Justice Delayed Justice Denied

I acknowledge that people are losing faith in judiciary. It is mainly because of long delays at all points, the reluctance of all the adjudicators to give the adjudications and the inevitable adjournments. That is why people are approaching the mafia which believes in out summary justice.

Law is a benevolent profession. Lawyers and Courts have always been the last refute for the helpless and the despoiled litigants. But of late there is attrition of people’s, trust and faith in the Indian judicial system. The main cause for such attrition is jobbery (corruption) and delays. The allegation of jobbery is the first cause for the deteriorating functioning of the judiciary.

The primaryreason of delay is corruptionamong the premier judges. A few days ago, the judges of the Allahabad High Court found themselves being described in less than flattering words. The criticism stung even more because it came from the Apex court. The Supreme Court on Nov 26, 2010 ordered the Allahabad High Court’s Chief Justice to check some of the corrupted judges. For several years there had been babbles of discontent with functioning of the superior judiciary. Even authoritative seats had been heard saying that. For citation, a formerreputed Chief Justice of India, Justice Venkataramiah, speaks of High Court adjudicators going to their wealthy friends or to embassies in search of drinks. Another former reputed judge of the country’s premier court, mentioned several ways of judicial jobbery and also it is raised that once in a mean while costly benefits are given to some of the premier judges and munificentparties are arranged for them.

One of the major reasons why these Parliamentarians don’t make amendments to the law is because each one of them has at least two to three cases in their name. For example, a Dalit girl from Banda was allegedly raped by a BSP MLA Purushottam Naresh Dwiwedi. Parliament’s inability to elucidate Adarsh scam involving former Maharashtra CM Ashok Chavan, CWG scam involving MP Suresh Kalmadi, another land scam involving Honorable Karnataka Chief Minister BS Yeddyurappa and the mother of all scams involving former telecom minister A Raja causing nearly loss of 1.76 lakh crore to the exchequer was indirectly one more reason for the delay in the justice. Of late allegations of corruption have been raised against DinakaranHonorable Chief Justice of Karnataka HC on his elevation to the Apex Court has left many questions unanswered for those who raised the allegation.

Another cause for delay in adjudication is the code of conduct of judges. For example one of the judges of Gujarat HC once slapped on the face of one of his fellow workers after which Apex court had to intervene to resolve the issue by transferring one of the judges to some other states. In the recent times during Reliance case was going on one of the judges of the Apex Court showed his inability to sit on the bench with another judge when the hearing of the case was on the next date. A few years before furious attorneys danced on the tables in the Court room of the Chief Justice of Delhi HC, and interrupted the operations of all other judges. In the present situation, repeat of such thing cannot be ruled out and it cannot be expected the early delivery of the adjudications in these situations. It’s true that even Apex court’s best defense Contempt of court cannot prevent them from performing such activities again.

One more reason which causes the delay in adjudications is the century old modus operandi assumed by the judiciary of this country. That modus operandi resulted in thousands of pending cases. Gujarat Riots Case is an example of it. In Ruchika case, that poor girl Ruchika committedsuicide while awaiting justice as it took 19 long years after allto enter F.I.R.

One more cause of the delay in the justice is the approach of the lawyers towards the case. There should be LAW or Rule that the case cannot be postponed beyond three/four times. Lawyer asking for date extension on silly grounds (including chest pain or admitted to ICU) must be heftily penalized than only can one expect real justice

Over and over again shortage in the number of judges in the courts is seen as a cause for the delay in justice. Even the Law Commission did make many observations in this aspect which were also supported by the Chief Justice of India


There is an immense feeling that when a person approach a court to seek justice and to get rid of his problem but as a result there is a immense delay in seeking justice, in spite of such delay remedy provide could not satisfy the need of such situation. This is because Justice is being delayed and curbed due to serious pendency of cases and workload in the Court. The ultimate reason for any type of judicial discipline is to maintain public confidence in the judiciary. The reason behind this principle is easy. A legal system can function only as long as the public accepts and abides by decisions rendered by the courts; the public will accept and abide by these decisions only if it is convinced that the judges are fair and impartial; anything that tends to weaken that conviction should be avoided. In other words, justice must not only be done, but must also appear to be done.

I just want to express the miserablecondition of affairs in India in regards to the law. The major problem is that our Indian law is too lenient and trials are taking too much time. I just can’t realize the cause as to why would any case take more than ten years to get over, this includes almost each and every case from the highest to the lowest ( example: the Mumbai bomb blast 1992; it took over 12 years to come to a transitory conclusion, because the accused can still plea).

If I am over fifty, I can go ahead and kill some person and can delay the case till I die of natural death. So by the time the verdict comes that I am guiltyI would have long gone to my death. So hypothetically I would go Scott free.


Why can’t we have more judges and why can’t a person get justice in a year or two. All thepoliticiansare busy with the quota and other useless things when they fail to realize that the JUSTICE is the most basic right of Indians. I bet Mohammed Ajmal Amir Kasab the lone surviving 26/11 terrorist’s trail is going to go on for at least a decade, no wonder we are such a soft state.


There are many people who are imprisoned for more than 10years for the simple reason that they can’t afford bail. Though they had done nothing wrong except some petty stealing they are being confined in the four walls for more than 10 years. So, the proverb “Justice Delayed is Justice Denied” is proved as it is denied to the poorest of the poor.


Remedial measures:

So, I think that the Government should review the judicial system by making some of the following changes:

1] Fix trial and appellate limits to 1.5yrs and 0.5yrs maximum.

2] Increase penalties in IPC which are 60 years old and ridiculously low. For murder may be Rs 10,000 and for rape Rs 2000/. Isn’t it shameful? The fines have to be revised at least 10 times.

3]Minimum Rs 25000 fine where courts come to reasonable conclusion that case or complaint filed was malicious, malafied, vexatious, falsely filed as counter complaint. Besides this, Imprisonment for one month should also be sentenced A black mark to be added against counsel. When three blackmarks are accumulated, lawyer should beexpelled from bar for 3 years period and should be made to pay a fine of Rs 25,000.Today for large number of lawyers there is no difference between criminals and them. They misbehave with clients, don’t pay attention to case, overcharge and delay proceedings.

4] Makefinancial penalties main plank of criminal and civil jurisprudence like in USA so that people are afraid to do crimes and cheating. These should be recovered as land revenue arrears and jailing the convicts or decreed persons till they pay up. Concept of torts and damages should be made easy and included in judicial orders.

5]Change public servants rule to make dismissal easier by a 2 step higher officer or Governor/President as applicable on public complaints and poor honesty and efficiency record. Retire 25% government employees after 10 years of service and 50% thereafter every 5 years of service.

6]There should be LAW or Rule that the case cannot be postponed beyond three/four times. Lawyer asking for date extension on silly grounds (including chest pain or admitted to ICU) must be heftily penalized than only can one expect real justice.

7] Quality of the advocates practicing should be increased by increasing the range of the All India Bar Examination.


While the problem of delay looks intimidating, it can be dealt by having additional fast track Courts, making legal services much more striking thereby drawing high-quality lawyers and filling up all available jobs at various Courts. We can conclude from the above dialogue that we should not route in extra-ordinary hurry-up of cases by whatever means. As justice delayed is justice denied, similarly, the saying, justice hurried is justice buried is evenly factual. Therefore, adequate, realistic and due hearing of every cases with consideration of its state of affairs is the necessary requirement of natural justice and balance of convenience.

Disappearance of house sparrow

Ritu Dhingra


Disappearance of house sparrow

I am writing this article in the interest of society at large and for the conservation and protection of house sparrows which are disappearing from the region of Delhi at a very fast pace. These birds, being an indicator of environmental health, need to be saved before they can be seen only in books or on the internet. Little attention has been given to research and practical conservation measures for sparrows and common birds. . It’s only ignored because it’s common; it has little glamour as compared to other species. There is little awareness with regard to the ecological role it plays. House sparrows being a common bird are not considered important from the scientific point of view also.

House sparrows do not live in jungles, deserts or places where humans are not present. The sparrow is a species that has evolved with humans and is always found in and around human habitations. The house sparrow is a confirmed hanger on to man ever since human habitation started depending on agriculture. It has even been mentioned in most of our Mythologies and Folklores, along with the Common crow, Eagles and other such birds, which used to exist in close proximity to human dwellings. It was once a very common bird all over the country whether it was a bustling urban area or a small hamlet. For generations, house sparrows have added child-like freshness to households with their presence. Scientists and experts say that severe changes in the urban ecosystem in recent times have had tremendous impact on the population of house sparrows whose numbers are declining constantly.

Being a naturalist and  a lawyer by profession and I have been observing this phenomenon for the last two to three years, but since there were no steps taken by the concerned authorities to conserve this species of bird I wanted to create an awareness amongst the common people by writing this article.


Till four to five years ago, it was not difficult to find house sparrows in Delhi but now, one could hardly trace any flocks of sparrows, it is even difficult to locate a solitary house sparrow easily. Slowly and gradually this species of sparrow has become critically endangered in the region of Delhi. There is no awareness amongst the people for such disappearance of the house sparrows. People today are too busy in their everyday humdrum and have little time to think about birds.

According to a study the advent of man-made threats like the rising numbers of mobile phone towers and microwave pollution is silent killer of sparrows. Mosquito coils, cell phone radiation and automobile exhaust of vehicles running on lead-free petrol could also be major factors. Rapid urbanization, lack of nesting grounds due to increased concrete structures; excessive use of pesticides, exotic plants replacing native plants has created obstacles in habitat of the birds resulting thereby decreasing their number to a great extent.

As per a study the mobile phone towers emit a frequency of 900-1800 MHz, continuous penetration of EMR (electromagnetic radiation) through the body of birds would affect their nervous system and their navigational skills. They become incapable for navigation and foraging. The birds which nests near towers are found  to leave the nest within one week.  No measures are being taken by the concerned departments for bringing back the birds. No efforts are carried on by the concerned authorities for the rehabilitation of the house sparrows.


The source of information of the facts stated in this article are based on my personal experience and I have also verified the facts by personally visiting various places  in Delhi and also by personally talking to other people all over Delhi, regarding the disappearance of the house sparrows. And their observation is also the same.  Various reports and articles published on the internet websites also support my article since these birds are disappearing in many other cities in the world. I want to draw the attention of common people at this, since this decline in the number of house sparrows seems to be a common phenomenon in the urban areas across the country. More so, this decline in the number of house sparrows is a significant bio -indicator that there is something wrong in the whole ecosystem and there is some degradation in the urban environment which could be or is harmful for human beings as well. When our environment is not able to support the survival of a small sparrow then it is a matter of great concern.

I think that the concerned authorities must establish the reasons for the disappearance of the house sparrows and special efforts should be taken by concerned authorities to bring back the house sparrows in the city. Awareness amongst the common man must be generated with the help of media and other agencies for the conservation of house sparrows. Every year an inventory of birds of different species residing in Delhi should be drafted after counting the number of birds and the reports should be published in the newspapers along with other journals and websites also, so as to create an awareness amongst the people for the protection of the birds in Delhi.


I want to further expatiate the legal implication attached to this article is based on the following sections of various acts which cover the above stated problem:


(A)  Section 36, 38 and section 39 of the Biological Diversity act 2002. The sections are as follows;



36. (1) The Central Government shall develop national strategies, plans, programmes for the conservation and promotion and sustainable use of biological diversity including measures for identification and monitoring of areas rich in biological resources, promotion of in situ, and ex situ, conservation of biological resources, incentives for research, training and public education to increase awareness with respect to biodiversity.


(2) Where the Central Government has reason to believe that any rich in biological diversity, biological resources and their habitats is being threatened by overuse, abuse or neglect, it shall issue directives to the concerned State Government to take immediate ameliorative measures; offering such State Government any technical and other assistance that is possible to be provided or needed.

(3) The Central Government shall, as far as practicable wherever it deems appropriate, integrate the conservation, promotion and sustainable use of biological diversity into relevant sectoral or cross-sectoral plans, programmes and policies.

(4) The Central Government shall undertake measures, –

(i) wherever necessary, for assessment of environmental impact of that project which is likely to have adverse effect on biological diversity, with a view to avoid or minimize such effects and where appropriate provide for public participation in such assessment;

(ii) to regulate, manage or control the risks associated with the use and release of living modified organisms resulting from biotechnology likely to have adverse impact on the conservation and sustainable use of biological diversity and human health.


(5) The Central Government shall endeavour to respect and protect the knowledge of local people relating to biological diversity, as recommended by the National Biodiversity Authority through such measures, which may include registration of such knowledge at the local, State or national levels, and other measures for protection, including sui generic system.

38. Without prejudice to the provisions of any other law for the time being in force, the Central Government, in consultation with the concerned State Government, may from time to time notify any species which is on the verge of extinction or likely to become extinct in the near future as a threatened species and prohibit or regulate collection thereof for any purpose and take appropriate steps to rehabilitate and preserve those species.

39. (1) The Central Government may, in consultation with the National Biodiversity Authority, designate institutions as repositories under this Act for different categories of biological resources.

(2) The repositories shall keep in safe custody the biological material including voucher specimens deposited with them.


(B)  The relevant provisions of the constitution of India are as follows;


a) The State’s responsibility with regard to environmental protection has been laid down under Article 48-A of our Constitution, which reads as follows:

“The State shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country”.


b) Environmental protection is a fundamental duty of every citizen of this country under Article 51-A(g) of our Constitution which reads as follows:


“It shall be the duty of every citizen of India to protect and improve the natural environment including forests, lakes, rivers and wildlife and to have compassion for living creatures.”

The 42nd amendment to the Constitution was brought about in the year 1974 makes it the responsibility of the State Government to protect and improve the environment and to safeguard the forests and wildlife of the country. The latter, under Fundamental Duties, makes it the fundamental duty of every citizen to protect and improve the environment.

(C) Section 3 of the Environmental Protection Act 1986. The section reads as follows:


(1) Subject to the provisions of this Act, the Central Government, shall have the power to take all such measures as it deems necessary or expedient for the purpose of protecting and improving the quality of the environment and preventing controlling and abating environmental pollution.

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), such measures may include measures with respect to all or any of the following matters, namely:–

(i) Co-ordination of actions by the State Governments, officers and other authorities–

(a) Under this Act, or the rules made there under, or

(b) Under any other law for the time being in force which is relatable to the objects of this Act;

(ii) Planning and execution of a nation-wide programme for the prevention, control and abatement of environmental pollution;

(iii) Laying down standards for the quality of environment in its various aspects;

(iv) Laying down standards for emission or discharge of environmental pollutants from various sources whatsoever:

Provided that different standards for emission or discharge may be laid down under this clause from different sources having regard to the quality or composition of the emission or discharge of environmental pollutants from such sources;

(v) restriction of areas in which any industries, operations or processes or class of industries, operations or processes shall not be carried out or shall be carried out subject to certain safeguards;

(vi) Laying down procedures and safeguards for the prevention of accidents which may cause environmental pollution and remedial measures for such accidents;

(vii) Laying down procedures and safeguards for the handling of hazardous substances;

(viii) Examination of such manufacturing processes, materials and substances as are likely to cause environmental pollution;

(ix) Carrying out and sponsoring investigations and research relating to problems of environmental pollution;

(x) Inspection of any premises, plant, equipment, machinery, manufacturing or other processes, materials or substances and giving, by order, of such directions to such authorities, officers or persons as it may consider necessary to take steps for the prevention, control and abatement of environmental pollution;

(xi) Establishment or recognition of environmental laboratories and institutes to carry out the functions entrusted to such environmental laboratories and institutes under this Act;

(xii) Collection and dissemination of information in respect of matters relating to environmental pollution;

(xiii) Preparation of manuals, codes or guides relating to the prevention, control and abatement of environmental pollution;

(xiv) Such other matters as the Central Government deems necessary or expedient for the purpose of securing the effective implementation of the provisions of this Act.

I hope that in near future we can do something about conserving and saving our precious biodiversity, which we are losing at a very fast pace. House sparrow is only one life form on whose disappearance, I, tried to throw some light but there are other life forms which are even lesser known and which we have already lost by now. Other life forms which are disappearing from the urban environment are bees and butterflies and reasons which are currently known are the electromagnetic radiations from the cell phone towers. In the next article I will try to explain the detailed reasons for the same.

Currency Devaluation Hammers India

Article By: CA A. K. Jain

The year 2012 has begun with catastrophic affect for the rupee. It was Rupees 43.96 against a dollar in the July 2011 and now for $1 it is Rupees 54.3. Rupee hits all time low in January 2012. This kind of decline will have the sweeping impact on the macro economy of the country, as we are heavily dependent on the import of oil, food items and other crucial raw materials.

Devaluation means officially lowering the value of currency in terms of foreign currencies. There could be many motives of the devaluation. It stimulates exports of commodities. It restricts import demand for goods and services. It helps in creating a favourable balance of payments. Almost all the countries of the world have devalued their currencies at one time or the other with a view to achieving certain economic objectives. During the great depression of 1930 devaluation was carried by most countries of the world for the correcting their over-valuation.

Valuation History of Indian Rupee:

In early controlled exchange rate regime, the rupee exchange rate hovered around Rs 4.00 in the 1950s, Rs 5.00 in the 60s, Rs 7.00 in the 70s, and Rs 8.00 in the 80s. In the liberalised era of 90s, the rupee moved to Rs 20s and Rs 40 in the next decade of 2000.

During this period, the Government has declared two major devaluations. The rupee was devalued first in 1966 by 57% from Rs 4.76 to Rs 7.50 against the US dollar. In the 90s, the rupee was again devalued by 19.5% from Rs 20.5 to Rs 24.5 against the US dollar.

1966 – Devaluation:

Since 1951, despite government attempts to obtain a positive trade balance, India experienced a severe balance of payments deficits. Inflation caused Indian prices to go sky high. When the exchange rate is fixed and a country experiences high inflation relative to other countries, that country’s goods become more expensive and foreign goods become cheaper. Therefore, inflation tends to increase imports and decrease exports. Since 1950, Indian continuously faced trade deficits. Another reason, which played important role in the 1966 devaluation was war with Pakistan. The US and other countries withdrew their aid, which further necessitated devaluation. To improve fiscal position, Government of India devalued Rupee by whopping 57% against Dollar.

1991 – Devaluation:

In 1991, India still had a fixed exchange rate system, where the rupee was hooked to basket of currencies of major trading partner countries. At the end of 1990, the Government of India found itself in serious economic trouble. The government was close to financial default and its foreign exchange reserves had dried up to the point that India could barely finance three weeks of imports. In July of 1991 the Indian government devalued the rupee by 19.5%. The government also changed its trade policy from its highly restrictive form to a system which allowed exporters to import 30% of the value of their exports.

 Chronology of India’s Rupee Valuations

Year                  Exchange Rate

1947                   £1.00

1952                  $5.00

1970                  $7.57

1975                 $8.40

1980                 $7.88

1985                  $12.36

1990                  $17.50

1995                    $32.427

2000                    $45.00

2006                   $48.33

2007 (October)     $38.48

2008 (June )               $42.51

2008 (October)              $48.88

2009 (October)                    $46.37

2010 (January )                    $46.21

2011 (April)                                  $44.17

2011 (September)                        $48.24

2011 (November)                         $50.97

2011 (November)                          $52.11

2011 (December)                              $53.65


Impact of Inflation on Currency:

Inflation rates in India have risen about 8.50% amid concerns surrounding the devaluation of the rupee and the erosion of the purchasing power of savings. In spite of Governmental interventions, the rupee is in a free-fall, having slipped by over 20%, making it one of the most awful performing currency globally. RBI made thirteen rate increases attempts to docile the inflation in last one year but hardly achieved any significant result. Inflation rate maintained upwards trend. This is now reflected through the currency depreciation. Inflation directly enhances prices and thereby affects the purchasing power of currency. Currency value and inflation have a direct co- relation and impact each other. The currency re-valuation is also essential with the change in domestic prices affected by inflationary forces. Currency is considered to be over valued if the suitable adjustment is not made with the price index fluctuations.

