Tag: #SupremeCourtjudgement

INTRODUCTION

A transfer is an act of transferring something from one person to another. Any physical or virtual entity possessed by a person or group of people is considered property. A property asset can be transferred from one person to another through transferring rights, interests, ownership, or possession. Either or all of the ingredients can be satisfied. It can happen in two ways: by the parties’ acts and by law.

Section 5 of the Transfer of Property Act of 1882 defines the term “transfer of property.” It describes an activity in which a live person transfers property to one or so more people, or to himself or to one or so more living people, in the present or future. A living person is defined as a corporation, an association, or a group of individuals, whether or not they are incorporated.

Some important concepts in this act are as follows:

1. Immovable property involves land, benefits resulting from the land, and goods linked to the land, according to the General Clauses Act of 1897. Immovable property can be defined as including all property that is not standing wood, growing crops, or grass in the context of property transfer.
2. Mortgage debt was omitted from actionable claims following the amendment of 1900. Wallis C.J. held in Peruma animal vs. Peruma Naicker that mortgage debts might be transferred as actionable claims before 1900, but that they were excluded from the actionable claims because the legislature meant that the mortgage debt is transferred in the mortgagee’s interest through an instrument that is registered.
3. Instrument: The instrument is defined as a non-testamentary instrument according to the 1882 Transfer of Property Act. It serves as proof of a property transfer between living parties. An instrument is a formal legal document, according to the legal terminology.
4. Attested: A formal document signed by someone acting as a witness is referred to as attested. The executors are the persons who are in charge of transferring the property. In 1926, the amendment legislation was passed, stating that two or more witnesses must sign the document in the presence of the executant, not necessarily at the same time, and they must not be parties to the transfer.
5. Registered: According to the 1882 Transfer of Property Act, “registered” refers to any property that is registered in a jurisdiction where the Act is in effect. Various registration procedures must be followed.
   a. The property’s description should be stated.
   b. Avoid being a victim of fraud.
   c. A competent person should present the deeds.
   d. The property must be listed in the very jurisdiction as the registered office.
6. Actionable claims: A claim to any debt, except a debt acquired by a mortgage of immovable property or pledge o or hypothecation of movable property, or to any equitable interests in movables, not in the claimant’s possession, either actual or constructive possession, which the civil courts recognize as providing grounds for relief, whether such debt or advantageous interest is existent, accusing, or conditional.
7. Notice: The term “notice” refers to being aware of a fact. The individual is well-versed in a variety of scenarios. The Transfer of Property Act of 1882 settled 2 kinds of notices.
   
   Other important concepts are actual or implied notice means the one who is aware of a specific truth and constructive notice means that reality is discovered as a result of circumstances.
   
8. Transfer of property must be done by a competent person: For a legitimate transfer, the person transferring the property must be of sound mind, not intoxicated, a major, or not a person prohibited by law from entering into a contract of transfer of property with another person.
9. The transfer must be made in the following format: Property transfers do not have to be in writing, but if there is a specific property to transfer, it should be in writing:
   a) Over a hundred rupees was spent on the sale of the transportable property.
   b) The sale of intangibles must be done in writing.
   c) All mortgages with a value of more than a hundred rupees must be transferred in writing.
   d) A documented transference of actionable claims is required.
   e) Immovable property is given as a gift.
   f) A lease of more than one year on immovable property.

OSTENSIBLE OWNER

The provision is founded on the idea of proportionality. No one can confer a higher right on a property than what he owns, and alium transferee potest quam ipsa habet and nemo plus juris, which means that no one may transfer a right or title larger than what he owns. The ostensible owner’s transfer emphasizes the notion of holding out.

To make use of this section, you must meet specific qualifications, according to the law for its application. They are as follows:

1. The most important need is that the individual transferring the property is the ostensible owner.
2. The property owner’s permission should be given either implicitly or explicitly.
3. The transfer ought to be in exchange for something.
4. The transferee must exercise reasonable caution in determining the transferor’s authority to complete the transaction and whether he acted in good faith.
5. The idea of ostensible owner transfer is founded on the doctrine of estoppel, which states that when a genuine owner of property makes someone appear to be the owner to third parties and they engage on that representation, he cannot retract his representation.
6. This clause and its rules apply only to immovable property but not to movables.

However, the ostensible owner is really not the true owner, but he can pretend to be the real owner in such transactions. By the purposeful neglect or acquiescence of the genuine owner of the land, he has obtained that right, rendering him an ostensible owner. A guy who has been away for a number of years has donated his property to a close cousin to utilize for agricultural purposes and whatever else he sees suitable.

In this situation, the ostensible owner is a family member, and if he transfers the property to a third party during that time, the true owner cannot claim his property and claim that the person was not permitted to transfer it. Another scenario is when the property is in the wife’s name but the husband used to handle the finances and other aspects of the property. If the husband sells the property as a result, the wife will be unable to reclaim it.

In Ram Coomar v. MacQueen, the privy council declared that when it comes to transfers by apparent owners, somewhere along that lines that it is a principle of natural equity that where one man allows another to hold himself out as the owner of an estate and a third person buys it for value from the obvious owner believing that he is the real owner, the third person shall not be allowed to recover on a secrete title until he can overthrow that of notice, or something that adds up to constructive that ought to have put him on an inquiry, which, if put on trial, would have led to a discover.

ESSENTIALS

There are essentials that need to be meant to be an ostensible owner of any property. Like the term itself, the word ‘ostensible’ denotes ‘seeming’ or ‘apparent’. An ostensible owner is a person who poses as the one who owns that immovable property but is not the true owner.

1. A person must be the property’s ostensible owner.
2. That person must be such an owner with the genuine owner’s express or implied approval.
3. The one who is transferring must buy the property for consideration from the ostensible owner.
4. The transferee must take reasonable care before accepting the transfer to ensure that the transferor has the authority to make the transition; in other words, it should be done in good faith.

Reasonable care can be defined as the level of care that a reasonable and average person would take. It is his responsibility to check the transferor’s title.

As in the case of Nageshar Prasad v. Raja Pateshri, where the name of the proprietor was incorrectly recorded in the revenue records. The name was written was that of someone else, and the rightful owner had already complained about the mistake. The individual whose name was on the revenue records later sold it to a third party, who took possession of the property without making required investigations, and the rightful owner later objected. The third party is obligated to provide all available documents that may provide more information on the property’s title, which may include police registers, municipal registers, and other documents.

Also, there is a safety net in place for the true owner. As in the case of Mathura v. Ambika, in which the actual owner had disposed of the property to another person and had it registered prior to the ostensible owner’s transfer could even be registered, it was held that the real owner’s transfer would be valid because he has a greater title to the property than the ostensible owner, and that the rights of a third party who had purchased the property from the ostensible owner will not be protected under this section.

Only if the foregoing necessary conditions for the section’s applicability are met does the true owner lose his rights in the property here under the section.

There are steps to register an ostensible owner. Firstly, the documentation pertaining to the property must be examined to see if the transferor’s name appears as the owner.

Second, if the individual whose name appears on the records for the property in issue intends to buy it or not. Thirdly, look into “who has ownership of the site property and who is using it.” If the individual is the owner of the property according to the records and documents in the case at hand, the chances of it being a property of an ostensible owner or him being an ostensible owner are slim. However, “enjoying the property” doesn’t merely mean “being in possession of the property,” but also “selling rights,” “right to enjoy the benefits of the said property,” “right to lease out the stated property and receive compensation,” and “right to enjoy the benefits of the said property,” among other things. In this scenario, the term “enjoyment” has now been given a larger meaning.

Finally, the reason for it being given the ostensible ownership element, i.e. why the true owner has not bought it in his own name.

The transfer must be made without considering some factors:

1. The ostensible owner’s transaction is always for consideration. There should be some sort of exchange. Gratuitous transfers are not covered in this section.
2. When there is a transfer by an ostensible owner, care must be taken. He is unable to give the property away as a gift. As stated in the Indian Contract Act of 1872, consideration is a required component of every contract, and an ostensible owner’s property can only be transferred via contract. In addition, section 4 of the act states that anything that’s not expressly specified in this act must be determined from the basic definitions set forth in the Indian Contract Act of 1872.

THE BURDEN OF PROOF

The transferee bears the burden of proof in demonstrating that the transferor was the ostensible owner and also had permission to sell the property.

He must also demonstrate that he behaved in good conscience and took all reasonable precautions while obtaining possession of the property. It’s because he needs to show that he wasn’t at fault when he took the property and that the burden of proof should be shifted to the rightful owner. To shift his burden of proof, he can show that the transferor did not permit the transferee to know the true facts and went to great lengths to conceal them.

CONCLUSION

The Act’s Section 41 has done a good job of safeguarding the interests of the said innocent third party. However, this section may appear to be prejudiced in favor of the third party, this is only the case if the genuine owner is at fault. No one else can simply claim that he now owns the property and can no longer be evicted. The third party must exercise extreme caution when purchasing the property, and these criteria have been imposed by law to prevent the apparent owner and the third party from abusing this section. In a way, this also protects the genuine owner’s interests.

This article is written by Tingjin Marak, a BA/LLB student at Ajeenkya DY Patil University Pune.

INTRODUCTION

One of the most unprecedented crisis ever in modern human history unfettered its wings in the form of a virus transmission namely Covid-19. The pandemic shook all spheres of life ranging from regular personal issues to the most intriguing aspect of our life. The Legal field was no exception to this havoc and it too bore the brunt of the pandemic. It compelled the justice delivery system to turn its recourse from traditional instruments of justice delivery to modern ones. In order to cope with the complicated demand system and ensure speedy and accessible delivery of justice, the virtual courts evolved to the fullest. It would be necessary to observe that even though they were present before the pandemic, covid-19 caused their application. Even after the retrieval of the pandemic, the ever arching presence of technology-assisted tools such as video conferencing and virtual courts are like to stay long after given their immense benefits of time-saving, speedy trials, social distancing norms, and technical benefits. However, as we know everything comes at a cost, this becomes more relevant in this case where the queen card is technology.¹

TECHNOLOGICAL CONUNDRUM

Starting from the very conception, nearly all the aspects in this technology-driven process suffer from myriad glitches. In the present scenario of virtual proceedings, only lawyers and their respective clients can view the same. The general public is barred from participating in the process. This completely goes against the notion of open courts and access to justice because these ultimately erode the rule of law as the very credibility and transparency depend on the open and fair judicial trials. Moreover, poor audio-video quality, manipulation of testimonials and evidence, power backup and connectivity issues, irregular code of conduct by the stakeholders, difficulty posed in cross-examination of witnesses, and multiple other issues that have crept into the system have further accentuated the discrepancies and complications of the ongoing virtual process.

The words of Adv. Dushyant Dave who quoted, “Performance of virtual courts through the medium of video conferencing has been not only far from satisfactory, but utterly disappointing.” presents a stark contrast as to actual requirements of setting up the requisite infrastructure and the ground reality.

One of the pertinent questions that arise is how to retain the public trust and confidence in the ongoing convoluted circumstances when the very concept of open courts and access to justice have been endangered by the advent and ramifications of covid-19? One of the notable answers to this question could be the live streaming of cases in matters of constitutional and national public interest which had been laid down in the case of Swapnil Tripathi vs Supreme Court Of India². The case lays down the groundwork required for setting up virtual courts, thus, paving way for the establishment of online norms and infra for live streaming.

BRIEF FACTS OF THE CASE

In 2017, Swapnil Tripathi, a law student, filed a writ petition under Article 32 of the constitution and was joined by 3 others, seeking declaration for the live streaming of the cases of constitutional importance and affecting the public at large in a manner that is accessible for public viewing. It further sought guidelines for laying down criteria for determining the cases that qualify for live streaming and also chalking out the list of exceptional cases. In order to buttress his case, the petitioner relied on the case of Naresh Shridhar Mirjkar v. the State of Maharashtra³ wherein the court emphasized the efficacy of open trials for upholding the legitimacy, effectiveness of the courts, and enhancement of public confidence and support.

ISSUES RAISED

Whether there should be live dissemination of the cases with aid of ICT( information and communication technology) and, if they are to be introduced in India, then under what conditions?

