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Restoring value through tenancy reforms

The phenomenon of urbanisation, accompanied by the aspirations of the masses looking to make an ascend out of and above their life circumstances, dawns with transformation of landscapes. The harbours of the coast often become a passageway to opportunities. Settling the chaos of the opportunities in the city of Mumbai post the Second World War led to unique tenancy model in the city which sheltered its migrant population that would not otherwise be able to afford a shelter to call its own and ever since, rent control laws continue to bear the blame for much of an unlocked value of premises in the city despite the initial righteous intention of tenancy reforms.

Righteous Intention v. Regressive Implementation

The Maharashtra Rent Control Act, 1999 stands as a successor of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, which was enacted as social welfare, as well as regulative legislation with a bonafide intention of protecting tenants from exploitation by and tyranny of landowners and from the spurt in rentals. The aforesaid situation did not change much with the enactment of the Maharashtra Rent Control Act, 1999 as the provisions of this substituted legislation were nothing but old wine in a new bottle. It carried forward the pros and cons of the erstwhile Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 without rationale a and, as a result, rented premises in Mumbai city continue to fetch lower rental returns than prevalent market value or become a subject matter of long-lasting litigation/s. This situation has adversely impacted the rental market in the city of Mumbai and people are caught between the adverse demand and low yielding supply of the premises to be meant for rentals.

Against this background, yet another tenancy reform, the Model Tenancy Act, 2021 as approved by the Union Cabinet in the first week of June 2021 (“the Model Act”) is now being viewed as a great catalyst towards boosting the rental market as it may stimulate the market by promising secured higher rental returns to the landowners (which includes premises’ owner) and as an affirmative driving force addressing most of the concerns of its predecessors.

Rationalising the Expectation

While the disputes arising out of decades-old tenancies continue to keep their memories alive in the Small Causes Courts and further in the appellate courts, the prevailing skepticism that premises owners have lately clung to as a result of the pandemic over letting out their premises, shows the unreliability of the current rent control laws and eviction proceedings under the Maharashtra Rent Control Act, 1999. However, the enactment of the Model Act too depends on the adaptation of the provisions by the States to suit their indigenous tenancy models.

The State of Maharashtra has already cleared its stand in favour of protecting the interest of the tenants enjoying protection under the prevailing rent control regime.[i] Further, the prospective applicability of the Model Act is an important consideration while assessing the extent of the change to be expected out of the Model Act. Hence, it is required that the thrust of the reforms be maximised where it can be currently realised from the very stage of entering into a rental agreement, while the process of working out the reforms into the indigenous tenancy models continues to be unravelled by the State government.

One of the reforms that is hoped for is an overhauled dispute resolution process for rent and tenancy related matters. The Model Act seeks to nail the long lasting tenancy litigation by proposing a three-tier adjudicatory system being the Rent Authorities, Rent Courts and Rent Tribunals vested with exclusive jurisdiction to try and adjudicate disputes falling under the scope of the Model Act which does not extend to “question of ownership or title”.[ii] The essential condition to be met to seek relief through the Rent Authorities or the Rent Courts and Rent Tribunals is to have a rental agreement that is duly identified with a unique identification number by the Rent Authority set-up for a district under the Model Act.[iii]

An overview of the role to be played by the authorities/courts to be constituted under the Model Act is as tabulated below:

 

Matters related to the eviction of tenants are to be adjudicated upon by the Rent Courts, which may try and dispose off the matter based on the terms and conditions stipulated in the agreement entered between the disputing parties or on the basis of an application/documents made/placed before it.