Impact on Gold:

India currency devaluation has also resulted in surge of import by over 200% of gold and silver. Statistics show that imports of gold and silver to India were $8.96 billion a growth of 222%. The Reserve Bank of India purchased 200 tonnes of gold from the International Monetary Fund in 2009. From the start of 2011, some 30 banks in India have been granted permission to import gold and silver. Further gold purchases are expected in coming months, as the Reserve Bank has issued licenses to seven more banks to import gold and silver. Indian banks are therefore contributing to the massive increase in demand for gold and silver. Chinese banks are also catering to the increased demand of Chinese people for gold bullion for investment and savings purposes. In fact, most of the world’s central banks are now diversifying from major currencies such as the dollar and euro into gold. In addition to India and China, these countries include Russia, Sri Lanka, Bangladesh, Mauritius, Mexico, Iran and Saudi Arabia. Financial experts believe, the increased demand for gold and silver from India and wider Asia is sustainable and that it will keep the precious metal market thriving.

Impact on Stock Market:

As a result of de- valuation, Indian stock markets will face new threats. The operators and participants were earlier concerned about domestic inflation rate and the Reserve Bank of India’s economic policies. But the fall in the value of Indian currency has taken aback all concerned. The investors are bound to suffer as there is always a positive correlation between stock index and corporate results.

Reason for Devaluation:

1. Inflation: Firstly, the descend, in the rupee was assumed to have taken place to adjust for the high inflation. But, as the rupee continued to go down, apprehensions of further increase in the inflation have appeared.

2. Strengthening of Dollars: Increase in global dollar value can also be attributed as one of the prime reason for the fall in the value of rupee. The demand of dollars due to economic crisis in other countries including Europe has also tremendously increased the dollar demand. The Euro-Zone crisis has weakened the Euro significantly against the US Dollar. In other words dollar is getting stronger in the world markets. Obviously the investors are considering US as safe place to invest in. There was also an increased demand for the dollar in the domestic currency markets due to a flight of foreign funds from the domestic stock markets.

3. Dollar Demand from Stock Markets: Foreign institutional investor’s withdrawal from domestic economy is the one big reason for this depreciation. The Greece Crisis and its rescue package made investor to re-think about their investments. Certain political changes and civil movements are also the factors for foreign institutional investors to become net sellers recently.

4. Fiscal Deficit: The growing trade deficit and large fiscal deficit are also contributing to the fall in the rupee valuations.

Political View:

According to the Government, the reason for the current round of rupee depreciation is related more to current grim global economic environment. The currency of every other emerging economy (barring China that managed its currency peg against the US dollar) is falling. The currencies of Russia, Brazil, South Korea, and Indonesia have plunged by between 6% to 16%. So the 10% fall in the value of rupee against the US dollar is hardly out of context. The sovereign debt woes of European Union are shifting foreign investors from euro assets to dollar assets. There seems to be no other alternative to US dollar.

RBI Mechanics:

RBI is concerned and keeping close watch on the situation. Apart from direct intervention in the currency markets, RBI has taken many other measures such as relaxing external commercial borrowing norms by raising the ceiling on interest rates. It has also increased the interest rate cap on foreign currency deposits. The RBI has removed the USD 100 million cap on net foreign exchange supply arising out of rupee swap transactions that banks undertake on behalf of customers. In order to attract more foreign currency deposits, the RBI has raised the interest rate ceiling. The spreads for NRE term deposits were increased from 1.75% to 2.75% while those on FCNR (B) deposits were increased from 1% to 1.25 %.

Market Forecast:

The wide-ranging perception in the financial market is that until the global macroeconomic environment settles, the rupee will continue to be under pressure. “India’s external position has become increasingly vulnerable to global risk appetite. Further weakness cannot be ruled out,” Royal Bank of Scotland said in a research note. The rupee is down 14.80% on the year, with the closest loser among other Asian units being the Thai baht, which has shed just 3.2%, followed by the Malaysian ringgit that is down 3%.

The rupee’s slither may continue due to the decline in foreign exchange inflows and swelling outflows. The Euro zone, the world’s largest trading block and India’s biggest trading partner, is also in a deep crisis. In times to come, this zone has to stabilise to bring some semblance of order to the global currency markets. Numbers of Indian scams have also distracted government’s concentration away from economy. These scams make the bad image of India in the global market.

At the end of G-20 summit in Seoul recently, world leaders declared (in the backdrop of the US demanding that Chinese currency Yuan should be appreciated to check the Asian giant from taking advantage in international trade) “We will move towards more market determined exchange rate system and enhance exchange rate flexibility to reflect underlying economic fundamentals and refrain from competitive devaluation of currencies. Advanced economies including those with reserve currencies will be vigilant against excess volatility and disorderly movement in exchange rates”.

Attending a meet in Seoul PM, Dr. Manmohan Singh agreed to refrain from “competitive devaluation” and bring in exchange rate flexibility to ensure that no country gets undue advantage.

What Indian Government Can do, to Bring back Positive Vibrations in Indian Economy?

1. Allow free flow of foreign investment for the development of infrastructure and manufacturing sector.

2. Restrain / discourage import of non essential and luxury items e.g. auto sector imports.

3. Interest rates may be increased further on NRE and FCNR accounts.

4. Restrain /discourage export of agricultural produce and basic minerals e.g. iron ore.

5. Promote aggressively exports of manufactured goods like China

6. Promote migration of skilled personnel / work force from India. We have them in plenty.

7. Facilitate the voluntary return of the funds parked outside India.

8. Reduce / cut unnecessarily expenditure of government institutions e.g. Indian Embassies. Ask them to repatriate their surplus fund instead of calling funds from India. Many foreign embassies in India are remitting their surplus to their home countries.

9. Government should observe restraint in offering financial aid to other countries. We are yet not so rich. Our people are still hungry and need night shelters.

What is Consortium?

Question: Whether Joint Deeds of Hypothecations and Joint Deeds of Mortgages executed in Consortium Finance are covered under Section 5 or under Section 6 of Bombay Stamp Act or they do embrace separate and distinct matters or transactions or not? Whether or not they are liable to be stamped as separate instrument with separate stamp duty?

Ans: No, Joint Deeds of Hypothecations and Joint Deeds of Mortgages are not covered under Section 5 nor under Section 6 of Bombay Stamp Act as they do not embrace separate and distinct matters or transactions and not liable to be stamped as separate instrument with separate stamp duty. That Joint Deed of Mortgage & Joint Deed of Hypothecation are executed by the Borrowers in prescribed formats devised by IBA under directions of RBI are not embracing separate deeds or transactions but the documents formats have statutory binding and force and are of one single transaction carried out as a lenders partnership with common rights and liabilities.


What is Consortium?

A group of Independent Companies participating in a Joint Venture for mutual benefit. Companies in a Consortium co-operate with one another, often sharing technology as needed. A Consortium allows the Companies to conduct operations that they would not be able to do individually. It is important to note, however, that a Consortium is not a merger and the Companies remain independent. A group of Organizations that participate in a Joint Venture. Airbus Industries, a European Airplane manufacturer, is a Consortium of four Public and Private Corporations in Britain, France, Spain and Germany. A group of Organizations, sharing the same goals, which combine their resources and risks. Consortium Banking was popular in the late 1970s, when a number of major Banks would combine to form a Merchant-Banking or Finance-Company offshoot. Many of Australia’s Merchant Banks were formed as consortia with European, Asian and US Banks teaming with Australian Banks. Consortium is a coalition of Organizations, such as Banks and Corporations, set up to fund ventures requiring large capital resources. A Consortium is an association of two or more Individuals, Companies, Organizations or Governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. Consortium is a Latin word, meaning ‘partnership, association or society’ and derives from consors ‘’ Partner”, itself from con- ‘together’ and sors ‘fate’, meaning owner of means or comrade.

Consortium of Bank

A Subsidiary Bank owned by several different Banks. Each Owner Bank has an equal share so that no Bank is the majority shareholder. The Owner Banks are often in different countries. A Consortium Bank is created to finance a specific project; once the project is complete, the Consortium Bank dissolves itself. While they are not as common as they once were, they are useful when a project involves multiple currencies.


A Banking Syndicate formed by multiple Banks, often from different countries, for the singular purpose of financing a specific project that is too large for any individual Bank to finance on its own. Under this arrangement participating Banks completion of the project the Consortium Bank is disbanded.

That it means Consortium of Bank itself is a community of interest and member brigs its resources in certain percentage in the common pool. And therefore it shares the security interest in common.

 RBI’s Role in Consortium Finance:-

Large Lending’s are formed always under Consortiums as per the guidelines issued by DBOD of RBI. That DBOD of RBI as such issues circulars and guidelines from time to time including documentation one of such is enclosed at Annexure I hereunder which please be read as part of this opinion as our opinion Consortium of Bank itself is a community of interest and member brigs its resources in certain percentage in the common pool formed under statutory directives and documents are obtained as per the IBA formats strictly devised as per directions of RBI. That in terms of the guidelines which has statutory force the Consortium of Banks has a force of community of interest.

Now the question springs up for my opinion whether a deed of hypothecation or Mortgage created by a borrower in consortium lending shall be treated as one instrument or separate instruments for the purpose of section 5,6 of Bombay Stamp Act. Whether it is a multifarious instrument covering Several distinct matters? We will have to refer the provisions of Bombay Stamp Act

Where several distinct matters and transactions are embodied in a single Instrument, the Instrument is called the multifarious instrument.

Meaning of Distinct Matters:

The expression “Distinct Matters” connotes distinct transaction. The Term Distinct Matters mean the Matters of different kinds such as agreement for service and a lease. Similarly where a document under consideration is both an agreement for dissolution of a partnership and a bond, it is chargeable under Section 5 with aggregate duty with which two such separate instruments would be chargeable.

The word “Instrument” is defined in Section 2(14) to include “every document by which any right or liability is or purports to be, created, transferred, limited, extended, extinguished or recorded.” If by an Instrument a distinct right is transferred it should be described for the purpose of stamp duty as an instrument to transfer of such right. The subject of the schedule of the Stamp Act is the amount of duty to be charged on every instrument mentioned in it, as laid down by Section 3 of the Act. It appears to me to be a subject which is repugnant to the application of the rule that the singular should include the plural. The first column of the first schedule of the Stamp Act is headed as “description of Instrument,” and the second prescribes a duty with reference to the description thereof.

Distinct Matters would be comprised in an instrument, if different transactions are sought to be evidenced by the same deed. So long a transaction is one and the same it would not comprise Distinct Matters simply because the goods or properties dealt with by the transaction happen to be more than one.

When a transaction refers to several Distinct Matters documents can be executed in respect of those several Matters but for convenience can be jointly executed. Although for convenience one document is executed it should be treated as several documents and Section 35 of the Indian Stamp Act has to be applied to every one of those several instruments. It is true that when a document relates to several items of immovable properties and it does not bear a stamp chargeable in respect of all the properties it cannot be admitted in evidence in respect of some of the properties. A document which relates to a transaction relating to five distinct properties cannot be regarded as five documents relating to each of the five properties. But a document which relates to a mortgage of five properties and a receipt for the payment of `. 3500/- can be regarded as two instruments one relating to a Mortgage of immoveable properties and the second relating to the payment of `. 3500. In its popular sense, the expression “distinct matters” would connote something different from distinct “categories”. Two transactions might be of the same description, but all the same, they might be distinct.

Expression “distinct matters” in Section 5 and “description” in Section 6 – Whether have different connotations-Instrument in question-Whether comprised distinct matters. Can be decided only by strict construction and interpretation of relations which subject has with the object.

It is settled law that when two persons join in executing a Power of Attorney, whether it comprises distinct matters or not will depend on whether the interests of the executants in the subject matter of the power are separate or not. Conversely, if one person holding properties in two different capacities, each unconnected with the other, executes a power in respect of both of them, the instrument should logically be held to comprise distinct matters. It was held in 1956 AIR 35, 1955 SCR (2) 842, that the instrument in question in that case being braded as Exhibit A,-the impugned Power of Attorney -comprised distinct matters within the meaning of Section 5 of the Indian Stamp Act in respect of several capacities of the respondent mentioned therein. The fact that the donor of the Power of Attorney executes it in different capacities is not sufficient to constitute the instrument, one comprising distinct matters and thus requiring to be stamped with the aggregate amount of the duties with which separate instruments each comprising or relating to one of such matters would be chargeable under the Act, within the meaning of Section 5 of the Indian Stamp Act.

When two words of different import are used in a statute in two consecutive provisions, it cannot be maintained that they are used in the same sense and therefore the expression “distinct matters” in Section 5 and “description” in Section 6 have different connotations.

The statutory provisions bearing on the question are Sections 3 to 6 of the Act. Section 3 is the charging section, and it enacts that subject to certain exemptions, every instrument mentioned in the Schedule to the Act shall be chargeable with the duty of the amount indicated therein as the proper duty therefore. Section 4 lays down that when in the case of any sale, mortgage or settlement several instruments are employed for completing the transaction, only one of them called the principal instrument is chargeable with the duty mentioned in Schedule 1, and that the other instruments are chargeable each with a duty of one rupee. Section 5 enacts that any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under the Act. Section 6, so far as is material, runs as follows: “Subject to the provisions of the last preceding section, an instrument so framed as to come within two or more of the descriptions in Schedule I, shall, where the duties chargeable there under are different, be chargeable only with the highest of such duties”.

The point for decision is as to the meaning to be given to the words “distinct matters” in Section 5. The contention which found favour with the majority of the learned Judges is that the word “matters” in Section 5 is synonymous with the word “description” occurring in Section 6, and that they both refer to the several categories of instruments which are set out in the Schedule. The argument in support of this contention is that: Section 5 lays down that the duty payable when the instrument comprises or relates to distinct matters is the aggregate of what would be payable on separate instruments relating to each of these matters. An instrument would be chargeable under Section 3 only if it fell within one of the categories mentioned in the Schedule. Therefore, what is contemplated by Section 5 is a combination in one document of different categories of instruments such as sale and mortgage, sale and lease or mortgage and lease and the like, But when the category is one and the same, then Section 5 has no application, and as, in the present case, the instrument in question is a Power-of- Attorney, it would fall under Article 48 (a) in whatever capacity it was executed, and there being only one category, there are no distinct matters within Section 5. We are unable to accept the contention that the word “matter” in Section 5 was intended to convey the same meaning as the word “description” in Section 6. In its popular sense, the expression “distinct matters” would connote something different from distinct “categories”. Two transactions might be of the same description, but all the same, they might be distinct. If ‘A’ sells Survey No. 145 to ‘X’ and Mortgages Survey No. 155 to ‘Y’, the transactions fall under different categories, and they are also distinct matters. But if ‘A’ Mortgages Survey No. 145 to ‘X’ and Mortgages Survey No. 155 to ‘Y’, the two transactions fall under the same category, but they would certainly be distinct matters. But if ‘A’ Mortgages Survey No. 145 & 155 to ‘X’ and ‘Y’ jointly and severally, the two transactions fall under the same category, and they would certainly not be distinct matters. That in Consortium Finance there exist community or association common interest and therefore the Mortgage will be in favor of a group of persons branded as A Bank Consortium and therefore the interpretation that such Mortgage embraces separate and distinct subjects or matters or transaction is misnomer. That person interpreting such is not understanding the concept of consortium finance at all.

As held by Honorable Supreme Court of India in THE MEMBER, BOARD OF REVENUE Versus ARTHUR PAUL BENTHALL {1956 AIR 35 1955 SCR (2) 842} Conversely, if a number of persons join in executing one instrument, and there is community of interest between them in the subject-matter comprised therein, it will be chargeable with a single duty. That in the above case old celebrated judgments were relied on in deciding previously it was held in Davis v. Williams (1804 104 ER 358), Bowen v. Ashley (1804 104 ER 358), Good-son v. Forbes (1804 104 ER 358) and other cases. That if the interests of the executants are separate, the instrument must be construed as comprising distinct matters. In case of community of interest it should not be treated likewise.

Relying on the observations I have to opine that In case of Consortiums relations spurting out are from agreements between parties and a community of interest is created. if such community of interest is spelt out in the documents itself then such Mortgage or Hypothecation can not be said to have separate and distinct matters and such holding will be misinterpretations of law and misapplication of fiscal statute as well as it will be misunderstanding the concept of Consortiums rather it will be poor understanding of legal and factual position concerning Bank lending…

In the said judgment it was further Held that “No instrument chargeable with stamp duty under the heading Letter or Power of Attorney and Commission, Factory, Mandate, or other instrument in the nature thereof’ in the First Schedule to the Stamp Act, 1891, shall be charged with duty more than once by reason only that more persons than one are named in the instrument as donors or donees (whether jointly or severally or otherwise), of the powers thereby conferred or that those powers relate to more than one matter”.

In the matter of Vide Freeman v. Commissioners of Inland Revenue {(1804) 104 ER 358}. Applying the same principle to Powers-of-Attorney, as held in Allen v. Morrison that when members of a mutual insurance club executed single power, it related to one matter, Lord Tenterdon, C. J. observing that “there was certainly a community of purpose actuating all the members of this club”. In Reference under Stamp Act, S. 46(1), a Power of Attorney executed by thirty-six persons in relation to a fund in which they were jointly interested was held to comprise a single matter. On the other hand, where several donors having separate interests execute a single Power-of-Attorney with reference to their respective properties as, for example, when ‘A’ constitutes ‘X’ as attorney for management of his estate Black-acre and ‘B’ constitutes the same person as attorney for the management of his estate White-acre, then the instrument must be held to comprise distinct matters.

If the intention of the legislature was that the expression ‘distinct matters’ in Section 5 should be understood not in its popular sense but narrowly as meaning different categories in the Schedule, nothing would have been easier than to say so. When two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sense, and the conclusion must follow that the expression “distinct matters” in Section 5 and “descriptions” in Section 6 have different connotations.

It is urged against this conclusion that if the word “matters” in Section 5 is construed as meaning anything other than “categories” or in the phraseology of Section 6, “descriptions” mentioned in the Schedule, then there could be no conflict between the two sections, and the clause in Section 6 that it is “subject to the provision of the last preceding section” would be meaningless and useless.

There is no provision in the statute law of this country similar to the above, and it is significant that it assumes that a power of attorney might consist of distinct matters by reason of the fact that there are several donors or donees mentioned in it, or that it relates to more than one matter.

It is, as has been stated above, settled law that when two persons join in executing a Power-of-Attorney, whether it comprises distinct matters or not will depend on whether the interests of the executants in the subject- matter of the power are separate or joint.

That will be in consonance with the generally accepted notion of what are distinct matters, and that certainly was the view that express recited in the power that the executants executed it both in his individual capacity and in his other capacities.

I have to rely on the views expressed in judgment part rendered by Justice BHAGWATI J.- “ dissentingly he observed that “I am unable to agree with the conclusion reached in the Judgment just delivered. While agreeing in the main with the construction put upon Sections 4, 5 and 6 of the Act and the connotation of the words “distinct matters” used in Section 5, I am of the view that the question still survives whether the instrument in question is a single Power of Attorney or a combination of several of them. The argument which has impressed my Brother Judges forming the majority of the Bench is that though the instrument is executed by one individual, if he fills several capacities and the authority conferred is general, there would be distinct delegations in respect of each of those capacities and the instrument should bear the aggregate of stamp duty payable in respect of each of such capacities. With the greatest respect I am unable to accede to that argument. I agree that the question whether a Power of Attorney relates to distinct matters is one that will have to be decided on the consideration of the terms of ‘the instrument and the nature and the extent of the authority, conferred thereby. The fact, however, that the donor of the Power of Attorney executes it in different capacities is not sufficient in my opinion to constitute the instrument one comprising distinct matters and thus requiring to be stamped with the aggregate amount of the duties with which separate instruments each comprising or relating to one of such matters would be chargeable under the Act, within the meaning of Section 5. The transaction is a single transaction whereby the donor constitutes the donees jointly and severally his attorneys for him and in his name and on his behalf to act for him in his individual capacity and also in his capacity as managing director, director, managing agent, agent, secretary or liquidator of any company in which he is or may at any time, thereafter be interested in any such capacity as aforesaid and also as executor, administrator, trustee or in any capacity whatsoever as occasion shall require”.

