The Hindu Succession Act, 1956 : A view

Hindu Succession Act
Hindu Succession Act

Hindu Succession Act, 1956 came into force on 17th June, 1956 dealing with intestate succession among Hindus and is based on the rule of succession of Mitakshara principle of propinquity, i.e. preference of heir on the basis of proximity of relationship. The Act lays down a uniform and comprehensive system of inheritance and applies, inter alia, to persons governed by Mitakshara and Dayabhaga Schools as also to those in certain parts of southern India who were previously governed by the Murumakkattayam, Aliyasantana and Nambudri Systems. The Act applies to any person who is a Hindu by religion in any of its forms or developments; or to any person who is a Buddhist, Jain or Sikh by religion; to any person who is not a Muslim, Christian, Parsi or Jew by religion as per section 2 of Hindu Marriage Act. But it will not apply in the case of a Testamentary disposition and will be governed by the Indian Succession Act, 1925.

Earlier, concerning with women’s estate they had only limited estate in respect of this kind of property. Although, she had powers of possession, management and enjoyment of such property, but in actual sense, she had no power of alienation or transfer except in few cases.

But the passing of the Hindu Succession Act, 1956 brought about historic changes in respect with rights of Hindu women to succeed to property, which includes both movable and immovable property. Also, relating to women’s estate this Act gave retrospective effect and abolished the limited ownership of Hindu women and converted into full ownership in respect of the property held by her as women’s estate.

This Act had many loopholes and women’s ownership of property and was subject to certain limitations, and was also biased against them. But the Hindu Succession (Amendment) Act, 2005 (39 of 2005) was a pathbreaking effort made by government after almost fifty years. It came into force from 9th September, 2005. The Amendment Act, 2005 is to remove gender discriminatory provision in the HSA, 1956. The 2005 Act covers inequalities on: agricultural land, Mitakshara joint family property, parental dwelling house and certain widow’s rights.

After amendment it deleted the provision Section 4(2) from the Code. It provides for an overriding application of the provisions of the Act; seeks to repeal all existing laws, whether in the shape of enactments or otherwise, which are inconsistent with this Act. After Amendment Act 2005 the Customary Hindu Law of Succession ceased to have effect. The inheritance of which was subject to the devolution rule specified in State-level tenurial laws. And where these laws were silent HSA applied by default. In Delhi, Haryana, Himachal Pradesh, Punjab, Jammu and Kashmir and Uttar Pradesh, the tenurial laws are highly gender unequal, primacy is given to male line of descent and women come very low in the order of heirs. Also, women get only a limited estate, and lose the land on remarriage. But now, it brings all agriculture land at par with other property and makes Hindu women’s inheritance rights in land legally equal to men’s across the States. This can potentially benefit millions of women dependant on agriculture for survival and would give economic security.

Secondly, the Amendment Act 2005 deletes Section 23 from the Code, thereby giving all daughters irrespective of their marriage the same rights as sons to reside in or seek partition of the family dwelling house. Section 23 was hostile discrimination against female heirs. It denies a married daughter the right to residence in an inherited parental home unless she is widowed, deserted or separated from her husband. It also denies female heir who has inherited house along with male member of a family from asking for her share of the property if any member of the family resides in the inherited house, until the male heirs also agreed. However, male heir has no such restriction. After the deletion of this proviso gives the same rights as that of son to all daughter either married or unmarried right to reside in or seek partition of the parental dwelling house.

Prior to Amendment Act 2005 section 6 of HSA states that if the deceased had left a surviving female relative specified in Class I of the schedule I or a male relative specified in that class who claims through such female relation, the interest of a deceased in Mitakshara coparcenary property shall devolve by testamentary of intestate succession under the Act and not as survivorship. This means that females cannot inherit ancestral property as males do and female also cannot ask for partition only sons can ask for it. When one of the coparceners dies then a female gets share of his interest as an heir to the deceased. Under this schedule there are four primary heirs namely son, daughter, widow and mother. The principle of representation goes up to two degrees in the male line of descent whereas; the female line of descent goes only upto one degree. Thus proviso is violative of the equal rights of women guaranteed under the Constitution in relation to property rights.

After amendment the gender discrimination proviso has been removed and now, gives equal rights to daughters in the Hindu Mitakshara joint family property as to sons have. As a birthright as sons to share can now, claim for partition and presumably can also become karta, while also sharing the liabilities. Also, makes the heirs of predeceased sons and daughter more equal by including as Class I heirs. Thus, it strengthens daughters economically and symbolically. This will enhance their confidence and if her marriage breaksdown then she would have an option to go to her parental and may reside out of her birthright.

Lastly, the amendment act 2005 deleted the section 24 from the HSA, 1956 which barred certain widows, from inheriting the deceased property if they had remarried. This section disqualifies certain female widows they are: widow of a pre-deceased son of the deceased or, widow of a predeceased son of a predeceased son of the deceased or, widow of a brother of the deceased. But it doesn’t explicitly say that the widow must be related to the intestate as the widow of a predeceased son of her husband by another wife, who, if otherwise, becomes entitled to succeed, property gets disqualified if she remarries before the succession opens. But after amendment it enables all widows to inherit property even after remarriage. Thus, will be benefited by millions of female as widows and daughters.

Deepa Jyoti Khakha

Legal Round Up 2014 – Detailed

 

Legal Round Up 2014
Legal Round Up 2014

FIVE SIGNIFICANT HEADLINES OF 2014:

  1. New Companies Act brought into force:

The Companies Act, 2013 partially replaced The Companies Act, 1956.The Ministry of Corporate Affairs has notified 183 sections of the new Companies Act, 2013, which have become effective from April 1, 2014. With this, 283 of 470 sections of the Act have gotten notified in a phased manner. The Ministry of Corporate Affairs has notified respective Rules related with the effective Sections of Companies Act, 2013.

  1. Section 309 IPC :Attempt to suicide decriminalized

The government has decided to decriminalize “attempt to suicide” by deleting Section 309 from the Indian Penal Code (IPC). Under the said Section, a suicide bid is punishable with imprisonment of up to one year, or with fine, or both. The Law Commission of India in 2008 had recommended the repeal of Section 309 stating that the act of taking one’s own life should be treated as a manifestation of “deep unhappiness” rather than a penal offence. 18 states and 4 Union territory administrations have supported the deletion of Section 309.

  1. FDI Policy 2014: 100% FDI in Railways infrastructure, 49% in defence

The government has notified an increase in the FDI limit to 49 per cent through approval route in the defence sector. FDI ceiling in the defence sector has been hiked from current 26 per cent, with the condition that the company seeking permission of the government for FDI up to 49 per cent should be an Indian company owned and controlled by Indians. Further the Cabinet cleared a 100 per cent FDI in railways infrastructure. In the railway segment, FDI will be allowed in construction, operation and maintenance of suburban corridor projects through PPP, high speed train projects and dedicated freight lines.

  1. Wage ceiling hiked under the Employees provident fund scheme

Ministry of Labour and Employment issued notifications dated 22 August 2014 enhancing statutory wage ceiling (for becoming a subscriber of Employees’ Provident Fund Organisation) from existing Rs. 6500/-to Rs. 15000/-, fixing minimum pension of Rs. 1000/-per month and 20% additional relief on the amount of assurance benefit admissible under EDLI Scheme, 1976.

  1. New land acquisition law comes into force:

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 came into force from January 1, 2014, replacing the 120 year old, Land Acquisition Act, 1894. The new law stipulates mandatory consent of at least 70% of affected people for acquiring land for Public Private Partnership (PPP) projects and 80% for acquiring land for private companies. Compensation for the owners of the acquired land will be four times the market value in rural areas and twice in urban areas. It also stipulates that the land cannot be vacated until the entire compensation is awarded to the affected parties. The law has the provision that the companies can lease the land instead of purchasing it. Besides, the private companies will have to provide for rehabilitation and resettlement if land acquired through private negotiations is more than 50 acres and 100 acres in urban and rural areas, respectively.

 

FIVE SIGNIFICANT JUDGMENTS OF 2014

  1. No automatic arrests in dowry cases, due process to be followed

The Supreme Court, in this landmark judgment of Arnesh Kumar vs State Of Bihar & Anr has issued certain directions to be followed by the police authorities and the Magistrates while making arrests and/or authorizing detention of an accused. The Supreme Court stated that automatic arrests in cases under Section 498A of the IPC should be discouraged and discontinued. Examining the powers of the Police under Section 41 of the Code of Criminal Procedure, the Court held that no automatic arrests/detentions shall be made by the Police/Magistrates even in in dowry harassment cases unless the conditions precedent to making arrest/authorizing detention under the Code of Criminal Procedure, 1973 are satisfied.

  1. Supreme Court redefines territorial jurisdiction in cases of cheque dishonor

The Supreme Court in its decision in Dashrath Rupsingh Rathod v. State of Maharashtra & Anr., held that in cases of dishonour of cheque, only those courts will have the jurisdiction to try the case within whose territorial limits the drawee bank is situated i.e. where the cheque has been dishonoured. The Hon’ble Court, overruling an earlier decision made in K. Bhaskaran Vs. Shankaran Vaidhyan Balan, held that , an offence under Section 138 of the Negotiable Instruments Act is committed as soon as a cheque is returned unpaid to the drawee. Hence the place, place of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank, is located.

  1. No transfer-pricing provisions if shares issued by domestic subsidiary to parent company

The Bombay High Court in the case of Vodafone India Services Pvt. Ltd. v. Union of India held that shares issued at premium by a resident entity to a non-resident entity didn’t give rise to income and there is no ‘international transaction’ to trigger transfer-pricing provisions as provided under the Income Tax Act, 1961. The Court added that ‘Income’ as defined under the Income Tax Act cannot be given a broader meaning to include notional income within its ambit. Transfer pricing provisions under the Act are not a code by itself but only a machinery provision to compute Arm’s Length Price.

4. No royalty on excavated earth for laying foundation

The Supreme Court in Promoters & Builders Association of Pune vs State of Maharashtra & Others has held that the government is not entitled to any mining royalty if a developer excavates land for laying foundation of a building. A Court ruled in favour of the Promoters and Builders Association of Pune, which had challenged Maharashtra government’s move to impose penalties on them claiming that the activity of digging up earth for any such concrete foundation is akin to mining operations. The Court held that Builders excavating “ordinary earth” to lay foundation of a building cannot be deemed to be carrying out “mining” of a minor mineral and hence no royalty was payable. The Builders had all the building sanctions and did not require special nod to excavate as they were not using the earth for levelling purposes in roads, railways, embankments, etc.

  1. New rules to adduce digital evidence in Courts:

The Supreme Court in Anvar P. K. vs. P.K Basheer & Ors redefined the evidentiary admissibility of electronic records. The court held that documentary evidence in the form of an electronic record can be proved only in accordance with the procedure under Section 65B of the Evidence Act. Thus, in the case of a CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible. Hence compliance with Section 65B is now mandatory for persons who intend to rely upon emails, websites or any electronic record in a civil or criminal trial.

 

FIVE DEVELOPMENTS AWAITED IN 2015

 

1.          The Companies (Amendment) Bill, 2014

The Companies (Amendment) Bill, 2014 was passed in the Winter Session of the Lok Sabha. The Bill introduces amendments such as jurisdiction of special courts to try certain offences, making common seal optional, no approval required from non-related shareholders for transactions between holding companies and wholly-owned subsidiaries, fraud involving a lesser amount will no longer be reported to government but to the audit committee or to the board of the company, etc. The proposed amendments aim to ensure ease of business transactions and give some respite to Corporate India

  1. Labour Reform Bills

The Union Labour and Employment Ministry tabled two Labour Reform Bills in the Lok Sabha on 7 August 2014 namely the Factories (Amendment) Bill 2014 and the Apprentices (Amendment) Bill 2014. The purpose is to enable the government to make certain rules in consultation with the States to ensure safety and welfare of workers at workplace. Once passed, they are expected to make it easier to do business in India by allowing flexibility in both hiring and working hours.


  1. Securities Laws (Amendment) Bill, 2014

The Securities Laws (Amendment) Bill, 2014, was also introduced in the Lok Sabha in 2014. The Bill aims to empower the capital market regulator i.e. SEBI by giving powers such as authority to seek call data records and information “not only from the people or entities associated with the securities market but also from persons who are not directly associated with the securities market”. The objects and reasons listed by the government on the Bill said, “To protect the interests of investors and to ensure orderly development of securities markets, it has become necessary to enhance the powers of the Board”. Once the bill becomes an Act, SEBI would have powers to check fraudulent investment schemes, to call for documents on entities under probe and provide for constitution of special courts to expedite the cases.

 

  1. Insurance Laws (Amendment) Bill:

The Insurance Laws (Amendment) Bill raising the foreign direct investment (FDI) limit to 49 % was introduced in the Parliament in August 2014 The composite 49 per cent cap would include foreign direct investment, foreign institutional investments, foreign portfolio investments as well as all instruments that may be included as FII at a later date.The Bill also proposes a rider that management control rests in the hands of an Indian promoter alongside the eased FDI cap.

 

  1. Ordinance to amend the Arbitration and Conciliation Act, 1996

The cabinet in December 2014, cleared an ordinance to amend the Arbitration and Conciliation Act, 1996 which would make settlement of contractual disputes between foreign companies and their Indian partners easier. The Ordinance is aimed at making it mandatory for commercial disputes to be settled within nine months and also putting a cap on fee of arbitrator. The arbitrator will be free to seek an extension from the High Court. But in case of further delays, the High Court will be free to debar the arbitrator from taking up fresh cases for a certain period.