Eviction of a tenant may be sought on the following grounds under the Model Act:

  • Non-payment of arrears of rent and other related charges for a period of two consecutive months despite being served a notice by the landowner as stipulated under the Model Act.
  • Abandonment of the premises (part or whole) by the tenant without the consent of the landowner.
  • Misuse of the premises includes the use of additional space by the tenant, causing damage to the premises, or carrying out activities that cause a public nuisance or are illegal.
  • Carrying out repair and alterations to the tenanted premises.[i]
  • Bonafide requirement by the legal heirs of a deceased landowner during the subsistence of the tenancy agreement.[ii]

It is noteworthy that the Model Act also provides for the interest of landowners who have let out vacant land as a part of the tenanted premises, to enable the landowners to undertake construction on the vacant land by causing severance of the vacant part of the land from the tenanted premises. In order to give effect to such severance of vacant land, the landowner may make an application before the Rent Court, if the landowner is unable to obtain possession of the vacant land from the tenant. The Rent Court may, on being satisfied with the willingness of the landowner to commence construction on the vacant land without causing undue hardship to the tenant, direct severance of vacant land or make other such orders that it may deem fit.[iii]

Restoring Value

The Model Act once again comes in as a tenancy reform with noble intent at a time when restoring the value of constructed properties that are vacant as a fallout of the current circumstances is vital for the recovery of the real estate market. While the applicability of the Model Act to the premises that have been trapped under old rental agreements and arrangements is subject to its enactment by the State, the assurance, that continues to gleam through is the balance that can be brought about by having a watertight rental agreement as per the Model Act. The Model Act accords primacy to the rental agreement executed between the landowner and tenant and strives to ensure its absolute enforcement.

Execution of new rental agreements pertaining to residential and commercial premises as per the provisions of the Model Act, as may be notified by the State government, will be the first step for landowners who seek better returns on their premises along with a more balanced set of landowner-tenant obligations. The challenge here remains to convince existing tenants to agree to the shift.

Taking a lesson from the quandary arising out of the existing rent control legislation, it is important that the implementation of the Model Act should be directed towards giving full effect to the balanced set of rights and obligations of tenants and landowners as currently envisaged therein. The pitfall to be avoided is the misuse of the autonomy given to the landowners and tenants while putting the provisions of the Model Act, that place reliance on the rental agreement to steer the course of the tenancy, into practice. It is only when the fine balance of responsibilities created under the Model Act are replicated in rental agreements, that the potential positive socio-economic impact of the Model Act will be of aid to the collective advancement towards the goal of ‘Housing for All’.

References

[i] Naresh Kamath, Maharashtra to Partially Adopt Central Model Tenancy Act, HINDUSTAN TIMES (June 3, 2021),
https://www.hindustantimes.com/cities/mumbai-news/maharashtra-to-partially-adopt-central-model-tenancyact-101622743211971.html.

[ii] The Model Tenancy Act, 2021, §40.

[iii] The Model Tenancy Act, 2021, §4(4)(a).

[iv] The Model Tenancy Act, 2021, §10.

[v]The Model Tenancy Act, 2021, §20(3).

[vi] The Model Tenancy Act, 2021, §32.

[vii ] The Model Tenancy Act, 2021, §35(7).

[viii] The Model Tenancy Act, 2021, §35(8)

[ix] The Model Tenancy Act, 2021, §38(3)

[x] The Model Tenancy Act, 2021, §37.

[xi]The Model Tenancy Act, 2021, §35(2).

[xii]The Model Tenancy Act, 2021, §21.

[xiii]The Model Tenancy Act, 2021, §22(2).

[xiv]The Model Tenancy Act, 2021, §27.

 

Image Credits: Photo by Sasun Bughdaryan on Unsplash 

 It is only when the fine balance of responsibilities created under the Model Act are replicated in rental agreements, that the potential positive socio-economic impact of the Model Act will be of aid to the collective advancement towards the goal of ‘Housing for All’.

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Intensifying Social Accountability of Corporates in India

In a bid to make companies progressively accountable in the social panorama, the government has been modifying the provisions of Corporate Social Responsibility (“CSR”) ever since its introduction. Amendments have been made in section 135 of the Companies Act, 2013 (“the Act”), The Companies (Corporate Social Responsibility) Rules (“the Rules”) and Schedule VII (“Schedule”) of the Act by the Ministry of Corporate Affairs (“MCA”), from time to time.

While the earlier amendments to section 135 of the Act and the Rules were mostly clarificatory in nature or were relating to the inclusion of certain activities relating to COVID – 19 as the contribution made towards  CSR, the amendments to section 135 of the Act inserted by the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act, 2020 and notification of The Companies (Corporate Social Responsibility) Amendment Rules, 2021 (“the Amended Rules”), both effective from January 22, 2021, has brought about a radical change in the treatment of unspent CSR amount, among other amendments, which is dealt with in this write-up.