If the transaction or matter to which the instrument in question relates is single and indivisible and cannot be separated without destroying the object of the transaction it will not be treated as relating to two distinct matters within the meaning of Section 5, Stamp Act. The instrument contains only one contract, a demise; the option of renewal of the lease is ancillary to it and forms part of the consideration for entering into the lease.

It was there held that an instrument can be regarded as falling under two distinct categories each requiring a separate stamp, only where there is what is called a “distinct consideration” for each and not where there is a unity of consideration as in the present case.

The instrument clearly says that the properties shall continue as security until the entire amount due is discharged. Article 6 (2) relating to stamp duty payable, on a pledge runs:

“Article 6. Agreement relating to deposit of title deeds, pawn or pledge, that is to say, any instrument evidencing an agreement relating to …………………………………

(2) the pawn or pledge of moveable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt.”

The very Article gives an Indication of what is meant by pawn or pledge of moveable property. The moveable property must have been given by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt. In this case, moveable property has been pledged for an existing debt. Section 172 of the Indian Contract Act defines “pawn” or “pledge” as bailment of goods as security for payment of a debt or performance of a promise. Clearly, the instrument also satisfies the requirement of Article 6. As the instrument is attested, it does not fall under the exemption to Article 6.

The fact that there has been so much difference of opinion shows that the Stamp Act on the point in question is capable of various interpretations. I think I have to accept that interpretation which is for the benefit of the subject borrower, the Act being purely a fiscal one it is to be construed strictly and no far and no further. That in matters of consortium advances basis of the consortium is not to be destroyed for Stamp Act.

Hence in our opinion Consortium of Bank itself is a community of interest and member brigs its resources in certain percentage in the common pool formed under statutory directives and documents are obtained as per the IBA formats strictly devised as per directions of RBI. That in terms of the guidelines which has statutory force the consortium of banks has a force of community of interest and bank documentation is to be strictly construed as Homogenous transaction and not separate transaction as apprehended.

As a conclusion:- Joint Deeds of Hypothecations and Joint Deeds of Mortgages are not covered under Section 5 nor under Section 6 of Bombay stamp Act as they do not embrace separate and distinct matters or transactions and not liable to be stamped as separate instrument with separate stamp duty. That Joint Deed of Mortgage & Joint Deed of Hypothecation are executed by the Borrowers in prescribed formats devised by IBA under directions of RBI are not embracing separate deeds or transactions but the documents formats have statutory binding and force and are of one single transaction carried out as a lenders partnership with common rights and liabilities. That thus it is admittedly proved fact that the joint documents are not separate and distinct contracts but interwoven as a single transaction and hence they do not embraces separate and distinct matters or transactions and hence not liable to be stamped as separate instrument with separate stamp duty.

This article is for removing the established misconception about the interpretation that such documents embraces separate and distinct matters or transactions and hence not liable to be stamped as separate instrument with separate stamp duty and based on that certain practice adopted by the Banks of over stamping it. It is suggested that borrowers are unnecessarily burdened with such unwarranted stamp duty. If Bank feels it a borrower may be directed to seek the opinion of competent Court and get the confirmation of the situation.

 Annexure I


It is not uncommon to find a Borrower availing Term Loan as well as Working Capital limits from a number of Financial Institutions and Commercial Banks. A Term Loan to a Borrower may be sanctioned jointly by All India Financial Institutions and Banks. Similarly, Working Capital limits may also be availed by the Borrower from a number of Banks partly because of the large size of borrowing and partly to have a degree of flexibility in his operations with different Banks.

The Borrower may have a multiple Banking relationship where he has independent arrangement with each Bank, security offered to each Bank is separate and no formal understanding exists between different Banks financing the same Borrower. Under this arrangement Banks may not be exchanging information on the Borrower and limits might have been sanctioned on different terms and conditions. This arrangement may be preferred by the Borrower as it affords him a great flexibility in operating his accounts with different Banks but goes contrary to the expectations of Reserve Bank which desires that a wholesome view of entire operations of a customer must be taken by the Banks and the assessment of credit needs be also done in totality.

The other arrangement for sanctioning of credit limit to such a Borrower may be to form a Consortium of Banks to take care of the entire needs, of the Borrower. No definite guidelines on formation of consortium of Banks, however, existed in past and it was generally left to the Borrower to decide this issue.

The first attempt in this regard was made by Reserve Bank of India while it constituted a study group in December, 1973, headed by Shri G. Lakshmmaryanan, which submitted its report in July, 1974. The report was accepted by Reserve Bank.

 RBI Guidelines on Consortium Advances

The concept of Consortium Advance has since gone many changes and most of the large Borrowers are now being financed by Banks in consortium. Reserve Bank of India had also issued revised comprehensive guidelines in June 1987 on this subject.

Reserve Bank of India further constituted a Committee in January, 1993. under the Chairmanship of Shri J.V. Setty, Chairman and Managing Director, Canara Bank, to review the extant guidelines on lending under Consortium arrangement and suggest measures for improving the efficiency of banking system in delivery of credit. Based upon the report submitted by the above Committee, Reserve Bank announced important changes in die existing guidelines. Guidelines m applicable to Consortium advance are as under.1

• The overall exposure to a single borrower should not exceed 25%2 of the net worth of the banking institution. For this purpose non fund based facilities shall be counted @ 50%3 of limits sanctioned and added to total fund based facilities to arrive at total exposure to the borrower.

• Exposure limit to group has also now been stipulated. The overall exposure to a group should not exceed 50%2per cent (60%2 in case of infrastructure projects consisting of power, telecommunication, roads and ports) of the net worth of the banking institution.

(a) The borrowers who are already having multiple banking arrangement and enjoy fund based credit limits of Rs. 50.00 crores or more must necessarily be brought under Consortium arrangements. The bank who is having the largest share in the credit facilities would automatically become the leader of Consortium and would ensure that Consortium arrangements are finalised immediately.

(b) The borrowers who are already having multiple banking arrangement and enjoy fund based credit limits of less than Rs.50 crores should also be brought under formal Consortium arrangements at the time of further enhancements which would take the aggregate limits to Rs.50 crores or more. The enhancements in such cases would be considered jointly by the financing banks concerned and the bank which takes up the largest share of fund based limits shall be the leader of the Consortium.

(c) These provisions would also be applicable to new units which approach more than one bank for sanctioning of working capital limits of Rs.50 crores or more.

The net effect of these provision amounts to that no borrower will be allowed to have multiple banking arrangement if the total fund based credit limit sanctioned to him amounts to Rs.50 crores or more. A formal Consortium will have to he constituted in such cases and the bank having largest share in fund based credit limits will automatically assume the status of the leader of the Consortium.

Reserve Bank has since withdrawn its instructions for obligatory formation of Consortium. It will thus not be obligatory on the part of banks to form a Consortium even if the credit limit per borrower exceeds Rs.50 crore. The need based Finance required by the borrowers may, therefore, be extended by the banks either entirely on their own, subject to observance of exposure limits, or in association with other banks. As an alternative to sole/multiple banking/ Consortium arrangement, banks may adopt loan syndication route, irrespective of the quantum of credit involved.

• There is no ceiling on number of banks in a Consortium, whether it is obligatory (fund based credit limits of Rs.50 crates and above from more than one bank) or voluntary (fund based credit limits below Rs.50 crores from more than one bank) in nature. However, the share of a bank as member of Consortium should he a minimum of 5 per cent of the fund based credit limits or Rs.1 crore whichever is more. This provision would itself restrict the number of banks in a Consortium. To illustrate this point let us consider these two examples:

(a) In a Consortium for total fund based credit limits of Rs.3 crores, the minimum share should be Rs1.00 crore.

(b) In a Consortium for total fund based credit limits of Rs.50 crates, the minimum share should be Rs.2,50 crores.

• The banks who have sanctioned term loans to a unit or who have also participated in term loans sanctioned in Consortium with term lending financial institution should also provide working capital facilities to such a unit. ‘These banks may, however, associate other banks, if so warranted, to provide working capital Finance.

• The borrower who is being financed under a formal Consortium arrangement should not avail any additional credit facility by way of bills limits/ guarantees/acceptances, letters of credit etc. from any other bank outside the Consortium. It has been stipulated by Reserve Bank of India that any bank outside the Consortium should not extend any such facility or may not even open a current account without the knowledge and concurrence of the Consortium members.


This stipulation is applicable to even those borrowers who are enjoying total fund based credit limits of above Rs.50 crores from a single bank or under syndication without a Consortium arrangement.


• In case of borrowers enjoying aggregate fund based credit limits of Rs.1 crore and above but below Rs.50 crore from more than one bank, and where there is no formal Consortium arrangement, banks should obtain full details of the credit facilities (including ad hoe facilities) availed of by such borrowers from the banking system, each time any fresh facility/enhancement is sought. Also the banks should ensure timely exchange of information and co ordinated approach in the interest of overall health of advance made to such borrowers. Further, in the case of borrowal accounts enjoying fund based credit limits below Rs.50 crore from more than one bank, the concerned banks will be free to enter into a Consortium arrangement at their option.

• Banks/consortia treat borrowers having multi division/ multi product companies as one single unit, unless there is more than one published balance sheet. Similarly, in the case of merger, the merged unit will be treated as a single unit. In case of split, the separated units will be treated as separate borrowal accounts provided there is more than one published balance sheet.

• In case of borrowers enjoying fund based credit limits of Rs.50 crore and above, the concerned single bank and/or the leader of the existing Consortium, will be free to organise a ‘syndication’ of the credit limits.

• In cases, where banks/consortia/syndicates am unable to adhere to the recommended maximum time frames for disposal of loan applications/ proposals, borrowers will be free to bring in a new bank or new banks to form/ to join a Consortium /syndicate. Within seven days of sanction of any credit facility, such new banks should inform the existing Consortium /syndicate/ regular banks/(s) and. should not disburse the limit without obtaining ‘no objection’. In case such ‘no objection’ certificate is not received within next ten days, it would be doomed that existing consortia/syndicates/regular bank/(s) have no objection to the new bank/(s) joining/forming consortia/syndicates.

• In the cases of existing consortia, if a member bank is unable to take up its enhanced share, such enhanced share in full or in part could be reallocated among the other existing willing members. In case other existing member banks are also unable to take up such enhanced share of an existing & member bank, a new bank willing to take up the enhanced share may be inducted into the Consortium in consultation with the borrowers.

• While a member bank may be permitted not to take to up its enhanced/incremental shares it cannot be permitted to leave a Consortium before expiry of at least two years from the date of its joining the Consortium. An existing member bank way be permitted to withdraw from the Consortium after two years provided other existing member banks and/or a new bank is willing to take its sham by joining the Consortium.

• In cases whore the other existing member banks or a new bank an unwilling to take over the entire outstanding of an existing member desirous of moving out of the Consortium after the expiry of above mentioned period of two years, such bank may be permitted to leave the Consortium by selling its debt at a discount and/or furnishing an unconditional undertaking that the repayment of its dues would be deferred till the dues of other members are repaid in full.


Note : It would be open to a borrower to choose his bank/(s) for obtaining credit facilities as also for the bank/(s) to take a credit decision on the borrower. However, once a Consortium(obligatory or voluntary) is formed, on” of a new member into a Consortium should be in consultation with the Consortium.


• Quite often non availability of data or submission of incorrect data or non receipt of required financial statements results in banks/consortia being not able to take decisions within a stipulated period of time. These data/

• statements include, among other, audited financial results for the last two years, estimated and projected results for’ the current and subsequent years respectively. More often than not borrowers require an average time of at least six months to obtain audited financial statements. Considering all these aspects as also available technology, the following maximum time frames are prescribed for formal disposal of loan proposals provided applications/proposals are received together

• with required details/information supported by requisite financial and operating statements :

Proposals for sanction of fresh/enhanced credit limits60 days (45 days)Proposals for renewal of existing credit limits45 days (30 days)Proposals for sanction of ad hoc credit facilities 30 days(15days

Note: Figures in brackets are the maximum time frames for sanction of export credit limits.

• Further, individual banks/consortia/syndicates should review the borrowal accounts during the first quarter of the current year on the basis of audited statements for the year before lust, provisional statements (where audited statements are not available) for the last accounting year, provisional estimates for the current accounting yew and forecast for the next year. Consequently, individual banks/consordia/syndicates, at their discretion, may release 50 per cent of the additional credit requirement during or before the second quarter of the current accounting year. The remaining 50 per cent could be released consequent to submission of audited results provided there is no significant difference between the provisional estimates and the audited results.

• No bank will be allowed to move out of the Consortium in case of sick/weak units since in such cases all the banks are required to associate themselves with rehabilitation efforts.

• The appraisal of credit proposals will be done by the lead bank.

The customer has to submit all the necessary papers and data regarding appraisal of his limits to the lead bank who will in turn arrange for preparation of necessary appraisal note and its circulation to other member banks. Lead bank must complete the entire work relating to appraisal within the maximum time frame. Reporting to and attending to any correspondence with Reserve Bank of India shall also be the responsibility of lead bank.

• There may sometimes be disagreement between the member banks on the quantum of permissible bank Finance, terms and conditions or any other matter. In such cases, decision of the Consortium will be binding on the lead bank as also other members. Lead bank will however, enjoy the freedom to sanction an additional credit upto a pre determined percentage in emergent situations. The lead bank should however, inform other members immediately together with their pro rata share.

• There also exists a provision for forming steering committee consisting of leader bank and the bank with next highest share in the Consortium. Normally steering committee banks must have more than 5 1 % share. Wherever Consortium fails to reach the consensus, other member banks shall follow the decision of the steering committee.

• Earlier, the terms and conditions including rate of interest, margin etc. finalised at the Consortium meeting were uniformly applicable to all banks. Reserve Bank has however, relaxed the guidelines in this regard with freedom granted to banks to determine their own lending rates for advances above Rs.2 lacs. The banks in a Consortium will now be free to offer different rates of interest and other charges on their shares.

• The ancillary and non fund based business should also be passed on by the borrower to all the member banks in almost the same proportion in which funds based limits are shared.

• The inspection/verification of securities may be done by the lead bank or members in rotation as per arrangement which may be finalised in the Consortium.

• The quarterly operating statements as required under Chore Corn mince for fixation of quarterly operative limits will also be required to be sent to the lead bank who shall in association with the bank having the next largest share in the credit facilities should meet at quarterly intervals and fix the operative limits and also individual bank’s share thereof for the next quarter.

• The information regarding quarterly operating limits fixed in such a manner would be communicated by the lead bank to other member banks.

• In a Consortium, lead bank or the lead bank and the bank with the next highest share will be the final authorities in case of differences of opinion and their views will prevail in all cases of disputes among the member relating to terms and conditions.

From the above discussion it will be appreciated that the borrower under the Consortium arrangements is required to deal with the lead bank and bank having second largest share in total credit limits for an practical purposes. The borrowers were, however, put to inconvenience for execution of varied types of documents etc. with various banks in the Consortium. On the recommendations of ‘Mahadevan Committee’ who submitted its report in April, 1988, Reserve Bank revised guidelines in relation to Consortium advances and the ultimate ideal set for the banking industry is to achieve ‘Single Window Concept For Lending (SWCL), to minimise delay and inconvenience to the borrowers. Single Window Concept has now been brought into operation in respect of two important areas of lending in Consortium as under:

First Disbursement

Lead bank in all Consortium will have the authority from each of the other member banks to make available their shares of entire/enhanced limits if latter’s decision is not conveyed to the lead bank within the prescribed time of two months. The borrower will thus be able to avail first disbursement from the lead bank itself, if other member banks delay their decision. However, after first disbursement as above, the borrower will be allowed to operate his accounts with different member banks according to his requirements subject to the limits allocated to them.


Important recommendations as accepted by Reserve Bank for implementation are as given below:

(i) The borrower should tie required to execute only one document, which will be signed by the lead bank on its own behalf as well as on behalf of other members.

(ii) The lead bank should complete the formalities connected with creation and registration of charge etc. with the Registrar of Companies.

(iii) As soon as the documents are executed, the lead bank shall send a confirmation in this regard to other members by telex/telegram.

(iv) The sharing of security and the rights and responsibilities of the banks, including the lead bank, should be documented by means of an inter se agreement among the members of the Consortium.


To bring, in the uniformity in respect of type of documents to be obtained by different banks. Indian Bank. Association has finalised model documents to be adopted by all the banks uniformly. The document procedure as recommended by IBA for implementation by the banks has been revised and now the execution of following documents:


(i) Resolutions to be passed by the borrower’s Board of Directors authorising the borrowing company to borrow under the Consortium arrangement.

(ii) Working capital Consortium agreement.

(iii) Joint deed of hypothecation.

(iv) Revival letter for purposes of limitation.

(v) Letter of undertaking from the borrower for creating a second mortgage on the fixed assets.

(vi) Agreement to be signed with the lead bank who signs on behalf of itself and on behalf of other member banks.


Model forms for all these documents have already been circulated by IBA to all the banks for implementation and borrowers may approach their bank to get copies of these documents. In addition the banks are required to sign various inter se agreements as per revised proforma adopted by IBA .

Classification of Advance

As per the norms specified by Reserve Bank each borrowal account is to be classified in any of the four categories as under:

(i) Standard Asset

(ii) Sub standard Asset

(iii) Doubtful Asset

(iv) Loss Asset

The banks are further required to make provisioning at the prescribed rates in their profit and loss ale on the basis of the above classification at the time of finalising their annual accounts. Classification of borrowal account has thus assumed an added significance.

As per the practice, member banks were following the classification as given by the lead bank in a Consortium. It has now been stipulated by Reserve Bank that each member bank will classify the ale on its own keeping in view the relevant guidelines. If any bank under the Consortium classifies the ale as 1 sub standard’ all the Banks under the Consortium will have to classify such ale as ‘sub standard’. This stipulation has been brought into effect to ensure that borrower lakes steps to maintain his a/cs with all member banks free of irregularities.

Lead Bank charges

Reserve Bank has permitted the lead bank to charge a suitable fee (say 0.25 per cent of the limits) per annum for various services rendered to the borrower. Detailed guidelines in this regard are as under:

(a) The fee of 0.25 percent per annum is to be reckoned with reference to the fund based working capital credit limits sanctioned by the Consortium.

(b) The rate of fee may be negotiated with the borrowers with the ceiling of 0.25%.

(c) Service charge on enhancement of limits after regular sanction has taken place will be charged on the amount of enhancement/incremental limits.

(d) No fee is payable on syndication of limits.

(c) No service charge is to be levied on working capital limits authorised under special arrangements, by Reserve Bank of India for procurement/purchase under price support/market intervention operations etc. to public sector corporations or agencies of State Government.


It may be mentioned here that formation of Consortium is no more obligatory and instruction relating to conduct of Consortium which were issued by Reserve Bank Iron, time to time have also been withdrawn. Consortium members have been given powers to frame their own ground roles governing the Consortium arrangement viz. number of participating banks, minimum share of each bank, entry into/exit from the Consortium, sanction of additional/adhoc limit in emergent situations/contingencies by lead banks/ other banks, the fee to be charged by the lead bank for the services rendered by it, the grant of any facility by a non member bank etc.


Consortium arrangement of lending for working capital needs will continue to exist for operational convenience of the participating banks as well as borrowers. The ground rules of Consortium arrangements discussed in earlier paragraphs will also hold good in most of the cases with certain modifications and hence may be considered relevant.