 

Prepared By: The Team of Lawyers at Abhay Nevagi & Associates, Pune

 

Disclaimer: This circular provides general information and guidance as on date of preparation and does not express views or expert opinions of Abhay Nevagi & Associates. Contents of this Newsletter should neither be regarded as comprehensive nor sufficient for making any decisions. No one should act on the basis of information provided in this newsletter without obtaining proper expert professional advice. Abhay Nevagi & Associates disclaim any responsibility and hereby accept no liability for consequences of any person acting or omitting or refraining to act on the basis of any information contained herein

Section 185 of the Companies Act and its impact on lending transactions

Section 185, effective from September 12, 2013 and Section 186, effective from April 1, 2014 are two provisions of the company act(“Act”) which have created much anxiety among the business community because of its direct impact on capability of the businesses to raise finance.

A bare reading of Section 185 of the Act, suggests that advancing of loans or giving of corporate guarantee or providing any security by any company (for the purposes of this article, the “Lending Company”) to a firm and/or body corporate with common management with such Lending Company is completely proscribed. Also prohibited are transactions where the Lending Company is advancing loans, providing security or guarantee to body corporate, the management of which is accustomed to act in accordance with the direction or instructions of the board of directors/or any director of such Lending Company. No guidance has been provided as to what constitutes “acting in accordance with the direction or instructions of the board of directors/or any director”. Furthermore, this provision has been made applicable both to the public and private companies and even the provision of undertaking such transactions with the approval of the Central Government (as under Section 295 of the Companies Act, 1956) has been omitted under the new Act.

The compliance of Section 185 of the Act has been ensured by putting in stringent punishments for contravention, the fine being as high as Rs.5,00,000 (Rupees Five Lakhs) extendible to Rs. 25,00,000 (Rupees Twenty Five Lakhs) for the Lending Company. The director or any other person to whom the loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the person shall be punishable with imprisonment which may extend to six (6) months along with a fine which shall not be less than Rs.5,00,000 (Rupees Five Lakhs) but may extend to Rs.25,00,000 (Rupees Twenty Five Lakhs) or both. The stakes being this high for both the Lending Company and the persons receiving such loan and/or the benefit of the guarantee/security, makes it very important to understand the nuances of this provision.

The following transactions are permitted under Section 185 of the Act:

  1. Any loan provided by a holding company to its wholly owned subsidiary company for its principle business activities.
  2. Any guarantee given or security provided by a holding company in respect of any loan for funding the principle business activities of its wholly owned subsidiary company;
  3. Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company for its principle business activities;Even though ‘principal business activity’ has not been defined under the Act, generally the activities provided under the main objects of the memorandum of association should qualify as a principal business activity of that company.
  4. Any loan advanced or guarantee/security provided by a company, which in its ordinary course of business provides loans or gives guarantees or securities for repayment of any loan, provided that such loans shall not be provided at an interest rate less than the bank rate declared by the Reserve Bank of India. No loan may be given by the Lending Company at an interest rate lower than the prevailing yield of one year, three year, five year or ten year government security closest to the tenor of the loan.The phrase ‘ordinary course of business’ has also not been defined under the Act. This is because there can be no universal meaning ascribed to it. What is ordinary for one entity or one type of business or one sector or even one region may not be so for another. However, based on judicial precedents and keeping in view the intent and purpose of the provision, a transaction can be said to be in ‘ordinary course of business’, if:
  1. The Lending Company has in the past provided loans/guarantees/securities to such entities as a matter of routine.[1] The frequency of such transactions[2] and a certain amount of continuity is imperative as ‘business’ itself implies carrying on a particular trade or vocation as a ‘continuous’ activity by application of labour, skill and money to earn the income. [3] Also, important is that such transactions have been appropriately disclosed in the financial statements of the Lending Company for the past years.[4] The disclosure of such transactions in the financial statement indicate that such activities were being carried on normally in the usual course of business, specifically inclusion of the amounts involved as ‘business income’ gives further credence to the fact.
  2. The memorandum of association of the Lending Company allows for such transactions i.e. the providing of loans/guarantees/security to other entities should be part of atleast the incidental or ancillary objects of the memorandum of association. The Courts have not been uniform in their ruling with respect to the significance of the objects clause of the memorandum of association in making this assessment. The Courts also differ on whether an activity is in ‘ordinary course’ only if is part of the main objects or whether an activity ancillary to the main objects may also be considered so.[5]
  • The Lending Company has passed a board resolution, specifically, categorising the transaction as being in ‘ordinary course of business’. Also, the board should have examined the transaction from the perspective of Section 185 and should have resolved to undertake the same. The consent of all the directors present at the meeting should have been obtained in accordance with Section 186 (5) of the Act. Whether a transaction is in the ‘ordinary course of business’ is a question of fact and a board resolution is important in making this assessment.[6]

 

  1. The loan documents/security documents executed for the purpose of the loan/security/guarantee provided by the Lending Company should contain a clause stating that the transaction contemplated therein is in ‘ordinary course of business’.
  2. The transaction should be conducted at arms’ length basis and appropriate disclosures should be made with respect to the interest of any management of the Lending Company in the entity receiving the loan, guarantee or security. Ultimately the aim of Section 185 is to prohibit related party transactions where the Lending Company provides undue advantage or gain to any other entity related to the management of the Lending Company and to avoid conflict of interest scenarios for directors of such Lending Company.
  3. The Lending Company (not if it is a banking company or an insurance company or a housing finance company providing the loan/security/guarantee in ordinary course of business or company engaged in business of financing of companies or of providing infrastructural facilities[7]) should have complied/should comply with the following conditions under Section 186 of the Act:
  1. The loan or the guarantee/security to be provided should be within the limits prescribed under Section 186 of the Act i.e. it should not exceed the higher of 60% (sixty percent) of the paid up share capital, free reserves and securities premium account or 100% (one hundred percent) of its free reserves and securities premium account. Alternatively, if the giving of loan, security or guarantee is beyond the prescribed limits the Lending Company should have obtained special resolution of its shareholders in the general meeting.
  2. The Lending Company should disclose to its members in the financial statement the full particulars of the transaction, including the purpose for which the loan or guarantee or security is proposed to be utilised.
  3. The prior approval of each of the public financial institution from which the Lending Company has availed any term loan should be obtained in case: (1) the loan or the guarantee/security to be provided by the Lending Company is beyond the limits prescribed under Section 186 of the Act; and/or (2) the Lending Company has defaulted in repayment of loan instalments or payment of interest as per the terms and conditions of the term loan availed from the public financial institution.
  4. The Lending Company should not be in default of repayment of any deposits or payment of interest.
  5. The Lending Company shall have maintained a register in Form MBP 2 as per Companies (Meetings of Board and its Powers) Rules, 2014 and enter therein the particulars of loans and guarantees given, securities provided by it.
  1. The borrowing company shall have obtained requisite special resolutions under Section 180 (1)(a) and Section 180 (1)(c) of Act, if applicable.

Popular Views in the Market

One view in the market is that as Section 185 of the Act begins with ‘Save as otherwise provided in this Act’, it should be subject to Section 186 of the Act, implying that any transaction permitted under Section 186 should be permitted under Section 185 of the Act. However, this view makes the very existence of Section 185 redundant which could not have been the intent of the legislature. Such an interpretation of Section 185 should be avoided.

A popular method being used by financers/investors and creditors to comply with Section 185 is to make the Lending Company providing the security or guarantee a co-borrower to the lending transaction. This works well for some transactions but in other cases group companies are found reluctant to undertake such responsibilities.

Also, financers/investors/creditors have been seeking organisational restructuring of holding and subsidiary companies including eliminating common directors and other senior management to avoid falling within the purview of Section 185. For further comfort, certificates of non applicability of Section 185 from the company secretary or a director of the Lending Company is being insisted upon as pre-condition to such lending transactions.

Conclusion

One must look at Section 185 of the Act in the right spirit in which it was modified from its predecessor provision under the Companies Act, 1956. The objective was not to hinder business and financing of businesses but was to discourage related party lending transactions which bred favouritism and nepotism. Any transaction should be tested on the anvil of Section 185 of the Act while keeping this in mind.

Aastha Suman

[1] Dillip Kumar Swain v. Executive Officer, Cuttack  1997 I OLR 202

[2] Ibid

[3] A.R.Enterprises v. Assistant Commissioner of Income Tax [2007]14SOT13(Chennai), (2006)99TTJ(Chennai)85

[4] Poysha Oxygen (P) Limited v. Assistant Commissioner of Income Tax [2008] 19 SOT 711 (Delhi); Matrix Logistics Limited v. The Commissioner of Income Tax-II [2010] 22 ITD 228 (Ahd)

[5] Poysha Oxygen (P) Limited v. Assistant Commissioner of Income Tax [2008] 19 SOT 711 (Delhi); Commissioner of Income-Tax v. City Motor Service Limited 1966 61 ITR 418 Mad; Matrix Logistics Limited v. The Commissioner of Income Tax-II [2010] 22 ITD 228 (Ahd); A.R.Enterprises v. Assistant Commissioner of Income Tax [2007]14SOT13(Chennai), (2006)99TTJ(Chennai)85

[6] In Matrix Logistics Limited v. CIT (2010)122ITD 228 (Ahd)

[7]The expression “business of financing of companies” shall include with regard to a Non-Banking Financial Company registered with the Reserve Bank of India, the “business of giving of any loan to a person or providing any guaranty or security for due repayment of any loan availed by any person in the ordinary course of its business”.

Enforcement of Foreign Decrees / Judgement in India

This Article aims to study in detail the enforceability of foreign Judgements/decrees passed by a foreign court and the scope of Sec. 13 of the Civil Procedure Code, 1908.

With the advent of globalization and with India poised as a major international and global player in the world economy, it is apposite to consider the law concerning enforcement of foreign judgments in India. In law, the enforcement of foreign judgments is the recognition and enforcement rendered in another (“foreign”) jurisdiction. Foreign judgments may be recognized based on bilateral or multilateral treaties or understandings, or unilaterally without an express international agreement. The “recognition” of a foreign judgment occurs when the court of one country or jurisdiction accepts a judicial decision made by the courts of another “foreign” country or jurisdiction, and issues a judgment in substantially identical terms without rehearing the substance of the original lawsuit.

Recognition will be generally denied if the judgment is substantively incompatible with basic legal principles in the recognizing country.

However, the Code of Civil Procedure, 1908 has defined Foreign Court and Foreign Judgements as :-

Section 2 of the CPC, 1908

(5) “foreign Court” means a Court situate outside India and not established or continued by the authority of the Central Government;

(6) “foreign judgment” means the judgment of a foreign Court;

In other words, a foreign judgment means an adjudication by a foreign court on a matter before it.

ENFORCING FOREIGN JUDGMENTS IN INDIA

A foreign judgment can be enforced in India in one of two ways:

  1. Firstly by filing an Execution Petition under Section 44A of the CPC (in case the conditions specified therein are fulfilled).

In other words – Judgments from Courts in “reciprocating territories” can be enforced directly by filing before an Indian Court an Execution Decree.

  1. Secondly by filing a suit upon the foreign judgment /decree

In other words – Judgments from “non-reciprocating territories,” such as the United States, can be enforced only by filing a law suit in an Indian Court for a Judgment based on the foreign judgment. The foreign judgment is considered evidentiary. The time limit to file such a law suit in India is within three years of the foreign judgment.

However, “reciprocating territory” is defined in explanation 1 to Section 44A of India’s Civil Procedure Code as:

Any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare as a reciprocating territory.”

 

The List of the Reciprocating Territories as per the Provisions of Section 44 A of the Code of Civil Procedure, 1908, is as under :

  1. United Kingdom
  2. Singapore
  3. Bangladesh
  4. UAE
  5. Malaysia
  6. Trinidad & Tobago
  7. New Zealand
  8. The Cook Islands (including Niue)and The Trust Territories of Western Samoa
  9. Hong Kong
  10. Papua and New Guinea
  11. Fiji
  12. Aden.

 

44A. Execution of decrees passed by Courts in reciprocating territory.

(1) Where a certified copy of decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in [India] as if it had been passed by the District Court.

(2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.

(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.

“The Supreme Court held in the case of Moloji Nar Singh Rao vs Shankar Saran AIR 1962 SC 1737 that a foreign judgment which does not arise from the order of a superior court of a reciprocating territory cannot be executed in India. It ruled that a fresh suit will have to be filed in India on the basis of the foreign judgement.”

Therefore Under S. 44A of the CPC, a decree of any of the Superior Courts of any reciprocating territory are executable as a decree passed by the domestic Court. In case the decree does not pertain to a reciprocating territory or a superior Court of a reciprocating territory, as notified by the Central Government in the Official Gazette, the decree is not directly executable in India and a fresh suit will have to be filed in India on the basis of such a decree or judgment, which may be construed as a cause of action for the said suit. In the fresh suit, the said decree will be treated as another piece of evidence against the defendant.
However in both cases the decree has to pass the test of S. 13 CPC which specifies certain exceptions under which the foreign judgment becomes inconclusive and is therefore not executable or enforceable in India.

Sections 13 and 14 enact a rule of res judicata in case of foreign judgments. These provisions embody the principle of private international law that a judgment delivered by a foreign court of competent jurisdiction can be enforced by an Indian court and will operate as res judicata between the parties thereto except in the cases mentioned in Section 13.

A foreign judgment may operate as res judicata except in the six cases specified in the section 13 and subject to the other conditions mentioned in Sec. 11 of C.P.C.

 

Sec. 13 of CPC, 1908:- When foreign judgment not conclusive.