DECISION

The decision was delivered by a 3 judge bench of the Supreme Court of India wherein Justice Khanwilkar delivered the majority judgment on behalf of himself and CJI Dipak Misra. Justice D.Y Chandrachud gave a different concurring judgment. The bench ruled that the cases of the constitutional and national importance of public matter should be live-streamed in a manner consistent with the guidelines as prescribed by the honorable Supreme Court of India.

HELD

The Judgement is held to be significant, for it opens the door that provides open access to justice, public information and ensures transparency of the judicial process. The judgment has opened the application of live stream even to the most bottom tiers of judicial institutions i.e. lower courts thereby enhancing the efficiency and effectiveness of the entire judicial ecosystem. The court held that the right to view the live broadcast of the above-mentioned cases flowed from the right to access to justice which is derived from Article 21 Right to life and liberty thereby underlining the concept of open courts. However, this right is not absolute and is subject to the provisions of model guidelines framed for this purpose. The SC shall hold the broadcast and archive rights exclusively. The court concluded that live streaming of cases would uphold the constitution values, infuse public confidence into the judicial machinery, and uphold the values of democracy and integrity. However, there is a compelling need to balance the administration of justice and the virtues of privacy and dignity of the stakeholders involved. The other benefits involve:

1. It would infuse radical immediacy of the court proceedings and espouse public awareness regarding matters of national importance.
2. It would reduce public reliance upon second-hand narratives and ensure the credibility of the system.
3. It would literally eliminate the space and the time constraints by removing physical barriers and decongesting the courtrooms, thereby, greatly aiding in keeping infections at bay.
4. It would drastically enhance the accountability and credibility of the judicial process, thus, promoting democracy.

CONCLUSION

While allowing such streaming, the majesty, integrity, and decorum of the courts as well as of the stakeholders involved, should not be compromised. Given in this unprecedented crisis of covid19 and the post covid world, live streams would be an imperative tool for the purpose of serving justice and fulfilling the notion of open courts thereby promoting technological prowess.

References:

1. https://lawtimesjournal.in/swapnil-tripathi-vs-supreme-court-of-india/
2. (2018) 10 SCC 628
3. 1966 3 S.C.R 744

This article is written by Riya Ganguly, 2nd year BBA LLB student at Bharati Vidyapeeth New Law College, Pune.

Introduction

Transgender¹ or the third sex denotes those people who cannot align themselves to their given respective biological genders with their inherent biological features. They are usually born as male or female but their innate perseverance of gender turns out to be different from their bodily features. Their self-proclaimed gender identity doesn’t match with their sex leading to the discrepancy in their gender orientation. Transgender, transsexual, and hijra are synonymous with each other and are used to denote them.

Since the dawn of human civilization, the existence of transgender people has been acknowledged but they have been devoid of subsequent approval from mainstream society. Even in this 21st century, such people are viewed as taboo and are subjected to persecution and a state of constant denial. Shame and stigma still continue to characterize such subjects in both public and private spheres thus engendering grave misconceptions. They are systematically denied equal rights in spheres of education, employment, marriage, divorce, inheritance, property, adoption, etc. The rudimentary reason for their denial of equal rights is ambiguity in recognition of their gender status as most of the civil rights especially succession, inheritance, marriage, and property rights are gender-specific and the policymaking in India has been always conceived primarily in respect of only two genders i.e. male and female, thereby preventing them from exercising their civil rights in their desired gender.

National Legal Services Authority vs Union of India

The Supreme Court in its landmark judgment of National Legal Services Authority vs Union of India² declared the transgenders as the third gender and endowed them with the right of self-identification of gender as female/ male / third gender. This self-perceived gender identity forms a very crucial part of one’s right to life under Article 21 of the Indian Constitution. The two-judge bench affirmed their entitlement to the fundamental rights granted to them via the constitution of India. Any denial of their fundamental rights in the civil or criminal sphere owing to their third gender is discriminatory to them. The court held transgenders as socially and economically backward classes (OBC) who are entitled to reservation in educational institutions and public sector appointments.

Constitutional Rights

Article 14 of the Constitution of India states that the State shall not deny to “any person” equality before the law or the equal protection of the law within the territory of India. The phrase “any person” includes transgender too. And article 15 prohibits discrimination against any citizen on grounds of sex. Non-recognition of the identities of transgender/hijras leads to the systematic denial of the rights of equality and equal protection of the law. Article 19 (1) (a) of the Indian Constitution describes that all citizens shall have the right to freedom of speech and expression. It guarantees one of the most basic and fundamental human rights. Expression and alignment of one’s gender is hence an obvious derivative of article 19 (1)(a). Denial of the right to express one’s sexual identity through speech and choice of romantic/sexual partner would lead to violation of Article 19

The Transfer of Property Act 1882 and Miscellaneous rights

The Transfer of Property Act 1882³ and its subsequent amendments regulate the transfer of property. The phrase ‘transfer of property’ denotes a demonstration by which a person transfers or passes the property to at least one person, or himself, and at least one different person. It basically implies the transfer of property from one person to another. The term person consists of an individual, or body of individual or company, or association. Section 5 of the Act provides that transfer of property must take place between two or more persons who are living or it must take place inter vivos. The word “person” above forth holistically includes male, female and third gender. The other property-related laws such as The Hindu Disposition Of Property Act, 1916, The Indian Easements Act, 1882, etc include the word “person” to connote and include transgender within its sphere and do not per se disqualify them from legal transactions.

Inheritance Laws

The inheritance and succession laws lay down rules pertaining to the devolution of property on the death of an individual. The property is devolved on the basis of the relationship between the deceased and the inheritor. The succession laws in India are governed by the respective personal laws of the religious communities that chiefly recognize inheritors into the watertight compartments of the male and female genders. In order to claim property rights, transgenders are required to recognize themselves as male or female.

The Hindu Succession Act 1956⁴ which governs the inheritance of properties is completely silent pertaining to the rights of transgender. It explains who is Hindu and whom all comprise the inheritance schedule (such as son, daughter, spouse, etc.) within the said definition. The Act establishes a comprehensive and uniform system of inheritance. Ownership over the property is granted only to males and females thereby excluding the third gender. Such trans people are devoid of property rights and subject to extreme prejudice and vulnerability. They have to align their genders to respective categories of either male or female in order to claim property rights. So they have to establish their gender identity as per the one assigned to them at their birth certificate. Moreover, trans people are not entitled to the status of legal heir of their parent’s separate property nor coparcener in the Joint Hindu Family with their gender identity.

Similar to the line of succession rules of The Hindu Succession Act, the personal law of Muslims i.e. Shariat too follows similar rules pertaining to transgender property rights. Indian Succession Act, 1925 governs property inheritance of Christians. Notably, Section 44 of the act has included transgender and elucidates upon their inheritance of the ancestral property.

THE TRANSGENDER PERSONS (PROTECTION OF RIGHTS) ACT, 2019

THE TRANSGENDER PERSONS (PROTECTION OF RIGHTS) ACT, 2019⁵ has made a decent effort to protect the rights of transgender and promote their welfare by prohibiting discrimination on grounds of education, employment, healthcare, movement, access to goods and services, choice of occupation, etc. The act has sought to remove discrepancies in unfair treatment with regard to the right to reside, purchase, rent, or otherwise occupy any property. Section 4(2) of the Act provides the right to self-perceived gender identity. Section 5 of the Act provides that a transgender person could be perceived as third gender (transgender) by making an application to the District Magistrate for issuing a certificate of identity as a transgender person. But the act does not delineate anything about property rights thereby perpetuating lacunae in the system.

Evolving Sphere

Recently States such as Uttar Pradesh⁶, Uttarakhand, etc have sought to enforce progressive laws on property inheritance of transgender people. It has successfully passed an amendment to include transgender people in the UP Revenue code wherein they will be included in the inheritance nomenclature. The transgender people will now be recognized as members of a landowner’s family and will hold an equal right to inherit agricultural property.

Conclusion

The SC judgment in the NALSA case coupled with THE TRANSGENDER PERSONS ACT, 2019 has sought to create a level playing field by endowing trans people with the right to self-identification and creation of the label of the third gender. Transgenders cannot be denied the right to property per se as they have the absolute right to inherit family property unless disqualified by law. The State must strive to ensure equality of rights and promote the holistic development of the trans community as a whole.

References:

1. FAQs, https://transequality.org/issues/resources/frequently-asked-questions-about-transgender-people
2. WP (Civil) No 400 of 2012
3. https://www.indiacode.nic.in/bitstream/123456789/2338/1/A1882-04.pdf
4. https://www.ijlmh.com/wp-content/uploads/2019/03/Inheritance-Rights-of-Transgender-A-Cry-of-Humanity.pdf
5. https://www.news18.com/news/buzz/why-transgender-people-still-have-to-go-through-hoops-to-get-married-or-inherit-property-in-india-2842545.html

This article is written by Riya Ganguly, 2 nd year BBA LLB student at Bharati Vidyapeeth New Law College, Pune.

INTRODUCTION:

Insolvency and Bankruptcy Code, 2016 came into existence to govern the easy exit of businesses, it has been witnessed from time to time that India has been lacking the legal framework for the companies whose businesses have been hindered and they want to exit the market although it had also been a matter of concern to determine the order of distribution of assets at the time of liquidation of the company. Previously there were no specific provisions to govern the distribution of assets amongst the creditors. But in the present era section 53 of the Insolvency and Bankruptcy code, 2016 deals with the mechanism for the distribution of assets under liquidation.

The mechanism laid down under the code is termed as “waterfall mechanism”. In a general sense, the waterfall mechanism lay put the list of stakeholders in a sequential manner to indicate the priority in getting the payments from liquidation.

HISTORICAL PERSPETIVE:

At the time of Insolvency proceedings, the Inter-se ranking amongst creditors plays an important role as it dictates the arrangement and determines the priority in which the financial offerings by the resolution applicant shall be distributed to the secured creditors. The status of determining the priority was the different pre-IBC regimes and post IBC regimes.

Pre-IBC Regime:
The Supreme Court of India in the case of ICICI Bank v. Sidco Leathers Ltd. and Others¹ addressed the issue of priority under Sections 529 and 529A of the Companies Act, 1956, which govern the ranking of creditors’ claims in a company in liquidation similar to what is given under section 53(1) (b) of the code. In this instance, the Supreme Court interpreted the meaning and scope of Section 48 of the Transfer of Property Act, 1882 to rule that the first-charge holder’s claims would persuade over the second-charge holder’s. The Supreme Court also noted that there was a lack of legislative clarity on this issue and that if the legislature had intended to reduce a right as important as the right of priority, it would have done so explicitly in the legislation.

Post- IBC Regime:
Even after the IBC came into force, there has been no clarity on this subject. Explanation: Section 53 of the IBC provides that “Each of the debts will be paid in full, or in equal proportion within the same class of beneficiaries, if the proceeds are inadequate to meet the debts in full, at each step of the distribution of proceeds in respect of a class of recipients who rank similarly.”

As a result, the IBC envisions the distribution of liquidation proceeds on a pari passu basis, or on an equal level, among the same class of stakeholders. Any agreement that upsets the priority ranking established by Section 53 of the IBC must be rejected, according to Section 53(2) of the code. Moreover, the issue of priority of inter-se secured creditors who have relinquished their security interests has not been specifically cleared by the code.

The National Company Law Appellate Tribunal in the matter of Technology Development Board v Anil Goel² held that “the moment when a secured creditor relinquishes their security interest in the liquidation estate, the sale proceeds shall then be strictly distributed as per the waterfall mechanism given under section 53 of IBC remains unpaid following the enforcement of security interest thereby when compared to a secured creditor, it has a lower priority.”

THE WATERFALL MECHANISM UNDER IBC:

The waterfall mechanism lays down that at the time of the company’s liquidation and while distributing the assets of the company the secured financial creditors shall be given the priority and the amount belonging to them shall be paid fully according to their admitted claim before initiating any distribution to unsecured financial creditors.

The Appellate Authority in its recent landmark judgment in the case of Technology Development Board vs. Anil Goel, Liquidator of Gujarat Oleo Chem Limited (GOCL) & Ors³ made it specifically held that: “Whether the Secured Creditor holds a first charge or second charge is material only if the Secured Creditor elects to realize its security interest.” “However, once a Secured Creditor opts to relinquish its security interest, the distribution of assets would be governed by Section 53(1)(b)(ii), which states that – all Secured Creditors who have renounced security interests rank equally.”

