 NOC 101: 2001 AIHC 2956 (Cal)
6 See: Aakarsh Kamra, Code of Civil Procedure, Chapter 5: Pleadings in General, Lexis Nexis Publication (2015), p. 115
7 See: Section 3 of the Limitation Act, 1963
8 See: Vinayak D. Kakde, Civil Trials: Practice and Procedure, Chapter VIII: Written Statement, Set-Off and Counter-Claim (Order VIII), Universal Law Publishing (2015), p. 30
9 See: Maharashtra State Farming Corporation Ltd. v. Belapur Sugar and Allied Industries Ltd., 2004 (3) Mh LJ 414 (Bom)
10 See: Nathmal v. Kashiram, AIR 1975 Raj 217
11 See: Union of India v. Karam Chand Thapar & Bros (Coal Sales) Ltd, (2004) 3 SCC 504
12 2 M.H.C.R. 296 (1865)
13 See: Chishlom v. Gopal Chander, ILR 16 Cal 711 (1889)
14 AIR 1952 SC 782
15 (1987) 1 SCC 19
16 AIR 1975 Cal 150
17 See: Cofex Exports Ltd. v. Canara Bank, AIR 1997 Del 355 (at 365)
18 (1897) 21 Bom 126
19 AIR 1940 Nag 177
20 See: Pramada Prasad v. Sagarmal, AIR 1954 Pat 439 (at p. 441)
21 AIR 1990 Kant 175


gstAnukriti Ladrecha
The introduction of unified gods and services tax (GST) across the nation is the most important indirect tax reform since independence. It has taken almost 16 years from the date of inception of idea, formation of task force, to passage in Parliament. It represents a Herculean, nationwide, multi-party consensus- building exercise which is finally bearing fruits, officially known as The Constitution (One Hundred and twenty second Amendment) Bill, 2014, proposes a national Value added Tax to be implemented in India from 1 April 2017
There are few steps that lie ahead following the Rajya Sabha’s nod to the Constitution Amendment Bill.
Changes made to the bill in Rajya Sabha will have to be approved again by the Lok Sabha (either in a special session, or the winter session).
The Bill needs to be ratified by a majority of the states (15/29). Following this, it will be sent to the President.
After Presidential assent, a GST Council compromising representatives from the states and centre will be set up.
The council will help codify central GST and State GST laws which would be passed by Parliament and State assemblies.
GST Network, the IT backbone of GST, to facilitate online registration, tax payment and return filing would be introduced.
GST Network will create an online portal. The portal will begin migrating data on existing taxpayers under the current VAT/excise/service tax regimes.
All businesses will be given a GST identification number, a 15- digit code comprising their State code and 10 characters PAN.
The GST Network has already validated the PAN of 58 lakhs businesses from the tax department.
Government is already enabling “master trainers”, who would train accountants, lawyers and tax officers on the new system

GST will replace State taxes, Value Added Tax, Central Excise Duty, including additional excise duties, excise duty under medicinal and toilet preparations (Excise Duties) Act, 1955.
Octroi and Entry Tax, Service tax.
Purchase Tax, Additional Customs Duty
Taxes on lottery, betting and gambling, Central Sales Tax levied by the Centre and collected by the States.
State cesses and surcharges Central surcharges and cesses relating to supply of goods and services.
Luxury Tax, Special Additional and Duty of Customs.
Entertainment tax, other than the tax levied by the local bodies.

Major benefits of GST
It addresses a serious impediment to our competitiveness. Without the GST, there are multiple points of taxation and multiple jurisdictions. We also have an imperfect system of offsetting credits on taxes paid on inputs, leading to higher costs. Further there is cascading of taxes- that is tax on tax. Interstate commerce has been hampered due to dead weight burden on Central sales tax and entry tax, which have no offsets. All this will go once the GST is in place. It will enhance the ease of doing business, and make our producers more competitive against imports.

GST will increase the resources available for poverty alleviation and development
Indirectly: tax base will rise
Directly: the resources of poorest state: U.P., Bihar, M.P., who happens to be large consumers, will increase substantially.

The adoption of the GST is an iconic example of what PM Narendra Modi has called “cooperative federalism”. It represents a national consensus; an outcome of grand bargain stuck together by 29 States and 7 Union Territories with the Central Government. The States agreed to give up their right to impose sales tax on goods (VAT), and the centre gave up its right to impose excise and service tax. In exchange they will each get a share of unified GST collected nationally. The anticipated additional gains in efficiency, competitiveness and overall tax collections are what drove this bargain.

GST will facilitate ‘Make in India’ by making one India.
CST on interstate sales of Goods
Numerous intra state taxes
Extensive nature of countervailing duty exemptions that favours import over domestic production.