A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except-

(a) Where it has not been pronounced by a Court of competent jurisdiction;

(b) Where it has not been given on the merits of the case;

(c) Where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of [India] in cases in which such law is applicable;

(d) Where the proceedings in which the judgment was obtained as opposed to natural justice;

(e) Where it has been obtained by fraud;

(f) Where it sustains a claim founded on a breach of any law in force in [India].

The awards and decrees of the Indian courts are sacrosanct. However, Section 13 of the Code of Civil Procedure 1908 (CPC) lays down that a foreign judgment shall be conclusive as to any matter directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except in few cases.

The operation of section 13 would be better appreciated by the following illustration:

 

“A sues B in a foreign court. If the suit is dismissed, the decision will operate as a bar to a fresh suit by A in India on the original cause of action, unless the decision is inoperative by reason of one or more of the circumstances specified. If a decree is passed in favour of A in the foreign court and A sues B on the judgment in India, B will be precluded from putting in issue the same matters that were directly and substantially in issue in the suit in the foreign court, unless the decision is once again inoperative for the said exceptions.”

 

  1. NOT PRONOUNCED BY A COURT OF COMPETENT JURISDICTION

 

In the case of R.M.V. Vellachi Achi v. R.M.A. Ramanathan Chettiar, AIR 1973 Mad. 141, it was alleged by the respondent that since he was not a subject of the foreign country, and that he had not submitted to the jurisdiction of the Foreign Court (Singapore Court), the decree could not be executed in India. The Appellant, in defense of this argument, stated that the Respondent was a partner of a firm which was doing business in Singapore and had instituted various suits in the Singapore Courts. Therefore, the Appellant argued, that the Respondent had accepted the Singapore Courts jurisdiction. The Court held that it was the firm which had accepted the jurisdiction of the foreign Court and the Respondent, in an individual capacity, had not accepted the jurisdiction. This was one of the reasons for which the High Court held that the decree against the Respondent was not executable.

The High Court in the above case had referred to a decision of the Madras High Court in the case of Ramanathan Chettiar v. Kalimuthu Pillai AIR 1914 Mad. 556, which lays down the circumstances when the foreign courts would have jurisdiction under this Section. The circumstances mentioned are as follows:

a)Where the person is a subject of the foreign country in which the judgment has been obtained                             against him on prior occasions. b) Where he is a resident in foreign country when the action is commenced. c) Where a person selects the foreign Court as the forum for taking action in the capacity of a plaintiff, in which forum he is sued later. d) Where the party on summons voluntarily appears e) Where by an agreement a person has contracted to submit himself to the forum in which the judgment is obtained.

In the case of Oomer Hajee Ayoob Sait v. Thirunavukkarasu Pandaram, the Madras High Court while dealing with the issue of submission to jurisdiction held that mere conduct or circumstances indicative of intention to submit to the jurisdiction is enough to derive a conclusion of submission to jurisdiction. In the present case, during the pendency of the suit, plaintiff effected attachment before judgment of certain property of the defendant and the defendant by a letter acknowledged the attachment and requested merely for a concession, which was not a conditional request and when the offer is refused and the defendant remained ex parte and the suit was decreed, it was deemed that the defendant submitted to the jurisdiction of the foreign Court.

In the case of British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries Ltd. the Supreme Court held that even though the defendant had taken the plea of lack of jurisdiction before the trial Court but did not take the plea before the Appeal Court or in the Special Leave Petition before the Supreme Court, it amounted to submission to jurisdiction.

           PROPOSITION

 

By reading the aforesaid cases under Section 13(a) of CPC the following proposition may be laid:

 

In case of actions-in-personam, a Foreign Court may pass a decree or judgment against an Indian defendant, who is served with the summons but has chosen to remain ex parte. But the said judgment or decree may be enforceable against such a defendant in India, only if by fulfilling any of the following conditions it can be shown that the Foreign Court had jurisdiction upon the Indian defendant:

 

  • Where the person is a subject of the foreign country in which the judgment has been obtained against him on prior occasions.
  • Where he is a resident in foreign country when the action is commenced.
  • Where a person selects the foreign Court as the forum for taking action in the capacity of a plaintiff, in which forum he is sued later
  • Where the party on summons voluntarily appears
  • Where by an agreement a person has contracted to submit himself to the forum in which the judgment is obtained

 

 

 

 

  • Not given on the merits of the case:

 

 

The fountainhead of all decisions under this head has been the decision of the Privy Council in the case of D.T. Keymer v. P. Viswanatham. In this case, a suit for money was brought in the English Courts against the defendant as partner of a certain firm, wherein the latter denied that he was a partner and also that any money was due. Thereupon the defendant was served with certain interrogatories to be answered. On his omission to answer them his defence was struck off and judgment entered for the plaintiff. When the judgment was sought to be enforced in India, the defendant raised the objection that the judgment had not been rendered on the merits of the case and hence was not conclusive under the meaning of S. 13(b) of CPC. The matter reached the Privy Council, where the Court held that since the defendant’s defence was struck down and it was treated as if the defendant had not defended the claim and the claim of the plaintiff was not investigated into, the decision was not conclusive in the meaning of S. 13(b) and therefore, could not be enforced in India.

In deciding International Woolen Mill’s case (supra), the Supreme Court of India also noted with approval the decision rendered by the Kerala High Court in the case of Govindan Asari Kesavan Asari v. Shankaran Asari Balakrishnan Asari AIR (1958) Ker. 203 wherein the Kerala High Court held as follows :-

(a) In construing section 13 of the CPC, the Indian Court has to be guided by the plain meaning of the word and expressions used in the section itself and not by other extraneous considerations. There is nothing in the section to suggest that the expression “judgment on the merits” has been used in contradistinction to a decision on a matter of form or by way of penalty.

(b) The section prescribes the conditions to be satisfied by a foreign judgment in order that it may be accepted by an Indian Court as conclusive between the parties thereto or between parties under whom they or any of them litigate under the same title. One such condition is that the judgment must have been given on the merits of the case.

“Whether the judgment is one on the merits, must be apparent from the judgment itself. It is not enough if there is a decree or a decision by the foreign court. In fact, the word “decree” does not find a place anywhere in the section.

What is required is that there must have been a judgment. What the nature of that judgment should be is also indicated by the opening portions of the section where it is stated that the judgment must have directly adjudicated upon the questions arising between the parties”.

(c) The Court must have applied its mind to that matter and must have considered the evidence made available to it in order that it may be said that there has been an adjudication upon the merits of the case. It cannot be said such a decision on the merits is possible only in cases where the defendant enters appearance and contests the plaintiff’s claim. Even where the defendant chooses to remain ex-parte and to keep out, it is possible for the plaintiff to adduce evidence in support of his claim and such evidence is generally insisted on by the Courts in India, so that the Court may give a decision on the merits of the plaintiff’s case after a due consideration of such evidence, instead of dispensing with such considerations and giving a decree merely on account of the default of appearance of the defendant.

     PROPOSITION

Under Section 13(b) of CPC the following proposition may be laid:

A judgment or decree passed by a Foreign Court against an Indian defendant, who has    chosen to remain ex-parte, may not be enforceable against him, until unless it can be shown that the said judgment was passed after investigation into, and leading of evidence on the plaintiff’s claim

 

 

  1. Where the judgment is passed disregarding the Indian Law or the International Law. –

 

      In the case of Panchapakesa Iyer v. K.N. Hussain Muhammad Rowther, the facts were that the foreign Court granted the probate of a will in the favour of the executors. The property was mostly under the jurisdiction of the foreign Court, but some of it was in India. A suit came to be filed by the wife of the testator against the executors for a claim of a share in the property. The suit of the widow was decreed and a part of it was satisfied. The remaining part the widow assigned in favour of the Plaintiff in the present suit. In the present suit the Plaintiff relied upon the foreign judgment for a claim against the defendants for a share in the property within the jurisdiction of the domestic Court. One of the defences which was taken for resisting the suit was that the widow’s claim was founded upon a breach of a law in force in India. The Court observed that

She made as the Learned Subordinate Judge has found in another part of his judgment, a claim which could not be entirely supported by the law of British India; but that is a different thing from founding a claim on a breach of the law in British India, for instance a claim in respect of a contract which is prohibited in British India.”

 

      Another issue which fell for the Courts consideration was that whether the foreign Court had decreed the suit on an incorrect view of International Law. In this regard the Court held that the foreign Court had adopted an incorrect view of International Law, since a foreign Court does not have jurisdiction over the immovable property situated in the other Country’s Court’s jurisdiction. Therefore the judgment was declared to be inconclusive and unenforceable in India.

 

PROPOSITION

       Under Section 13(c) of CPC the following proposition may be laid:

 

  • A judgment or decree passed by a foreign Court upon a claim for immovable property which is situate in the Indian territory may not be enforceable since it offends International Law.
  • A judgment or decree passed by the foreign Court to where before a contrary Indian law had been shown, but the Court had refused to recognise the law, then that Judgement or decree may not be enforceable. However if the proper law of contract is the foreign law then this may not be applicable. 

 

 

  1.  
  • Where the proceedings in which judgment was obtained are opposed to natural justice –  

 

  1.  
  2.  

In the case of Sankaran Govindan v. Lakshmi Bharathi, the Supreme Court while interpreting the scope of S. 13(d) and the expression “principles of natural justice” in the context of foreign judgments held as follows:

 

“… it merely relates to the alleged irregularities in procedure adopted by the adjudicating court and has nothing to do with the merits of the case. If the proceedings be in accordance with the practice of the foreign court but that practice is not in accordance with natural justice, this court will not allow it to be concluded by them. In other words, the courts are vigilant to see that the defendant had not been deprived of an opportunity to present his side of the case. … The wholesome maxim audi alterem partem is deemed to be universal, not merely of domestic application, and therefore, the only question is, whether the minors had an opportunity of contesting the proceeding in the English Court. If notices of the proceedings were served on their natural guardians, but they did not appear on behalf of the minors although they put in appearance in the proceedings in their personal capacity, what could the foreign court do except to appoint a court guardian for the minors.”

 

PROPOSITION

 

Under Section 13(d) of CPC the following proposition may be laid:

 

The Foreign Court which delivers the judgment or decree must be composed of impartial persons, must act fairly, without bias in good faith, and it must give reasonable notice to the parties to the dispute and afford each party adequate opportunity of presenting his case, in order to avoid any allegation of not fulfilling the principles of natural justice in case the judgment or decree comes to the Indian court for enforcement. Unless this is done the judgment or decree passed by a foreign Court may be opposed to Principles of Natural Justice.

 

  • Where it has been obtained by fraud- In the case of Sankaran v. Lakshmi the Supreme Court held as follows:“In other words, though it is not permissible to show that the court was mistaken, it might be shown that it was misled. There is an essential distinction between mistake and trickery. The clear implication of the distinction is that an action to set aside a judgment cannot be brought on the ground that it has been decided wrongly, namely that on the merits, the decision was one which should not have been rendered but that it can be set aside if the Court was imposed upon or tricked into giving the judgment.” 
  • PROPOSITION 

 

           Under Section 13(e) of CPC the following proposition may be laid:

 

“In case the plaintiff misleads or lies to the Foreign court and the judgment is obtained on that basis, the said Judgment may not be enforceable, however if there is a mistake in the judgment then the Indian courts will not sit as an appeal Court to rectify the mistake”.

 

  1. Where it sustains a claim founded on a breach of any law in force in India –
  2. “It is argued that the Orissa Money Lender’s Act precludes a decree being passed for more than double the principal amount and in passing a decree, based on a claim which violates that rule, the English Court sustained a claim founded on the breach of a law in force in the State of Orissa. I am unable to accept the argument. The claim was not based on the law as prevailing in India at all. Rightly or wrongly, the plaintiffs alleged that the parties were governed not by the Indian law but the English Law. The English Court accepted that plea and were consequently not sustaining a claim based on any violation of the law in India. Suppose, that the defendant had submitted to the jurisdiction of the English Court and that Court passed a decree. Such a decree would by implication have decided that the defendant was bound by English Law and that the Orissa Money Lender’s Act did not apply. Such a decision would be binding from the international point of view and the point could not be further agitated in these Courts.”
  3. In the case of I&G Investment Trust v. Raja of Khalikote, it was held as follows:

 

PROPOSITION

             Under Section 13(f) of CPC the following proposition may be laid:

 

A judgment or a decree, passed by a foreign court, on a claim founded on a breach of any law in force in India may not be enforceable. However, in case it is based upon a contract having a different “proper law of the contract” then it may be enforced.

 

 

 

 

 

 

 

 

 

With the liberalization of Indian economy and the globalization of business activities, there is now almost a free flow of foreign capital/funds in India and similarly Indian companies are increasingly investing in foreign companies. Naturally, in many such international contracts, there are provisions for settlement of inter-se disputes through arbitration at International level or through the adjudication of disputes by the foreign courts. While routinely signing such international contracts may not be in vogue, but still many Indian companies assume that just like in India, litigation in foreign courts will also be protracted and time consuming and that somehow the Indian companies can stall the enforcement of decrees passed by the foreign Courts against Indian companies.