Statutory provision:
The statutory provision which sets out the order of priority for the distribution of sale proceeds from the sale of liquidation assets is categorically mentioned under Section 53 of the Insolvency and Bankruptcy Code, 2016.

According to section 53 (1) (b):
“The following debts will be ranked equally between and among them:
(i) workmen’s dues for the period of twenty-four months preceding the liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52”

According to Section 53(2) of the code:
“The liquidator will overlook any contractual arrangements between receivers under sub-section (1) with equal ranking if they disturb the sequence of priority under that sub-section.”

WATERFALL MECHANISM AND MEANING OF SECURED CREDITOR:

A secured creditor is one in whose favor a “security interest” has been created by the corporate debtor.⁴ Section 52 of the code provides the secured creditors with two options:

• either to realize its security interest, or
• give away its security interest to the liquidation estate⁵

It is the duty of each secured creditor to communicate to the liquidator about his decision to either relinquish his security interest or to realize its security interest.
If the secured creditor fails to inform the liquidator of its intention within 30 days from the commencement of the liquidation process, the security interest held by such secured creditor is deemed to be relinquished.⁶
In case a secured creditor chooses to relinquish its security interest then it has to stake its claim to the liquidation estate.

CONCLUSION:

The prevailing approach towards the Secured creditors’ priority rights, established at the time of lending, supposedly provides them with a security net in the event that the firm defaults and insolvency procedures are initiated. Even after the IBC was enacted, there is nothing in the IBC that specifically addresses this issue. Furthermore, Section 53(2) of the IBC only prohibits agreements that disrupt the waterfall mechanism’s sequence of precedence. The problem of priority of inter-se secured creditors who have renounced their security interests is left unanswered. As a result, it is clear that there is still lacking legal certainty on this topic.

The intrinsic ambiguity in the topic, as well as the lack of a clear legal precedent, leaves no answer to the difficulty. It is conceivable, however, that any priority rights connected to a security interest stay tied to the security interest, and that when the security interest is abandoned, the priority rights associated with the security interest expire as well. Although it appears that lawmakers considered all issues when establishing the IBC’s liquidation waterfall, which favored secured creditors, legislators should give equal weight to the interests of other stakeholders in order to fulfill the IBC’s goals.

References:

1. (2006) 10 SCC 452.
2. Technology Development Board v Anil Goel, Company Appeal (AT) (Insolvency) No.731 of 2020
3. Company Appeal (AT) (Insolvency) No.731 of 2020
4. Insolvency and Bankruptcy Code, 2016, Section 3 (30).
5. Insolvency and Bankruptcy Code, 2016, Section 52 (1).
6. Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Regulation 21A.

This article is written by Shubhendra Joshi, a BBA.LL.B 4th-year student of Indore Institute of Law.

Introduction

Tort is a civil wrong, meaning it is a wrong committed against a person. Tort comes from the Latin word “tortum,” which means “crooked” or “twisted.” It is equivalent to the English term ‘wrong’ in this sense. There are two kinds of law: civil and criminal. Tort and contract law are two subsets of civil law. It’s essentially a violation of a legal obligation. It violates the legal rights of others. A tort happens when someone intentionally or carelessly harms another person.

Civilization and law coexist. It is not possible for one to exist without the other. If one thrives, the other develops as well, and if one declines, the other suffers. As a result, tort law was created to deal with everyday offenses.

The Tort Law can be traced back to the Roman precept alterium non-laedere. The maxim means “not to harm another,” implying that no one should be harmed by their actions or words. This maxim is similar to the maxims of honesty vivere, which means “to live honorably,” and suum clique tribuere, which means “to render to every man that which belongs to him,” or “to bring fairness to every person.” The development of tort law can be traced back to these three maxims.

What is Tort according to jurists?

Salmond defined tort as, “It is a civil wrong for which the remedy is a common-law action for unliquidated damages and which is not solely a violation of contract, trust, or other essentially equitable obligation.”

Winfield mentions, “Tortious liability comes from the breach of a primary legal obligation: this duty is owed to all individuals, and its failure is redressable by an action for unliquidated damages,” Winfield says.

The definitions of Winfield and Salmond are incompatible. The practical point of view is represented by Salmond’s definition, but the theoretician point of view is represented by Winfield’s definition. Salmond’s point of view is preferred by lawyers, but Winfield’s is preferred by students. Furthermore, Salmond’s perspective is narrower, whereas Windfield’s perspective is larger.

Application of English Law of Torts in India

In India, tort law is based on English tort law.
The English Law of Torts has a significant influence on Indian tort law, despite the fact that the act has been changed to reflect Indian legislation. When the British ruled India, they established their own set of rules and procedures for administering justice. Jimha, which means crooked in Sanskrit, was believed to be akin to “tortious of fraudulent conduct” in ancient Hindu law. At the time, the scope of British tort was limited.

Because the Indians were utterly uninformed of the English laws, they were found to be unjust and inequitable. It was difficult to administer Indians in the early days of British law since there was an English Judge who had to deal with a case in a foreign language. As a result, they resolved to draught an Indian Tort Law based on English concepts in order to avoid chaos. They chose to set up courts in India in the 18th century after studying the Indian laws at the time and obtaining the necessary approval.

Mayors Courts in the Presidency Towns of Calcutta, Madras, and Bombay were the first courts established by the British in India. These courts were subject to English statutes and Acts, which were then implemented in England.
The courts established that “justice, equity, and good conscience” were the guiding principles at the time. The Privy Council understood the phrase “justice, equity, and good conscience” to include norms of English law that are suitable to Indian society and circumstances. All of this meant that the High Courts of Bombay, Calcutta, and Madras adhered to the Common Law of Torts, while the other courts applied the principles of justice, equity, and good conscience.
Also, when looking at Indian decisions, Justice Bhagwati stated in M.C. Mehta v. Union of India,

“In a highly industrialized economy, we need to develop new ideas and lay down new rules that will effectively deal with new challenges that occur.” We cannot allow our judicial thought to be shaped by the law as it currently exists in England, or for that matter, in any other country. We are absolutely open to receiving illumination from any source, but we must first establish our own jurisprudence.” We can infer from the words that Justice Bhagwati recognized the importance of having one’s own law and how it contributes to the nation’s growth.”

The main purpose of Law of Torts in India

The primary goal of tort law is to provide compensation to people who have been injured. Though, in current times, the goal is to distribute losses among those who are connected in some way.

Furthermore, some authors argue that Tort Law is more concerned with punishing than compensating. For the purpose of Torts, everyone has their own point of view. The violation of a general duty is a common ingredient in both crimes and torts. Murder, robbery, burglary, and other major crimes are all under governmental supervision. The state has power over all common wrongs in Tort Law as well. Individual harm is thought to be equivalent to societal harm.
As a result, the primary goal of tort law is to punish wrongdoers and foster social peace.

Reasons for the slow development of Law of Torts in India

In comparison to other countries, India’s tort law is not well developed. Even the Indian Tort Law does not have a codified version. There are several reasons for India’s sluggish development of tort law, some of which are stated below:

1. The law is ambiguous. People face a great deal of uncertainty because the legislation is not codified and is still in its early phases of development. This is why only a small number of cases are filed under Indian Tort Law. Furthermore, there are few precedents, which adds to the vagueness of Tort law. The existing precedents are from English Tort law and cannot be applied to Indian law.
2. There is a general lack of political awareness among the general public. Because most people are unaware of their rights, tort law is rarely employed in the country. This issue arises as a result of India’s widespread illiteracy, which also causes people to avoid going to court to exercise their rights. People who carry out their responsibilities are given more weight than those who demand their rights.
3. Why do people disregard their legal rights? This is due to a lack of awareness of their rights and the country’s high illiteracy rate. Because of their illiteracy, people are unaware of their rights and are hesitant to seek redress through the courts.
4. Poverty continues to be a factor in India’s delayed development of tort law. The majority of India’s population is economically poor, and as a result, they are unable to afford the hefty costs of litigation. This is still a major reason to avoid bringing a Tort case.
5. The court system is also highly expensive. The cost of going to court and hiring a lawyer is extremely significant. As a result, rather than approaching the court, the poor man chooses to suffer the torture. The cases are likewise handled in a molasses-like manner. On the other hand, in England, the administration of justice is so cheap and quick that these types of cases are resolved in under a year. All of these issues contribute to the tort law’s delayed evolution.

The number of pending cases in India as of October 13, 2018, is depicted in the graph below.

The graph was created using data from the National Judicial Data Grid. Due to the sluggish evolution of Indian legislation, a considerable number of cases are still waiting.

Have Torts been Ignored in India?

The next stage will be to see if the Indian court system has disregarded tort law. Simply said, tort law has not been forgotten. The M.C. Mehta case, which established the absolute liability rule, the Supreme Court’s direction on Multinational Corporation Liability, recognition of Governmental tort by government employees, principles on the legality of the state, the evolution of the tort of sexual harassment, a grant of interim compensation to a rape victim, and award of damages for violations of human rights under writ jurisdiction are all examples of this.

Despite the fact that most areas of law, such as crimes, contracts, property, trusts, and so on, have been systematically organized, India’s lack of a torts code is notable. The work of Indian attorneys and judges has contributed significantly to the evolution of tort law. Tort reform has been advocated for about a century and a half, with the earliest support coming from Sir F Pollock in 1886, who drafted the ‘Indian Civil Wrongs Bill.’ The bill, however, was not brought up for consideration in the legislature.

The value of code cannot be denied, but it is vital to remember that tort law is still in its infancy, and codifying it would not only be difficult but may also stifle its progress. However, the lack of a code prevents torts from becoming the dominant mode of litigation. The evolution of tort law in India pales in comparison to that of other progressive countries, where tort law is substantially more mature.

As previously stated, codification of tort law at this time would be premature. A more prudent approach would be, to begin with, enactments in areas where case law is lacking. The subject of the government’s liability when it comes to torts committed by its workers is one of the first suggestions made by the Law Commission in this regard.

In the report of the commission led by MN Venkatachaliah CJ, the National Commission for Review of the Working of the Constitution (NCRWC) has also recommended a statute that makes the state liable for the torts of its employees (2002). The small volume of tort litigation in Indian courts, on the other hand, contributes considerably to why an Indian code on this branch of law may be premature. Currently, only a small percentage of tort lawsuits are ever brought to court. However, this is a catch-22 since until a code for tort law is developed, there will be few tort cases brought in courts because people have no means of knowing what they are getting into.

Concerns with Tortious Litigation in India

Despite the fact that India is regarded as a litigious country, the number of lawsuits filed is quite modest. This is because of the limits and roadblocks that have been placed in place, including prohibitive fees, lengthy delays, and inadequate harm grants. In recent years, there has been a notable increase in the number of cases completed, particularly in cases involving the administration. This is typically linked to India’s financial development and, as a result, increased awareness of legal rights.

Common law jurisprudence shaped the Indian legal system and was introduced to the Indian people in an uncommon way. Although the English tort law served as a model for its Indian counterpart, its application is still ambiguous and limited. Several decisions and cases involving defamation and contributions between joint tortfeasors plainly illustrate that India cannot and does not adhere to English common law.

The English tort law applied differentially to Presidency towns and the mofussil throughout the colonial era. Indian citizens are exempt from the champerty and maintenance statutes. In fact, only those provisions of English tort law that suit the local conditions in India have been upheld and are valid in India. Given this situation, determining whether a given English statute also applies in India is difficult.

It was also unclear whether a specific statute remained in force in India after being abolished or changed under English law. For such a question, there is no final answer. As a result, unless a judge decided otherwise, it was difficult to know whether aspects of English law were applicable in India. Tort law remained uncodified even after the Constitution took effect. Article 372 of the Indian Constitution states that legislation in effect immediately prior to the adoption of the Constitution remains in effect. Any rulings issued by English courts, on the other hand, are no longer required to be upheld by Indian courts.