Syndication of credit

A syndicated credit is an agreement between two of more lending institutions to provide a borrower a credit facility using common loan documentation. A prospective borrower intending to raise resources through this method awards a mandate to a bank as ‘Lead Manager’ to arrange credit on his behalf. The mandate spells out the commercial terms of the credit and the prerogatives of the mandated bank in resolving contentious issues in the course of the transaction. The mandated bank prepares an Information Memorandum about the borrower in consultation with the latter and distributes the same amongst the prospective lenders soliciting their participation in the credit to be extended to the borrower. The Information Memorandum provides the basis for each lending bank making its own independent economic and financial evaluation of the borrower, if necessary, by seeking additional supporting information from other source as well Thereafter, the mandated bank convenes a meeting to discuss the syndication strategy relating to coordination, communication and control within the syndication process and finalises deal timing. charges towards management expenses and cost of credit, share of each participating bank in the credit, etc. The loan agreement is signed by all the participating banks. The borrower is required to give prior notice to the ‘Lead Manager’ or his agent for drawing the loan amount to enable the latter to tie up disbursements with the other lending banks. Syndication is thus very similar to the system of Consortium lending in terms of disposal of risk and is a convenient mode of raising long term funds by borrowers.

Consortium of banks and financial institutions

Banks are now taking increasing share in term loans sanctioned to borrowers by financial institutions. Granting of working capital assistance remains in the exclusive domain of commercial banks. To avoid delay in project implementation, it is desired that concept of ‘single window clearance’ is brought into operation. It is, therefore necessary that commercial banks either taking a share in term loans and/or financing working capital are associated by all India financial institutions at the appraisal stage of the project. For this purpose, all India financial institutions have to form a Consortium with commercial banks and have proper co ordination in dealing with new investments either by existing companies (as modernisation, diversification, expansion) or by new companies. A summary of important guidelines issued by Reserve Bank in this regard is given below:

Association of commercial banks with the project appraisal: The promoter of a project must identify commercial bank(s) who should be willing to extend term loan and/or working capital Finance for the project. The bank which is to take the maximum share of term loans among the banks and/or working capital Finance should be associated with appraisal exercise initiated by lead financial institutions. The lead bank is to be given full opportunity for expressing views at the time of appraisal. The bank will not be allowed to withdraw unilaterally from the Consortium at a later date. Where more than one bank is associated, the appraisal as finalised jointly by the lead financial institutions and the lead bank should be accepted by other banks. An added advantage of this exercise would be correct estimation of margin required for working capital as part of project cost and help early sanction of requisite working capital limits after sanction of term loan assistance.

Extent of participation in term loan by banks: Restriction earlier imposed by Reserve Bank on participation in term loans by banks were related to the cost of project which have since been modified. The restriction is now placed on the basis of quantum of loan irrespective of the cost of project. The present position in this regard is now as under:

(i) The quantum of loan will be the determining criterion and not the cost of the project.

(ii) Maximum quantum of term Finance /loans sanctioned by a commercial bank together with its other exposures in the form of fund based and non fund based credit facilities, investments, underwriting, and any other commitment, will be restricted to the prudential exposure norm, as prescribed by the Reserve Bank of India from time to time, for individual borrowers/group of borrowers. The earlier ceiling of Rs. 50 crores for individual bank has since been withdrawn.

(iii) Subject to an individual ceiling of term loan for a bank, as per (ii) above various banks in consortia/syndicate may give loans uptoRs.500 crore for each project.

(iv) For projects requiring term finance assistance exceeding Rs.500crore, banks shall continue participating jointly with All India Financial Institutions, subject to share of individual banks not exceeding as per (it) above and that of the banking system Rs.500 crores.

 Ground Rules for Co ordination between hooks and financial institutions1

(1) Time frame for sanction of facilities:

(a) If only two lenders we involved, all the issues with regard to sanction of facilities should be resolved by them by mutual discussion within 60 days front the date of sanction by the lead,

(b) Where more than two lenders we involved, their agreement or disagreement for sanction of facilities must he conveyed by the lead within 60 days from the date of receipt of complete loan application. The other participating institutions must convey their decision within 60days from there receipt of appraisal note from the lead.

(c) Prima facie rejection of the proposal should be conveyed within 30 days.

(d) Sanction in the case of fresh loan proposals involving more than 2 lenders should be conveyed within two months from the date of appraisal note by the lenders.

(e) Where restructuring is involved, the lead should complete the process within 3 months from die receipt of complete proposal and the other participants should convey their decision within 2 months from the receipt of appraisal note.

(2) Asset Classification: Banks and Financial Institutions may classify the, recounts based on their performance as per their books. In cases of restructured and Consortium accounts the classification should he same for ill lenders.

(3) Disciplinary Borrowers: The views of the majority of lenders, in a Consortium (say 70% of total funded exposure), on a Consortium specific basis, should he adopted in regard to changing the management of a defaulting borrower unit.

(4) Levy of Charges: Consortium members should decide the rate of interest to be charged oil borrowal accounts. Punitive charges/penal interest, if any, should not exceed two percentage points above the contracted rate.

(5) Group Approach: Normal funding requirements of the healthy units belonging to a group should not be hampered by adopting group approach.

(6) Sharing of Securities and Cash Flow: Exact modalities with regard to sharing of securities and cash flow has it) he worked out between the Consortium members.

Working Capital Finance by Non Consortium Financial Institution 2

In the case of borrowers, whose working capital is financed under it multiple banking arrangement, file financial institution should obtain an auditor’s certificate indicating the extent of funds already borrowed, before considering the request of the borrower for further working capital Finance.

Prudential Norms for Exposure Limits w.e.f. April, 2002

To ensure that the banks have proper spread in their advance portfolio and do not commit large resources to a single borrower/group for better risk management, Reserve Bank of India has stipulated prudential norms for exposure to a single borrower or group as under:

(a) The overall exposure to a single borrower shall not exceed 15% (20% in case of credit to infrastructure projects) of the capital funds of the banking institution.

(b) The overall exposure to a group shall not exceed 40% of the capital funds of the banking Institution (50% in case of credit to infrastructure projects)


Exposure shall include credit exposure (funded and non funded credit limits) and investment exposure (underwriting and similar commitments) as well as certain types of investments in companies. The sanctioned limits or outstandings, whichever are higher, shall be reckoned for arriving at exposure limit. With effect from 1.4.2003, non fund based exposures should also be reckoned at 100% of the limit or outstandings. Loans and advances granted against the security of bank’s own term deposits may be excluded from the purview of the exposure ceiling. For details refer to Chapter 3 of the Book.


Banks must ensure that its overall commitment to a single borrower/group is invariably within the exposure limit as per prudential norms. No exception in this regard is permitted by Reserve Bank of India except the following exemptions:


(a) The exposure limits would not he applicable to existing/additional credit facilities to weak/sick industrial units under rehabilitation packages; and

(b) Borrowers to whom limits we allocated directly by the Reserve Bank, for food credit, will be exempt from the ceiling.

[R1] Reserve Bank of India has since permitted the banks to decide modalities of the functioning of consortium. Banks may therefore, decide on all issues including rates of interest, allocation of limits, sharing pattern, sanction of adhoc limits etc. in the consortium meting The guidelines issued by Reserved Bank may thus be taken as indicative only.

[R2]The exposure ceiling limits applicable from 1.4.2002 is 15 percent of capital fund in case of single borrower and 40 percent in the case of a borrower group. In case of credit to infrastructure projects this ceiling shall he enhanced to 20% in case of a single borrower and 50% in case of a group.

[R3]Effective from April 1, 2003. non fund based exposure shall he taken at 100%.

[R4]The exposure ceiling limits applicable from 1.4.2002 is 15 percent of capital fund in case of single borrower and 40 percent in the case of a borrower group. In case of credit to infrastructure projects this ceiling shall he enhanced to 20% in case of a single borrower and 50% in case of a group.

[R5]The exposure ceiling limits applicable from 1.4.2002 is 15 percent of capital fund in case of single borrower and 40 percent in the case of a borrower group. In case of credit to infrastructure projects this ceiling shall he enhanced to 20% in case of a single borrower and 50% in case of a group.

[R6]Circular No. DBOD. BP. BC. 82/21.04.048/00 01, dt. 26.2.2001.

[R7] As per RBI FIC No. 85/01 02.00/95 96 dt. 26.6. 1996

[R8] Vide DBOD No. Dir, BC 20/13.03.00/2002-03 dt. 20.8.2002.

Source : http://rushabhinfosoft.com/Webpages/BHTML/CH-20.htm.

 Annexure II

Date: Aug 05, 2009

Lending under Consortium Arrangements/Multiple Banking Arrangements



August 5, 2009

The CEOs of the Select All-India Term-lending and Refinancing Institutions

(Exim Bank, NABARD, NHB and SIDBI)

Dear Sir,

Lending under Consortium Arrangements/Multiple Banking Arrangements

Please find enclosed Circular DBOD.No.BP.BC.46/08.12.001/2008-09 dated September 19, 2008 on the above subject along with subsequent circulars DBOD.No.BP.BC.94/ 08.12.001/2008-09 dated December 08, 2008 and DBOD No. BP. BC. 110 / 08. 12. 001 /2008-09 dated February 10, 2009 respectively and DBS.CO.FrMC.BC.No.8/23.04.001/2008-09 dated June 24, 2009. It is advised that the above guidelines on Consortium arrangements/multiple banking arrangements issued to banks, shall mutatis mutandis apply to the select all-India Financial Institutions (AIFIs) for sharing of information among the AIFIs and with banks.

Yours faithfully,

(Vinay Baijal)

Chief General Manager

Encls : As above



Reema Srivastava

ABSTRACTS OF THE ARTICLE (as available on web)

Working capital is the fund invested in current assets and is needed for meeting

day to day expenses. Working capital is the fund invested in current assets. It occupies an important place in a firm’s Balance Sheet. Working capital financing is a specialized area and is designed to meet the working requirements of a business. The main sources of working capital financing are trade credit, bank credit, factoring and commercial paper.

Out of all these, this paper is related only to bank credit which represents the most

important source for financing of current assets. The firms generally enjoy easy access to the bank finance for meeting their working capital needs. But from time to time, Reserve Bank of India has been issuing guidelines and directives to the banks to strengthen the procedures and norms for working capital financing. This paper attempts to analyse the role of bank credit in financing working capital needs of firms. It also tries to give a bird’s eye view about the guidelines issued by RBI to banks in relation to working capital financing.


Working capital is that portion of a firm’s capital which is employed in short term

operations. Current assets represent Gross Working Capital. The excess of current assets over current liabilities is Net Working Capital. Current assets consists of all stocks including finished goods, work in progress, raw material, cash, marketable securities, accounts receivables, inventories, short term investments, etc. These assets can be converted into cash within an accounting year. Current liabilities represent the total amount of short term debt which must be settled within one year. They represent creditors, bills payable, bank overdraft, outstanding expenses, short term loans, etc.The working capital is the finance required to meet the costs involved during the operating cycle or business cycle. Operating cycle is the period involved from the time raw materials are purchased to the time they are converted into finished goods and the same are finally sold and realized. The need for current assets arises because of operating cycle. The opera ting cycle is a continuous process and therefore the need for current assets is felt constantly. Each and every current asset is nothing but blockage of funds.

Therefore, these current assets need to be financed which is done through Working

Capital Financing.

There is always a minimum level of current assets or working capital which is

continuously required by the firm to carry on its business operations. This minimum level of current assets is known as permanent or fixed working capital. It is permanent in the same way as the firm’s fixed assets are. This portion of working capital has to be financed by permanent sources of funds such as; share capital, reserves, debentures and other forms of long term borrowings. The extra working capital needed to support the changing production and sales is called fluctuating or variable or temporary working capital. This has to be financed on short term basis. The main sources for financing this portion are trade credit, bank credit, factoring and commercial paper. It is in this context that bank financing assumes significance in the working capital financing of industrial concerns.


A commercial bank is a business organization which deals in money i.e. lending and borrowing of money. They perform all types of functions like accepting deposits, advancing loans, credit creation and agency functions. Besides these usual functions, one of the most important functions of banks is to finance working capital requirement of firms. Working capital advances forms major part of advance portfolio of banks. In determining working capital requirements of a firm, the bank takes into account its sales and production plans and desirable level of current assets. The amount approved by the bank for the firm’s working capital requirement is called credit limit. Thus, it is maximum fund which a firm can obtain from the bank. In the case of firms with seasonal businesses, the bank may approve separate limits for ‘peak season’ and ‘non-peak season’. These advances were usually given against the security of the current assets of the borrowing firm.

Usually, the bank credit is available in the following forms:

Cash Credit – Under this facility, the bank specifies a predetermined limit and the borrower is allowed to withdraw funds from the bank up to that sanctioned credit limit against a bond or other security. However, the borrower can not borrow the entire sanctioned credit in lump sum; he can draw it periodically to the extent of his requirements. Similarly, repayment can be made whenever desired during the period. There is no commitment charge involved and interest is payable on the amount actually utilized by the borrower and not on the sanctioned limit.


❖ Overdraft – Under this arrangement, the borrower is allowed to withdraw funds in

excess of the actual credit balance in his current account up to a certain specified limit during a stipulated period against a security. Within the stipulated limits any number of withdrawals is permitted by the bank. Overdraft facility is generally available against the securities of life insurance policies, fixed deposits receipts, Government securities, shares and debentures, etc. of the corporate sector. Interest is charged on the amount actually withdrawn by the borrower, subject to some minimum (commitment) charges.

 ❖ Loans – Under this system, the total amount of borrowing is credited to the current account of the borrower or released to him in cash. The borrower has to pay interest on the total amount of loan, irrespective of how much he draws. Loans are payable either on demand or in periodical instalments. They can also be renewed from time to time. As a form of financing, loans imply a financial discipline on the part of the borowers.

Bills Financing – This facility enables a borrower to obtain credit from a bank against its bills. The bank purchases or discounts the bills of exchange and promissory notes of the borrower and credits the amount in his account after deducting discount. Under this facility, the amount provided is covered by cash credit and overdraft limit. Before purchasing or discounting the bills, the bank satisfies itself about the creditworthiness of the drawer and genuineness of the bill.

❖ Letter of Credit – While the other forms of credit are direct forms of financing in which the banks provide funds as well as bears the risk, letter of credit is an indirect form of working capital financing in which banks assumes only the risk and the supplier himself provide the funds. A letter of credit is the guarantee provided by the buyer’s banker to the seller that in the case of default or failure of the buyer, the bank shall make the payment to the seller. The bank opens letter of credit in favour of a customer to facilitate his purchase of goods. This arrangement passes the risk of the supplier to the bank. The customer pays bank charges for this facility to the bank.

Working Capital Loan – Sometimes a borrower may require additional credit in excess of sanctioned credit limit to meet unforeseen contingencies. Banks provide such credit through a Working Capital Demand Loan (WCDL) account or a separate ‘non–operable’ cash credit account. This arrangement is presently applicable to borrowers having working capital requirement of Rs.10 crores or above. The minimum period of WCDL keeps on changing. WCDL is granted for a fixed term on  maturity of which it has to be liquidated, renewed or rolled over. On such additional credit, the borrower has to pay a higher rate of interest more than the normal rate of interest.


Banks generally do not provide working capital Finance without adequate security. The nature and extent of security offered play an important role in influencing the decision of the bank to advance working capital Finance. The bank provides credit on the basis of following modes of security:

Hypothecation – Under this mode of security, the banks provide working capital Finance to the borrower against the security of movable property, generally inventories. It is a charge against property for the amount of debt where neither ownership nor possession is passed to the creditor. In the case of default the bank has the legal right to sell the property to realise the amount of debt.

Pledge – A pledge is bailment of goods as security for the repayment of a debt or fulfillment of a promise. Under this mode, the possession of goods offered as security passes into the hands of the bank. The bank can retain the possession of goods pledged with it till the debt (principal amount) together with interest and other expenses are repaid. . In case of non-payment of loan the bank may either; Sue the  borrower for the amount due;Sue for the sale of goods pledged; or After giving due notice, sell the goods.

❖ Lien – Lien means right of the lender to retain property belonging to the borrower until he repays the debt. It can be of two types:

(i) Particular lien and (ii) General lien.

Particular lien is a right to retain property until the claim associated with the property is fully paid. On the other hand, General lien is applicable till all dues of the lender are paid. Banks usually enjoy general lien.

 ❖ Mortgage Mortgage is the transfer of a legal or equitable interest in a specific immovable property for the payment of a debt. In case of mortgage, the possession of the property may remain with the borrower, while the lender enjoys the full legal title. The mortgage interest in the property is terminated as soon as the debt is paid.

Mortgages are taken as an additional security for working capital credit by banks.

 ❖ Charge – Where immovable property of one person is made security for the payment of money to another and the transaction does not amount to mortgage, the latter person is said to have a charge on the property and all the provisions of simple mortgage will apply to such a charge. A charge may be created by the act of parties or by the operation of law. It is only security for payment.


Till the sixties, bank credit for working capital was available easily and in convenient form to industrial borrowers. Further, the cash credit arrangement, the

principal device through which such Finance has been provided, is quite advantageous from the point of view of borrowers. Banks have not been concerning themselves about the soundness of the borrower or about the actual end use of the loan. Bank financing was mainly security oriented. This security oriented system tended to favour borrowers with strong financial resources irrespective of their economic function. This resulted in the concentration of economic power. Another problem was that the increase in the bank credit was not commensurate with the expansion in the level of inventory and production. This resulted in a number of distortions in financing of working capital by banks. Major Banks was nationalized in 1969 and with that, approach to lending also changed. Consequently, bank credit has been subjected to various rules, regulations and controls. The basic objective of regulation and control of bank credit is to ensure its equitable distribution to various sectors of the Indian economy. The RBI has been trying, particularly from the mid-sixties onwards, to bring a measure of discipline among industrial borrowers and to redirect credit to priority sectors of the economy. The RBI has been issuing guidelines and directives to the banking sectors towards this end. Important guidelines and directives have derived from the recommendations of certain specially constituted groups assigned with the task of examining various aspects of bank finance to industry.



In the past, working capital financing was constrained with detailed regulations on how much credit the banks could give to their customers. The recent changes made by RBI in the guidelines for bank credit for working capital Finance are discussed below:

1. The notion of Maximum Permissible Bank Finance (MPBF) has been abolished by RBI and a new system was proposed by the Indian Banking Association (IBA). This

has given banks greater freedom and responsibility for assessing credit needs and

credit worthiness. The salient features of new system are:


– For borrowers with requirements of upto Rs. 25 lakhs, credit limits will be

computed after detailed discussions with borrower, without going into detailed



– For borrowers with requirements above Rs. 25 lakhs, but upto Rs. 5 crores, credit

limit can be offered upto 20% of the projected gross sales of the borrower.


– For large borrowers not selling in the above categories, the cash budget system

may be used to identify the working capital needs.

However, RBI permits banks to follow Tandon/Chore Committee Guidelines and retain MPBF concept with necessary modifications.

2. Earlier RBI had prescribed Consortium arrangements for financing working capital beyond Rs. 50 crores. Now it is not essential to have Consortium arrangements. However, banks may themselves decide to form Consortium so that the risks are spread. The disintegration of Consortium system, the entry of term lending institutions into working capital finance and the emergence of money market borrowing options gives the best possible deal.

3. Banks were advised not to apply the second method of lending for assessment of MPBF to those exporter borrowers, who had credit export of not less than 25% of their total turnover during the previous accounting year, provided that their fund based working capital needs from the banking system were less than Rs. 1 crore. RBI has also suggested that the units engaged in export activities need not bring in any contribution from their long term sources for financing that portion of current assets as is represented by export receivables.

4. RBI had also issued lending norms for working capital, under which the banks would decide the levels of holding of inventory and receivables, which should be supported by bank finance, after taking into account the operating cycle of an industry as well as other relevant factors. Other aspects of lending discipline, viz; maintenance of minimum current ratio, submission and use of data furnished under quarterly information system etc. would continue though with certain modifications, which would make it easier for smaller borrowers to comply with these guidelines.


From the above discussion we can say that bank credit occupies an important

place in financing working capital requirements of industries. Working capital financing is a specialized line of business and largely dominated by commercial banks. Generally, the bank finance for meeting working capital needs is easily available to firms. But it has been always difficult to determine the norms for an adequate quantum of bank credit required by an industry for working capital purpose. Various committees have been set up for examining the working capital financing by banks and to recommend norms for and to regulate bank credit. Besides this from time to time, Reserve Bank of India has been issuing guidelines and directives to the banks to strengthen the procedures and norms for working capital financing.