“Recently the Bombay High Court had rendered a judgment ordering admission of a winding up of an Indian company based on the decree passed by a foreign court”

 

The Bombay High Court has passed a judgment in China Shipping Development Co. Limited v. Lanyard Foods Limited (2007-77 SCL 197-Bom) wherein the High Court has held that a petition for winding up of an Indian company would be maintainable on the basis of judgment of foreign Court. In the above case before the Bombay High Court, the foreign company delivered cargo to the Indian company in compliance with requests made by the Indian company and in the process the foreign company had incurred certain liabilities towards third parties and it had to pay certain amount in legal proceedings and therefore, in terms of the letter of indemnity issued by the respondent Indian company, the foreign company claimed the amount from the respondent Indian company, which denied its liability and therefore the foreign petitioner company initiated legal proceedings against the Indian company in the English Courts as provided in the Letter of Indemnity. The respondent Indian company did not file defence and therefore the English Court passed ex-parte order awarding certain amount in favor of the petitioner foreign company and the foreign court’s order made it clear that the said order was passed on consideration of evidence and was a judgment granted on merits of the claim filed by the foreign company. By a notice issued under sections 433 and 434 of the Companies Act, 1956, the petitioner foreign company called upon the respondent Indian company to pay the amount due under the order of the English Court. As the respondent Indian company still did not pay the amount, the Petitioner foreign company filed a petition for winding up of the Indian company. In the above circumstances since the records of the case manifestly revealed that the respondent Indian company was unable to pay its debts, the petition for winding up was admitted vide order dated 4.4.2007 under sections 433 and 434 of the Companies Act, 1956.

 

 

Therefore the Analysis of the legal issues involved in enforcement of foreign decrees in India emphasizes the need for the Indian business sectors not to treat the summons received from foreign courts casually and enter appearance and make submissions against the plaint initiated in the foreign courts. Otherwise, to contend at a later stage that the foreign decision/decree is not based on “merit” and does not conform to the provisions of the Indian Civil Procedure Code, may turn out to be too much of a risk and may jeopardize the protective umbrella which the Indian companies are so accustomed to while dealing with litigations in Indian courts.                                                                                                                                    

                                                                                                                                            AASHISH. M DAFARIA

  CHENNAI LAW ASSOCIATES.

Private International Law

CUSTODY OF CHILDREN/VISITATION RIGHTS, ENFORCEMENT OF FOREIGN DECREE THROUGH WRIT JURISDICTION

 

Jurisdictional issues and applicability of the correct domestic law and conflict of legal remedies in Indian courts viz-a-viz foreign courts have assumed great PRIVATE INTERNATIONAL LAWcustody importance in the recent past in view of the world becoming a global village.  The realm of Private International Law has assumed greater significance and dimensions with the spread of the Indian community across the globe in large numbers. Young and enterprising men and women desirous of career opportunities abroad, move on and relocate themselves for permanent settlement in foreign countries without any hesitation to satisfy their financial needs apart from enhancing their technical skills and intellectual content.  We, Indians are being appreciated across the globe for our adaptability to new language, community living and altogether new lifestyles.  While all these positives have come with the economic growth and the pursuit for excellence abroad in our younger generation, the most important aspects of our culture and value systems have received a true and genuine beating.  As a result in many cases pertaining to Indian spouses/couples settled abroad, we can notice incompatibility of temperament (not at an acceptable marginal level but at a very high level), intolerance to accept the changed life style of either of the partners and constant stress in the marital relationship of spouses/couples living abroad with or without children.  Constant stress and matrimonial discord, invariably leads one of the parties to seek redress within the legal system of the country which they have chosen to pursue their dreams.

In very many cases it is not uncommon to find either the husband or the wife or the live in partner or the spouse, to abscond from the foreign soil in order to escape from the legal clutches of the country where they chose to pursue their dreams.  While absconding from the foreign court’s jurisdiction in most cases we can observe that either one or more children of the couple are taken by the parent who absconds and a whole lot of proceedings are initiated in our country i.e. in India relying on the Guardian and Wards Act and other laws relating to family disputes in India.  The aggrieved person domiciled in the foreign country also resorts to getting remedies legally through such courts having jurisdiction to decide issues like custody, child care, protection of children etc. from the courts of the country of domicile.  Resultant outcome is passing of orders of different nature in both countries favoring either of them.  Most of the times both the spouses decide to remain ex-parte in the foreign jurisdiction and orders are being passed in the absence of either of them.

 

The following case laws from the Hon’ble Supreme Court and other High Courts has stressed the need to redirect the party approaching Indian courts to their respective country of domicile for pursuing legal remedies such as custody of minor children in the absence of any orders being passed by foreign courts.  However if orders have already been passed by foreign courts the party residing in India where the wife or the husband with or without children are directed to pursue, contest and bring to finality the orders regarding custody of children in the foreign court which is the court of the country where the parties had domiciled foregoing their Indian citizenship.

 

  • Isabell Singh V. Ram Sing and Anr, reported in AIR 1985 Raj 30, – “I am thus satisfied that it would be in the welfare of both Joanna and Lisa if their custody is restored to the petitioner and she is allowed to take them to the United States of America. I would accordingly direct that the Respondent Ram Singh shall handover the custody of both Joanna and Lisa to the petitioner forthwith. The petitioner is entitled and is hereby authorized to take the children to the United States of America.”

 

 

  • Elizabeth Dinsha -Vs- Arvand M. Dinshaw & Anr, reported in 1987 (1) SCC 42 – “As already observed by us, quite independently of this consideration, we have come to the firm conclusion that it will be in the best interests of the minor child that he should go back with his mother to the United States of America and continue there as a ward of the concerned court having jurisdiction in the State of Michigan.”

 

  • V. Ravi Chandran –Vs- Union of India & Ors., (2010) 1 SCC 174 – “However, in a case where the court decides to exercise its jurisdiction summarily to return the child to his own country, keeping in view the Jurisdiction of the Court in the native country which has the closest concern and the most intimate contact with the issues arising in the case, the court may leave the aspect relating to the welfare of the child to be investigated by the court in his own native country as that could be in the best interest if the child.”

 

  • Elizabeth Packiam & Another –Vs- State of Tamil Nadu,. CDJ 2013 MHC 3660, – “Finding the petitioners have approached this court with utmost promptitude, that the minors were ordinarily residents of Australia, that no elaborate enquiry into the merits of the rival contentions is called for and it would be appropriate to allow the Courts of the Country of the minors natural habitat to decide upon custody and related issues this court allows this petition.”

 

“…………as the minors were not ordinarily resident in India and that it would be best to leave issues relating to their custody to Courts in their country of habitat, Australia.”

 

Both the parents are found to use minor children either one of them or all of them to some practical advantage in order to settle personal scores.  While doing so either of the parents are often involved in character assassination of their counter parts.  Prejudicing the tender mind of the minor children courts could cause havoc in the psyche of the young kids who are in the company of a single parent either the mother or the father.  Children are taught the worst things about their father or mother living in separation due to forced circumstances to tarnish the image of their counterpart and to boost and show that the parent with whom the child is currently living is the best in the world. To satisfy their personal egos, to wreck vengeance on the other partner, unmindful of the agonizing effect that is being etched on the delicate mind of the young child such acts are consciously pursued by none other than the parents.  Winning legal battles and teaching a lesson to the life partner takes centre stage and priority and the spouses are not afraid of cleaning up their savings to achieve the said goal. Some single parents are seen working overtime to make money for budgeting the legal expenses likely to be incurred in prosecuting and defending proceedings. Children also take undue advantage and increase their demands and requirements knowing fully well that certain requirements of theirs will be met if the parent with whom they are residing is made happy even by accusing the other parent.  Lot of emotional undesirable changes affecting the character of the child in the long run gets registered, nurtured and projected unknowingly.  The words such as co-parenting, single mother, single father etc., have all gained significance due to the recent globalization and opening of career opportunities throughout the world. Courts have also started to consider foreign judgments as binding on parties and in all the above Supreme Court decisions, we find that due respect for a foreign decree is being canvassed and subscribed with the authority by the Apex Court of our country perhaps to curb malicious prosecution, self serving litigation etc.

Even though prescribed provision of Public International Law requires only signatory countries to the treaty to honour their counterpart judgments and decrees, the Supreme Court is still considering the nuances, and changes in the Private International Law has come to the aid of the spouse who had secured appropriate orders regarding custody of children from the competent court.  The Supreme Court would go on to add a phrase “comity of courts” to bring in a host of other countries who are not signatories to the treaty regarding execution of foreign decrees.

Writ of Habeas Corpus generally considered as a remedy for securing a detenu who is in illegal custody of either the law enforcement agency or individuals, is the writ i.e. being invoked by the aggrieved parent against whose wish and consent the minor child has been withdrawn from the country of their domicile to the country of birth of the other parent. Various guidelines have been framed by the Supreme Court and the High Courts as to when and how the writ jurisdiction can and cannot be invoked and courts have always come to the rescue of the aggrieved parent by directing the return of custody of children along with their passports with a direction to the other parent to participate in any proceedings relating to custody in a competent court in the country of their domicile.  The spheres of 2 courts, the applicability of laws regarding jurisdiction, the management of litigation and the urgent interim measures regarding visitation rights of either of the parents pending litigation and the temporary custody are all aspects for which proper and effective legal remedy can be availed by invoking article 226 of the Constitution of India or Article 32 of the Constitution of India either before the Hon’ble High Courts or before the Apex Court as the case may be.  The above mentioned case laws will give enough insight into the legal topic private international law – custody of children/visitation rights and enforcement of foreign decree.

  M.L. Joseph

 

Is Legal Process Outsourcing an Ethical Practice ?

 Salai Varun Isai Azhaganlpo

A man without ethics is a wild beast loosed upon this world.

  • Albert Camus quotes

 

Since time immemorial, the legal profession has been acknowledged as the ‘’nobel profession’’. The reason why legal profession was braded so was because of the firm emphasis made on ethical aspects in the profession. “It is a pleasant world we live in, sir, a very pleasant world. There are bad people in it, , but if there were no bad people, there would be no good lawyers” said Charles Dickens. Lawyers were often meant to be the rescuers  of the wounded. Thus , the nobility of the profession was seldom questioned. However, changes in the nature of practice of law have raised up queries questioining ethics in such practices. Outsorcing and Offshoring  of legal process is one such practice that has been vehemently crticized for being unethica whilst the patrons of Legal process outsourcing have defended it with commendable justifications.

What is Legal Process Outsourcing ?

LPO is the process of obtaining legal support services from an external unit. By, obtaining support services from an outside firm, the outsourcer firm relishes several advantages. If it is from an outside country, it is called as ‘’offshoring’’. “Legal process outsourcing refers to the offshoring of different elements in the legal process by law-firms, corporations, and in-house legal departments (mainly in US and UK) to offshore centres (mainly in India).[1] The object behind the outsourcing is to capture the opportunities prevailing in the external environment. In case of off shoring, the outsourcer shall be depreived of certain benefits and previleges which the outsourced shall be entitled to. Thus, the outsourcer can stay at one place and reap the benefits existing at two different environment.

Reasons for Outsourcing in India

India is the top notch destination for legal outsourcing from U.S.A and U.K. The service sector in India accounted for about 52% of GDP in 2004-05. In fact India’s service exports had more than doubled from US$ 25bn in 2003-04 to US$ 60bn in 2005-06 and now accounts for nearly 37% exports[2]. As Indian nation is geographically situation in a time zone exactly distincitive of these two nations, it facilitates the firms in the U.S.A and U.K to work round the clock. Secondly, Indian law has been inherited from the United Kingdom during the Colonial era, therefore similarities in issues of law diminishes ambiguity to a commendable extent. In addtion , English is considered of pivotal importance in India and priority is given to learn and speak English than the native languages. The linguistic deftness and familiarity in English makes Indians more demanded in the Outsourcing Industry. The cost of labour is another highlighting reason as to why India is preferred. As a result of such factors, the Westerners use India as a major player in the outsourcing Industry.

What is Outsourced ?

The quality of legal work outsourced to India has vastly improvedover the years and now a majority of work includes high end servicessuch as End to End E-Discovery Management (Litigation and Regulatory Reviews), Legal Research, Drafting of Pleadings, IP services, Compliance &Due Diligence and End to End Contract Management[3]. In End to End discovery managemnt  collection of electronically stored information, processing and reviewning by a team of lawyers to code relevant documents to a particular case or regulatory enquiry. The offshore legal team aids the US legal firm in decision making as to whether it would be appropriate for their clients to go to trial or settle out of court on the basis of the review findings. Ontract management involves managing the life cycle of a contract. This includes an extensive use of technology and a perpetualservice for clients from the time the contract is redlined until the expiry of the contract. In the field of Intellectual Property Rights aspects such as trademark search, Copyright search, technical research , registeration and proof reading are outsourced. Legal research on case laws, legislations and statutes pertaining to a particular case is also outsourced.

Ethical Arguments against Legal Process Outsourcing

 

  1. Unauthorized Practice of Law ;-

 

The first and foremost criticism of ‘’Offshoring’’ on ethical grounds is that a part of the legal practice is performed by persons without authorization. The outsourcer may have an authorization, however the agency to which the legal work has been outsourced will not have authentication or authorization as it it geographically located in a place beyond the jurisdiction of the outsourcer. Thus it can be argued that the outsourcer aids and abetts unauthorized practice. American Bar Association’s Model Rules of Professional Conduct states as follows in Rule 5.5[4] ;-

A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction or assist another in doing so.’’ limiting the practice

of law to members of the bar protects the public against rendition of legal services by unqualified persons[5].’’

For an illustration ; An Indian attorney is unallowed to practise or to represent any client outside India. In case of Offshoring, America obtains service support from an Indian attorney for an American Client. This is on perspective would amount to abetment of unauthorized practice of law by the American Firm.