These decisions may only have persuasive power at most. As a result, the state of tort law remains unchanged. Because English tort law cannot be applied generally to the Indian setting, Indian tort law as a whole remains ambiguous. Furthermore, there is still a discrepancy in the application of laws in Presidency towns against the mofussil.
Citizens do not have a clear knowledge of their rights and responsibilities before going to court. Lawyers are likewise constrained in how much assistance they can provide in this circumstance because many areas of the law are still uncertain. The judge presiding over the case also has a difficult assignment ahead of him.

It’s simple to understand why victims often accept the wrongdoings they’ve been subjected to without pursuing legal redress. Is there always a way to stand up for one’s rights? The explanation, according to Professor Northrop, could be found in the cultural contrasts between eastern and western nations. Compromise is encouraged in Eastern societies. Furthermore, Asian tribes have a reluctance to use Western, right-wing legislation to resolve their conflicts. As a result, when it comes to torts, there is very little litigation.

People have been skeptical of such sweeping generalizations for a long time, while also urging that we reconsider the need for tort law litigation in India and its repercussions. Such recommendations strongly propose that empirical research be conducted to evaluate the validity of such reasons, which are mostly based on sociological, civilizational, and cultural elements.

If there is one thing that is certain in today’s culture, it is that quality justice is not provided; rather, it can only be purchased at a hefty cost. This is not to imply that the court is corrupt; rather, it demonstrates how a common man cannot even imagine receiving proper recompense for the damages to which he is entitled. This is true because the adversary can always use his money or influence to get around our country’s complicated judicial structure.

The commoner, on the other hand, will face a chain reaction of procedural issues as soon as he approaches the judicial system with his grievance, which will absorb all of his money, willpower, and time. The aggrieved will be obliged to pay hefty lawyer’s fees, court fees, and other incidental charges just to file his claim in court. To the uninitiated, it may not seem true, yet his legal expenses in seeking to recover his losses might sometimes much outweigh the original amount of his claim.

Unfortunately for him, if he loses at the conclusion of the trial, he may be forced to pay even more money to the court, first as costs, and then to file an appeal in a higher court. We haven’t even discussed the length of time it takes to resolve a civil case in India. According to studies, courts in tortious litigation cases take an average of nearly 6 years to reach a judgment. So far, the shortest time it has taken for a tort case to be resolved in 5 years, while the longest time it has taken is 13 years. Even severely harmed people are discouraged from resorting to civil action due to the excessive costs and lengthy decision-making process involved in tort claims.

We have highlighted a few cases that have further discouraged those who have been wronged in order to show the court attitude in such scenarios where compensations must be paid. According to precedent, in a case where the plaintiff’s claim was for Rs. 10,000/-, he was only awarded Rs. 1/- in compensation. In another case, two civil actions were valued at Rs. 500/- apiece, but the court only granted the aggrieved parties Rs. 60/- and Rs. 50/-, respectively.

The Hon’ble Nagpur Bench of the erstwhile Bombay High Court determined that in a matter where the claim was for Rs. 11,300/-, the aggrieved would be satisfied with an award of only Rs. 315/-. In a case before the Hon’ble Madras High Court, a plaintiff filed a claim for Rs. 10,000/- but was only given Rs. 650/- in compensation. It should be noted that these examples are somewhat ancient, yet they have been mentioned to emphasize the Indian judiciary’s inclination to ignore tort proceedings and award grossly disproportionate amounts when contrasted to the plaintiff’s claims.

Major Breakthroughs in Tort Law in India

UPHAR CINEMA CASE –The Gateway to Tort Law in India

The Uphaar Cinema, located in a wealthy suburb in the center of the country, New Delhi, caught fire on June 13, 1997, due to a malfunctioning generator mounted by the Electricity Board in the theatre’s basement. The exits from the balcony were clogged due to the installation of unlicensed seats years ago. As a result, the occupants inside the theatre were unable to flee, and fifty-nine people perished and another hundred were injured.

In November 1997, all of the injured’s outraged family members established an association and filed a complaint in the High Court of New Delhi, represented by a volunteer lawyer. The group sought Rs. 22.1 crore in compensation and Rs. 100 crore in punitive damages, which would be used to establish a trauma center, making it the biggest demand in an Indian tort case to date.

Following that, in 2003, the court ordered Rs. 21 crores in compensation for the families of the deceased people, as well as Rs. 1.04 crore for the 104 injured theatre-goers. In addition, a sum of Rs. 2.5 crore has been approved for the establishment of a trauma center in this regard.

The multimillionaire theatre owners were then charged with criminal offenses, and the Sessions Court found them guilty and sentenced them to two years in prison. However, the aggrieved association, dissatisfied with the penalty, went to the Supreme Court in 2007, which maintained the convictions and enhanced the sentence.

In India, the Uphaar Cinema Case was a watershed moment for tort relief in catastrophes. It had well-organized and affluent appellants represented by a dedicated lawyer who did not charge for his services, as well as a case with no evidentiary issues.

However, fourteen years after the fire, on October 13, 2011, the Supreme Court reduced the damages awarded to the deceased victims to a fraction of their original amount, from 2.5 crores to 25 lakhs, a 90% reduction, and all government agencies charged with the fire were exonerated except the Delhi Electricity Board. Even when it was a win-win case totally in favor of the appellants who had been tortured by the incompetent authorities, the future of mass tort in India appeared dismal once again.

In 2014, the Supreme Court heard a new appeal in the criminal case of Uphaar. It upheld the Ansals’ convictions, i.e. the cinema owners who had previously been found guilty, but it couldn’t agree on the amount of compensation to be paid to the victims. Justice T.S. Thakur favored restoring the Ansals’ original punishment, but Justice Gyan Sudha Mishra favored awarding Rs. 100 crore as compensation for the establishment of a Trauma Center in the Uphaar Victims’ memory. The judge’s readiness to award such a large sum for a tort law case in India, far bigger in magnitude than had previously been contemplated, demonstrated the growth of mass torts in India.

INDIAN MEDICAL ASSOCIATION VS. V.P. SHANTHA– The Saha Case

In 1986, Parliament passed the Consumer Protection Act, which established a three-tiered consumer grievance redress system to give remedies for substandard “goods and services” across the country. In 1995, the Supreme Court ruled that “medical services” would fall under the Consumer Protection Act of 1986’s “goods and services” category. As a result, medical claimants no longer have to travel to court and pay high court fees, and they began submitting claims in Consumer Tribunals, which accounted for the majority of the cases handled by the Consumer Tribunals at the time.
From 2008 to 2014, the National Consumer Dispute Redressal Service delivered 154 medical malpractice lawsuits, accounting for 8% of its total judgments. Surprisingly, the claimants won over the medical practitioner in nearly 45 percent of the cases. From the moment the lawsuit was filed until the final verdict was reached, it took an average of 11.7 years.

An Indian-American couple traveled to Kolkata a year after the Uphaar tragedy to meet their relatives. The husband was a medical doctor, and the wife was a child psychologist who was 36 years old. The wife had a treatable but uncommon skin ailment and was admitted to the AMRI hospital, where she was cared for by a number of famous medical professionals. The treatment involved the administration of massive amounts of Depomoderol, which exacerbated the wife’s condition and finally led to her death.

Dr. Kunal Saha, the dissatisfied spouse, filed a complaint with the West Bengal Medical Council, which cleared the doctors. The spouse then filed criminal charges against the doctors under section 304A of the Indian Penal Code. The doctors were convicted by the West Bengal courts, but the Calcutta High Court overruled the District Court’s decision and exonerated them. Regrettably, the Supreme Court confirmed the Calcutta High Court’s decision regarding criminal responsibility.

Dr. Saha’s wife died as a result of the negligence of the three AMRI doctors, and a claim of Rs. 77 crore was made with the National Consumer Disputes Redressal Commission (NCDRC). The National Consumer Disputes Redress Commission (NCDRC) dismissed his claim and complaint in 2006. Dr. Saha represented himself in all of these proceedings, which cost him in a number of ways: (1) He had to travel 50 times from the United States to India as the case advanced. (2) Due to legal and travel expenditures, he declared bankruptcy in the United States of America. (3) He did not take up his academic position in Cincinnati, and as a result, his academic career was cut short.

Finally, the Supreme Court of India rejected the NCDRC’s ruling in 2009, and the matter was referred back to the National Consumer Disputes Redressal Commission to determine the amount of compensation. In October 2011, the commission finally awarded Dr. Saha damages of Rs. 1.5 crore. When the matter was appealed to the Supreme Court, a sum of Rs. 6.08 crores was awarded to Dr. Saha, directed against the doctors and the hospital, plus interest of 6% per annum, more than double the compensation previously awarded.

The Saha Case is a classic example of a one-on-one case that resulted in a milestone in Indian tort law. The Supreme Court granted increased damages because of the loss of a long career with a high American income that was harmed. The Saha case is an interesting reversal of the Bhopal Gas Tragedy, in which the perpetrator was an American Union Carbide Company and the victims were Indians, whereas the Saha case involved Indian wrongdoers and an American victim. We still don’t know if the broad tort damages based on monetary losses perpetuate gaps and inequality among the general public.

The Future of Torts in India – Conclusion

There is no empirical evidence to claim that India is a litigious nation. The truth is that Indian courts move slowly not because they are inept, but because there are too many cases for too few judges. We need to increase capacity in order to make our judicial system more strong, not just for civil cases, but also for criminal proceedings. Personal harm, which is addressed by tortious litigation elsewhere in the globe, requires significant attention in India, as has been adequately portrayed in this study. Tortious responsibility claims, both against the government and private parties, abound in the country. The procedure of approaching the court, on the other hand, is so delirious for the plaintiff that they are better off not going.

In general, as things stand now, those with money and privilege are able to buy their way out of the judicial system and avoid responsibility for their own negligent behavior. With little resources, it is the poor who must fight the system and the aggressor. This deplorable state of affairs necessitates a reassessment of tort litigation in India. Perhaps there is a need to constantly issue statutes that correctly deal with diverse tort law principles, rather than codifying and therefore making the entire branch immobile. A strong civil-litigation system will undoubtedly strengthen the government’s and citizens’ discipline, while also protecting human life and dignity. A strong civil-litigation system will undoubtedly strengthen the government’s and citizens’ discipline, while also elevating the value of human life and dignity for all people, not just the wealthy.

This article is written by Uday Todarwal.

Introduction

One of the primary players in India’s journey to prevailing in quick structure its economy has been the banking sector. Since our present legal framework for business exchanges has not stayed aware of developing strategic policies and monetary sector changes. This outcome in an extended recuperation of defaulted advances and an expansion in the number of nonperforming resources held by banks and monetary organizations. The Central Government laid out the first and second Narasimham Committees, as well as the Andhyarujina Committee, to look at banking sector changes. These committees surveyed the need for changes in the legal framework in these sectors. These committees, among others, have proposed new regulations for securitization that would permit banks and monetary organizations to take care of protections and sell them without the requirement for judicial activity.¹

In light of these suggestions, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) were passed by the Parliament on December 17, 2002. The motivation behind this act is to permit banks and financial organizations to expeditiously recover cash progress. The Act licenses banks and financial organizations to sell sold property to recover outstanding obligations that poor person been paid for quite a long time in spite of various updates. Non-performing assets (“NPA”) in the records of banks and financial foundations must be dealt with in much the same way. The property being referred to could be a private or business property that has been sold with a bank or financial establishment as security for the assets progressed. Before the execution of the SARFAESI Act, distressed parties, like banks or financial establishments, would record a common recuperation claim in common court, and the interaction would delay for quite a long time in light of the fact that the common suit was battled by the two sides. Considering this, the law-making body chose to enact regulation that would permit such nonperforming assets (NPAs) to be quickly settled, permitting the bank to reinvest the recuperated reserves. Banks and financial foundations will save time by not recording a claim in common court, which would regularly be an extensive strategy.² Unstable advances, credits under $100,000, and obligations that are under 20% of the underlying guideline are excluded from the resolution. This regulation allowed the arrangement of resource reconstruction organizations (ARCs) and the offer of non-performing assets by banks to ARCs. Without the assent of a court, banks are approved to take responsibility for the property and sell it.