1. Bhalla, V. K., (2003), Working Capital Management, New Delhi, Anmol Publications Private Limited, 5th Edition.

2. Chandra, Prasanna, (2001), Financial Management: Theory and Practices, New

Delhi, Tata McGraw Hill Publishing Company Limited, 5th Edition,.

3. Khan, M. Y. and Jain, P. K., (2004), Financial Management: Text and Problems,

New Delhi, Tata McGraw Hill Publishing Company Limited, 4th Edition.

4. Maheshwari, S. N., (2004), Financial Management: Principles and Practices, New

Delhi, Sultan Chand & Sons Educational Publishers, 9th Edition.

5. Pandey, I. M., (2001), Financial Management, New Delhi, Vikas Publishing House

Private Limited, 8th Edition.

6. Srinivasa, S., (1999), Cash and Working Capital Management, New Delhi, Vikas

Publishing House Private Limited.

Scholarly Article written by Research Scholar Reema Shrivastava Faculty of Commerce BHU Varanasi

Dispute Settlement in the World Trade Organization


“Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.”

World Trade Organization, Article 21.1 of the DSU

In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes or Dispute Settlement Understanding (DSU) (annexed to the “Final Act” signed in Marrakesh in 1994) . Pursuant to the rules detailed in the DSU, member states can engage in consultations to resolve trade disputes pertaining to a “covered agreement” or, if unsuccessful, have a WTO panel hear the case . The priority, however, is to settle disputes, through consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached the full panel process.

The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions . The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body (DSB) . Like the General Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible for administering the DSU, i.e. for overseeing the entire dispute settlement process. It also has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize the suspension of obligations under the covered agreements. The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU .

Since 1 January 1995 to 1 March 2007 of the extent to which WTO Members have complied with adverse WTO dispute settlement rulings rendered both by dispute settlement panels and the Appellate Body. The record indicates that, generally speaking, WTO Members found in violation of their WTO obligations in dispute settlement proceedings have done a reasonably good job in taking steps to correct these violations within a reasonable period of time. While there have been some cases where compliance has been delayed or where full compliance has yet to be achieved, this should not detract from the fact that the overall compliance record of WTO Members has been quite positive, which in turn has contributed significantly to the effectiveness of the WTO dispute settlement system as a whole.

It is to be recalled that Article 3.7 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) clearly states that the preferred remedy under the WTO dispute settlement system is the withdrawal of any WTO-inconsistent measure. If and only if this is not possible on a timely basis are alternative remedies to be pursued. These alternative remedies are (i) the granting of compensation by the responding Member to the complaining Member consisting of trade liberalization measures with respect to a volume of trade comparable to that adversely affected by the WTO-inconsistent measures; and (ii) if compensation is not possible and as a last resort, retaliation by the complaining Member consisting of trade-restrictive measures of a proportionate nature against the trade of the responding Member .

Up until 1 March 2007, there have been panel or panel/Appellate Body reports adopted by the WTO Dispute Settlement Body (DSB) in 109 cases excluding reports from so-called Article 21.5 of the DSU compliance proceedings, which have occurred in roughly one out of every five cases where WTO violations have been found in the original WTO litigation proceedings . Of the 109 adopted panel or panel/Appellate Body reports, in nearly 90% of these cases the panel and/or the Appellate Body have found WTO violations.

Only 17 WTO Members—counting the European Communities as 1 Member rather than as 27 Members—or about 30% of all 150 WTO Members—counting the European Communities in this calculation as 27 Members—have ever been the object of adverse or partially adverse rulings by WTO panels and/or the Appellate Body for which compliance was required. Seven of these 17 WTO Members have been the object of only one adverse or partially adverse ruling. These seven Members are Brazil, the Dominican Republic, Egypt, Guatemala, Indonesia, Thailand, and Turkey.

Ten WTO Members have had multiple adverse or partially adverse rulings in WTO litigation proceedings. These 10 Members are (with the number of cases in which violations against them were found in parentheses) the United States (33), European Communities (16), Canada (8), Argentina (6), India (4), Mexico (4), Korea (5), Japan (4), Chile (2), and Australia (2).


As has been widely acknowledged by WTO Members themselves, the overall compliance record of WTO Members with adverse WTO dispute settlement rulings has generally been quite good in the cases to date in which WTO violations have been found. In virtually every one of these cases, the WTO Member found in violation of its WTO obligations has indicated its intention to bring itself into compliance and in most cases has already done so.

The record has also shown that compliance has usually been more rapid where WTO violations could be corrected through administrative action under the control of the Executive as opposed to legislative action. This outcome is not surprising since legislative action involves more complicated political processes; the enactment of corrective remedies through changes to national statutes usually takes a longer period of time in most national systems. As will be seen further, the experience of the United States in this regard is instructive.

The use of compensation as a transitional remedy until full compliance could be achieved has only occurred in one case . Thus, the WTO dispute settlement model in practice has been a ‘compliance-retaliation’ model rather than a ‘compliance-compensation-retaliation’ model.

As for the resort to retaliation, out of the 109 cases where a panel or panel/Appellate Body report was adopted, retaliation has been requested in only 18 instances of which 9 have gone through the arbitration process under Article 22.6 of the DSU to establish the proper level of retaliation. The DSB granted authorization to retaliate in only eight cases. In one case (US—1916 Act), the WTO-inconsistent measure was withdrawn soon after the arbitration was completed, thus obviating the need for final DSB authorization of retaliation. More will be said on retaliation in the final section subsequently.

Compliance Problems in WTO Dispute Settlement:

This Comment surveys the problems of compliance facing the World Trade Organization (WTO) dispute settlement system and considers reforms that might improve compliance. In general, the WTO dispute settlement system has an excellent compliance record. A recent examination of the implementation record of WTO decisions for the first ten years of WTO dispute settlement found a compliance rate of 83% . Although new problem cases continue to arise, several of the ten problem cases outstanding at the time of the study have since been resolved . This compliance rate is very good for an international state-to-state dispute settlement system .Moreover; the success rate of consultations in WTO cases that do not result in either adopted panel or Appellate Body reports is impressive . The picture, however, is not so rosy if one looks beyond general statistics and considers the quality and timeliness of compliance actions.

Timeliness also encompasses inquiries into whether the time taken by the panel and appellate processes has met the standards specified in the WTO Dispute Settlement Understanding (DSU) .

An examination of the quality and timeliness of compliance in the first ten years of the WTO dispute settlement system reveals some interesting patterns. General Agreement on Tariffs and Trade (GATT) and Trade- Related Aspects of Intellectual Property Rights (TRIPS) cases typically result in the timely withdrawal of the contested measure . The two TRIPS cases brought against the United States and the European Communities –Bananas case are the main exceptions to this trend . In other words, the desired result has generally been achieved in GATT and TRIPS cases. There have also typically been timely withdrawals of the contested measures in safeguard and textiles cases; however, the contested measures in these cases were often in place for all or most of the initially intended period of effectiveness . Thus, compliance was timely in terms of respecting the reasonable period of time for implementation set by the WTO dispute settlement process, but the overall WTO process took so long that implementation was not very meaningful in practical terms .

Finally, with respect to the overall timeliness of the panel and appellate process, a detailed examination of the time taken by panels to issue their reports shows that panels typically exceed the targets set in the DSU by many months, especially in Article 21.5 compliance proceedings .While the Appellate Body usually issues its report within ninety days of an appeal , the overall time taken by the process— especially when the “reasonable” periods of time for implementation are taken into account— is quite long . This Comment will not further consider the problem of the length of proceedings, except to note that reforms are both needed and feasible .

Taken together, the foregoing suggests that although the WTO dispute settlement system may have an admirable record overall, considerable room for improving the quality and timeliness of compliance exists. Indeed, businesses have expressed concerns about non-compliance and delays as reasons not to use the WTO dispute settlement system, which raises serious concerns for the future . Thus, it is appropriate to consider the question of what changes might be made to the system to address these problems. It has been considered that the changes in compensation and retaliation rules could resolve the dispute settlement system more perfect.


The United States and the European Communities are the two WTO Members that have by far not only initiated the greatest number of WTO litigation proceedings against other WTO Members but that have also had the most number of litigation proceedings initiated against them. Thus, it is particularly instructive to review the compliance record of the United States and the European Communities, since together they have been the object of about one half of all adverse WTO rulings.

The United States has been the object of adverse or partially adverse rulings as a respondent in 33 cases. In four other cases, no WTO violations were found and the United States was fully exonerated. Of the 33 cases where violations were established, the United States has been able to comply or is in the process of complying solely through administrative actions in 26 cases. Sixteen of these were either anti-dumping or subsidy cases, three were textile cases, four were safeguard cases and three involved other WTO violations. As of 1 March 2007, the steps taken by the United States to implement the rulings and recommendations of the DSB in US—Upland Cotton, US—Oil Country Tubular Goods Sunset Reviews, and US—Gambling were in compliance proceedings under Article 21.5 of the DSU. In seven cases legislative action has been or is necessary to bring the United States into compliance. In four out of these seven cases, the US Congress has already passed remedial legislation . Indeed, these legislative acts to comply by the US Congress, all taken since late 2004, have been among the most noteworthy and positive developments for the WTO dispute settlement system, given the previous harsh criticism of the system emanating from certain members of the US Congress, particularly with respect to trade remedy cases. There are some transitional problems in the US—Offset Act (Byrd Amendment) case since the legislation repealing the Byrd Amendment does not take effect until 1 October 2007 and remedial legislative action is still required in the other three cases. Nonetheless, recent congressional actions to implement adverse WTO panel and Appellate Body reports have been significant and their importance for maintaining the legitimacy of the WTO dispute settlement system should not be underestimated.

As for the European Communities, it has been the object of adverse or partially adverse rulings in 16 of the 19 completed cases in which it was the responding party. In addition, the European Communities settled the matter prior to the issuance of the final panel report in three instances. In all 16 cases where the European Communities was found to be in violation of certain of its WTO obligations, the European Communities committed to bring itself fully into compliance with the adverse panel and Appellate Body reports. Its actual compliance record has also been good, although the administrative and legislative processes which must be observed to implement a decision are of course quite different from those used in the United States . While the United States and the European Communities have been the WTO Members with the most extensive compliance experience, other WTO Members, both developed and developing, have also had to comply with adverse WTO rulings and, for the most part, have done so in a satisfactory fashion. As for other developed country WTO Members, Canada has taken actions to comply in six cases . Canada has yet to comply in the two regional aircraft subsidy cases successfully brought against it by Brazil. For its part, Japan has taken actions to comply in three cases where WTO violations were found and settled the matter prior to the adoption of the final panel report in one instance. Finally, Australia has taken actions to comply in the two cases where WTO violations were found.

A problem with the implementation of WTO dispute settlement recommendations and rulings is the lack of guidance over what exactly a losing party must do to comply. The tendency has been for the losing party to take minimal steps and declare itself in full compliance. The winning party often disagrees. One solution is to refer the matter to a compliance panel under art 21.5 of the DSU.In EC—Bananas III (Ecuador) and EC—Bananas III (US) , the DSB authorized retaliation for both Ecuador and the United States against the European Communities. However, only the United States actually imposed retaliatory measures against $115 million of its trade with the European Communities. These measures were subsequently withdrawn after a bilateral settlement and are no longer in effect.

In EC—Hormones (Canada) and EC—Hormones (US) , the DSB authorized retaliation for both Canada and the United States against the European Communities and both imposed retaliatory measures—the United States against $130 million of trade and Canada against some $20 million of trade. Despite claims by the European Communities that it has brought itself into compliance with the original panel and Appellate Body reports, these retaliatory measures currently remain in place. The European Communities has initiated dispute settlement proceedings against Canada and the United States seeking their removal .

In US—Offset Act (Byrd Amendment) , the DSB authorized retaliation by the eight original complaining parties against the United States, with the amount of the retaliation to be directly tied to the amount of the anti-dumping and countervailing duties actually refunded to US petitioners under the WTO-inconsistent statute. To date, only the European Communities, Canada, Japan, and Mexico have actually imposed retaliatory measures against US trade. Following a recent US court ruling that the Byrd Amendment does not apply to Canada and Mexico by virtue of certain NAFTA provisions, Canada and Mexico withdrew their retaliatory measures. However, the European Communities and Japan have indicated that their retaliatory measures will remain in place as long as anti-dumping and countervailing duties assessed against their exports to the United States continue to be distributed to domestic producers under the Byrd Amendment. This distribution of duties assessed may continue to occur with respect to certain existing orders even after the repeal of the Byrd Amendment becomes effective on 1 October 2007.

Finally, in the regional aircraft subsidy cases (Canada—Aircraft Credits and Guarantees and Brazil—Aircraft) brought by Canada and Brazil against each other, the DSB authorized retaliation for each side against the other, but retaliatory measures have never been imposed as the two sides continue to seek a negotiated settlement to the dispute.

Implications for Panel Reform

Consideration of how the WTO dispute resolution process is perceived and the criticisms to which it has been subjected may provide useful information to policy makers in assessing how the panel process might be improved.

A. General Principles for Reform

In light of the concerns discussed above, we should arguably focus panel reform on a few central issues, such as: (i) the need for panels to exercise restraint and refrain from moving into areas where negotiated rules are unclear, (ii) the need to focus on compliance in cases where the rules are clear and there has been a violation, and (iii) the need to ensure that the capabilities of the system are realistically portrayed and appreciated by Parties.

Encouraging panelists to exercise restraint may be pursued simply through recognition of the dangers inherent in “activism” and “law making,” and in creating a culture among the community of practitioners, WTO officials, and potential panelists that reflects the importance of closely adhering to the terms of relevant agreements and applicable standards of review. More radical proposals – such as altering the negative consensus rule to allow some percentage of DSB Members to block a panel decision – would obviously be much more controversial. In terms of compliance, the Parties to the DSB have already begun consideration of ways to streamline and clarify procedures after a panel has rendered an opinion. Finally, ensuring that the capabilities of the system are realistically assessed may suggest that we should go slowly in pursuing a more “adjudicative” structure for panels – a structure that could inappropriately downplay the continued need for negotiation and diplomatic interchange to achieve resolution of disputes.

B. Specific Proposals for Reform

Concerns such as those set out above may also have implications for specific reform proposals that have been offered to increase the efficiency, consistency and transparency of panels. A few specific proposals are discussed below.

1. Permanent Body of Panelists: One proposal for panel reform that has received quite a bit of attention is the notion of establishing a permanent system of panelists, similar to that existing in the Appellate Body . In light of the challenges facing the overall dispute settlement system, however, there are other considerations that could be brought to bear on the issue.

First, are there not benefits to the current system, whereby countries play an active role in the selection of panelists? 4 Since parties to a dispute arguably bear some responsibility for the composition of panels, they may be less inclined to criticize particular panelists for bias, lack of qualifications to hear a particular matter, etc. Certainly, such criticisms would be deflected to some degree to the extent Parties participate in the selection process.

Second, would a permanent body of panelists “put a face” on the panel system that is easier to attack by opponents. Under the current system, there is likely to be a greater diversity of panelists in terms of background, outlook, and experience as parties to a dispute seek to have panelists uniquely appropriate for their particular case, and perhaps favorable to a particular country’s outlook. While this may lead to less consistency, it may also create a less definable target for opponents who want to paint the system as dominated by “international bureaucrats” set on undermining national sovereignty.

Finally, would a permanent system of panelists not raise its own questions as to the ideological bent of panelists? A permanent body might give rise to fewer concerns about the bias of individual panelists against a particular country. While this may be true, a permanent body might be perceived as more ideological and more given to developing the predispositions – whatever they may be – of professional trade officials. Arguably, an expert body might feel more comfortable, and more qualified, than ad hoc panels in venturing into ambiguous areas that are better left to negotiations – exacerbating concerns that panels are “making law.” This is not meant to suggest that these considerations are decisive or would outweigh the arguments in favor of more consistency and professionalism – only that they should be part of the mix in considering reforms .

2. Transparency

Many proposals for panel reform have focused on transparency and in some sense these reforms seem obvious. Making the system more open and less mysterious would seem to have obvious benefits, if for no other reason than that it would deprive critics of a powerful argument about democracy and fairness. While the fundamental benefit of transparency seems clear, looking at the issue with an eye toward the challenges facing the dispute resolution system in general does raise some additional considerations. Undoubtedly, many of the groups and individuals that have sought greater access to the WTO have done so out of a legitimate desire to work constructively within the system. The disruption seen at Seattle, however, raises the prospect that certain groups are interested more in destroying than improving the WTO .

This fact has implications for reform. Transparency in the context of the dispute resolution process is arguably best focused on two goals: (i) to allow interested groups and individuals to better follow and understand the workings of the system, and (ii) to the extent practicable, to allow greater input that will help elucidate the proper scope and application of WTO agreements. On the other hand, to the extent proposals for reform would heighten opportunities for activists to politicize cases or put extraneous pressure on panelists, the implications for the system may be far less positive.



The incentive for governments to negotiate and abide by international trade agreements depends in part on the effectiveness of enforcement provisions. Effective enforcement is particularly important for developing countries, as they will rarely be able to exert credible threats against large trading entities that do not abide by the negotiated rules of the game and often will not appear on the ‘radar screen’ of the WTO.

Domestic enforcement is a vital dimension in enhancing the relevance of multilateral commitments to domestic stakeholders (importers, exporters, consumer groups). In most countries, including high income nations, domestic interests are restricted in their ability to contest actions by national government agencies that violate WTO commitments. Civil society has a strong interest in seeking to maximize the extent to which international treaty obligations can be invoked in national legal systems. This will remove a number of layers of uncertainty and complexity associated with bringing cases to the WTO. Strengthening national enforcement mechanisms can help make the WTO a more relevant instrument from an economic development perspective by increasing the ownership of negotiated commitments. It also relaxes the constraint of having to convince one’s government to bring a case to the WTO and will reduce the burden of DSP at the WTO level. The easiest way of making WTO commitments enforceable nationally is to expand on the type of challenge mechanisms that have been introduced in the GPA.

The private sector must play a much greater role in enforcement. In part this can be achieved by

designing domestic legal mechanisms that increase the incentive for them to collect, compile and transmit information on the measures that are being applied by governments, both their own and foreign. Thus, there is a close link to our first point — giving private interests standing in domestic fora (via a general challenge procedure) can be expected to be a great motivator for greater involvement in both the development and enforcement of multilateral disciplines. But greater private sector participation is also vital in order to ensure that developing countries can defend their rights at the WTO level. This upstream dimension of DSP at the WTO is as important as the efficacy of the downstream panel and Appellate Body process.

Developing countries have an interest in re-negotiating the existing legal framework for remedies.

Remedies in the WTO do not guarantee paritas armis among the various players and unless corrective action is taken, developing countries might have even less incentive to submit cases. On this particular issue we side with Bhagwati’s (1999) proposal to opt for re-negotiation of concessions (instead of keeping it as an option) any time a developing country’s claim prevails before the WTO but implementation raises serious political problems.

Finally, we argued in favor of a formal amendment of the DSU with respect to notification of bilateral agreements to the effect that no such agreement will be applied unless previously cleared through the DSB. The reason for this proposal is twofold: when developing countries participate in such deals along with developed countries, because of the inequality of power between the two, they might be forced to non WTO-compatible solutions. On the other hand, when they do not (which is the vast majority of cases) they might see their rights under the WTO contract diminished since the parties to such deals hardly have the incentive to respect MFN.



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Delay in Death sentence: Dual punishment

Shikha Patel

Justice Iyer observes that “ In any scientific system which turns the focus, at the sentencing stage, not only on the crime, but also the criminal and seeks to personalize the punishment so that the reformatory component is as much operative as the deterrent element, it is essential that facts of social and personal nature, sometimes altogether irrelevant , if not, injurious at the stage of the fixing the guilt, may have to be brought to the notice of the court when actual sentence is determined.”Nevertheless, the punishment remains as the most counterpart of crime. Punishment is an expression of the society’s disapproval of the acts and its magnitude decide punishment. Although the word “punishment” is used in varying contexts, it is generally accepted that it is served out unpleasantly to an individual in hopes that the person learns from the punishment and, therefore, doesn’t repeat the bad deed. The supreme court of India has not relied or based its sentencing or rather interference in sentencing on any specific theory of the punishment.