Once the GST is in its place, it means a unified un-fragmented national market for goods and services, accessible to the smallest entrepreneur. Companies need not maintain stocks depots to avoid paying interstate taxes. This will free up some capital. All this will add to demand, and also efficiency. The National Council for Applied Economic Research and others have estimated that national GDP growth can go up by one percentage point on a sustained basis.

GST would improve even substantially tax Governance in 2 ways:
The first relates to the self- policing incentives inherent to a value added tax. To claim input tax credit, each dealer has an incentive to request documentation from the dealer behind him in value added/ tax chain.
The second relates to the dual monitoring structure of the GST, one by State and one by Centre.

Because the structure of claiming input tax credit is linked to having proof of taxes paid at an earlier stage in the value chain, this creates interlocking incentives for compliance between vendor and customer. No more questions from a vendor “would you like that with receipt or without receipt?” because of this inherent incentive, the total taxes paid, and hence collected, may go up significantly. This provides buoyancy to the GST. In fact a significant part of the black economy will enter the tax-paid economy.

Boost to investment have been documented in the report on the Revenue Neutral Rate that was submitted in December last year

The fewest flaws at inception
First is the question of uniform GST rates. An early report of finance minister from 2003 mentioned a rate of 12% but over the years this rate drifted higher and now is 18%. The empowered committee of finance minister uses a concept called “Revenue Neutral Rate”. It is that uniform rate which when applied will leave all states with the same revenue as before. So no state should lose out by signing up to the GST. But this approach is faulty, since unless we try it for a year or more we won’t be able to gauge the buoyancy of the GST. In trying to assuage the fears of the states, the calculation of the RNR has been loaded by every possible existing rate. This has caused the RNR to steadily escalate upward. But approach is to keep the GST rate low initially and promise to fully reimburse loosing state by the end of the year.

The report urged, GST be comprehensive, in its coverage, that exemptions from the GST be limited to a few commodities that catered to clear social benefits and that most commodities be taxed at the standard rate.
Another issue is that GST is an indirect tax, by its nature, indirect tax is regressive because they affect the poor more than the rich. India’s ratio of indirect to direct tax collection is 65:35, which is exactly the opposite of the norm in most developed countries. India’s ratio of direct tax to GDP is one of the lowest in the world and is badly needs to expand the direct tax net. Unless s rate cap I adopted, the GST rate could easily drift higher further hurting India’s income inequality.

It is far better to start and allow the process of endogenous change to unfold over time than to wait Gogot-like for the best time and best design before it is introduced.

Tax litigation is another issue. Approximately Rs 1.5 lakh crore is stuck in litigation related to Central excise and service taxes. On the other hand the State level VAT is administered in a way that empowers tax officials to dispose of cases quickly. Disputes involving Central taxes go through an appeal and tribunal processes and a drag on years. It is important that GST approach leans towards the more efficient State-level model
GST-type taxes in large, federal system are either overly centralized, depriving the sub-federal levels of fiscal autonomy. (Australia, Germany, Austria.) Where there is dual structure they are either administered independently creating too many differences in tax bases and rates that weaken compliance and make inter-state transactions difficult to tax.( Brazil, Russia, Argentina). Where administered with a modicum of coordination which minimizes these disadvantages ( Canada and India), but does not do away with.

The major problem comes in implementing the GST is the governance within the GST Council. It is de facto council of states, along with representatives from the Union Finance Ministry. It seems that one state will get on vote irrespective of its size. This seems unfair. An economically larger states, contributing a bigger chunk of the GST Pie, should have a greater say similarly the special needs of smaller states should also be headed
The Indian GST will be a leap forward in creating a much clearer dual VAT which would minimize the disadvantages of completely independent and central system

Exceptions in the form of permissible additional excise taxes on special good ( Petroleum and Tobacco) for centre, a petroleum and alcohol for states will provide the requisite fiscal autonomy to states.
Finally the issue of State’s autonomy. India will be uniquely large democracy that adopts a nationwide GST with virtually no taxing powers to state. In a situation where state want to undertake special spending programmes to respond to State specific situation, such as disaster?
In 1982, the CM of Tamil Naidu upgraded a midday meal scheme which his opponents criticized as being an empty promise and fiscally reckless. In response he raised taxes on goods (not possible in GST regime) and made the programme so successful that it is praised to this day. Similarly in the drought crises year of 1972, the Maharashtra government imposed a profession tax on city dwellers (not possible under GST) to fund an innovative programme called the rural “ Employment Guarantee Scheme”, which 3 decades later was acknowledged nationally as the inspiration behind the National Rural Employment Guarantee Act. The GST regime should remain sympathetic to this issue of state’s fiscal autonomy. The local bodies are not even discussed
The GST is obviously not a panacea for all ills of India’s economy it is nevertheless a revolutionary and long pending reform. It promises economic growth and jobs, better efficiency and ease of doing business, and higher tax collection.