Objective and Applicability

It’s a legal framework that governs securitization transactions. Security interests can be implemented without the support of a court. The Act encourages banks and financial institutions to manage their assets to successfully deal with NPAs, asset reconstruction, and asset securitization organizations are being established. This Act empowers banks and financial institutions to seize hypothecated or mortgaged assets to recover nonperforming assets (NPAs). Without the participation of the court, the SARFAESI Act enables the following recovery channels for NPAs: securitization, asset reconstruction, and security enforcement.

The following topics are covered under the Act:

• The Reserve Bank of India regulates and registers Asset Reconstruction Companies (ARCs). Facilitating the securitization of banks’ and financial institutions’ financial assets, with or without the use of underlying securities.
• The ARC supports the consistent transferability of financial assets by issuing bonds, debentures, or any other instrument as a debenture to buy financial assets from financial organizations and banks.
• By entrusting the Asset Reconstruction Companies with the task of raising cash through the sale of security receipts to eligible buyers, the Asset Reconstruction Companies will be able to obtain funds.
• Facilitating the reconstruction of financial assets obtained when exercising securities enforcement authorities, management change powers, or other powers intended to be placed on banks and financial organizations.
• The borrower’s account is classified as a non-performing asset following the Reserve Bank of India’s instructions or guidelines released from time to time.
• In this case, the officials authorized shall exercise the rights of a secured creditor in line with the Central Government’s laws.
• An appeal to the relevant Debts Recovery Tribunal and a second appeal to the Appellate Debts Recovery Tribunal against any bank or financial institution’s activity.
• The Central Government may establish or compel the establishment of a Central Registry to register securitization, asset reconstruction, and security interest formation transactions.
• Applicability of the proposed legislation to banks and financial institutions initially, with the Central Government empowered to expand the proposed legislation’s application to non-banking financial enterprises and other organizations.
• The proposed regulation does not apply to security interests in agricultural lands, loans under one lakh rupees, or circumstances where the borrower repays 80% of the loan.

Asset Reconstruction

Asset Construction is covered by RBI regulations and legislative provisions under the SARFAESI Act, 2002. It consists of the following:

• The fundamental definition of “asset reconstruction” is the process of transforming nonperforming assets (NPAs) into performing assets.
• It all starts with a specialist Asset Reconstruction Company purchasing defective assets, including hypothecated assets, and financing them by issuing Bonds, Securities, and cash.
• The Asset Reconstruction Company takes over or changes the management of the borrower’s business, sells or leases a part or all of the borrower’s firm, and reschedules the borrower’s debt payments using this approach.

Working of Security Enforcement

The SARFAESI Act gives banks and financial institutions the authority to enforce their securities. The procedure begins with the Debtor being given a 60-day notice period to pay the owing amount. If the outstanding dues are not paid within the required term, the Banks and FI’s have the authority to enforce their SECURITY INTEREST by taking the following steps:

• Banks and financial institutions have the legal right to take ownership of the secured property.
• Banks and financial institutions have the option of selling or leasing such property or assigning the right to security.
• Appointment of a “Manager” to oversee the aforementioned security.

It can approach the borrower’s debtors for payment of the borrower’s debts.

Landmark Cases

M/S Transcore vs Union of India & Anr³
The appellant is M/s Transco, while the respondent is Union of India and Anr. This case is of general interest since it brings up a public approach issue about whether the principal stipulation to Section 19(1) of the DRT Act, 1993 (added by the Amending Act No.30 of 2004) is a condition that should be met prior to utilizing the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The respondent (Indian Overseas Bank) recorded activity with the DRT in Chennai for the recuperation of duty from the appellant in Civil Appeal No. 3228 of 2006. In 2005, the Respondent gave a Possession Notice to the appellant under segment 13(4) of the Act, expecting him to reimburse his duty of Rs. 4.15 crores (around) in addition to premium inside sixty days, and expressing that the appellant had neglected to do as such and that the bank had claimed the undaunted properties recorded in the timetable to the Notice, which was then sold. In any case, a common allure has been recorded, and the sale deal has been deferred.

In this case, the Supreme Court reasoned that pulling out a case forthcoming before the DRT is definitely not essential for utilizing the SARFEASI Act. This choice has settled the lawful issue encompassing the send-off of simultaneous procedures under the SARFAESI Act. The allure/I.A. made by the appellant in this Court is excused, yet the allure/I.A. is presented by the banks/FIs. is allowed with no expense’s choice. Besides, the choice in the Transcore case permitted banks and monetary foundations to start systems under both the SARAESI Act and the DRT Act simultaneously. The court likewise held that segment 13(2) of the SARFAESI Act is a notification of interest expecting activity to be directed inside the time expressed and not a simple show-cause notice. At the point when a notice is given to the indebted person it is adequately evident, that borrower has neglected to put in his time and his record is classed as NPA. The obligation is distinguished and the record is delegated a nonperforming resource (NPA) under RBI rules. Prior to the bank/FI can summon Section 13(4) of the SARFAESI Act, the requirements of Section 13(2) of the SARFAESI Act should be met. Following the culmination of Section 13(2) conditions, the bank or FI would be qualified to assume responsibility for the borrower’s gotten resources or make different moves. For this situation, the possibility of the political race doesn’t matter in light of the fact that the Act is a beneficial solution for the DRT Act. They are joined to frame a solitary cure; henceforth the possibility of the political race doesn’t have any significant bearing. The SARFAESI Act gives an additional cure that isn’t in a struggle with DRT. The SARFAESI Act was intended to safeguard the bank/premium FI’s in monetary resources that it claims because of an agreement or the use of customary regulation standards. Segment 13 of the SARFAESI Act intends to recuperate reserves utilizing a non-adjudicatory way. Under the SARFAESI Act, a got resource is one in which the borrower makes revenue for the bank/FI and the SARFAESI is determined exclusively on that premise. The reason for adding the stipulation to Section 19(1) of the DRT Act is to bring the arrangements of the DRT Act, the SARFAESI Act, and Order XXIII CPC into the arrangement.⁴

Mardia Chemicals Ltd. vs Union of India⁵
Here, the protected authenticity of SARFAESI was addressed, especially Sections 13, 15, 17, and 34, on the grounds that they are erratic and outlandish. Whenever the Act became real, IDBI Bank gave a notification to Mardia. Mardia defaulted-spoke to the court, where a progression of comparable petitions was assembled and tended to as a solitary case. The appellant battled that section 13 of the SARFAESI Act gives full freedoms to banks and monetary establishments while overlooking the privileges of defaulters. Likewise, borrower interest was not thought about by any means in Section 13. Besides, the borrowers had no right of direction or response to an adjudicatory technique. Section 17(2) of the Act expressed that the defaulter should store 75% of the sum to like and allure the sum was inordinate and subsequently restricted admittance to the legal plan of action of allure maybe a suggested bar had been made/to this, respondent battled that few different regulations accommodated such preconditions/Pet contended that those were for the claim and not for the use of first occurrence/respondent attempted to invalidate that by expressing that The strategy for assuming control over the business and the board of an element, especially a firm, was canvassed in Section 15 of the 15. The appellant likewise fought that section 34 was indistinguishable from Section 34 of the RDB Act, which announced that DRTs have selective locale, i.e., no respectful court will give any request or order against a bank practicing privileges under the Act. SARFAESI was pointless on the grounds that there was at that point a regulation managing this subject issue, and a few regulations were not expected to deal with a similar topic. It was additionally brought up that the most inconvenient obligation section somewhere in the range of 25,000 and 1 lakh dollars-didn’t require separate regulations.

For this situation, the Supreme Court held that the Parliament’s prevalence in concluding the requirement for regulation is underlined. The association between the RDB Act and SARFAESI was dismissed since the last option manages the exceptionally specific issue of nonperforming resources (NPAs) (among different contrasts, for example, the last option managing got leasers). Accordingly, it really depends on Parliament to conclude regardless of whether regulation is required. Section 13 was viewed as intrinsically authentic by the Court. The got bank is just practicing his privilege on the grounds that the default that prompted the sec 13 measure may be viewed as a “second default”- NPA + 60 days additional chance to reimburse following notification. Prior to the 2016 Amendment, Section 13 recognized the Right of Redemption it might be said. Rule 8 and 9 of the SI Rules expressed that the bank should serve a notification affirming the offer of gotten property and that the borrower might take care of the commitment and recover ownership any time before the genuine deal. While the Supreme Court affirmed the section’s legality, it pushed it difficult for borrowers to reserve the privilege to the portrayal. The Supreme Court decided Section 17(2) to be inconsistent and requested that the heading be modified from “claim” to “application.”⁶

Pandurang Ganpati Chaugale v. Vishwasrao Patil Murgud Sahakari Bank Ltd⁷
“‘Banking’ relating to cooperatives can be included within the purview of Entry 45 of List I, and it cannot be said to be over inclusion to cover provisions of recovery by cooperative banks in the SARFAESI Act,” a five-judge bench of Justices Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah, and Aniruddha Bose, has held in this case. The ruling of the Court came in a reference made in light of contradictory decisions in Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd.⁸, Delhi Cloth & General Mills Co. Ltd. v. Union of India⁹, T. Velayudhan Achari v. Union of India¹⁰, and Union of India v. Delhi High Court Bar Association¹¹.

The seat held that the whole situation and banking action of helpful banks is represented by a regulation authorized under Entry 45 of List I, i.e., the BR Act, 1949, and the RBI Act ordered under Entry 38 of List I, saying that “recuperation of duty would be a fundamental capacity of any banking foundation, and the Parliament can sanction a regulation under Entry 45 of List I as the action of banking done by agreeable banks is inside the domain of Entry 45 of List I.” Obviously, under Section 13 of the SARFAESI Act, Parliament has the position to endorse the solution for recuperation.” The Court likewise clarified that the principal part of the matter of the agreeable bank connecting with banking was covered by the BR Act, 1949, and the Reserve Bank of India Act, such regulations are connected with Entries 45 and 38 of List I of the Seventh Schedule. The parts of ‘joining, regulation and twisting up’ are covered by Entry 32 of List II of the Seventh Schedule. “As we would see it, such bankers’ banking movement is covered by Entry 45 of List I, which considers the Doctrine of Pith and Substance, as well as the passability of accidental infringement on the field held for the State.” The court reasoned that disturbing ‘banking,’ the regulation connecting with Entry 45 of List I of the Seventh Schedule of the Constitution of India administers cooperative banks enrolled under State regulation and multi-State level cooperative social orders enlisted under the Multi-State Cooperative Societies Act, 2002 (MSCS Act, 2002). The cooperative banks run by cooperative social orders enrolled under State regulation for ‘joining, regulation, and ending up,’ specifically, to issues that are outside the domain of Entry 45 of List I of the Constitution of India, are administered by the said regulation connected with Entry 32 of List II of the Constitution of India. The significance of ‘Banking Company’ is characterized under Section 5(c) read with Section 56(a) of the Banking Regulation Act, 1949, which is a regulation associated with Entry 45 of List I. It manages the ‘banking’ part of co-employable social orders’ banks. The Banking Regulation Act, 1949, and some other regulation appropriate to helpful banks interesting in ‘Banking’ in Entry 45 of List I, and the RBI Act appealing to Entry 38 of List I of the Seventh Schedule of the Constitution of India, deny agreeable banks from participating in any movement except if they conform to the arrangements of the Banking Regulation Act, 1949, and some other regulation relevant to such banks engaging to ‘Banking’ in Entry 45 of List I. Under section 2(1)(c) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, state-contracted helpful banks and multi-state agreeable banks are alluded to as “banks.” The recuperation component laid out under section 13 of the SARFAESI Act, regulation connected with Entry 45 List I of the Seventh Schedule to the Constitution of India is pertinent on the grounds that recuperation is a significant part of banking.¹²

Amendment to the SARFAESI Act

The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, was introduced in Parliament to amend four laws: the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI), the Indian Stamp Act, 1899, and the Depositories Act, 1996. When secured creditor defaults on a loan, the SARFAESI Act permits secured creditors to seize the collateral used to finance the transaction. This procedure is carried out with the help of the District Magistrate and does not necessitate the involvement of courts or tribunals. The District Magistrate must finish this process within 30 days, according to the Bill. Furthermore, the Bill authorizes the District Magistrate to assist banks in assuming management of a company if it is unable to repay loans. This will be done if the banks convert their outstanding loans into equity shares and hold a 51 percent or greater ownership in the company as a result.