Capital punishment is one of the type of punishment given if the case falls in the domain rarest of rare cases. Capital punishment is given for horrendous crime. It is necessary to change an offender into a non offender. The goal is reformation not retribution. Appreciable thought of Mahatma Gandhi tells that if the principle of ‘an eye for an eye’ prevails then there will two blind persons at last. But, this principle is repudiated by the classical jurisprudence and sanction impose by the law. The view of Justice Iyer in E. Anamma v State of Andhra Pardesh was a earmark for beginning of the reformative theory of punishment.

In Jagmohan v State of U.P. capital punishment is not held to be unreasonable. Code of Criminal procedure, 1978 has made life imprisonment for murder a rule and death sentence an exception. But in Bachan singh v State of Punjab Constitutional bench upheld the validity of the death sentence but the aggravating as well as mitigating circumstance & motivating factor need to be considered determining the sentence under sec. 302 the Supreme Court evolved the dictum of rarest of rare cases for imposing death sentence and further justification was outlined in five categories.


“I have always found that mercy bears richer fruits than strict justice.”

-Abraham Lincoln, 16th U.S President .

Without such a power of clemency, to be exercised by some functionary of the government, a country would be most imperfect and deficient in its political morality. With this view, our Indian constitution had given space for clemency which can be granted by the executive. Under section 415, 416, 417 of CrPC states grounds ground for postponement of execution sentence of death in case of appeal. But there is no underlined rule nor any guiding principle to govern the mercy petition. Consequently it leads to delay.

It envisaged that the convict is awarded death sentence for his crime, when it falls in the ambit of Rarest of rare cases. Instead of executing the death sentence the accuse has been put behind the bar years together for deciding the Mercy petition and delaying the execution of the sentence. Therefore, undergoing many years in imprisonment after confirmation of death sentence it would amount to dual punishment because firstly the convict had undergone many years of his life in prison and thereafter he would be face the mirror of his death by judicial hanging, which is contrary to provision of constitution and criminal jurisprudence.

The common law rule of nemo debet vis vexari which means that no man should be put twice in peril for the same offence. The accuse is protected under Art. 20 (b) for double jeopardy whereas there is no law restraining dual punishment which the convict countenanced for postponement in execution of death penalty.

Speedy trial hold the key to the success of any sentencing policy. The Apex Court had declared in A. R Antulay v R. S. Nayak that the right to speedy trial is a part of fundamental right to life and personal liberty guaranteed by Art. 21 of the constitution. It is settled law that inordinate delay in the trial and further proceeding by the way of appeals or revision itself is a mitigating factor justifying a lesser sentence. Postponement in carrying out death sentence is result of undue time taken by the executives i.e. the President empower under Art. 71 & Governor under Art. 161 of the constitution for granting mercy petition. Apparently, it end up only affecting the convict neither the death sentence is executed nor is relived from threat of capital punishment thus he stands at middle of cross road with hope to live though wrongfully bearing confinement and is at ambiguous situation.

In deciding the mercy petition there exist many impediments which conclude in taking so much time which is concurrent to the minimum punishment prescribed for the offense. And many a time due to political intervention delay is subsequent into not only days but years together. A time limit needs to be provided for the processing and final disposal of a mercy petition which would bring relief to the death chamber convicts.

As per convention of Universal declaration of human right. Art. 3 & 5 affirms that no one should be inflicted with the cruel, inhuman or degrading treatment or punishment. Everyone has the right to liberty & security of person. Referring to violation of human right by the state law enforcing agencies the court is of the view that these acts were breach of humanitarian law and as well as total negation of constitutional guarantee & human decency.

Agony of waiting to be executed traumatizes and kills the convict many more times than the actual execution. Also, the Executive needs an advisor who has some degree of independence from those who prosecuted the underlying criminal case; who can bring a different policy perspective and different values to bear on the matter, and whose independent political accountability can provide the president a measure of protection from public criticism.

Death Sentence is deterrent type of punishment. The main object of awarding capital punishment is to create fear in the mind of other offenders and restraining reoccurrence of such a grave offense. As a result of delay in execution for several year, the effectiveness of creating threat among society is not fulfilled which may be achieved by immediate execution. Pertinently delay results in ineffective and the change of circumstance may not warrant for such a grave punishment after years. Thus, Capital punishment may not be required.

One of the pivotal object of capital punishment is deterrent in nature if it executed within short time after commission of offense. While undergoing the imprisonment its needless to presume that the convict had not gone under any reform in his life therefore there can be change in his criminal mensrea or might have wiped out misdeed and he is not the same person as he was at the time of commission of offense. While deciding Mercy petition his current state of mind is requisite to be considered. For example, Great sage Valmiki who was once upon a time was a great dacoit but with passage of time it was evidential that he became great sage. No strait jacket formula should be applied for execution rather evaluation of convict current status must be looked upon.

Appeals of such type of cases ought to have been decided in the limit bound schedule so as sentence does not lose its effectiveness and potentiality & to meet with the object of punishment. There is lacuna in time bound program for deciding such mercy petition& standard operating procedure (SOP).

The vast majority of countries in Western Europe, North America and South America–more than 95 nations worldwide, have abandoned capital punishment. Countries has adopted policy of with regards to United Nation declaration of Human rights which give due respect to human dignity and there are many more initiative taken by UN thus to preserve the human value. Therefore, India can abandon the Capital punishment inspite of losing the virtue of capital punishment by delaying it.

Right To Reject Candidates And Recall LegisIators–How Far Feasible

Right To Reject CandidatesBy G.L.Verma

Gandhian Anna Hazare’s call for introducing Right to Recall non-performing or corrupt MPs/MLAs with Right to Reject candidates at the hustings has sparked off a nation-wide debate. It also aims at to give a message to MPs/MLAs that once elected, they can not take their voters for granted and have to perform to live upto their expectations. It also goes contrary to the fact that such rights are already in vogue in different countries. There is no justified reason as to why MPs/MLAs, who are either engrossed in corruption or are simply fence-sitters, should continue without accountability towards their electorate. Similarly, there is also no justified reason for electorates to elect from the candidates thrust upon them by the political parties. They must have the right to reject candidates if they find that the candidates so thrust upon them by political parties do not enjoy their confidence. The then Lok Sabha Speaker Mr. Som Nath Chatterjee had himself once laid emphasis on introducing Right to Recall. While delivering a lecture on “Democratic Consolidation” in Thiruvanthapuram, he recommended the introduction of right to recall in India. He said “It is time for us to look for devices such as “recall” to ensure accountability of the members of democratic institutions at all levels, before the common man gets totally disillusioned with the prevailing system. The performance and functioning of the Parliament as well as its members would improve if people who elected their representatives to voice their grievances watched the Parliamentary proceedings regularly.” Keeping this in view, PUCL had in year 2004 filed a PIL in Supreme Court to seek issuance of direction to the Union Government for introducing such a provision by amending Representation of Peoples Act 1951. When this matter came before two judges Bench, it was decided for referring the same to a Constitution Bench. It is being hoped that such a Bench is likely to be constituted soon. But it is being felt widely that the Apex Court has limited jurisdiction which extends to examining the constitutional validity of an existing law only and it may not extend to the extent of directing Parliament to pass or amend any Act which is within the domain of the Parliament. Already in its several judgments from time to time, it has ruled this position in clearer terms.

In the meanwhile, Law Minister has opined that the demand for introducing Right to reject may be more practical and feasible than the Right to Recall. According to him this may be considered to arrive at a broad consensus to facilitate suitable amendment in the existing law. In this context, Chief Election Commissioner’s statement that Right to recall and Right to Reject legislators are not practical has added new dimension to the debate. In fact his statement goes contrary to what his predecessor T.S.Krishnamurti had himself suggested in year 2001.providing a column “None of above” in voting machine for rejecting all the candidates. Earlier also he had discarded the electoral reform by introducing compulsory voting despite the fact that the Election Commission had in year 1963 recommended to Union Government for introducing compulsory voting. The Law Minister described the suggestion of Right to Recall as impractical leaving the right to reject candidates open for debate. In its two days’ meeting at Ralegan Siddhi on 10th and 11th September, Anna Core Committee approved this agenda and declared its intent to mobilize people for getting their support to call Government to introduce this system. These events have together set the ball rolling for another national debate in the times to come. Surprisingly, no political party has so far revealed its stand on this matter in categorical terms.

In fact, demand for introducing right to recall and right to reject as part of electoral reforms is not new and need has all along been felt for its complete overhaul. Events which took place during last few years sent a grim reminder on the lowest ebb to which our institutions have fallen. Legislatures are mired in deep-rooted maladies like candidates with pending criminal cases, use of black money, illegal funding of political parties by companies, use of official machinery and people’s apathy towards casting votes etc. But Right to Recall an elected MP/MLA holds special significance because in that case voters themselves would assume the role of their representatives and their antecedents. The system is already being practiced in several countries. It is in vogue in about 18 states of United States of America since 1903. In some states of USA, election for a successor is held simultaneously with the recall election. Even in our country, some states have introduced this system albeit at local level only. The first question that arises as to why and when people should recall their legislator ? The answer to this question is not far to seek. If a representative, after getting elected indulges in malpractices, misfeasance or is otherwise inactive and indifferent to the issues affecting electorates, power vests with the people to recall such a representative. Once elected, it does not mean a representatives enjoys un-bridled license to hold the position without corresponding liability to perform. There are instances galore wherein MPs/MLAs remained idle and their dull performance inside and outside the House did not find favor with their electorates. According to a report, hundreds of MPs did not open their mouths during proceedings even on sensitive matters of national importance and raised no question also. Then charges of corruption and irregularities are often leveled against them during their tenure. It is well-known fact that immediately after getting elected, an MP or MLA files an incorrect account of expenditure. Matter does not end here and it goes on un-abated when he violates rules pertaining to MPLAD Fund and other discretionary quotas etc. Some MPs have been found sub-letting even their bungalows at a considerably higher rent which amounts to malpractice. Some legislators were found taking cut while exercising their discretionary powers for various welfare schemes. Instances for Cash-for-votes, cash-for-query have already hit the headlines. News about renting out the MPs’ bungalows for pecuniary gains have hit the headlines in the past. Once it comes to the notice of electorates that the person in whom they had reposed trust and elected, had gone against their aspirations and indulges in corruption or simply remains non-performing, there is no reason why voters should remain helpless to just wait for 5 years and allow him to go on carrying out his game-plan without any check. So the first question is answered with valid reasons of undeniable nature.


It is, however, the second question i.e. how far right to recall is practicable that is at the centre-stage of the whole matter. Anna Team has not so far elaborated how Right to Recall can be translated into reality. It is felt that such a right should not be granted before at least two years of an MP or MLA elected to the legislature. It means there should not be any right to recall for at least two years immediately after the elections. Further, proper safeguards against misuse of such a right must be introduced as otherwise it can be misused to destabilize a government on purely political consideration. Political parties can obviously misuse this right to outwit their rivals and can easily manage the requisite number of voters to initiate the move. Therefore, while introducing such a right, law must ensure that a definite percentage of voters will initiate the move to recall the MP but final decision to allow such a right must vest with a committee of non-political persons or Tribunal comprising only non-political persons drawn from academic or juristic background with sound reputation. Such a committee or Tribunal shall broadly examine the performance audit of the legislator who is proposed to be recalled. Thus the initiative will remain with people but final call would rest with committee or tribunal comprising persons without affiliation to any political party. It requires a definite elaborate mechanism duly strengthened by enacting a law. There are various ways for adopting the mechanism of recalling the representatives and the one suitable to our political system can be considered. In California (USA), mechanism adopted for recalling the representative merits consideration. In this state, if 12 per cent of the electorate sign a petition with reasons for recalling the representative, it shall be mandatory for the Election Commission to circulate Ballot of Recall to all the electorates with options Yes or No for Recall. If majority of the ballots is in favor of recall, by-election has to be conducted. Venezuela provides yet another example of the mechanism adopted for practicing right to recall. Its constitution enables the recall of any elected representative including the President provided if half of their term is elapsed and 20 per cent of the voters petition for recalling the representatives after recording reasons. Hence, the sweeping statement that right to recall is impractical is irrational and hasty. In fact right to recall can be introduced if the men at the helms of affairs rise above their political motives and acquire the will to introduce the system. It can be given a start in some states on experimental basis and thereafter based upon its working it can be introduced at national level.

Regarding demand for introducing right to reject the candidates by inserting “None of above” in the Electric Voting Machine, its objective remains to vest in people their right to reject candidates nominated by political parties. It is a well-known fact that people have no say in selection of the candidates. Political parties are prone for lobbyism and a person even with dubious record manages to win over the political party bosses to get the ‘Ticket’. Thus people are deprived of having any say in selection or nomination of the candidates. In such circumstances, their options are limited and they have to select either of the candidates thrust upon them by political parties. Therefore, Right to reject candidates is wholly justified. If such a right is introduced, it will exert pressures on the political parties also and they shall have to respect the popular sentiments before nominating the candidate for elections. It can be laid down that if at least half of the total votes cast go in favor of rejection of all candidates, process of re-election must start. There can not be a second rejection if re-poll is ordered after first rejection. It can be argued that such a system of rejection of candidates and re-election may delay the poll process and formation of government. But this argument holds no cognizance as the entire poll-process can be scheduled in such a manner that final tally would be in place only after the process of rejection and re-election gets completed.

As Anna Team has decided to make the right to recall and right to reject as part of their campaign in crusade against corruption, it is bound to enliven a national debate. It would be in the fitness of things if the Government, instead of rejecting the demand outrightly, starts getting sense of the nation and introduce the system in some of the States on experimental basis so that the same can be considered for introducing the system at national level.

Right to Marry under Right to Life : Panoramic View

Right to MarryAsst.Prof.Anisa Shaikh

The three most important events of human life are equally devoid of reason: birth, marriage and death.

~ Austin O’Malley

Marriage is one of the universal social institution. It is established by the human society to control and regulate the life of man. It is a corner stone of a society .It is in the family that children learn to become citizens; it is in the family that children learn about relationships; it is in the family that children learn about what is expected of them in society, how to act and how to be. Central to the nuclear family is the traditional idea of marriage, consisting of one man and one woman in a monogamous and permanent relationship. We need to promote and protect marriage to secure a healthier society. Marriage has legitimate recognition to get united. Society accepts union of two souls because primary object of marriage is to beget and bear offspring, and to them until they are able to take care of themselves. Right of all members of family like Right to Respect for private and family life, Right to marry and found family, is foundation of justice, freedom and peace.

President George W. Bush understands the necessity of marriage and has said, he will support an amendment to the Constitution that defends marriage against the threats from the cultural breakdown. Marriage must remain the standard for family life in the society We cannot renew our country when, within a decade, more than half of our children will be born into families where there is no marriage .

The definition of marriage can be looked at from a legal perspective. A legal dictionary defines marriage as “the state of being united to a person of the opposite sex as husband or wife in a legal, consensual, and contractual relationship recognized and sanctioned by and dissolvable only by law.” Legally, marriage is a binding contract between the two parties that joins together their possessions, income, and lives .


Marriage, according to the Hindu Law ,

Marriage is a body for the performance of religious duties. It is deemed as a holy union in Hindu Law. It is also considered to be an union of flesh to flesh and blood to blood. It is a religious sacrament and not a civil contract.TheHindu Marrige Act 1955,Sec.5 provides right to marry under statutory condition.

Marriage, according to the Muslim law:

Quran states “every person must marry”. Quran asserts that marriage is the only way to satisfy one’sdesire. Marriage (nikha) is defined to be a contract which has for its object the procreation and the legalizing of children


Modern international conceptions of human rights can be traced to the aftermath of World War II and the foundation of the United Nations The rights espoused in the UN charter would be codified in the International Bill of Human Rights, composing the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. The family is the fundamental and natural unit of society and requires the full protection of the state. Human rights law upholds the positive right of all peoples to marry and found a family. It upholds the ideal of equal and consenting marriage and tries to guard against abuses which undermine these principles. It is not prescriptive as to the types of families and marriages that are acceptable, recognising tacitly that there are many different forms of social arrangements around the world.

The Universal Declaration of Human Rights (UDHR) was adopted by the United Nations General Assembly in 1948. The UDHR urges member nations to promote a number of human, civil, economic and social rights asserting these rights as part of the “foundation of freedom, justice and peace in the world.” The declaration was the first international legal effort to limit the behaviour of states and press upon them duties to their citizens following the model of the rights-duty duality.

Whereas recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world.

—Preamble to the Universal Declaration of Human Rights, 1948

Article 16 Universal Declaration of Human Right

States Parties shall take all appropriate measures to eliminate discrimination against women in all matters relating to marriage and family relations and in particular shall ensure, on a basis of equality of men and women:

(a)The same right to enter into marriage;

(b)The same right freely to choose a spouse and to enter into marriage only with their free and fullconsent;

(c) The same rights and responsibilities during marriage and at its dissolution; (d) The same rights and responsibilities as parents, irrespective of their marital status, in matters relating to their children; in all cases the interests of the children shall be paramount; (e) The same rights to decide freely and responsibly on the number and spacing of their children and to have access to the information, education and means to enable them to exercise these rights; (f) The same rights and responsibilities with regard to guardianship, warship, trusteeship and adoption of children, or similar institutions where these concepts exist in national legislation; in all cases the interests of the children shall be paramount

(g) The same personal rights as husband and wife, including the right to choose a family name, a profession and an occupation;

(h) The same rights for both spouses in respect of the ownership, acquisition, management, administration, enjoyment and disposition of property, whether free of charge or for a valuable consideration.

Article 23 of the International Covenant on Civil and Political Rights 1966:

(a)The family is the natural and fundamental group unit of society and is entitled to protection by society and the State.

(b)The right of men and women of marriageable age to marry and to found a family shall be recognized.

(c) No marriage shall be entered into without the free and full consent of the intending spouses.

(d)States Parties to the present Covenant shall take appropriate steps to ensure equality of rights and responsibilities of spouses as to marriage, during marriage and at its dissolution. In the case of dissolution, provision shall be made for the necessary protection of any children.

Article 10 of the International Covenant on Economic, Social and Cultural Rights 1966:

The States Parties to the present Covenant recognize that:

The widest possible protection and assistance should be accorded to the family, which is the natural and fundamental group unit of society, particularly for its establishment and while it is responsible for the care and education of dependent children. Marriage must be entered into with the free consent of the intending spouses.

The European Convention on Human Rights:

The ECHR states that all men and women, who have reached the age at which they can legally marry, have the right to get married and to start a family.

The European Convention on Human Rights (ECHR) sets out a list of fundamental rights and freedoms which are believed to be common to all people. The ECHR lists these rights in numbered’Articles’.

Article 8 of the ECHR concerns an individual’s right to respect for their private and family life.

Article 12: Right to marriage

Men and women of marriageable age shall have the right to marry and to found a family, according to national laws governing the exercise of this right.

Marriage is Civil Right

Recognized federal civil rights law in the United States is grounded in the U.S. Constitution as interpreted by the Supreme Court. By this standard, marriage has long been established as a civil right. The operative constitutional text is section 1 of the Fourteenth Amendment, which was ratified in 1868. The relevant passages read as follows: No State shall not make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State 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.

The U.S. Supreme Court first applied this standard to marriage in

Loving v. Virginia (1967),

Where it struck down a Virginia law banning interracial marriage.As Chief Justice Earl Warren wrote for the majority: The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men …

To deny this fundamental freedom on so unsupportable a basis as the racial classifications embodied in these statutes, classifications so directly subversive of the principle of equality at the heart of the Fourteenth Amendment, is surely to deprive all the State’s citizens of liberty without due process of law. The Fourteenth Amendment requires that the freedom of choice to marry not be restricted by invidious racial discriminations. Under our Constitution, the freedom to marry, or not marry, a person of another race resides with the individual and cannot be infringed by the State.