However, jurists are of the opinion that Indian is often an ‘’outsourced’’ and it is governed by the Advocates Act and the Bar Council of India Rules

 

  1. Breach of Confidentiality ;-

 

The legal profession thrives on confidentiality. Confidentiality and Security have always been an integral possession of the the relationship of lawyers and his clients. It could even be stated that confidentiality would be the foremost factor that makes the attorney-client relationship very delicate. Contrastingly , in the case of the LPO, the confidential information is transmitted by the outsourcer to an outsider firm thereby breaking the strands of confidentiality in the Attorney-Client relationship.  The question of whether the information transmitted is irrelevant in ethical point of view by few scholars who emphasis that one of the important tenets of legal professional ethics is Confidentiality.

 

If Client Confidences and Secrets are to be Disclosed[6]

 

MRPC 1.6 Confidentiality of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b)[7].

 

To combat the criticism of lack of confidentiality Confidentiality agreements are being utilised. Albeit there are additional safeguards undertaken to prevent breach of confidentiality through world recognized standards and certifications, small sized LPOs are maimed due to credibility issues when pursuing clients.

 

  1. Biling for Outsourced legal support ;-

 

Another practice in case of legal outsourcing which is vehemently criticised is the billing for external legal support. The outsourcer hires expernal legal aid for considerable advantages such as cost and time. However, when he bills the client for the advantages he enjoys , it could be termed unfair and unethical.  This criticism can however be vitiated if the Outsourcer  himself bears the expense of the fruits he enjoys.

 

  1. Conflict of Interests

 

Cnflict of interest occurs when an LPO undertakes a project, conciously or unconciously, which is detrimental to the interest of the client. However, in order to ensure that there is no conflict of interest, credible LPOs conduct a thorough conflict check prior to undertaking a project and also reject client work in case of a conflict[8].To combat these cracks and crevices, LPOs take adequate precautions by requiring attorneys to sign Non-Disclosure Agreements and moreover maintain a database of attorney profiles and their past project experiences to validate any conflict.

 

  1. Incompetent Representation

 

As noted above, proper supervision is required to ensure your client is adequately represented. Conduct the necessary due diligence to ensure the LPO delivers the necessary level of competence. Interview the company in advance, obtain references for both the company and the individual who will be doing the work, request sample work product, and communicate directly with person assigned to your project to discuss to ensure he/she understands both the assignment and ethics involved.

 

Conclusion

 Ultimately , LPO’s are an impeccable system of generating work and employment. It also serves as an outstanding mode of extending legal services globally and an efficient and effective technique to minimise the cost and to improve the quality of legal research and work. However, as discussed earlier there are several criticisms against the functioning to LPO’s around the globe. Arguments on ethical grounds cannot be avoided as ethics, morality and law are different pages of the same book. While ethics is the branch of knowledge that deals with moral principles, professional ethics is the personal and corporate rules that govern behaviour within the context of a profession. As the ambit of profession has been diversifying and complexing over several years, the concern for ethical practices have arisen. Therefore, there is a necessary requirement for a standard set of rules or regulations to govern the function of legal outsourcing. The American Bar Association and the United Kindom bar have been much ahead of us in formulating a professional code of conduct with regard to Legal Process Outsourcing. On the contraray the Indian Advocates Act or the Bar Council Rules have absolutely no mention about Outsourcing.  To obtain a more holistic monitoring of the Legal Outsourcing activities there has to be either a regulatory or a statutory instrument such that unethical and undesirable actions could be remedied and regulated.

 

[1] Legal Process outsourcing: Can offshoring of legal services to India be both efficient and ethical? Maya Karwande. Legally yours blog.

[2] India 2007. Ministry of Information and Broadcasting Government of India

[3] “Will tough economy push companies to outsourcing” David Hechler

[4] “Offshore Legal Outsourcing: the Ethical Implications,” (LawScribe

MCLE Course handout), LawScribe, Inc. [Glendale, CA], 2007.

[5] MODEL RULES OF PROF’L CONDUCT R. 5.5 (2003).

[6] ABA Comm. on Ethics and Prof’l Responsibility, Formal Op. 88-356 (1988)

[7] American Bar Association Model Rules of Professional Conduct,”

http://www.abanet.org/cpr/mrpc/mrpc_toc.htm

[8] ‘’The Ethics of Legal Process Outsourcing to India – Is the Practice of Law a ‘Noble Profession,’” or is it Just Another Business? – Aaron.R.Harmon

Fear Of The Mighty – Fearlesness Of The Judiciary

M.L.Joseph,
Managing partner, Chennai Law Associates

Rights, Remedies and Consequences

On 27.07.2014 the Special Trial Judge, John Michael D’Cunha passed an order of conviction after hearing the arguments of the prosecution and defence against the former Chief Minister of Tamil Nadu, Selvi Jayalalitha and 3 others in the Rs.66.65 Crores disproportionate assets case. After coming to the conclusion that the guilt of the accused has been proved by the prosecution beyond reasonable doubts the Special Court sentenced Selvi Jayalalitha to four years imprisonment along with a fine of Rs.100 Crores and confiscated the seized properties and also awarded the same imprisonment for other accused while awarding a lesser fine of Rs. 10 Crores each.
This article is not meant to scrutinise the merits and de-merits of the Judgment passed by the Special Trial Judge but intends to go deeper into the legalities, repercussions, ramifications surrounding the order and the propriety expected to be maintained by individuals, societies, groups etc in light of such high profile judgments.
Section 389 of the Code of Criminal Procedure lays down the procedure of suspension of sentence pending an appeal; release of appellant on bail. As per the section, the appellate court can suspend the sentence for reasons to be recorded in writing and if the convicted person is in confinement he or she can be released on bail. The section further states that the power of suspension of sentence can be exercised by the Court which has sentenced the accused without requiring the accused to invoke the appellate authority, if the term of conviction does not exceed three years. In such event the accused, subject to granting of such suspension of sentence by the trial Court itself under Section 389 (3) of CrPC, would not be required to go to the prison immediately. However in the present case as the imprisonment is for 4 years the Sessions Judge ( the Trial Court) is not at liberty to exercise such powers and hence Selvi Jayalalitha and the other accused had to undergo imprisonment immediately. Section 389 CrPC is extracted herein below:
“Section 389 in The Code Of Criminal Procedure, 1973
389. Suspension of sentence pending the appeal; release of appellant on bail.

(1) Pending any appeal by a convicted person, the Appellate Court may, for reasons to be recorded by it in writing, order that the execution of the sentence or order appealed against be suspended and, also, if he is in confinement, that he be released on bail, or on his own bond.

Provided that the Appellate Court shall, before releasing on bail or on his own Bond a convicted person who is convicted of an offence punishable with death or imprisonment for life or imprisonment for a term not less than 10 years, shall give opportunity to the Public Prosecutor for showing cause in writing against such release:

Provided further that in cases where a convicted person is released on bail it shall be open to the Public Prosecutor to file an application for the cancellation of the bail.

(2) The power conferred by this section on an Appellate Court may be exercised also by the High Court in the case of an appeal by a convicted person to a Court subordinate thereto.

(3) Where the convicted person satisfies the Court by which he is convicted that he intends to present an appeal, the Court shall,-

(i) where such person, being on bail, is sentenced to imprisonment for a term not exceeding three years, or
(ii) where the offence of which such person has been convicted is a bailable one, and he is on bail, order that the convicted person be released on bail, unless there are special reasons for refusing bail, for such period as will afford sufficient time to present the appeal and obtain the orders of the Appellate Court under sub- section (1); and the sentence of imprisonment shall, so long as he is so released on bail, be deemed to be suspended.

(4) When the appellant is ultimately sentenced to imprisonment for a term or to imprisonment for life, the time during which he is so released shall be excluded in computing the term for which he is so sentenced.”
Section 389 has a larger importance in the present case in view of the proviso to Section 389 (1) which was inserted by The Criminal Law (Amendment) Act, 2005. The proviso as extracted above does not make it mandatory for the appellate court to give an opportunity to the Public Prosecutor for showing cause in writing against such release if the offence is not punishable with death, imprisonment for life or if the period of punishment is less than 10 years. However at the same time the proviso does not make it mandatory for such appellate courts not to hear the objections in such cases as well. In legal parlance the courts are vested with a discretionary power to call for objections even if the period of imprisonment is less than 10 years or if the offence is not punishable with death or imprisonment for life. Therefore in the present case the accused cannot ask as a matter of right before the appellate court waive the hearing of objections of the Public Prosecutor in suspending the sentence and granting of bail. In fact after an eminent Senior Advocate of the Supreme Court filed an advance hearing petition before the Chief Justice Court in the Karnataka High Court for hearing the matter urgently the CJ had directed for the formation of special vacation bench headed by Justice Ratnakala on 1st October, 2014. However the Bench insisted that the hearing of suspension of sentence and bail application would have to wait until a public prosecutor is appointed and specifically stated that the case required representation from the prosecution side and hence adjourned the matter perhaps by exercising the said discretion vested with the Appellate Judge.
A bare reading of the Preamble of the Representation of Peoples Act, 1951 ( RPA) makes it amply clear that the intention of the Legislators was to prevent persons involved in corrupt practices from representing the people in the House of Parliament and the House of Legislators. The Apex Court has on every occasion ensured that the spirit of the Act is protected and amendments which has the effect of diluting the legislative intention is struck down. The Supreme Court on 10th July, 2013 gave a landmark judgment whereby a bench comprising of Justice A.K.Patnaik and Justice S.J. Mukhopadiya reported in Lilly Thomas vs Union of India reported in 2013 (3) SCC (Cr) 641 struck down Section 8(4) of the Representation of Peoples Act, 1951 as unconstitutional. The said section before being struck down by Supreme Court was brought into force by an amendment in the year 1989 whereby the disqualification as prescribed under Section 8 of the Act will not be effective until the appeal or application against an order of conviction is disposed off. This provided an opportunity for the convicted representatives to file an appeal and continue to be in power and enjoy all the fruits attached therewith for a considerably longer period of time even after conviction. The relevant portion of the Judgment reads as follows:
“Looking at the affirmative terms of Articles 102(1) (e) and 191(1) (e) of the Constitution, we hold that Parliament has been vested with the powers to make law laying down the same disqualifications for person to be chosen as a member of Parliament or a State Legislature and for a sitting member of a House of Parliament or a House of a State Legislature. We also hold that the provisions of Article 101(3) (a) and 190(3) (a) of the Constitution expressly prohibit Parliament to defer the date from which the disqualification will come into effect in case of a sitting member of Parliament or a State Legislature. Parliament, therefore, has exceeded its powers conferred by the Constitution in enacting sub-section (4) of Section 8 of the Act and accordingly sub-section (4) of Section 8 of the Act is ultra vires the Constitution.”
The question as to whether a convicted member of Parliament or a State Legislature and a sitting member of a House of Parliament or a House of State Legislature faces further punishment under the Representation of Peoples Act, 1951 besides the conviction already passed against him or her has to be answered by giving due importance to Article 102 (1) (e) and 191 (1) (e) of the Constitution of India. The said Article empowers the Parliament to pass laws that may disqualify membership in either house of Parliament. A disqualification from either the Parliament or State Legislature cannot be equated to a punishment under any of the penal laws of the land. A member of a Parliament or State Legislature is expected to follow certain standards, principles, values and the Constitution has been given sufficient powers to disqualify members indulging in any act which is in contradiction to the dignity of the post that he or she holds. As politics is perceived to be a service to the people and not an occupation or employment such disqualification cannot be termed to be a punishment but only certain checks made by the Legislatures themselves to uphold the integrity of the House of Parliament and State Legislature.
Article 20 of the Constitution of India clearly protects persons from conviction of offences retrospectively. Article 20 reads as follows:
“20. Protection in respect of conviction for offences
(1) No person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence
……………………………………..”

Therefore if the law of the land does not deem an act to be an offence at the time of commission of such act or prescribes a lesser punishment, then the person cannot be either convicted or sentenced to a higher punishment subsequently on account of amendment of any law.

From a bear reading of the excerpts of the operative portion of the Judgment of conviction and sentences many question regarding the harshness of the sentence pertaining to imprisonment for 4 years is being discussed in the print and electronic media at length and debated for both sides non-stop on different television channels. Whether the new law prescribing a minimum of 4 years and a maximum of ten years and the intention of the Legislature to bring such an enhanced punishment for the same offence and the said minimum sentence itself being 4 years have all created a psychological bench mark in the mind of the trial Judge while fixing the quantum of sentence are all nuances of Criminal Law which will remain to be answered by High Court or the Supreme Court at appropriate stages of the respective appeals and the outcome of such arguments and findings in such judgments from the appellate Courts will indeed offer great insight into such finer aspects of Criminal Law in general and post conviction consequences, rights, remedies and also provide sufficient guidelines for judicial duties of a trial judge after recording his judgment of conviction.