The Act establishes a single registry to keep track of secured asset transactions. The bill establishes a consolidated database that will allow property records from diverse registration systems to be integrated into one central registry. This contains registrations made under the Companies Act of 2013, the Registration Act of 1908, and the Motor Vehicles Act of 1988. Secured creditors will not be able to take possession of collateral unless it is registered with the central registration, according to the bill. Furthermore, after the registration of a security interest, these creditors will have priority over others in the repayment of their debts.¹³

Conclusion

With the recent judgment made by the Supreme Court of India, all state and multi-state cooperative banks will now be subject to the SARFAESI Act of 2002. Banks can now sell and seize defaulters’ properties to recover their debts, because of the Supreme Court’s crucial decision. The court bench also recognized a 2003 notification that cooperative banks are covered by the SARFAESI Act and are entitled to seek redress. Cooperative banks had to go to court to recover their dues before this notification was written. The Supreme Court went on to say that this decision was made to eliminate delays in collecting dues because cooperative banks are required to resort to civil courts under the Cooperative Societies Act to do so. The court also held that co-operative banks that engage in banking activities are subject to Sections 5 (c) and 56 (a) of the Banking Regulation Act of 1949, which are laws related to List I Entry 45. (Union List).¹⁴ After the judgment made by the Court regarding this issue, experts hope that it would bring the much-needed reforms in the cooperative banks sector, which has been subjected to bankruptcy and corruption. They also believe that it would bring large-scale implications.

References:

1. SARFAESI ACT, 2002- Applicability, Objectives, Process, Documentation, cleartax.in https://cleartax.in/s/sarfaesi-act-2002 
2. An overview of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), Arun Bapat, iPleaders https://blog.ipleaders.in/overview-securitisation-reconstruction-financial-assets-enforcement-security-interest-act/
3. 2006(5) CTC 753(SC)
4. M/S Transcore vs Union of India & Anr, Darshika Rughani, Pro Bono India https://probono-india.in/research-paper-detail.php?id=415 
5. Case No.: Transfer Case (civil) 92-95 of 2002
6. Constitutional Validity of SARFAESI Act of 2002 tested under ‘Mardia Chemicals vs. UOI’, Shubham Phophalia, taxguru  https://taxguru.in/finance/constitutional-validity-sarfaesi-act-2002-tested-mardia-chemicals-vs-uoi.html
7. 2020 SC 431
8. (2007) 6 SCC 236
9. (1993) 2 SCC 582
10. (1983) 4 SCC 166
11. (2007) 6 SCC 236
12. SARFAESI Act applicable to Cooperative Banks: Constitution Bench, Prachi Bharadwaj, SCC Online https://www.scconline.com/blog/post/2020/05/05/sarfaesi-act-applicable-to-cooperative-banks-constitution-bench/ 
13. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, PRS India https://prsindia.org/billtrack/the-enforcement-of-security-interest-and-recovery-of-debts-laws-and-miscellaneous-provisions-amendment-bill-2016#:~:text=Amendments%20to%20the%20SARFAESI%20Act,intervention%20of%20courts%20or%20tribunals.
14. What is SARFAESI Act? Jagran Josh https://www.jagranjosh.com/general-knowledge/sarfaesi-act-1588850144-1

This article is written by Arryan Mohanty, a student of Symbiosis Law School.

INTRODUCTION

The word ‘federalism’ is derived from the Latin word ‘foedus’ which means ‘covenant or treaty. Federalism refers to the distribution of powers between the state and the central government. Three lists are provided by the seventh schedule of our Indian constitution and the three lists are union lists, state lists, and the concurrent list. The central government deals with the issues mentioned under the union list such as defense, trade and commerce, citizenship, insurance, banking, highways, railways, higher education, navigation and shipping, and many more. The state government deals with the issue given under the state lists such as agriculture, pilgrimages within India, prisons, state court fees, public health and sanitation, and the last list is a concurrent list which consists of issues on which both the central government and the state government can exercise jurisdiction such as contempt of court, evidence, protection of wild animals and bird, labor welfare, stamp duties, food, administration of justice, etc. if there is a conflict between the central government and the state government then, the decision of the central government will supersede the decision of the state government.

PRINCIPLES OF FEDERALISM

SEPARATION OF POWERS
The power is divided into three branches: legislative, executive, and judiciary. These three organs of the government are independent of each other. These branches are well-known examples of the tripartite system in the united states. The main purpose of this separation of power is to prevent the concentration of power and autocracy.

CHECKS AND BALANCES
Checks and balances are important to prevent the concentration of power and violation of the separation of power. It is required for the proper functioning of the three organs of the government. Some of the examples of checks and balances are judicial review, basic doctrine structure of the Indian constitution, etc.

KEY FEATURES OF THE FEDERALISM UNDER THE INDIAN CONSTITUTION

DIVISION OF POWER
Division of power is the essential feature of federalism so that the power is not concentrated in the hands of the central government. In this, the power flows from the central government to the state government and the local government i.e panchayat.

SUPREMACY OF THE INDIAN CONSTITUTION
Supremacy of the Indian constitution means that the powers of the executive, judiciary, and the legislative are mentioned in the Indian constitution and they are bound by the constitution hence, no one is above the constitution. This feature gives strength to the basic structure doctrine of the Indian constitution which was given by the Keshvananda Bharti vs the State of Kerala¹.

WRITTEN CONSTITUTION
A written constitution is necessary to constitute a country as a federal nation. As it is difficult to distribute the powers orally among the center and the state government. Written constitution helps to maintain the supremacy of the Indian constitution and provides clarity.

RIGID CONSTITUTION
It is important to have rigidity in the constitution to maintain the supremacy of the constitution.

JUDICIARY
There can be a dispute between the center and the state and the judiciary provides the proper mechanism to solve the dispute between them and the decision of the judiciary is binding upon all of them.

• ARTICLE 131
  According to this article, the supreme court has original jurisdiction to hear the disputes between the center and the state, two or more states, etc.²
• ARTICLE 262
  This article focuses on the issue of water and valley disputes between states. This parliament Is allowed to make laws on the distribution of water or control of river valleys and can even bar the supreme court to hear disputes related to water or valley disputes.³
• ARTICLE 263
  Article 263 is based on the issue of the “establishment of the inter-state council”. In this article, the president can ask to establish a council on the charge of interest of the public or to resolve disputes between them. The duty of these councils is to advise and inquire the states if a dispute arises between them, make a recommendation for the better functioning of the policy, and discuss the subjects which are common to both the state and the union.⁴

BICAMERAL LEGISLATION
Like Canada, India has also bicameral legislation. India also has two houses upper house [Rajya Sabha] and the Lower house [Lok Sabha] and a bill have to be passed by both the houses of the parliament. In India even states also have bicameral legislation such states are Karnataka, Maharashtra, Uttar Pradesh, Bihar, Telangana, and Andhra Pradesh. They have an upper house [Vidhan sabha] and a lower house [Vidhan Parsihad].

QUASI FEDERALISM

Quasi federalism means a form of government that has features of both the federal government and the unitary government. For example India and Canada. But the major control and authority lie with the central government. India is a quasi-federal country in which the states have the power to make laws under list 2 of the seventh schedule of the Indian constitution and the central government has jurisdiction on the matters mentioned in the first list of the seventh schedule of the Indian constitution. The state government and the central government both have the powers to make laws on the matter listed under the third list of the seventh schedule of the Indian constitution. If the dispute arises between the center and the state then the opinion of the central government will prevail.

In India, emergencies can be imposed under articles 352, 356, and 360 of the Indian constitution. During an emergency center government retains all the power and the state government has no autonomy during an emergency. This way federalism loses its luster.

ISSUES AND CHALLENGES FACED BY THE INDIAN FEDERALISM

REGIONALISM
As center focuses more on bigger states than the smaller states and states work according to the democratic system. Then, the conflict can arise between them and they demand to be separated from the union.

ABSENCE OF FISCAL FREEDOM
Fiscal freedom basically means the distribution of financial and tax-related power between the center and the state government. It is necessary for the development of the nation. Though the main power lies in the hands of the center and also they have a finance commission whose work is to decide the state’s share in the center’s revenue.

OFFICE OF THE GOVERNOR
Governor is the head of the state and is appointed by the president of India under Article 155 of the Indian constitution. The decision of the president can overrule the decision of the governors appointed by the president.

INTEGRATED SERVICES
India has integrated services of the judiciary, audits, elections, and many more. The judiciary system of India consists of the supreme, the high court at the state level, and district courts. Supreme courts decisions are bound on the high court and the high court doesn’t have jurisdiction to entertain cases related to disputes between the states. The process of election is the same at both the center and the state level. At the center, it is conducted by the election commission and at the state level it is conducted by the chief electoral officer [CEO] but they are under the supervision of the election commission.

DIFFERENT RELIGION
India is a diverse country and has people who belong to many religions but India is a secular state and the word secular was added in the preamble under the 42nd amendment act which means India will not have any religion or will not promote any religion. This can lead to a conflict between the two religions and then makes federalism weak.

CASE LAWS

MANEKA GANDHI VS UNION OF INDIA
In the year 1978, the verdict passed under this law is that any law made by the legislature is considered to be ultra vires if it violates or infringes any of the fundamental rights. The fundamental rights can only be changed by the constitution, hence this is a check on both the executive branch and the parliament and the state legislatures. During times of emergency article 19 of the Indian constitution is taken away as during the times of emergency our country follows a unitary government. Therefore India is a quasi-federal country.⁵

STATE OF WEST BENGAL VS UNION OF INDIA
The exercise of sovereign rights by Indian states was the central issue in this case. The Parliament’s legislative competence to implement a statute requiring the Union to acquire land and other properties vested in or owned by the state, as well as the sovereign authority of states as separate entities, were also investigated. The Supreme Court of India ruled that the Indian Constitution did not contain an absolute federalism provision.⁶

Article 13 of the Indian Constitution will therefore become a non-issue, and it may be overlooked because even regular legislation will be exempt from judicial examination because they were passed on the strength of a constitutional amendment that is not subject to challenge.⁷

CONCLUSION

Federalism is the distribution of power from the central government to the state government and the local government. The main objective of this is to prevent autocracy. India is quasi federalism country which means it has the features of federalism but the main authority lies with the central government. No doubt there is a lack of balance between the center and the state government.

References:

1. Kesavananada Bharti vs state of Kerala, [1973 SC 1461]
2. Constitution of India, 1950 Art 131
3. Constitution of India, 1950 Art 262
4. Constitution of India, 1950, Art 263
5. Maneka Gandhi Vs Union of India, [AIR 567, 1978 SCR[2] 621]
6. State of West Bengal vs union of India, [AIR 1987 Cal 226]
7. Constitution of India, 1950 Art 13

This article is written by Prerna Pahwa, a student of Vivekananda Institute of Professional Studies, New Delhi.

INTRODUCTION

With the advent of social media and networking it is difficult to maintain privacy with the data available online. Data on the internet is flowing like water in the river. If the information of someone is available on the internet which the person has relevant context now or the reason for which it was there on the internet has been served is affecting the other person emotionally or making it difficult for another person to live peacefully. Then, it is a violation of article 21¹. This can be removed through the right to be forgotten which is provided under the right to privacy.

Right to forgotten means the deletion of the user’s personal information from the search engine, website, and many more. The European Union acquired the General Data Protection Bill [GDPR]² in the year 2018. Article 17 of this bill provides certain rights to the erasure of personal information and the certain rights include which are no longer necessary, consent has been withdrawn for particular information, and where there is legal obligation to erase. There are also some reasonable restrictions to some extent like in the area of public interest related to public health, or the data required in achieving historical, statistical, or scientific research.³

The right to be forgotten is to be followed in other countries also. In 2014, in Spain, the European court of justice managed a case Google Inc V Agencia Espanola De Proteccion De Datos in which a Spanish man whose name was Mario Costeja Gonzalez asked google to remove his information related to the auction for his unbridled home and the debt he had subsequently paid. Google was sued under the National High court which suggested a series of questions to the European court of justice. The court ruled the judgment in the favour of the Spanish man and asked google to delete the information.