Marriage is a Constitutional Right

One of our most fundamental rights as citizens of the United States of America is the right to marry the person of our choice. Courts in this country have determined that the right to marry is, in some cases, more fundamental than the right to vote. The right to marry cannot be denied:

(a) On the basis of an individual’s race; (b)To those who have shown themselves to be delinquent on child welfare payments; or (c) to inmates.


The right to marry is a component of right to life under art 21 of Constitution of India which says, “No person shall be deprived of his life and personal liberty except according to procedure established by law”. In the context of right to marry, a mention may be made of a few Indian cases.Person who suffering from venereal disease, even prior to the marriage cannot be said to have any right to marry so long as he is not fully cured of disease.

Mr.’x’ v. Hospital ‘Z’ AIR 1999 SC 495

The Court had rested its decision on the facts of the case that it was open to the hospital or the doctor concerned to reveal such information to persons related to the girl whom he intended to marry and she had a right to know about the H.I.V. positive status of the appellant. If that was so, there was no need for the Court to go further and declare in general as to what rights and obligations arise in such context as to right to privacy or confidentiality or whether such persons are entitled to be married or not or in the event such persons marry, they would commit an offence under law or whether such right is suspended during the period of illness. Therefore, all those observations made by the Court in the aforesaid matter were unnecessary, particularly when there was no consideration of the matter after notice to all the parties concerned. In that view of the matter, court held that the observations made by this Court, except to the extent of holding as stated earlier that the appellant’s right was not affected in any manner in revealing his HIV positive status to the relatives of his finance, are uncalled for. We dispose of these applications with these observations.

Latasinghv.state of Uttar Pradesh, AIR 2006 SC 2522

The Supreme Court viewed the right to marry as a component of right to life under Art 21 of Indian Constitution the court observed that:

“This is a free and democratic country, and once a person becomes a major he or she can marry whosoever he/she likes. If the parents of the boy or girl do not approve of such inter-caste marriage the maximum they can do is that they can cut off social relations with the son or daughter, but they cannot give threats or commit or instigate acts of violence and cannot harass the person who undergoes such intercaste marriage”.

Both the parents in the case were adults and so free to marry of their choice.’there is no bar to an inter-caste marriage under Hindu marriage Act or any other law’.intercaste marriages are in fact in the national interest as they will result in destroying the caste-system.


Marriage is the foundation of a family as well as social relations. A couple owes a great responsibility to the family and society. In other words, right to marry is not an absolute one; it has to correspond to some other duties. For example, among the various objectives of a marriage, two prime objectives are to legalize the sexual intercourse between two persons of opposite sexes, and to procreate children. But through marriage, law does not only give right to two adult persons to satisfy their biological needs and to give birth to legitimate children, but also does impose a duty not to harm their life partner and children in any way. If a person is not able to perform this duty, he/she cannot exercise his/her right to marry

The right to marry is subject to national laws regulating marriage; including laws that prohibit marriage between certain types of people (for example close relatives). Although the government is able to restrict the right to marry, it must not impose limitations which impair the very essence of the right.

Right to marriage is provided under human right charter that to under the heading of” Right to have family”.In Indian Constitution this right not expressly mention.But it is interpretated under Art 21 .right to marry is universal right .it is available to all persons but whether it includes same sex marriage. Marriage right is recognized at international level but in India there is no special law for marriage right .marriage right is mentioned under various covenant but it does not include person of same sex marriage. Indian constitution provides for right to marry but it is not fundamental right.

Position of Software Patents in UK

Statutory Background

Keeping in mind the exclusive rights that need to be attributed to an inventor, the UK Patent Act, 1977 was enacted. The , 1977 is the main patent law in the UK. It sets out the legal rights and duties for UK patents and patent applications and how UK law relates to the European Patent Convention (EPC) and the Patent Co¬operation Treaty (PCT). Section 1(1) of this act clearly stated that an invention has to be new, must involve an inventive step and must be capable of industrial application.

In furtherance of the abovementioned provision, Section 1(2), UK Patent Act, listed out some non-¬inventions, i.e., prima facie inventions that are non-¬patentable.

Inter alia, the section entails –

“a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer”.

Thus the statutory provision, at the very outset, ousts computer programs from being patented. However the proviso for section states as follows: ¬

“but the foregoing provision shall prevent anything from being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such.”

Section 130(7) of the Patent Act is the international compliance provision, i.e. it establishes a synergy between the international instruments and the municipal laws. With regard to this section, the judiciary has taken the view that the purpose of Section 1 of the Patents Act is to transpose the requirements of Article 52 (EPC) into UK law and thus any differences between the EPC and the Patents Act should be ignored. The text of the EPC itself should therefore be regarded as definitive.

Article 52(2) of the European Patent Convention (EPC) includes a slightly different list of non-inventions, although “programs for computers” are present. Article 52(3) EPC then goes on to state that patentability for the identified subject matter or activities is excluded “only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such.”

This rider clause, as mentioned above has created a lot of controversy and has granted numerous software patents to inventors that are ex-¬facie wrong and illegal.

Common Law Development –

The first ruling in Europe as to how far the granting of software patents was prevented by the qualified exclusions set out in the European Software PatentPatent Convention 1973 was the Vicom decision in 1986 by the (European Board of Appeals) EBA. It was stated by the EBA that ¬

“1. Even if the idea underlying an invention may be considered to reside in a mathematical method a claim directed to a technical process in which the method is used does not seek protection for the mathematical method as such.

2. A computer of known type set up to operate according to a new program cannot be considered as forming part of the state of the art as defined by Article 54(2) EPC.

3. A claim directed to a technical process which process is carried out under the control of a program (whether by means of hardware or software), cannot be regarded as relating to a computer program as such.

4. A claim which can be considered as being directed to a computer set up to operate in accordance with a specified program (whether by means of hardware or software) for controlling or carrying out a technical process cannot be regarded as relating to a computer program as such. ”

This decision is important from UK’S perspective because in Merrill Lynch’s Application., Fox LJ made Vicom as close to a binding law in the UK jurisdiction, and said at page 569 that, while it was “impermissible to patent an item excluded by section 1(2) under the guise of an article which contains that item”, it would be possible to obtain a patent for a program which contributes “some technical advance on the prior art in the form of a new result (e.g., a substantial increase in processing speed as in Vicom).”Justice Fox stressed on the words “decisive is what technical contribution the invention as defined in the claim when considered as a whole makes to the known art.” He opined that it cannot have been intended for a patent to be granted for an item excluded by art. 52 (2) EPC under the guise of an article that contains an excluded item, such as a conventional computer loaded with a program. “Something more” was required and that something was a technical advance on the prior art.

In 1991, Gale’s Application was refused on the basis of the deductions made in the case of Merrill Lynch’s Application. The application was for a read only memory containing a computer program. Nicholls LJ accepted that a computer programmed with the applicant’s software would be a better computer. But the software did not embody a technical process that existed outside the computer. Nor did that software solve a technical problem lying within the computer. The application was denied for being both a mathematical method and a computer program as such.

In Gale, Nicholls LJ, made the following observation

“ though computer programs are not patentable as such they may represent, for instance, a technical process for the reason that they may record the means for carrying out a technical process with the aid of a computer……it is difficult in identifying clearly the boundary line between what is and what is not a technical problem for this purpose ”

The same problem was faced by Aldous LJ in the Fujitsu case. In this matter two major questions were asked to decide the question on software patentability:

1. Does the application consist of a program for a computer as such?

2. Does the claim consist of a method of performing a mental act as such?

With respect to the first question Fujitsu out rightly denied patent grant to a computer program on the grounds of being statutorily barred. With respect to the second question the judgment was mum and further clarifications with regard to the same were made later in the obiter view of the Aerotel case where the court of Appeal expressly admitted that the mental act exclusion did not extend to acts done using computers.

The settled law in today’s context is that “acts done on a computer” are excluded from patentability because they fall under the excluded category of “mental acts”.

Another major observation made in the Fujitsu case was that the courts need to comply with the express provisions of the EPC, namely Articles 52 and 53 while adjudicating upon any issue relating to patentability subject matter. This inference was drawn by reading Section 130(7) of the UK Patent Act. In the year 2006, Jacob L.J., while writing the landmark judgment in the Aerotel case summarized the various approaches the UK courts have taken while determining the issue patentability subject-¬matter with regard to software patents . The relevant findings were as follows: ¬

“(1) (The contribution approach) ¬ Ask whether the inventive step resides only in the contribution of excluded matter – if yes, Art.52 (2) applies. This approach was supported by Falconer J. in Merrill Lynch with reference to the Viacom case.

(2) (The technical effect approach) ¬ Ask whether the invention as defined in the claim makes a technical contribution to the known art ¬ if no, Art. 52(2) applies. A possible clarification (at least by way of exclusion) of this approach is to add the rider that novel or inventive purely excluded matter does not count as a “technical contribution”. This approach was adopted in the disputed matters relating to Gale and Fujitsu Applications.

(3) (The “any hardware” approach) ¬ Ask whether the claim involves the use of or is to a piece of physical hardware, however mundane (whether a computer or a pencil and paper). If yes, Art. 52(2) does not apply. This approach was adopted in three cases, Pension Benefits, Hitachi and Microsoft/Data transfer (the “trio”). However there are variants of the “any hardware” approach:

(3)(i) Where a claim is to a method which consists of an excluded category, it is

excluded by Art. 52(2) even if hardware is used to carry out the method. But a claim to the apparatus itself being “concrete” is not so excluded. The apparatus claim is nonetheless bad for obviousness because the notional skilled man must be taken to know about the improved, excluded, method. This is the Pension Benefits approach.

(3)(ii) A claim to hardware necessarily is not caught by Art. 52(2). A claim to a method of using that hardware is likewise not excluded even if that method as such is excluded matter. Either type of claim is nonetheless bad for obviousness for the same reason as above. This is the Hitachi approach.

(3)(iii) Simply ask whether there is a claim to something “concrete”, e.g. An apparatus. If yes, Art. 52(2) does not apply. Then examine for patentability on conventional grounds ¬ do not treat the notional skilled man as knowing about any improved excluded method. This is Microsoft/Data Transfer approach. ”

After having traced the previous approaches the court set forth its own formulation in the form of a 4  step test. The test stated the following:

“40. the approach is in 4 steps:

(1) Properly construe the claim

(2) identify the actual contribution;

(3) ask whether it falls solely within the excluded subject matter;

(4) Check whether the actual or alleged contribution is actually technical in nature”.

It is clear from the above findings that this judgment left open a question about the wording of patent claims: Can claims to a computer program (or a program on a carrier) be allowable when other claims in a different form or claims covering the use of that particular program, would be allowed?

The UK¬IPO concluded that claims to computer programs or to programs on a carrier were not allowable. This change of practice was challenged jointly by a group of patent applicants. They argued that if their computer implemented methods and apparatus were patentable, they should also be able to protect the underlying computer programs themselves. This challenge led to a hearing before Mr. Justice Kitchin in the High Court in the Astron Clinica Application. In his judgment, Kitchin J has now clarified the law in this area, and decided that patents should, as a result of applying the test formulated in Aerotel/Macrossan, be allowed to protect a computer program if, and only if, the program implements a patentable invention.

The UK IPO decided not to appeal to this judgment and follow it with immediate effect. Thus, the Aerotel’s case set aside all controversies relating to patentable subject-¬matter and as of today stands as the law of the land and is substantially relied upon as precedence. Despite the 4-point test mentioned supra, some ambiguity remained with regard to the fourth condition, i.e., technical nature.

What exactly is the ambit of “technicality”?

The explanation relating to the unexplored territory of technical contribution as stated in Aerotel’s case was first briefly explained in the case of Symbian v. Comptroller General of Patents and then re¬iterated in the case of AT&T Knowledge Ventures LP and CVON Innovations Limited v Comptroller General Of Patents.

The findings in this regard were as follows:

i) Whether the claimed technical effect has a technical effect on a process which is

carried on outside the computer;

ii) Whether the claimed technical effect operates at the level of the architecture of the

computer; that is to say whether the effect is produced irrespective of the data being

processed or the applications being run;

iii) Whether the claimed technical effect results in the computer being made to operate in a new way;

iv) Whether there is an increase in the speed or reliability of the computer;

v) Whether the perceived problem is overcome by the claimed invention as opposed to

merely being circumvented.”

Thus the settled law relating to software patents maybe inferred from the Aerotel findings read with the principles established in the Symbian case. An illustration of the same has been seen in the case of Cranway Ltd v Playtech Ltd and others where the Royal Court of Justice, based on abovementioned analysis held an online gambling application to be non-¬patentable and thus there was no charge of infringement.


Conclusion –

Thus, in nutshell it maybe said that the law as it stands today in relation to the software patents comes from a cumulative deduction from the Aerotel case and the Symbian case.

The abovementioned deducible law has to a great extent suppressed the equivocality and ambiguity created by the concept of Technical Contribution. However, this creation of judicial adventurism will always be exploited and abused by notorious and cantankerous individuals who are competent to bypass or circumvent any law. Also, this development will adversely affect the open source community by creating additional grounds on which software patents maybe granted.

Justice Dispensation Through Alternate Dispute Resolution System In India


“You have undertaken to cheat me. I won’t sue you, for the law is too slow. I’ll ruin you.”

Discords are bound to arise in society and ingenious human minds have always devised ways and means for resolution of conflicts. Nature has endowed people with rationality and they have constantly attempted to discover methods of establishing a cohesive society. Dispute resolution is one of the major functions of a stable society. Through the medium of the State, norms and institutions are created to secure social order and to attain the ends of justice or the least to establish dispute resolution processes. States function through different organs and the judiciary is one that is directly responsible for the administration of justice. In commonplace perception judiciary is the tangible delivery point of justice. Resolving disputes is fundamental to the peaceful existence of society. Therefore, effective and efficient systems for determination of disputes become an obvious appendage.


Justice is the foundation and object of any civilized society. The quest for justice has been an ideal which mankind has been aspiring for generations down the line. Preamble to our Constitution reflects such aspiration as “justice-social, economic and political”. Article 39A of the Constitution provides for ensuring equal access to justice. Administration of Justice involves protection of the innocent, punishment of the guilty and the satisfactory resolution of disputes.


The world has experienced that adversarial litigation is not the only means of resolving disputes. Congestion in court rooms, lack of manpower and resources in addition with delay, cost, and procedure speak out the need of better options, approaches and avenues. Alternative Dispute Resolution mechanism is a click to that option.




Article 21 of the Constitution of India declares in a mandatory tone that ‘no person shall be deprived of his life or his personal liberty except according to procedure established by law.’ The words “life and liberty” are not to be read narrowly in the sense drearily dictated by dictionaries; they are organic terms to be construed meaningfully. Further, the procedure mentioned in the Article is not some semblance of a procedure but it should be “reasonable, fair and just”. Thus, the Right to Speedy Trial has been rightly held to be a part of Right to Life or Personal Liberty by the Supreme Court of India. The Supreme Court has allowed Article 21 to stretch its arms as wide as it legitimately can. The reason is very simple. This liberal interpretation of Article 21 is to redress that mental agony, expense and strain which a person proceeded against in criminal law has to undergo and which, coupled with delay, may result in impairing the capability or ability of the accused to defend himself effectively. Thus, the Supreme Court has held the Right to Speedy Trial a manifestation of fair, just and reasonable procedure enshrined in Article 21.

The Constitutional philosophy propounded as Right to Speedy Trial has though grown in age by almost two and a half decades; the goal sought to be achieved is yet a far-off peak. The failures of prosecuting agencies and executive to act and to secure expeditious and speedy trial have persuaded the Supreme Court in devising solutions which go to the extent of almost enacting by judicial verdict bars of limitation beyond which the trial shall not proceed and the arm of law shall lose its hold. The validity or justness of those decisions is not the matter to be decided but the seriousness of delay in the conclusion of criminal and civil matters must be appreciated at the earliest. This seriousness was appreciated and accepted by many , including the Constitutional Courts , long before. The same has got recognition from the “legislature” as well in the form of introduction of “Alternative Dispute Resolution” (ADR) Mechanism (ADRM) through various statutes.

There is a growing awareness among the masses as well regarding ADR and people are increasingly using the same for getting their disputes settled outside the court. This will also reduce the “backlog problem’ that India is facing. It is now universally accredited that ‘Justice delayed is Justice denied’. The existing justice system is not able to cope up with the ever-increasing burden of civil and criminal litigation. There is growing awareness that in the majority of cases court action is not an appropriate remedy for seeking justice. We have to formulate effective ADR Mechanisms to ease the burden of judicial functioning. The backlog of cases is increasing day by day but criticizing judiciary for the same is a wrong practice. It must be noted that the backlog is a product of “inadequate judge population ratio” and the lack of basic infrastructure. The government has to play a pro-active role in this direction.



On 4th December 1997 the Chief Ministers of States and the Chief Justices of the High Courts met in New Delhi to discuss at length the alternative means of dispute resolution. In the meeting it was declared that the present justice delivering system is not capable to bear the whole workload and it would be appropriate to deliver justice by the alternative means of disposal of disputes as well. Under this system there is a procedural flexibility and also in time and money saving besides the absence of tension of regular trial.

The term “alternative dispute resolution” or “ADR” is often used to describe a wide variety of dispute resolution mechanisms that are short of or alternative to, full-scale court processes, established by the Sovereign or the State. The term can refer to everything from facilitated settlement negotiations in which disputants are encouraged to negotiate directly with each other prior to some other legal process, to arbitration systems or mini trials that look and feel very much like a courtroom process. It included arbitration, as also conciliation, mediation and all other forms of dispute resolution outside the courts of law, which would all fall within the ambit of ADR.

ADR facilitate parties to deal with the underlying issues in dispute in a more cost-effective manner and with increased efficacy. In addition, ADRs provide the parties with the opportunity to reduce hostility, regain a sense of control, gain acceptance of the outcome, resolve conflict in a peaceful manner, and achieve a greater sense of justice in each individual case. The resolution of disputes takes place usually in private and is more viable, economic, and efficient.

ADR is not a recent phenomenon as the concept of parties settling their disputes themselves or with the help of third party, is very well-known to ancient India. Disputes were peacefully decided by the intervention of Kulas (family assemblies), Srenis (guild so men of similar occupation), Parishad, etc., the primary object of ADR movement is avoidance of vexation, expense and delay and promotion of the ideal of “access of justice” for all.

ADR system seeks to provide cheap, simple, quick and accessible justice. Under this, disputes are settled with the assistance of third party; where proceedings are simple and are conducted, by and large, in the manner agreed to by the parties. So, precisely saying, ADR aims at provide justice that not only resolves dispute but also harmonizes the relation of the parties.



The growth of A.D.R in the last few decades on the one hand reflects disenchantment with the formal justice system characterized by delays and on the other an effort to promote a less formal dispute resolution mechanism. This development is not the outcome of any juristic philosophy. Rather it was necessitated by the growth of commercial litigation needing speedy resolution, by the ever increasing volume of court work, by court dockets becoming heavier and by the judge/case ratio becoming imbalanced on account of limited resources.

In a developing country like India with major economic reforms under way within the framework of the rule of law, strategies for swifter resolution of disputes for lessening the burden on the courts and to provide means for expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resolution (ADR) by establishing facilities for providing settlement of disputes through arbitration, conciliation, mediation and negotiation. In this context the legendaries of various fields i.e., commercial, administrative and legal unanimously constituted an institution to be called “International Centre for Alternative Dispute Resolution-ICADR. This institution was established in Delhi on 31st May, 1995 and registered under the Society Registration Act, 1960. It is an autonomous non-beneficial institution. The chief object of this institution is to inculcate and expand the culture of alternative dispute resolution.

In essence the system of ADR emphasizes upon:

• Mediation rather than winner take all.

• Increasing Accessibility to justice.

• Improving efficiency and reducing court delays.

The Constitution of India through Article 14 guarantees equality before the law and the equal protection of the laws. Article 39A of the Constitution mandates the State to secure that the operation of the legal system promotes justice on a basis of equal opportunity, and ensure that the same is not denied to any citizen by reason of economic or other disabilities. Equal opportunity must be afforded for access to justice. Law should not only treat all persons equally, but also the law must function in such a way that all the people have access to justice in spite of economic disparities. The expression “access to justice” focuses on the following two basic purposes of the legal system.