While there will be voluminous arguments in the ongoing appeal regarding the quantum of sentence the impact of a new law ( Representation of Peoples Act, 1951 as it stands now) relating to disqualification of an MLA and thereby directly disqualifying a Chief Minister in office, post conviction in a Criminal case maybe of grave concern to the first appellant, Selvi Jayalalitha since RPA enabled her to stay as an MLA and Chief Minister by filing a criminal appeal within three months and obtaining suspension of sentence alone and ensuring she doesn’t undergo imprisonment pending appeal, before the landmark judgment given by Hon’ble Apex Court. Therefore a delayed justice in view of the protracted trial which ultimately saw the striking down of a beneficial provision of law for appellants against a judgment of conviction who are members of state legislature or parliament or holding any other office on account of such membership has infact caused huge injustice to the first appellant who is a Chief Minister in power. How and whether there is a legal remedy to such an injustice has to be examined by legal experts outside the purview of the present criminal appeal. The cause for delay and the revisions and appeals filed by the accused at various stages to High Courts and Supreme Court may not be put against the accused particularly after conviction for deciding on the imposition of a heavier sentence of imprisonment. Whether the said delay has also been a parameter for the trial Judge in this case to pass the sentence of 4 years imprisonment as against the minimum of one year as it stands in law for the offences committed during the check period between 1991-1996 are finer questions of law that will be scrutinized and examined by the reputed Judges of higher Judiciary in the present appeal. The fact that any judgment of the trial Court requires a re-look by a higher Judiciary is the very basis of appellate jurisdiction of High Court and Supreme Court. It is from this fact that the right of appeal stems out. Every accused despite a judgment of conviction is statutorily entitled to challenge the said judgment and sentences under the provisions of law. If the accused was on bail throughout the trial period and the trial Judge could suspend the sentence of imprisonment if he had imposed it within the statutory slab of 3 years then in all probabilities the High Court will exercise discretion in suspending the sentence for the enhanced imposition of one year with perhaps appropriate bail conditions. Whether the appellant should remain in judicial custody for a longer period during the hearing of an application to suspend the sentence of imprisonment and fine are again absolutely discretionary powers wholly vested with the appellate Judge. The Appellant has to only await favourable interim orders at the earliest in the given circumstances.

It is unfortunate that a judgment is being discussed with utter disregard by people related to the accused or attached emotionally to the accused and organising public protest (even in a peaceful manner) particularly when the criminal case that ended in conviction was an individual case nothing to do with the rights of any State, people at large, community of linguistic or religious nature or a social issue of national or regional importance etc. It is also unfortunate that several imaginary theories without any substance including theories of conspiracy by politicians and political parties be alleged by individuals and groups against the judgment of conviction and sentences that is subjected to an appeal and now pending scrutiny by the High Court. Whether the High Court can direct print, electronic and social media from exercising restrain of the highest order to avoid scandalous and unfair public opinion being created on lower judiciary. Whether the appellate court can do it suo motto or whether the High Court in writ jurisdiction can take judicial notice of such developments are again finer areas of law which definitely requires introspection by the higher judiciary. Whether there is a bias against the appellant in the appellate court trying to guard and protect the morale of the trial Judge by unduly delaying the hearing of an otherwise normal criminal appeal in which accused are sentenced for a period of 4 years but for the high profile individuals ranked as accused before the trial court, is also a question which will have to be answered with judicial conscience by the appellate Judge.
Burning of effigies, shutdown of shops and establishments, black days, protesters mouth tied with black band, sadness and gloom and grief expressed by Ministers swearing in at a Government ceremony ( reading out of the oath of fearlessness, integrity, not showing favour etc) and demonstrating perhaps some sort of fear, lack of integrity to the sovereign function and perhaps an indication to favour at least their leader, may all have sent varied signals to the literate/ educated class on one hand and the illiterate and emotional masses following the popular leader on the other hand and result in varied reactions/consequences. The public sentiment happening voluntarily and being indirectly spread through the above acts of literate and illiterate people undoubtedly causes public nuisance and may also affect the daily routine of an ordinary person.
Law relating to fines: Whether the imposition of 100 Crore fine on A1 is justified. Does it show bias of any nature by the judge as against the accused and has the power of A1 become a reason for the trial judge to react in a more than harsh manner, perhaps causing bias to his own reasoning, for imposition of a bigger sentence and an exorbitant fine? Has a legal ego kick started during the process of judgment writing to impose the highest fine that has been imposed on an individual in a criminal case in the sentence of Indian judiciary? Whether practice of High Court insisting on payment of fine as pre-requisite condition for entertaining suspension of sentence of imprisonment and thereafter suspending only sentence of imprisonment and not the sentence of fine was another reason by the trial judge to impose such a heavy fine on an individual and make her personal liberty ( to which she is entitled pending appeal) herculean or difficult legally? Whether there is a bias against the particular accused on that portion of the sentence (fine) will all be explored at great depths by legal luminaries inside and outside the court hall in the days to come. Being popular, powerful and appearing to be rich vis-a-vis the fate of common man in prolonged litigation and post conviction sufferings before being granted personal liberty pending appeal and the moral determination and inner ego of a strict judge to ensure that justice should also be seen to be done and perhaps going a little further than the judicial requirement which “little” causes huge impact on legal and social repercussions and ramifications, will also be hopefully dealt with sufficient justification and explanation in this sensitive appeal involving various finer questions of law.
The attempt of the author has only been to view the post conviction situation of a sensitive case in all angles of law and frame searching questions which can be answered only by persons with judicial knowledge, judicial conscience and perhaps guide the society at large to act with social sense, constitutional responsibilities of individuals and communities even in the wake of unexpected or unfavourable verdicts coming against popular persons and leaders in power and the restraint required to be exercised by every responsible citizen of the country. It is only hoped that our judiciary which is an independent judiciary with a sound appellate system to cure defects if any at various stages of the case in a legal manner will definitely address even such wider issues while pronouncing judgments in such sensitive appeals.

Transgender & Human Right

Prof.Sunil kumar

TransgenderDr. C.P. Gupta

 

Introduction

Gender identity is one of the most fundamental aspects of life. The sex of a person is usually assigned at birth and becomes a social and legal fact from there on. However, a relatively small number of people experience problems, with being a member of the sex recorded at birth. This can also be so for intersex persons whose bodies incorporate both or certain aspects of both male and female physiology, and at times their genital anatomy, For others, problems arise because their innate perception of themselves is not in conformity with the sex assigned to them at birth. These persons are referred to as ‘transgender’ or ‘transsexual’ persons. For a long years together, there has been a controversy regarding the recognition of the transgender people in the society. They become breathless under the cover of a conflict between man and woman. The recent judgment of the Indian Supreme Court pronounced on 15th April 2014 had thrown water on the fire of the long debated controversy all over the world on the rights of the transgender. In the absence of any concrete definition of the term, everybody tries to define it according to one’s own perception. Defining the term, the Trans-gender ASIA says, “Trans people are those males or females of any age who are unhappy living in the gender identity ascribed to them at birth. Transgender, transsexual, or Trans persons are people whose psychological sex gender, or sense ‘of their own innate gender identity is different from their physical sexual characteristics.

 

Terminology

The terms third gender and third sex describe individuals who are categorized (by their will or by social consensus) as neither man nor woman, as well as the social category present in those societies who recognize three or more gender. The term “third” is usually understood to mean “other”, some anthropologist and sociologically have described fourth[1]’ fifth[2] even some[3] genders. The concepts of “third”, “fourth” and “some” genders can be, somewhat difficult to understand within Western conceptual categories[4].

Although biology usually determines genetically, whether a humans biological sex is male or female (though intersex people are also born), the state of personally identifying as, or being identifies by society as, belonging to neither the male or female genders is considered relative to term ‘third gender’ in terms of ‘sexual orientation,’ several other scholars, especially the native non-western scholars, consider this as a misrepresentation of ‘third genders.

Trans Gender Culture

To different cultures or individuals, a third gender may represent an intermediate state between man and woman, a state of being both (such as “the spirit of a man in the body of a woman”), the state of being neither (neuter), the ability to cross or swap genders, another

category altogether independent of men and women. This. last definition is favored by those who argue for a strict interpretation of the “third gender” concept. In any case, all of these characterizations are defining gender and not the sex that biology gives to living beings.

The term has been used to describe hijras of India, Bangladesh and Pakistan who have gained legal identity, Fa’afafine of Polynesia, and Sworn, virgins of the Balkans, among others, and is also used by many of such groups and individuals to describe themselves.

Like the hijra, the third gender is in many cultures made up of individuals considered male at the time of birth who take on a feminine gender role or sexual role. In cultures that have not taken on Western heteronomativity, they are usually seen as acceptable sexual partners for male-identifying individuals as long as the latter always maintain the “active” role.

Historical Aspect

Around the world, there have always been people whose gender identity and expression differ from the culture expectation associated with sex were assigned at birth. Some people born in male bodies lived as women, some born in female bodies lived as men, and others identified as a ‘third gender Culture and religion can be key parts of a trans person’s identity. In parts of Asia and the Pacific c, there are traditional terms for trans women, including those who identify as a third gender. Some trans women historically performed specific ceremonial roles.[5] This visibility has continued to the present day.

Africa — meme (for trans women in Namibia) and kuchu (for. trans, lesbian, gay and bisexual people in Uganda)

Asia — kathoey, Poo ying kham phet, and sao phra phet song (Thailand); abang and mak nyah (Malaysia); bin-sing-jan and kwaa-sing-bit (Hong Kong); transpinay (the Philippines); waria (Indonesia); hijra and aravani (India); and meti (Nepal)[6]

Pacific — vakasalewalewa (Fiji), palopa (Papua New Guinea), fa’afafi ne (Samoa, America Samoa and Tokelau) fakaleiti or leiti (the Kingdom. of Tonga), akava’ine (Cook Islands), and fakafi fi ne (Niue island) An estimated 155 of the 400 indigenous societies in North America traditionally had a third (and in many instances a fourth) gender. Two terms used in the past were alyha for trans women and hwame for trans men.[7]

Position of the Transgender in the Society

From time immemorial people belonging to transgender category face a wide variety of discriminatory barriers in enjoying full equality throughout the World. Even sometimes these people face difficulties in meeting their basic needs also like getting a job, housing, or health care or in having their gender identity respected like getting the facility of a public restroom. Throughout their life the transgender people face the worst challenges, regardless of which country they are coming from or situated in. Though the type of challenges vary from country to country due to the difference in political and social environment in that country, but usually the Trans people are on the borders of the society, being the most marginalized ones.

These people do not face only the societal dangers, but also a huge number of other challenges arising due to medical access in the country they live in depending upon the fact that how it legalizes the gender markers in their documents like birth certificates etc. For ex-ample, if a person could not be able to legally change his/her name and gender in the ID book by any means, he! she cannot be able to get employment anywhere. This concludes that in such kinds of situations they will never be able to be employed and will certainly have no income which will ultimately lead to having no livelihood. This is how a transgender is being deprived of his basic citizenship rights.

Progressive Gender Recognition Laws

Principle 3 of the Yogyakarta Principles states that “each person’s self defined gender identity is integral to their personality and is one of the most basic aspects of self-determination, dignity and freedom” and “no one shall be forced to undergo medical procedures, including sex reassignment surgery, sterilization or hormonal therapy, as a requirement for legal recognition of their gender identity”.[8] Increasingly, countries are responding to calls from trans people, health professionals and human rights bodies to implement human rights-based gender recognition laws.

The Argentinean Gender Identity Law was approved on, 8 May 2012 and camc into force in July 2012. It is the most progressive gender recognition law in the world. The law is ground-breaking because it is framed in terms of human rights, including the right to one’s gender identity[9] The case study at the end of this section discusses the law in more detail.

Since publishing its legal recognition statement in 2010, the WPATH Board has advised courts and governments in Ireland; Ontario, Canada; and South Korea. It has argued for legal gender recognition without requiring a diagnosis, medical treatments or that a trans person has lived for a defined period in their preferred gender role. The WPATH Board’s June 2013 letter to the Irish government explicitly supported the Argentinean gender recognition law.[10]

 

 

United States of America

With a view to ensure equal protection and due process clauses in Article 1 of the U.S. Constitution, that would implicitly include transgender and transsexual persons, as well as any other identifiable group, the Fourteenth Amendment to the U.S. Constitution was made with ratification. As per the Article, deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws”. Though the Supreme Court has not fully embraced the Amendment’s implications for transgender rights, these clauses will presumably form the basis of future rulings.

Since 2003, pursuant to the landmark ruling of the U.S. Supreme Court in Lawrence v. Texas[11] that made same-sex sexual activity legal in every U.S. state and territory, sexual activity between consenting adults and adolescents of a close age of the same sex has been legal nationwide. In fact, while deciding the case, the Court overturned its previous ruling on the same issue in the 1986 case of Bowers v. Hardwick, where upholding a challenged Georgian statute, it did not find a Constitutional protection of sexual privacy.

Another important issue relating to transgender activists came up before the U.S. Senate in November 2013, when the Senate approved the Employment Non-Discrimination Act, which would ban workplace discrimination on the basis of gender identity as well as sexual orientation.

United Kingdom

The UK is having a number of legislations to protect the rights of the transgender people as follows-

  • The Sex Discrimination Act 1975 makes it unlawful to discriminate on the ground of sex in employment, education and the provision of housing, goods, facilities and services.
  • The Sex Discrimination (Gender Reassignment) Regulations 1999 extended the Sex Discrimination Act to make it unlawful to discriminate on grounds of gender reassignment, but only in the areas of employment and vocational training. These Regulations do not apply to discrimination in education or in the provision of housing, goods, facilities and services.
  • The Gender Recognition Act, 2004 gives legal recognition to Gender Recognition Panel is successful, the transsexual person’s gender becomes for all purposes the acquired gender and they will receive a full gender recognition certificate (GRC). The GRC allows for the creation of a modified birth certificate reflecting the holder’s new gender.
  • The Equality Act 2006 introduced the Gender Equality Duty, which places an obligation on public bodies to pay due regard to the need to address and eliminate the unlawful discrimination and harassment of transsexual people in employment, related fields and vocational training (including further and higher education) and in the provision of goods, facilities and services.
  • The Sex Discrimination (Amendment of Legislation) Regulations, 2008 has extended the Sex Discrimination Act to make it unlawful to discriminate on grounds of gender reassignment in the provision of goods, facilities and services as well as in employment and vocational training.