In 2016, the first case of the right to be forgotten was heard by the Chinese court in Beijing in which they held that the residents don’t have the right to be forgotten. In this case, Ren Jiayu asked the Chinese web search tool Baidu to remove the search list that is related to Wuxi Taoshi’s previous business. Ren argued that the right of name and right of notoriety is reserved under Chinese law. Then the court ruled the judgment against Ren and said that he doesn’t have a right to be forgotten.

RIGHT TO BE FORGOTTEN UNDER THE PERSONAL DATA PROTECTION BILL

The right to privacy is our fundamental right under article 21 of the Indian constitution decided in the case of Justice K.S Puttaswamy Vs the Union of India⁴ in 2017. Data is a very sensitive thing that needs to be protected. The personal data protection bill⁵ was introduced in the Lok Sabha in 2019 with the objective to protect or conserve the data from getting into the wrong hands. This bill also includes the right to be forgotten under clause 20 of chapter V. it means that any person can ask the data fiduciary to remove or limit the data of the concerned person. The role of data fiduciary is to decide the means and the purpose of controlling the personal data it can be anyone an individual, entity, state, or cooperation. The data will be monitored by the Data protection authority and any removal of data has to be approved by the Data protecting authorities’ adjudicating officer. The officer has to see many aspects like the public interest in the concerned data, the extent of availability susceptibility, or the scope of divulgence before approving the removal of the data.

RIGHT TO BE FORGOTTEN VS THE FREEDOM OF SPEECH AND EXPRESSION

“Right to be forgotten is the biggest threat to freedom of speech and expression in the coming decade”
-Jeffrey Rosen

The right to be forgotten is a much-needed statute nowadays to protect the individual interest against defamatory or derogatory statements. Freedom of speech and expression is our fundamental right under article 19⁶ of our Indian constitution and also contains reasonable restrictions under Article 19[2]⁷. Whereas the right to be forgotten can undermine the lusture of freedom of speech and expression. It can affect journalism it will be difficult for media to express their views freely and to wait for the decision of the adjudicating officer. If any person wishes to delete some information on the internet then it will favor the individual, not the society at large. This will also create a sense of feeling in the minds of the people that they are not free to express their views through articles, books, blogs, etc.

CASE LAWS

• Jorawar Singh Mundy Vs Union Of India and Ors⁸
  In this case, the petitioner was an American citizen who visited India in 2009. He got acquitted under the narcotics drugs and substance [NDPS] act, 1985. After two years trial court convicted him on April 30, 2011. On 29 January 2013 through the appeal of state, the Delhi high court then affirmed her acquittal. After returning to America petitioner realized that the Delhi high court’s judgment is available on the internet and this can be harmful to his reputation or while screening test done by the employer. He sent directions to Google India Private Ltd., Google LLC, Indian Kanoon, and vLex.in but the judgment was not deleted then he filled a writ petition before the Delhi High Court for the violation of Article 21. The Delhi high court directed the respondents to delete the judgment.
  
• Dharmaraj Bhanushankar Dave Vs State of Gujarat and ors⁹
  In this case, the petitioner filed a writ petitioner under Article 226 of the Indian constitution before the Gujarat High court for the violation of Article 21. The non-reportable judgment was published by the Indian kanoon on their site and the petitioner contended that google and Indian kanoon has no right to publish any non-reportable judgment. The court held that the judgment was part of the proceeding and that merely publishing judgment on online websites will not amount to be reported. So, it is not a violation of Article 21 and there is no legal rationale to remove the judgment.
  
• Subhranshu Rout Gugul Vs State of Odisha¹⁰
  In this rape case, the accused has created a fake id on Facebook and uploaded objectionable photos of the prosecutrix on the fake id. The police were failed to take any strict action against the accused. The pictures were taken with the consent of the prosecutrix at the time they were in a relationship but now they got separated. It was observed that consent does not mean to misuse the phots or outraging the modesty of the women. In this case, the right to be forgotten should be exercised. The court held that the photo should be removed to protect the privacy of the victim. Irrespective of ongoing criminal cases. The Odisha High Court further noted that the Indian Criminal Justice system is more of a sentence-oriented system, with little emphasis on compensating victims for their losses and suffering. Allowing such offensive photographs and videos to remain on a social networking platform without a woman’s agreement is an outrage to her modesty and, more crucially, her right to privacy.

CONCLUSION

Information in the public domain is like toothpaste. They can not completely be deleted if someone has taken a screenshot or screened the concerned content. the right to privacy is our fundamental right under article 21 of the Indian constitution which needs to be protected. The right to be forgotten is also included in the personal data protection bill, 2019 which is a great step towards the safety of data and the privacy of the individual. In case one person was acquitted under any criminal action but later on find to be innocent and the judgment is reported on many websites or search engines. It can be difficult for the employee to get a job as during the screening process this can destroy the reputation of the employee. The right to be forgotten can be a major relief and can ask for the removal of the judgment. Also in the case when a person with the intention of taking revenge or with the feeling of animosity posts or share any picture or video which is offensive or outrages the modesty of the victim through the right to be forgotten victim can make them deleted. It is been a debatable topic whether the right to be forgotten undermines the fundamental right the freedom of speech and expression under Article 19 which also contains reasonable restrictions under Article 19[2] of the Indian constitution. If a person asks to remove some content from the website or from the internet then it can also cause feelings among the people that they are not free to express their views and opinion through writing articles, blogs, etc and the removal of the concerned content can lead to being in the favor of the individual rather than the society at large. According to me, it requires judicial administration, and article 19[2] which provides reasonable restrictions should be amended and should include privacy in it.

References:

Bench

Justice Indu Malhotra, Justice L. Nageswara Rao

Date of Judgment

9th July 2020

Provisions

Order VII Rule 11(a) & 11(d), CPC, Section 73AA of Land Revenue Code, The Limitation Act, 1963

Cases Referred

Vidyadhar v. Manikrao [(1999) 3 SCC 573], Chandrashankar Manishankar vs. Abhla Mathur and others [AIR (39) 1952 Bombay 56]

Introduction

In Dahiben v. Arvindbhai Kalyanji Bhanusali & Ors., the Supreme Court of India stated that mere non-payment of the full amount of consideration cannot be held as a ground for cancellation of sale deed.

Factual Background

• The Supreme Court was considering an appeal from a Division Bench of the Gujarat High Court, which had upheld the Trial Court’s judgment admitting an O7R11 application and ruling that the Appellants’ complaint was prohibited by limitation. In the recent case, the plaintiff owned a piece of agricultural property in the hamlet of Mota Varachha, Surat Sub-District. According to Section 73AA of the Land Revenue Code, the land was subject to restricted tenure. The Plaintiffs applied to the collector of the district for permission to sell the property to Respondent 1. The collector allowed the property to be sold and set the sale price according to the jantri issued by the State Government. The purchaser was required to pay via cheque, with a reference to the payment in the Sale Deed. The plaintiffs sold the property to respondent 1 after obtaining all necessary permissions. Respondent 1 issued 36 cheques for the payment of Rs.1,74,02,000 towards the sale considerations in the favour of Plaintiff.
• Later, Respondent No. 1 got the Land from Plaintiff and sold it to a group of third parties, comprising Respondents Nos. 2 and 3, in a transaction dated April 1, 2013, for Rs.2,01,00,000.
• The Plaintiff filed a suit before the Principal Civil Judge of Surat in December 2014, more than five years after the Sale Deed was executed, alleging that the sale consideration for the Land had not been paid in full by Respondent No.1 and praying, inter alia (among other things), that the Sale Deed is declared void, illegal, and ineffective. Respondents No. 2 and 3 were impleaded in the complaint since the Land had already been sold to them and was in their possession at the time the suit was filed.
• The Plaintiffs claimed that they were completely illiterate, unable to read or write, and could only make a thumb imprint on the Sale Deed dated 02.07.2009. The Sale Deed was gotten without full consideration being paid. Just Rs. 40,000 had been paid through six checks by Respondent No. 1, and the rest 30 checks adding up to Rs. 1,73,62,000 were false checks.
• On the grounds that the Suit was precluded by limitation and that no cause of action had been disclosed in the plaint, the Respondent filed an Application for Rejection of the Plaint under O7R11 (Application for Rejection).
• The Trial Court determined that the time restriction for filing the lawsuit was three years from the date of the sale deed’s execution on July 2, 2009. The Trial Court further highlighted that the lawsuit was filed on December 15, 2014, and so was time-barred. The Trial Court dismissed the lawsuit and granted the Application for rejection. The Appellants sought an appeal with the Gujarat High Court after being aggrieved by the Trial Court’s decision, which in turn upheld the decision. As a result, Plaintiff petitioned the Supreme Court to set aside the High Court’s decision.

Issues Raised

1. Whether non-payment of the part of sale consideration is a ground for cancellation of registered sale deed?
2. Whether the case filed by Plaintiff is barred by the Limitation Act?

SC Analysis and Judgment

The Supreme Court outlined the law that applies while determining an application under Order VII Rule 11 CPC. The court cited Vidyadhar v. Manikrao¹ and Section 54 of the Transfer of Property Act, 1882, saying that the words “price paid or promised or part paid and part promised” indicate that actual payment of the entire price at the time of the execution of the Sale Deed is not a sine qua non for the sale to be completed. The Court stated that in the Plaint, the Plaintiffs established a case of claimed non-payment of a portion of the selling consideration and requested relief of cancellation of the Sale Deed on this basis. Even in case, the whole purchase price is not paid, as long as the paperwork is registered and signed, the sale is done, and the title transfers to the transferee under the transaction. If a portion of the sale price is not paid, the transaction’s validity is unaffected. The parties must intend to transfer ownership of the property in exchange for a price that can be paid now or in the future to be regarded as a sale. The Plaintiffs might have other remedies in law for recovery of the equity consideration but could not be allowed the relief of cancellation of the registered Sale Deed.

Further, the SC held that Plaintiff’s claim that it first learned of the alleged fraud in 2014 after receiving the index of the Sale Deed was completely false because receiving the index would not be a cause of action for initiating the complaint. It was also noted that Plaintiff had omitted the date of execution and registration of the Sale Deed on purpose. As a result, it determined that the present case was a classic situation in which the Plaintiffs tried to build up an artificial cause of action to bring the claim within limitation by skillful writing of the plaint and that it should be dismissed at the threshold.

In Chandrashankar Manishankar vs. Abhla Mathur and Ors.², it was held that the document’s recital indicating payment of the consideration may be false, but it doesn’t make the document invalid. The entire amount does not have to be paid for the sale to be effective, since Section 54 of the Transfer of Property Act stipulates that the price may be paid or pledged in whole or in part. The Court further concluded that if the consideration was not paid but the document demonstrates that there was an intention to pay, the document is not declared invalid because the consideration was not paid. If, on the other hand, there was no intention of paying any consideration, the document is null and void.

The bench so on held that the Plaintiffs’ current lawsuit is a misuse of the court’s procedure and devoid of any merit. In light of the foregoing discussion, the instant Civil Appeal is rejected, with costs of Rs. 1,00,000/- payable by the Appellant to Respondents Nos. 2 and 3 within twelve weeks of this Judgment’s date.

Conclusion

In the recent case, the court determined the fact that the parties should not waste the time of the court as already there is a huge number of cases pending before the court and the lawyers of the parties should reject the plaint at the threshold if it does not disclose any cause of action. Plaintiff should be diligent in safeguarding its legal rights and making sure that legal actions are started before the statute of limitations runs out. In addition, the plaintiff should make certain that the plaint is well constructed in order to highlight important problems. If the ownership of the property has been transferred to the other party, even if the money has not been paid in whole or in half, the party has no right to launch a lawsuit against the other, claiming that the contract is void or illegitimate. If the plaint is submitted beyond the deadline if the averments do not reveal a valid cause of action, the Courts will not hesitate to dismiss the case.

Citations

1. (1999) 3 SCC 573
2. AIR (39) 1952 Bombay 56

Analysis by Hemant Bohra student at School of Law, Lovely Professional University, Punjab.