• The system must be equally accessible to all.

• It must lead to results that are individually and socially just.

It is one of the most important duties of a welfare state to provide judicial and non-judicial dispute-resolution mechanisms to which all citizens have equal access for resolution of their legal disputes and enforcement of their fundamental and legal rights. Poverty, ignorance or social inequalities should not become barriers to it. The workload of Indian Judiciary increased by leaps and bounds and has now reached a stage of unwieldy magnitude, which has in fact led to a large backlog of cases. Due to this ADR has become the need of the hour for Indian Judiciary. Considering the delay in resolving the dispute Abraham Lincon has once said:

“Discourage litigation. Persuade your neighbors to compromise whenever you can point out to them how the nominal winner is often a real loser, in fees, expenses, and waste of time”.

“In the same vein Judge Learned Hand commented, “I must say that as a litigant, I should dread a law suit beyond almost anything else short of sickness and of death”.


In Sitanna v. Viranna, AIR 1934 SC 105, the Privy Council affirmed the decision of the Panchayat and Sir John Wallis observed that the reference to a village panchayat is the time-honoured method of deciding disputes. It avoids protracted litigation and is based on the ground realities verified in person by the adjudicators and the award is fair and honest settlement of doubtful claims based on legal and moral grounds.

The legislative sensitivity towards providing a speedy and efficacious justice in India is mainly reflected in two enactments. The first one is the Arbitration and Conciliation Act, 1996 and the second one is the incorporation of section 89 in the traditional Civil Procedure Code (CPC).

The adoption of the liberalized economic policy by India in 1991 has paved way for integration of Indian economy with global economy. This resulted in the enactment of the Arbitration and Conciliation Act, 1996 (new Act) by the legislature as India had to comply with well-accepted International norms. It superseded the obsolete and cumbersome Arbitration Act, 1940. The new Act has made radical and uplifting changes in the law of arbitration and has introduced new concepts like conciliation to curb delays and bring about speedier settlement of commercial disputes. The new Act has been codified on the lines of the Model Law on International Commercial Arbitration as adopted by the United Nations Commission on International Trade Law (UNCITRAL). One of the most commendable objects of the new Act is to minimize the role of the courts in the arbitration process. The Arbitration and Conciliation Act, 1996 laid down the minimum standards, which are required for an effective ADRM.

Further, the recent amendments of the CPC will give a boost to ADR. Section 89 (1) of CPC deals with the settlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be acceptable to the parties, the court may formulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement. While upholding the validity of the CPC amendments in Salem Advocate Bar Association v. U.O.I , the Supreme Court had directed the constitution of an expert committee to formulate the manner in which section 89 and other provisions introduced in CPC have to be brought into operation. The Court also directed to devise a model case management formula as well as rules and regulations, which should be followed while taking recourse to alternative dispute redressal referred to in Section 89 of CPC. All these efforts are aimed at securing the valuable right to speedy trial to the litigants.

ADR was at one point of time considered to be a voluntary act on the apart of the parties which has obtained statutory recognition in terms of CPC Amendment Act, 1999, Arbitration and Conciliation Act, 1996, Legal Services Authorities Act, 1997 and Legal Services Authorities (Amendment) Act, 2002. The access to justice is a human right and fair trial is also a human right. In India, it is a Constitutional obligation in terms of Art.14 and 21. Recourse to ADR as a means to have access to justice may, therefore, have to be considered as a human right problem. Considered in that context the judiciary will have an important role to play.

The Supreme Court of India has also suggested making ADR as ‘a part of a package system designed to meet the needs of the consumers of justice’. The pressure on the judiciary due to large number of pending cases has always been a matter of concern as that being an obvious cause of delay. The culture of establishment of special courts and tribunals has been pointed out by the SC of India in number of cases. The rationale for such an establishment ostensibly was speedy and efficacious disposal of certain types of offences.

Industrial Disputes Act, 1947 provides the provision both for conciliation and arbitration for the purpose of settlement of disputes. In Rajasthan State Road Transport Corporation v. Krishna Kant , the Supreme Court observed: “The policy of law emerging from Industrial Disputes Act and its sister enactments is to provide an alternative dispute-resolution mechanism to the workmen, a mechanism which is speedy, inexpensive, informal and unencumbered by the plethora of procedural laws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the courts and tribunals under the Industrial Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the circumstances for putting an end to an industrial dispute.”

Section 23(2) of the Hindu Marriage Act, 1955 mandates the duty on the court that before granting relief under this Act, the Court shall in the first instance; make an endeavor to bring about reconciliation between the parties, where it is possible according to nature and circumstances of the case. For the purpose of reconciliation the Court may adjourn the proceeding for a reasonable period and refer the matter to person nominated by court or parties with the direction to report to the court as to the result of the reconciliation. [Section 23(3) of the Act].

The Family Court Act, 1984 was enacted to provide for the establishment of Family Courts with a view to promote conciliation in, and secure speedy settlement of, disputes relating to marriage and family affairs and for matter connected therewith by adopting an approach radically different from the ordinary civil proceedings . Section 9 of the Family Courts Act, 1984 lays down the duty of the family Court to assist and persuade the parties, at first instance, in arriving at a settlement in respect of subject matter. The Family Court has also been conferred with the power to adjourn the proceedings for any reasonnable period to enable attempts to be made to effect settlement if there is a reasonable possibility.

Shri M.C.Setalvad, former Attorney General of India has observed: “….equality is the basis of all modern systems of jurisprudence and administration of justice… in so far as a person is unable to obtain access to a court of law for having his wrongs redressed or for defending himself against a criminal charge, justice becomes unequal …Unless some provision is made for assisting the poor men for the payment of Court fees and lawyer’s fees and other incidental costs of litigation, he is denied equality in the opportunity to seek justice.”


ADR can be broadly classified into two categories; court-annexed options (it includes mediation, conciliation) and community based dispute resolution mechanism (Lok- Adalat).

The mechanism of Arbitration and Conciliation was introduced in India through the Arbitration and Conciliation Act, 1996: Part I of this act formalizes the process of Arbitration and Part III formalizes the process of Conciliation. (Part II is about Enforcement of Foreign Awards under New York and Geneva Conventions.).


Arbitration: is a procedure in which the dispute is submitted to an arbitral tribunal which makes a decision (an award) on the dispute that is binding upon the parties. Arbitration generally grows when the parties through the contract agrees to resort to arbitration process, in case of disputes that may arise in future regarding contract terms and conditions. The process of arbitration can start only if there exist a valid Arbitration Agreement between the parties prior to the emergence of the dispute. As per Section 7, such an agreement must be in writing. The contract, regarding which the dispute exists, must either contain an arbitration clause or must refer to a separate document signed by the parties containing the arbitration agreement. The existence of an arbitration agreement can also be inferred by written correspondence such as letters, telex, or telegrams which provide a record of the agreement. Any party to the dispute can start the process of appointing arbitrator and if the other party does not cooperate, the party can approach the office of Chief Justice for appointment of an arbitrator. A sole arbitrator or panels of arbitrators so appointed constitute the Arbitration Tribunal. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if a party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before the tribunal itself. If the tribunal rejects the request, there is little the party can do accept to approach a court after the tribunal makes an award. Section 34 provides certain grounds upon which a party can appeal to the principal civil court of original jurisdiction for setting aside the award. Once the period for filing an appeal for setting aside an award is over, or if such an appeal is rejected, the award is binding on the parties and is considered as a decree of the court.

Conciliation: A non-binding procedure, in which an impartial third party i.e. the conciliator or the mediator, assists the parties to a dispute in reaching a mutually satisfactory and agreed settlement of disputes. Conciliation is a less formal form of arbitration. This process does not require an existence of any prior agreement. Any party can request the other party to appoint a conciliator. One conciliator is preferred but two or three are also allowed. Parties may submit statements to the conciliator describing the general nature of the dispute and the points at issue. Each party sends a copy of the statement to the other. The conciliator may request further details, may ask to meet the parties, or communicate with the parties orally or in writing. Parties may even submit suggestions for the settlement of the dispute to the conciliator.

When it appears to the conciliator that elements of settlement exist, he may draw up the terms of settlement and send it to the parties for their acceptance. If both the parties sign the settlement document, it shall be final and binding on both.

Mediation: Mediation, aims to assist two (or more) disputants in reaching an agreement. The parties themselves determine the conditions of any settlements reached— rather than accepting something imposed by a third party. The disputes may involve (as parties) states, organizations, communities, individuals or other representatives with a vested interest in the outcome. Mediators use appropriate techniques and/or skills to open and/or improve dialogue between disputants, aiming to help the parties reach an agreement (with concrete effects) on the disputed matter. Normally, all parties must view the mediator as impartial. Disputants may use mediation in a variety of disputes, such as commercial, legal, diplomatic, workplace, community and family matters. A third-party representative may contract and mediate between (say) unions and corporations. When a workers’ union goes on strike, a dispute takes place, and the corporation hires a third party to intervene in attempt to settle a contract or agreement between the union and the corporation.


Negotiation: Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution. Negotiation occurs in business, non-profit organizations, and government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. Those who work in negotiation professionally are called negotiators. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other titles, such as diplomats, legislators or brokers.

Lok-Adalat: The Lok-Adalat system contributed under National Legal Service Authority Act, 1987 is a uniquely Indian approach. The Constitutional duty of the State to provide legal aid, prompted by the decisions of the apex court, led to the formation of a Committee for Implementing Legal Aid Schemes (CILAS). The legal legitimacy of Lok Adalat flows from the Legal Services Authorities Act, 1987. It roughly means “People’s court”. This is a non-adversarial system, where by mock courts (called Lok Adalats) are held by the State Authority, District Authority, Supreme Court Legal Services Committee, High Court Legal Services Committee, or Taluk Legal Services Committee, periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired judge, social activists, or members of legal profession. It does not have jurisdiction on matters related to non-compoundable offences. There is no court fee and no rigid procedural requirement (i.e. no need to follow process given by Civil Procedure Code or Evidence Act), which makes the process very fast. Parties can directly interact with the judge, which is not possible in regular courts. A case can be transferred to a Lok Adalat if one party applies to the court and the court sees some chance of settlement after giving an opportunity of being heard to the other party. The focus in Lok Adalats is on compromise. When no compromise is reached, the matter goes back to the court. However, if a compromise is reached, an award is made and is binding on the parties. It is enforced as a decree of a civil court. An important aspect is that the award is final and cannot be appealed, not even under Article 226 because it is a judgment by consent. All proceedings of a Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed to be a Civil Court. Main condition of the Lok Adalat is that both parties in dispute should agree for settlement. The decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of execution through legal process. Lok Adalat is very effective in settlement of money claims. Disputes like partition suits, damages and matrimonial cases can also be easily settled before Lok Adalat. Lok Adalat is a boon to the litigant public, where they can get their disputes settled fast and free of cost.



We cannot stop the inflow of cases because the doors of justice cannot be closed, but we can increase the outflow of cases either by strengthening (both qualitatively and quantitatively) the capacity of the existing system or by way of finding some additional outlets.

In this situation ADR mechanism implementation can be such a drastic step for which three things are required most:

• Mandatory reference to ADRs

• Case management by Judges

• Committed teams of Judges and Lawyers


Equal justice for all is a cardinal principle on which entire system of administration of justice is based. We cannot conceive justice which is not fair and equal. We should aim to achieve earlier and more proportionate resolution of legal problems and disputes by increasing advice and assistance to help people resolve their disputes earlier and more effectively; increasing the opportunities for people involved in court cases to settle their disputes out of court; and reducing delays in resolving those disputes that need to be decided by the courts.

To implement the noble ideas and to ensure the benefits of ADR to common people, the four essential players (government, bench, bar litigants) are required to coordinate and work as a whole system. Case management includes identifying the issues in the case; summarily disposing of some issues and deciding in which order other issues to be resolved; fixing time tables for the parties to take particular steps in the case; and limiting disclosure and expert evidence.

• Government: Government has to support new changes. If the government support and implements changes ADR institutes will have to be set up at every level from district to national level.

• Bench: unless mindsets of the judges are changed, there will be no motivation for the lawyers to go to any of the ADR methods.

• Bar: the mindset of the members of the Bar is also to be changed accordingly otherwise it would be difficult it is difficult to implement ADR. The myth that ADR was alternative decline in Revenue or Alternative Drop in Revenue is now realizing that as more and more matters get resolved their work would increase and not decrease.

• Litigants: few parties are usually interested in delay and not hesitate in taking a stand so as to take the benefit if delay. Parties have to realize that at the end, litigation in court may prove very costly to them in terms of both cost and consequence.



ADR is quicker, cheaper, and more user-friendly than courts. It gives people an involvement in the process of resolving their disputes that is not possible in public, formal and adversarial justice system perceived to be dominated by the abstruse procedure and recondite language of law. It offers choice: choice of method, of procedure, of cost, of representation, of location. Because often it is quicker than judicial proceedings, it can ease burdens on the Courts. Because it is cheaper, it can help to curb the upward spiral of legal costs and legal aid expenditure too, which would benefit the parties and the tax payers. In this juncture, few things are most required to be done for furtherance of smooth ADR mechanisms. Few of them are:


• Creation of awareness and popularizing the methods is the first thing to be done.

• NGOs and Medias have prominent role to play in this regard.

• For Court- annexed mediation and conciliation, necessary personnel and infrastructure shall be needed for which government funding is necessary.

Training programs on the ADR mechanism are of vital importance. State level judicial academies can assume the role of facilitator or active doer for that purpose. While the Courts have never tired of providing access to justice for the teeming millions of this country, it would not be incorrect to state that the objective would be impossible to achieve without reform of the justice dispensation mechanism. There are two ways in which such reform can be achieved- through changes at the structural level, and through changes at the operational level:

• Changes at the structural level challenge the very framework itself and require an examination of the viability of the alternative frameworks for dispensing justice. It might require an amendment to the Constitution itself or various statutes.

• On the other hand, changes at the operational level require one to work within the framework trying to identify various ways of improving the effectiveness of the legal system. Needless to say, this will considerably reduce the load on the courts apart from providing instant justice at the door-step, without substantial cost being involved. This is also avoiding procedural technicalities and delays and justice will hopefully be based on truth and morality, as per acknowledged considerations of delivering social justice.



As is said in the practical philosophy of law that lawyers are what their cases have made them, so goes the addendum that a legal system is venerated as it has been handled and managed in course of time. Then only a legacy is left for the future to find it sufficiently germane to be accepted as a proposition of inheritance. The law and legal system should appeal the reasons of people, is not a legal principle but a common sense observation of fact. It is this spirit that has led to the evolution of ADR Mechanisms for the dispensation of justice with efficacy and steadfastness!

The Constitution of India calls upon the state to provide for free legal aid to ensure that opportunities for securing justice are not denied to any citizen by reason of economic inability. India socio-economic conditions warrant highly motivated and sensitized legal service programs as large population of consumers of justice (heart of the judicial anatomy) are either poor or ignorant or illiterate or backward, and as such, at a disadvantageous position. The State, therefore, has a duty of secure that the operation of legal system promotes justice on the basis of equal opportunity.

As per latest available information, 57,179 cases were pending in the Supreme Court of India as on 30.6.11. The number of cases pending in the High Courts were 42, 17,903 as on 30.9.2010. Shri Salman Khurshid, Minister of Law & Justice said that in order to facilitate expeditious disposal of cases in courts, Government has taken a number of measures as mentioned below:

The Government has approved setting up of ‘National Mission for Justice Delivery and Legal Reforms’. The major goals are:

• Increasing access by reducing delays and arrears in the system;

• Enhancing accountability through structural changes and by setting performance standards and capacities.

Enactment of the Gram Nyayalayas Act, 2008 which provides for establishment of Gram Nyayalayas to improve access to justice to marginalised. The current year allocation has been increased from Rs. 40 crore to Rs. 150 crore. So far 151 Gram Nyayalayas have been notified by the states. In order to computerise the justice delivery system Government is implementing e-Courts Project for the District and Subordinate Courts in the country.

The Government has accepted the recommendations of the Thirteenth Finance Commission to provide a grant of Rs. 5000 crore to the States for improving the justice delivery system in the country over a five year period 2010-15. With the help of these grants, the States can, inter-alia, set up morning / evening / shift / special magistrates’ courts, appoints court managers, establish ADR centres and provide training to mediators / conciliators, organise more Lok Adalats to reduce pendency. The grants also provide for training of judicial officers, strengthening of State Judicial Academies, and training of public prosecutors and maintenance of heritage court buildings.

Former Minister of Law and Justice, Veerappa Moily announced the ‘National Litigation Policy’ (NLP) to reduce the average time of pending cases in India. The NLP aims at reducing government litigation in courts. Launching the NLP to make government an “efficient and a responsible” litigant, Moily said, “Monitoring and review mechanism proposed under it would prevent delay or neglect of important cases such as the Bhopal gas tragedy.” The Law Minister had in October 2009 released a vision statement at a two-day conference on National Consultation for Strengthening the Judiciary towards Reducing Pendency and Delays to reduce the backlog of cases. However, some of the suggestions laid out in the vision statement have not been included in the NLP such as introduction of night courts, appointment of judges on a contractual basis and establishment of a National Arrears Grid.

Mahatma Gandhi had put in correct words as:

“I had learnt the true picture of law. I had learnt to find out the better side of human nature and to enter men’s heart. I realized that the true function of a lawyer was to unite parties riven asunder. The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromised of hundreds of cases. I lost nothing thereby not even money certainly not my soul.”

In the days of “time being money”, even in games like cricket, we have drifted towards one day, limited over matches instead of the five days, two inning matches. Arbitration, as practiced in India, instead of shortening the lifespan of the dispute resolution, became one more “inning” in the game. Not only that, the arbitrator and the parties’ lawyers treated arbitration as “extra time” or overtime work to be done after attending to court matters.

The disillusionment and frustration of people over the inordinate delay in dispensation of justice today looms large as a great threat to erode the confidence of people in the justice system of the country. It is the constitutional obligation of the judiciary to exercise its jurisdiction to reaffirm the faith of the people in the judicial set up. Therefore, evolution of new juristic principles for dispute resolution is not only important but imperative.



• Alternative Dispute Resolution: Negotiation and Mediation, Madabhushi Sridhar, Lexisnexis Butterworth, Wadhwa Nagpur.



• Arbitration & ADR (An essential revision aid for Law Students), Universal Law Series, Universal Law Publishing Company Ltd.

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Lexisnexis, Butterworth, Wadhwa Nagpur.

• Law of Arbitration and Conciliation, Avtar Singh, 2006, Eastern Book Company Ltd.

• Alternative Dispute Resolution: What it is and how it works, (Reprint), Rao P.C. & William Sheffield, Universal Law Publishing Company Ltd.

• Arbitration Agreements & Awards (2nd Edn.), Bansal Ashwinie Kumar , Universal Law Publishing Company Ltd.

• Arbitration Business & Commercial Laws, Lakshmanan AR , Universal Law Publishing Company Ltd.

• International Commercial Arbitration & Its Indian Perspective, Sethi & Gupta , Universal Law Publishing Company Ltd.

• Commentary on the Arbitration and Conciliation Act, (Introduction by Fali S. Nariman), 5th Edn., Malik Justice S.B , Universal Law Publishing Company Ltd.

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• Law Commission of India, 188th Report on Proposals for Constitution of Hi-Tech Fast – Track Commercial Division in High Courts December, 2003.

• Law Commission of India, 76th Report on Arbitration act, 1940, November, 1978.

• Law Commission of India, 114h Report on Gram Nyayalayas, August 1986.

• Law Commission of India, 215th Report on L. Chandra Kumar be revisited by Larger Bench of Supreme Court

• Law Commission of India, 221st Report on Need for Speedy Justice – Some Suggestions, April, 2009.

• Law Commission of India, 222nd Report on Need for Justice-dispensation through ADR etc, April, 2009.