With a view to make transgender equality a reality, the present Government is seriously looking for, thus in March 2011, the Government published ‘Working for Lesbian, Gay, Bisexual and Transgender Equality: Moving Forward’, which included Government’s commitments to tear down barriers and advance equal opportunities for lesbian, gay, bisexual and transgender people in all areas of society — including in schools, at workplace and in healthcare.

Germany

Providing solution to a long debated question, Germany became the flu St European country to officially recognize a “third gender” category on birth certificates for intersex infants Previously, German parents had just a week’s time to decide whether their intersex children were male or female, and register them appropriately at the registry office This resulted heavy pressure on the parents to take decisions, which often made them in a state of panic and fiequently lead to forced medical operations in the genital area. Thankfully, on 1st November, 2013, Germany became the first country in Europe as well as one of the firstr countries in the world to allow the parents of babies without “clear gender-determining physical characteristics, parents can now mark their birth certificates with, an “X”, for undetermined gender.

Proceeding further, the new law also gives right to the intersex children to decide their gender identity once they reach an adult age, and not to be labeled male or female at birth without their will. This law is definitely a step towards a new horizon.

Pakistain

In 2009 the Supreme Court of Pakistan ordered the government to conduct a census of hijras living in the country. Earlier that year, local police had allegedly attacked, Robbed and raped eight hijra wedding dancers near Islamabad. That traumatic event led Muhammed Aslam Khaki, a lawyer specializing in Islamic law, to file a private case in the country’s Supreme Court, asking to recognize hijras as a third gender. At the end of 2009 the chief justice of Pakistan ordered the National Database and Registration Authority to issue national identity cards with a “third gender” category for non-binary citizens.

India

For quite a long period of time, the second populous country of the world, India has recognized the transgender as a separate community, known as ‘Hijras’ as citizens who don’t identify themselves as either male or female term “eunuchs” despite the fact that only few of them are identified as• such. Their status has further been changed in the year 2009, when the Election Commission of India has decided to formally allow for intersex or transgender voters an independent designation which meant that the citizens could choose an “other” category indicating their gender in voter forms. It is pertinent to mention here that now after the recent judgment of the Supreme Court in National Legal Services Authority v. Union of India[12], the transgender are now categorically recognized as third gender having the right to vote, own property, marry and to claim formal identity more meaningfully. The Apex Court even proceeding a further directed both the center and the states to treat the transgender as socially and educationally backward classes of citizens and to ensure that they are not discriminated against in obtaining basic needs like health care, employment and education.

 

Conclusion

The aim of the paper is to understand the, the law related to the trans people in different parts of the world . What measures are taken by the government and judiciary of the different countries and understand the human rights issue that the trans people are facing and the priority action required to secure trans people right to dignity, equality, health ‘and security.

We all are humans and the transgender are born in our own society by us only so why people discriminate them and don’t provide equal opportunity like they treat normal gender people, now this is the time for world to look them in different way. The most important point to be considered by every human being is that the transgender people are not like this by their choice, rather it is due to their physical structure by birth which they cannot change. It is thus a matter of concern for all, to regard them with dignity with all rights which being human everybody is entitled to enjoy.

 

[1] Ros case will (2000) changing once : third and forth genders in native North America. Palgrave Machillcan (Jene 2006) ISBN 0-312-22479-6

[2] ab Grabanh Sharyas (2001), sulawesil’s fifth gender inside Indonesia April-Juen 2001

[3] a b Martin M. Maj & Voorhises Barbara (1975)

[4] Mc Gee. R.Jon Richard L. Wasm 2011, Anthropological Theory : An Introductory history New York, Mc Graw Hill

[5] Some indigenaus culture allocated specific role to gender diverse people something recognizing then as a link between the spiritual and the physical word for e.g. there are anerdotal allount that whah (indigenous maari trans women) in Newzeland historically were the only the group allined to touch the food given to tohinga (spissitual healers); sance personal communication with Sellna Patrika, March 2009

[6] Balzers, C and hutta (2012) Transrespect vensus transphobia world wide A comparative review of human right situation of gender variation trans people, W T Publication series, Vol. 6 P. 80 published 14 Oct.

[7] See the Pacific Sexual Diversity Network website : http://psdnetwork.org

[8] International commission of jurist (2007) pp. 11-12

[9] The gender identity and health comprehensive care for transgender people Act. Art. 1

[10] WPATH Presidents August 2013 monthly note accessed 4 July 2014 at www.wpath.org

[11] John geddes Lawrence & Tyron Granes V. Sexas 539. u.s. 558

[12] Writ Petition (civil) No 400 of 2012

Pharmaceutical Patent in India: Access to Medicines

Akshay Khandelwal

Abstract

Patents provide the Patent owner with the legal means to prevent others from making, using, or selling the new invention for a limited period of time, subject to a number of exceptions. Patents do not constitute marketing authorizations. The TRIPS Agreement stipulates that it must be possible for all inventions to be protected by a patent for 20 years, whether for a product (such as medicine) or a process (a method of producing an ingredient for a medicine).

TRIPS (The Agreement on Trade Related Aspect of Intellectual Property Rights) attempt the arduous task of balancing private and public rights. On one hand, it protects the interest of the pharmaceutical companies that invest heavily in R & D of Drugs and, on the other; it allows nations that belong to the WTO to promote public health in their respective countries. However, patents on pharmaceutical products have adversely affected industrially developing and least developed countries, hampering their ability to formulate appropriate public health policies that would enable their ailing citizen to access medicines. For instance Pharmaceutical patents have raised the cost of life saving drugs, effectively putting them out of the reach of the majority of the World’s population.

The Article will analyze the effect on availability of medicines to the public due to the pharmaceutical patent system in the light of Indian Patent Act, 1970 and TRIPS agreement. The Author will identify the difficulties which the common people are facing and the unlawful gains which the patent holders are making, due to this patenting system.

“The idea of a better ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death.”

Indira Gandhi at the World Health Assembly in 1982

INTRODUCTION:

The patent system is social policy tool that aims to stimulate innovation. Internationally, patent protection is governed by the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. TRIPS do not establish a uniform international law, but sets out minimum standards of patent protection that must be met by all WTO members. Developed countries have already implemented the agreement, and other countries such as India are implementing it now, in 2005. Least-developed countries are not obliged to do so until 2016.

Medicines are expensive when they are protected by patents. The patent holder has a monopoly on the drug for a minimum of 20 years, and uses that period to maximize profit. But as soon as generic competition is possible, prices of medicines plummet: for instance, after the Brazilian government began producing generic AIDS drugs in 2000, prices dropped by 82%.

Protection of public health was one of India’s major concerns when the TRIPS Agreement was being negotiated. The Patents Act, 1970 did not provide for product patents for inventions relating to medicines. The duration of protection of process patents for medicines was also limited to a maximum of seven years. This conscious policy choice adopted in India’s Patent Act yielded positive results over a period of three decades in building a good industrial infrastructure for manufacturing generic medicines, while also to keeping the price of essential drugs at a relatively low level. During the final stages of negotiations that resulted in the TRIPS Agreement, India attempted to ensure that TRIPS provisions would not substantially affect the public health needs of the large sections of the population that are below the poverty line. Subsequently, India made conscious efforts to incorporate the flexibilities available in TRIPS and the Doha Declaration when India amended the Patents Act in 1999, 2002 and 2005.

The reasons for the lack of access to essential medicines are manifold, but in many cases the high prices of drugs are a barrier to needed treatments. Prohibitive drug prices are often the result of strong intellectual property protection. Governments in developing countries that attempt to bring the price of medicines down have come under pressure from industrialized countries and the multinational pharmaceutical industry. The World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) sets out the minimum standards for the protection of intellectual property, including patents for pharmaceuticals. While TRIPS does offer safeguards to remedy negative effects of patent protection or patent abuse, in practice it is unclear whether and how countries can make use of these safeguards when patents increasingly present barriers to medicine access.

The lack of protection for product patents in pharmaceuticals and agrochemicals had a significant impact on the Indian pharmaceutical industry and resulted in the development of considerable expertise in reverse engineering of drugs that are patentable as products throughout the industrialized world but unprotectable in India. As a result of this, the Indian pharmaceutical industry grew rapidly by developing cheaper versions of a number of drugs patented for the domestic market and eventually moved aggressively into the international market with generic drugs once the international patents expired. In addition, the Patents Act provides a number of safeguards to prevent abuse of patent rights and provide better access to drugs. The Indian Patents (Amendment) Act, 2005 introduced product Patents in India and marked the beginning of a new patent regime aimed at protecting the Intellectual property rights of patent holders. The Act was in fulfillment of India’s Commitment to World Trade Organization (WTO) on matters relating to Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Background:

Sick people in India and around the world depend on the willingness of Indian producers to carry out the research to develop and manufacture affordable generic versions of second-line AIDS drugs and other new medicines. India has a long history of fighting for protection of public health over intellectual property: it led developing countries’ resistance to the TRIPS Agreement during the Uruguay Round of WTO negotiations, and also played a key role during the 2001 WTO ministerial conference in Doha, which resulted in the adoption of the Doha Declaration on TRIPS and Public Health. Unlike other developing countries, it has also waited as long as was permitted by TRIPS before introducing patents on pharmaceutical products. In the new post-2005 TRIPS context, it is crucial that India continue to develop policies that promote access to medicines, not just out of responsibility to its own people, but as a lifeline to patients in other developing countries.

At the time of independence in 1947, India’s pharmaceutical market was dominated by Western MNCs that controlled between 80 and 90 percent of the market primarily through importation. Approximately 99 percent of all pharmaceutical products under patent in India at the time were held by foreign companies and domestic Indian drug prices were among the highest in the world. The Indian pharmaceutical market remained import-dependent through the 1960s until the government initiated policies stressing self-reliance through local production. At that time, 8 of India’s top 10 pharmaceutical firms, based on sales, were subsidiaries of MNCs. To facilitate an independent supply of pharmaceutical products in the domestic market, the government of India founded 5 state-owned pharmaceutical companies. Today, India is the world’s fifth largest producer of bulk drugs.

Government policy culminated in various actions including: the abolition of product patents on food, chemicals, and drugs; the institution of process patents; the limitation of multinational equity share in India pharmaceutical companies, and the imposition of price controls on certain formulations and bulk drugs. Subsequently, most foreign pharmaceutical manufacturers abandoned the Indian market due to the absence of legal mechanisms to protect their patented products. Accordingly, the share of the domestic Indian market held by foreign drug manufacturers declined to less than 20 percent in 2005. As the MNCs abandoned the Indian market, local firms rushed in to fill the void, and by 1990, India was self-sufficient in the production of formulations and nearly self-sufficient in the production of bulk drugs.

Regulatory framework for Pharmaceutical Patent before TRIPS Agreement:

The focus of the intellectual property regime that India has had to adopt since it took Commitments under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) have remained on the ability of the country to provide mechanisms which can ensure that the country is able to provide access to medicines to its citizens at affordable prices. India has had a unique position among the countries in the developing world for it has a strong generic pharmaceutical industry, which has been able to provide medicines at prices that were among the lowest in the world. Much of the credit for this development goes to the Patents Act that India enacted in 1970. Two key provisions facilitated this process.

• The first was introduction of a process patent regime for chemicals and,
• The second, shortening of the life of patents granted for pharmaceuticals.
The Patent Act 1970 stated objective was to foster the development of an indigenous Indian pharmaceutical industry and to guarantee that the Indian public had access to low-cost drugs. The Act replaced intellectual property rights laws left over from the British colonial era and ended India’s recognition of Western-style “product” patent protection for pharmaceuticals, agricultural products, and atomic energy. Product-specific patents were disregarded in favor of manufacturing “process” patents that allowed Indian companies’ to reverse engineer or copy foreign patented drugs without paying a licensing fee. This allowed the domestic industry build up considerable competencies and offer a large number of cheaper “copycat” generic versions legally in India at a fraction of the cost of the drug in the West, as long as they employed a production process that differed from that used by the patent owner. The Act protected process patents for 7 years instead of the usual 15 years needed to develop and test new drugs.

Indian Patent (Amendment) Act, 2005 (In consensus with TRIPS Agreement):

On March 23, 2005, the Indian Parliament passed the Patent (Amendment) Bill 2005 (Bill No. 32-C of 2005). It was the third amendment to the Indian Patent Act (1970). The amended Patent Act conforms to requirements set forth by the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Since the new law came into effect on January 1, 2005, there have been serious concerns regarding the role of the domestic Indian generic industry in the new product patents regime, and the continued availability of essential medicines at affordable prices.
To meet its TRIPs obligations, India amended its patent law on March 22, 2005, abolishing its “process” patents law and reintroduced Western style “product” patents for pharmaceuticals, food, and chemicals. This action effectively ended 36 years of protection for Indian pharmaceutical companies and stipulated that Indian companies selling copycat drugs must pay foreign patent holders a “reasonable” royalty for copies sold in the Indian market. The amendment made reverse engineering or copying of patented drugs illegal after January 1, 1995.

The Act allowed for only two types of generic drugs in the Indian market:

• Off-patent generic drugs and,
• Generic versions of drugs patented before 1995.

At present, nearly 97 percent of all drugs manufactured in India are off patent and therefore will not be affected by this Act. It also introduced a provision establishing compulsory licenses for exports to least developed countries with insufficient pharmaceutical manufacturing capacities. The Amendment grants new patent holders a 20-year monopoly starting on the date the patent was filed and, without a compulsory license, no generic copies can be sold during the duration of the patent.