Abstract

Gambling, in the current time, is mushrooming at an enormous speed, thereby posing a grave threat to the stakeholders involved due to its inherent vulnerability. The vociferous and the reverberating calls for its legalization newer assume more significance given the nebulous state of gambling laws in the country. Although the legalization would bring with itself a gush of entailing benefits, the profound and the pressing issues at hand pertaining to legalization are required to be given a thorough perusal including the pricking need to overhaul enforcement mechanism rather than venturing into the question of how and when to legalize the gambling given the legal and socioeconomic intricacy of India.

Introduction

It would be apposite, to begin with, the scrutinization of the term “gambling”. Gambling is a game that involves chances of winning or losing money or possessions of bet. Cambridge dictionary defines betting as the habit of risking money and placing a wager on the outcome of sports events. Gambling is a genus while betting is a species and both function on the coefficient of unpredictability especially those of the sporting events. The modern world thrives on the perpetuities of monetary gains and gambling serves as a handy way to satiate those materialistic needs.

This article seeks to systematically articulate the advantages and disadvantages that ensued due to the legalization of gambling, thereby concluding with some apposite and congruous solutions.

Background

India and gambling have had a substantiative co-relationship since ancient times, with the Rig Veda believing to have documented its first description. Since then, gambling has been a popular choice in India among the masses when it came to quick monetary gains in the course of satisfaction with worldly needs. Initially, gambling was encouraged in colonial India due to its economic benefits, but soon, it was illegalized due to its ensuing negative consequences such as bankruptcy, criminal delinquency, etc.

Thus, the Public Gambling Act of India was passed in 1867¹ to regulate and restrict gambling practices, thereby, illegalizing gambling albeit without sufficient punitive sanctions. The Act sought to restrict most forms of gambling including sports gambling (lotteries, casinos, festive gambling, etc were allowed and regulated in a few states) that was wagering in nature involving pure chance (eg: using the roll of dice or marble to determine the outcome) baring the few games that involved “skill” and not pure chance such as horse racing; online games of skill such as rummy, poker, fantasy games, etc. In K.R. Lakshmanan v. State of Tamil Nadu², the Apex court held that “The test of the legality of gambling vis-à-vis nature of sports is dependent upon the dominance of the element of skill/chance with regard to a recognized sport.”

With the advent of the constitution, Subjects of betting and gambling were kept in the State list as entry no. 34. The States have been given the liberty to delve into their own legislation on betting and gambling, having the freedom to regulate and deregulate it. While some states such as Sikkim (which has legalized betting in the online form), Kerala (conducts State-run lotteries), Goa³ (which has legalized casinos), etc have framed their own betting laws, others continue to govern themselves via the Central legislation of 1867. In a nutshell, both online and offline sports betting baring the games involving “skill” are currently illegal in India.

In recent times, gambling has unfettered its wings, mushrooming at an enormous speed with no signs of ebbing down in near future, more so due to the advent of advanced technology, penetration, and access to the internet in even the remotest corner of the world. India, too remained at the forefront to exploit this vice opportunity, with the 2016 ICC and the 2013 IPL betting scandals that involved thousands of crores of Rupees, giving testimony to this booming trend. It was in light of such massive illegal betting markets and the large-scale flouting of the law by the masses that the Supreme Court of India, in 2016, mandated the Law Commission of India (LCI)⁴ to examine a logical way to deal with India’s illegal gambling.

The LCI mentioned in its report that– “since it is not possible to prevent these activities completely, effectively regulating them remains the only viable option” Also, a Private Member Bill was introduced by Mr. Shashi Tharoor in 2018 in this regard, which articulated the legalization of sports betting in India under strict surveillance as it would curb the illegalized betting ecosystem in India which was under the monopolistic ambit of underworld mafias. It would curb the black money market, along with the generation of massive revenues for the government which could then be utilized for funding the sports infrastructure and betterment of athletes. Some of the potential restrictions that the bill sought to introduce were barring the minors from participating and limiting the highest betting fees one can bid. The bill impeccably envisioned the regulation mechanism by introducing a 7 member committee that would be responsible for formulating the rules and regulations monitoring sports online gaming. The bill also sought to criminalize the activities of sports fraud and match-fixing to the extent of 5 years of imprisonment and hefty fines which in turn would espouse deterrence. The bill also focused on maintaining the integrity of sports and preventing any event such as manipulations or match-fixing as those current pressing issues were not dealt with by the present legal framework.

Advantages of legalizing gambling

Gambling is one of the forms that has been an inherent phenomenon in Indian society and curbing it entirely won’t be certainly possible, more so because of the willful and brazen flouting of the legal norms by masses. Hence, giving it a legal sanctity would be a desirable approach in the discourse of its regulation and fund generation thereby espousing public consent and adherence rather than remaining oblivious to its incongruous existence. Far from this realization has been the seemingly illogical approach of the legislative setup which has still kept it within the cloak of illegality. This has been further reinforced by the Indian Judiciary by keeping horse race (on the basis of predicting the winnability) under the gamut of ‘games of skill’ but not the other games involving technicality and intricacy of similar nature such as cricket or hockey.

The most popular form of gambling has been in the sporting activities involving bets, which has evolved itself as a clandestine ecosystem possessing a huge network of people and enormous amounts of money. The Drastic modernization in the sports ecosystem coupled with the digital boom has led to sweeping revolutionary changes across the spectrum. This in turn accentuated the gambling culture creating a mammoth web of individuals and finances involved in this subculture. The first step in the legalization process would involve systematic identification and acknowledgment of these prevailing entities. Next would come regulation, owing to the fact that an exorbitant amount of Rs 300,000 Crores of black money is used annually for betting and the sector involves an enormous cash flow worth 60 billion dollars which is 3.5% of India’s GDP. It will lead to transparency as the source of cash flow could be traced and tracked thereby keeping a tight check on the black money market. Licensing of the brokers would further keep a check on them by curbing the black money laundering in illegal betting which is often used to fund terrorism and related nefarious activities¹. Involving in such illegal activities could lead to the cancellation of their licenses which in turn would serve as a deterrence to them. The legalization of sports betting would also ensure the protection of the subtle interests of minors, uneducated, poor fellows with a limited income and lack of bargaining power, and the elderly with shrinking life savings, who are often cheated by brokers. They remain at disadvantage due to unregulated and unenforceable market agreements lacking legal recourse owing to the wagering nature of the contract where the interests of the weaker party lacking bargaining power is jeopardized.

Currently, the earnings under betting are not reported as a source of taxable income under the Income Tax Act, 1961, thus, creating an avenue for black money. Legalizing the same would make the disclosure of such income mandatory (paving the way for effective surveillance and regulation) along with the generation of revenue receipts for the government to the tune of a minimum of Rs 12000 crores per annum⁵. It would also check on the tax evasions by brokers and bettors. The fund generated could be used for revamping sports infrastructure and related welfare schemes of the country along with peddling the development of the tribal and conventional sports that have been grossly neglected owing to their unpopularity and lack of resources.

Legalization would also serve as the panacea for ever-rising unemployment in the country by providing jobs ranging from the post of officers (required to monitor betting transaction) to a new catena of brokers who would specialize in sports betting along with a majority of unskilled workers employed in the implementation of menial economic activity in the betting industry. India, having the required knowledge, expertise and population could also evolve itself into a niche avenue for cyber betting like Denmark, the USA, etc, thus bringing with itself valuable foreign exchange which in turn would fuel the economic prosperity of the country.

Further, policing of the current gambling laws which illegalize it becomes a major problem due to the sheer numbers of “law-breakers” and exhaust colossal time of the law keepers which could be efficiently used for other productive work. Even effective policing results in large numbers of people gaining criminal records, with all of the consequential social problems. (employment problems, social and family stigma due to criminal record, etc). Hence, legalization would serve to meet the above ends. One other argument often posed in favor of legalization/regulation is that gambling adversely affects only a minority (less than 1% of the population due to problem gambling). So depriving the majority of a harmless leisure activity when it could add to a mix of other advantages is not worth it

Disadvantages of legalizing gambling

It is argued that the job of the government is to lead the people and not to simply follow popular views, especially if there are “public interest” reasons for pursuing unpopular routes. The concept and practice of gambling have historically been frowned upon in the Indian context. The moral issues constrain the government from peruse the idea of legalization as this has been a forbidden virtue in the Indian sub context given its entailing disadvantages. Giving it a legal sanctity would go against this entrenched ideal of morality.

Legalization would entail massive social costs as various studies have revealed that adolescents engaging in such activities possess a higher rate in school and academic failure accompanied by a history of family conflict triggered by the loss of household income, erratic sexual activity, severe financial difficulties such as large debts, poverty, and even bankruptcy; conflict and breakdown in relationships and a variety of psychological illnesses including anxiety and depression and psychiatric disorders, thus, paving way for baleful tendencies to commit suicide arising out of the ensuing depression.

State-sanctioned gambling would disproportionately burden the socially and economically backward people who expend a greater portion of their income into such wagering contracts, thus, exposing them to the channels of destituteness and crimes such as fraud and embezzlement, to address the mounting financial demands of their gambling. It will also push them into the scourging avenues of alcohol and drug addiction thereby instigating a vicious cycle of economic losses. Apart from the above menaces, gambling would also seriously impact the integrity and the true sportsmanship spirit of the sports due to the money factor and instances of match-fixing.

A logical argument against gambling follows that if gambling were to be legalized, it follows that more people would gamble (due to its enticing nature), and subsequently, more would become problem gamblers who face the adverse effects of gambling. Studies corroborate the above fact showing that increased availability of and easy accessibility to 2 gambling increased the participation in gambling and also the consequent prevalence of problematic gambling that entails massive social costs. Studies show that in India, although the prevalence of gambling was low, the proportion of people who had developed problem gambling among those who did gamble was considerably higher as compared to other countries. The final argument against legalization is that, even if it were to be considered a good idea, in theory, the time for such a major policy change in India is not right, because India did not possess the infrastructure to conceive, implement, monitor, or regulate such a huge change.

Suggestions

Certain suggestions could be considered in the light of the given circumstances. First, because of India’s inherent diversity, changes should be piloted in one or few states instead of going for pan India legislations so as to evaluate the post and pre-policy changes along with avoiding the deleterious and incongruous effects. Second, sufficient research needs to be undertaken so as to generate the local and relevant empirical pieces of evidence vis a vis the Indian sub context instead of relying on foreign pieces of evidence. Third, the question of government or private ownership of gambling monopoly needs to be delved upon. Fourth, the safeguard mechanism for the stakeholders needs to be put in place along with relevant and requisite standardized norms for regulation.

Conclusion

Keeping gambling under the scope of criminal legislation in spite of its nonviolent nature has been a source of contention amidst the scholars who view this as a step to give legitimacy to State paternalism. Section 30 of the Indian Contracts Act 1872 renders such betting (wagering) agreements voidable and takes off the recourse of legal enforceability, thus, exemplifying its vulnerability to financial exploitation and illegitimate transactions. Now in recent times, with a drastic surge in online gambling, the IT Act, falls short to curb people from engrossing in illegitimate offshore gambling websites where there is the absence of the protective blanket of national laws.

Thus, the archaic legislation of 1867 and the present laws being incompetent, abruptly fail to regulate the ongoing inconsistencies pertaining to betting. Further, nonchalance concerning the present penal provisions and the recklessness of the stakeholders exacerbate the administrative incapacities and ineffective framework of government. Against this backdrop, the vociferous and the reverberating calls for newer legislations assume more significance given the nebulous state of gambling laws in the country.

Given the pros and cons of the current issue at hand, there is no unambiguous evidence to support the status quo. Although the legalization would bring with it a gush of entailing benefits, the profound and the pressing issues at hand pertaining to legalization are required to be given a thorough perusal including the pricking need to overhaul enforcement mechanism rather than venturing into the question of how and when to legalize the gambling.

References

1. The Public Gambling Act, 1867. http:// www.sangrurpolice.in
2. 1996 AIR 1153, https://indiankanoon.org/doc/1248365/
3. https://www.scams.info/online-casino/india/#laws
4. Law Commission of India. Legal framework: Gambling and sports betting including in cricket in India. Report number 276. New Delhi: Law Commission of India, 2018.
5. http://timesofindia.indiatimes.com/business/india-business/Goa-casinos-contribute-Rs-135cr-revenue-in-2012-13/articleshow/19524670.cms

Written by Riya Ganguly student at Bharati Vidyapeeth New Law College, Pune.