Compulsory Licensing:

Compulsory Licensing is a procedure whereby a Government can allow any company, agency or designated person the right to make a patented product, or use a patented process under license, without the consent of the original patent holder. 36 Under section 84(1) of the amended Act, an application can be made for compulsory license three years after the grant of a patent: “At any time after the expiration of three years from the date of the grant a patent, any person interested may make application to the Controller for grant of compulsory license.”

Pharmaceutical Patent under TRIPS Agreement and Access to Medicines:

The World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS or “Agreement”), which sets out the minimum standards for the protection of intellectual property, including patents for pharmaceuticals, has come under fierce criticism because of the effects that increased levels of patent protection will have on drug prices. While TRIPS does offer safeguards to remedy negative effects of patent protection or patent abuse, in practice it is unclear whether and how countries can make use of these safeguards when patents increasingly present barriers to medicine access.

The Fourth WTO Ministerial Conference, held in 2001 in Doha, Qatar, adopted a Declaration on TRIPS and Public Health (“Doha Declaration” or” Declaration”) which affirmed the sovereign right of governments to take measures to protect public health. Public health advocates welcomed the Doha Declaration as an important achievement because it gave primacy to public health over private intellectual property, and clarified WTO Members’ rights to use TRIPS safeguards. Although the Doha Declaration broke new ground in guaranteeing Members’ access to medical products, it did not solve all of the problems associated with intellectual property protection and public health. The recent failure at the WTO to resolve the outstanding issue to ensure production and export of generic medicines to countries that do not produce may even indicate that the optimism felt at Doha was premature.

Indian generic drug manufacturers have been manufacturing generic versions of branded drugs. Under the Act, such generic drug manufacturers that had made significant investment and were marketing the product before January 2005 can continue marketing the product in the new regime. The Act grants them immunity from infringement suits from patent holders. They would only have to pay a reasonable royalty to the patentee. Indian generics makers still retain significant scope for copycatting patented Western drugs, legally or illegally, without penalty. And Western companies have seen relatively few of their patent applications approved. Industry observers who expected India’s IPR climate to suddenly change after the 2005 Act may have been overly optimistic in their estimate of how fast things can change in this industry.

India is one of the few developing countries that decided to use the full ten-year transitional period (1995-2004) under the TRIPS Agreement. During this period from 1995 to 2004, India received numerous product patent applications that the Indian Patent Office started examining in 2005. These applications are at various stages of examination and whether they are granted or not will have a significant impact on continued access to generic medicines.

Flexibilities available under TRIPS and its use by the Indian Government to secure access to essential medicines:

The introduction of pharmaceutical patents in India has been particularly controversial. Indian producers have long been suppliers of low-cost medicines (including key HIV/AIDS treatments), domestically and also to other low- and middle-income countries. In amending its patent law to meet new international obligations, India, like many developing countries, attempted to take advantage of flexibilities in TRIPS to ameliorate potentially negative effects that pharmaceutical patents might have on the supply of medicines. India used its full transition period, waiting to introduce pharmaceutical product patents until 2005 (pharmaceutical process patents were already available prior to TRIPS). Applications dating from 1995 onward were received but were not examined on HIV/AIDS (UNAIDS) and civil society groups, defend 3(d) and point to India as a model for developing countries attempting to use TRIPS flexibilities to promote public health.

In 2005, when India was compelled to re-introduce the product patent regime, the Indian Parliament, aware of its responsibility not only to Indians but to patients across the world adopted the only pragmatic solution available — to utilize flexibilities available under TRIPS in an attempt to secure the availability, affordability and accessibility of medicines. According to this approach, TRIPS does not set any universal common standard for the substantial aspects of the patent law. Thus, as the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration), clearly states every WTO member has the right “to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose”. Thus the TRIPS implementation strategy was “to find the means within the patent system and outside it, to generate the competitive environment that will help to offset the adverse price effect of patents on developing country consumers. The cautious approach suggests the implementation of TRIPS should be done with minimum damage”.

As noted above, the various amendments to India’s patents law introduced flexibilities at both the pre- and post-grant stage of a patent application. This study explores the potential of three of these key flexibilities in allowing continued generic production of medicines.
• The first relates to medicines invented prior to 1995. Under TRIPS there is no obligation to provide patent protection to products invented prior to 1 January 1995.

• The second is one of the most important flexibilities employed by India which is the restriction of the scope of patentability in relation to known substances. Thus, section 3(d) of the Patents Act, 1970 prohibits the patenting of known medicines unless the patent applicant can demonstrate increased therapeutic efficacy. It must be borne in mind that section 3(d) is not a blanket prohibition on such patents. However, the Indian Patent Office is expected to apply this provision strictly while examining the applications before it. It is also expected to apply the provisions of section 3(e) that prohibits the patenting of mere admixtures and section 3(i) which excludes from patenting any process of “medical or surgical, curative, prophylactic or other treatment of human beings…”

• Finally, section 11A(7) of India’s patents Act, 1970 provides that where a company was already producing and marketing a product before 1 January 2005 on which a patent application was made in the mailbox, should that patent be granted, the company may continue manufacturing that product on the payment of a reasonable royalty. These are only some of the flexibilities available under the Indian law. However, if applied strictly they offer a significant space for generic production.

Judiciary Opinion:
Supreme Court on: Access to Medicines (Novartis Case)

The Indian Supreme Court has refused to allow one of the world’s leading pharmaceutical companies to patent a new version of a cancer drug, a decision campaigner hailed as a major step forward in enabling poor people to access medicines in the developing world.
Novartis lost a six-year legal battle after the court ruled that small changes and improvements to the drug Glivec did not amount to innovation deserving of a patent. The ruling opens the way for generic companies in India to manufacture and sell cheap copies of the drug in the developing world and has implications for HIV and other modern drugs too.

Campaigners were jubilant. A ruling in Novartis’s favour would have reduced poor people’s access to the drug, said Jennifer Cohn, of Médecins Sans Frontières (MSF). “The fact that India says patents is to reward innovation as opposed to small changes does stay true to the concept of what a patent should be.”

F. Hoffman-La Roche Ltd., v. Cipla Ltd. (Delhi High Court):

The Court, while rejecting the application from Roche for a temporary injunction preventing Cipla from manufacturing and selling at very low price the generic version of the cancer drug erlotinib, observed:

“therefore, this Court is of the opinion that as between the two competing public interests, that is, the public interest in granting injunction to affirm a patent during the pendency of an infringement action, as opposed to the public interest in access for the people to a life saving drug, the balance has to be tilted in favour of the latter. The damage or injury that would occur to the plaintiff in such case is capable of assessment in monetary terms. However, the injury to the public which would be deprived of the defendant’s product which may lead to shortening of lives of several unknown persons, who are not parties to the suit, and which damage cannot be restituted in monetary terms, is not only uncompensatable, it is irreparable. Thus irreparable injury would be caused if the injunction sought for is granted.”

Problem of Data Exclusivelity in Access to Medicine in India:

Pharmaceutical companies have to submit test and clinical data to the national health authorities to obtain marketing approval for a new drug. The national health authorities keep the innovator data confidential against “unfair commercial use” for ascertain time period, thus barring generic manufacturers from using the submitted innovator data for the stipulated period.

The US and EU grant “data exclusivity” for five years and eleven years, respectively. Most often, companies use data exclusivity provisions to seek a period of monopoly in a country even if it does not have any patents on the product in the country. As such, data exclusivity provisions have considerable implications for developing countries like India.

So far, India has not introduced provisions pertaining to data exclusivity in the three amendments to the Patents Act, 1970. India is now considering amendments to the Drugs & Cosmetics Act, 1940 and the Indian Insecticides Act, 1968 incorporating provisions for data protection.

Once data exclusivity is introduced, generic companies would have to do their own safety and efficacy tests. The huge cost involved in this exercise could result in generic companies being barred from producing a generic version of a product for a period extending effectively beyond 20 years. It may also result in the ineffective use of compulsory license due to data exclusivity provisions, were such a license issued to a generic manufacturer.

Conclusion:

Since 1970, India’s Patent Act has allowed Indian manufacturers to legally produce generic versions of medicines patented in other countries. India’s expertise in reverse drug engineering and the efficiency of its pharmaceutical manufacturing industry fast established it as the prime source of generic medicines in the world. 2005 marks a fundamental and potentially dramatic change in access to medicines in developing countries: countries which do not yet grant patents on medicines, such as India, now have to implement patent laws in compliance with the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. The Act has some clear provisions to protect the interests of the domestic generic manufacturers. It has achieved a reasonably fine balance among stringent IP measures, while making use of some of the flexibilities that TRIPS offers. The amended Patents Act has an effective opposition system for challenging frivolous patents, limited patentability exceptions, elaborate provisions pertaining to compulsory licensing, and parallel importation.

The changes to the new Patents Act could enable India to continue playing the pioneer role that it played in the pre-TRIPS period, making drugs available at cheap prices to consumers both domestically, and around the world.

Private Equity Investments – A Brief Overview

Private EquitySaloni Mody Dalal

Private Equity (“PE”) financing has emerged as a major investor class and has been a driver of economic growth of companies over the world. This note summarizes the key steps involved in consummation of a PE investment.

In order to make a PE investment, the PE investor has to undertake a series of steps. A typical private equity investment commences with the PE investor seeking out a company requiring investment or being approached by such a company. The selection of the investee company after undertaking a background check of the investee company and its holding company (ies) / promoters is the most significant step in a PE Investment.

Following this, a basic document, such as a term sheet, memorandum of understanding or a letter of intent is executed between the PE investor and the investee company, in order to lay out the broad terms and conditions of the investment and expressing the intention to enter into definitive agreements. The consummation of the investment and execution of definitive agreements may also be subject to fulfilment of certain conditions precedent, to be spelt out in the initial document. If the transaction necessitates a diligence, then the execution of definitive agreements is generally subject to a favourable outcome of such diligence.

Once the initial document is in place, the PE investor usually conducts a legal, tax and financial due diligence on the investee company. The scope of the due diligence largely depends on the nature of the PE investment. A PE investment that envisages an investment by way of the PE investor and the promoter coming together to incorporate a start-up investee company may not require a due diligence, unless the diligence to be carried out is on the promoter(s) itself. However, if the PE investment involves investment in the share capital of an existing company, a comprehensive due-diligence is imperative.

Simultaneously with the due diligence process, the PE investor and the investee company commence negotiations in respect of the definitive agreements. The most common definitive agreements in a PE transaction are investment documents, including share subscription agreements, share purchase agreements and shareholders’ agreements between the PE investor, the investee company and the promoters/shareholders. There may be other documentation agreed on between the parties depending on the structure and other terms of the deal, such as trade mark licenses and technology transfer agreements, where one of the parties transfers its business or technology to the newly incorporated company or an escrow agreement for safeguarding shares, consideration or assets, etc.

The critical part in drafting the definitive agreements is inclusion of the representations, warranties and indemnities to be provided by the investee company and the promoters to the PE investor. The representations and warranties are nothing but an assertion of facts – past, present and future, in relation to the business and affairs of the investee company, legal compliance, its financial condition, taxes, disputes, etc. The representations and warranties provided by the investee company and its promoters generally form the basis on which the PE investor is induced to make investment in the investee company and can be appropriately drafted by considering the findings of the due-diligence exercise. In the event there are any irregularities in the findings of the due-diligence exercise, the PE investor may require the same to be ironed out as a condition precedent to the investment. However, in the event there are certain irregularities which cannot be rectified as a condition precedent, the rectification of such irregularities is made a condition subsequent in the definitive agreements and is supplemented by a suitable indemnity.

Another important to consider in the documentation of the definitive agreements is the indemnity obligation of the investee company and the promoters. An indemnity in PE transactions is a contractual obligation of the investee company and the promoters to compensate the PE investor for any loss incurred by such the PE investor on account of a breach of a contractual obligation or misrepresentation undertaken by the indemnifying party. The right to indemnity is one given by the definitive agreement(s) and is in addition to the right to claim damages arising from such breach, which is available under law.

The definitive agreements set out the framework of corporate governance and decision making in the investee company. They also set out detailed provisions in respect of transfer of shares and other securities of the investee company. In most PE transactions, the PE investor has board representation in the investee company along with certain veto rights. The veto rights usually extend to matters relating to corporate governance (such as changes to board composition, amendments to the charter documents, related party transactions, mergers and acquisitions etc.) and certain high-level operational matters (such as entering into litigations, taking on loans, substantial sales of assets, etc.).

Exit strategy is a very critical part of making PE investments. It is important for the PE investor to be able to divest its shareholding and exit in the most profitable, tax-efficient and expeditious manner. The most common exit options available to a PE investor are as follows (i) Buy-back / Redemption of shares, (ii) Initial Public Offer (IPO); (iii) Put / Call Options; (iv) Strategic Sale; (v) Drag Along Right; etc.

The definitive agreements often enumerate certain ‘events of default’ or ‘material breaches’ upon the occurrence of which the PE investor shall have the right to accelerate an exit at a substantially higher default price and terminate the definitive agreements. In such events, a default drag along right / default put option right generally serve to act as a deterrent against breaches and defaults.

Lastly, the definitive agreements set out the governing law, jurisdiction and dispute resolution mechanism, in the event of there being any disagreements / disputes between the parties. Arbitration has emerged as an effective form of dispute resolution and institutional arbitration remains a popular choice for most PE investors. Further, it is necessary to identify the governing law, which serves to determine the sub¬stantive law that will apply to any legal proceedings which may arise from the agreement and an informed choice must therefore be made between jurisdictions when determining the governing law and jurisdiction of the definitive agreements.