  1. CSR applicability extended to newly incorporated companies as well:

Sub-section (5) of section 135 provides that every company crossing the threshold limits prescribed in section 135(1) has to necessarily spend at least 2% (two percent) of the average net profits of the company made during the immediately preceding three financial years. By way of inclusion to section 135 (5), newly incorporated companies that cross the threshold limits prescribed under section 135(1) of the Act have also been brought within the ambit of compliance with CSR provisions.

  1. Compliance in respect of unspent CSR amount:

A brief outline of the amendments relating to the treatment of unspent amount is provided below:

 

  1. Penalty for non-compliance of sub-sections (5) or (6) of section 135 of the Act:

The newly-inserted sub-section (7) of section 135 of the Act deals with a penalty for non-compliance of provisions of sub-section (5) or (6). It is pertinent to note that the provisions of Companies (Amendment) Act, 2019 had prescribed for imprisonment for a term extending to three years, apart from a fine that may be imposed, on the failure of a company to comply with the provisions of sub-sections (5) or (6) which relates to transfer of unspent amount other than ongoing project and transfer of amount towards ongoing project respectively.

Understandably, there were apprehensions over the proposed implementation of penal provision with imprisonment for CSR activity, and after deliberations, the provision was replaced with a provision in the Companies (Amendment) Act, 2020 which provides only for penalty without imprisonment for non-compliance of sub-section (5) or (6) of section 135 of the Act.

Penalty for the company – twice the amount required to be transferred by the company to the Fund specified in Schedule VII / unspent CSR account (or)

INR 1,00,00,000/- (Indian Rupees One Crore only), whichever is less.

Penalty for every officer of the company who is in default –

one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII / unspent CSR account (or) INR 2,00,000/- (Indian Rupees Two Lakhs only), whichever is less.

  1. Power to give general or special directions:

As per sub-section (8) which has been inserted, the Central Government may give general or specific directions to a company or a class of companies, as necessary, which are required to be followed by such company/class of companies.

  1. Constitution of CSR Committee:

CSR committee is not required to be constituted by a company, where the amount it has to spend towards CSR activities is not more than INR 50,00,000/- (Indian Rupees Fifty Lakhs only) and the functions of the CSR committee shall be discharged by the Board of Directors of the company.

  1. Other notable changes in Amended Rules:
  • Registration under sections 12A and 80G of the Income Tax Act, 1961 has been made mandatory for CSR implementation entities (Rule 4(1) of the Amended Rules).
  • Every CSR implementation entity has to file Form CSR – 1 and obtain CSR registration number compulsorily from April 01, 2021 (Rule 4(2) of the Amended Rules).
  • Chief Financial Officer or any person responsible for financial management shall certify that the funds disbursed have been utilized for the purposes and manner as approved by the Board (Rule 4(5) of the Amended Rules).
  • In case of ongoing project(s), the Board shall monitor its implementation and shall make necessary modifications, as required (Rule 4(6) of the Amended Rules).
  • The CSR Committee shall formulate and recommend an annual action plan in pursuance of its CSR policy to the Board comprising the particulars as specified in Rule 5(2) of the Amended Rules, which may be altered at any time during the financial year, based on a reasonable justification.
  • Surplus earned from CSR activities shall be ploughed back into the same project or transferred to the “unspent CSR account” and spent as per the CSR policy and annual action plan or shall be transferred to the Fund specified in Schedule VII of the Act but shall not form part of the business profit of a company (Rule 7(2) of the Amended Rules).
  • The CSR amount may be spent by a company for the creation or acquisition of a capital asset, which shall be held by a CSR implementation entity specified in Rule 4, which has CSR registration number, or beneficiaries of the CSR project or a public authority (Rule 7(4) of the Amended Rules).
  • Annual report on CSR to be in the format specified in Annexure-II of the Rules, in respect of board’s report for the financial year commencing on or after April 01, 2020 (Rule 8 (1) of the Amended Rules).
  • Companies having an average CSR obligation of INR 10,00,00,000/- (Indian Rupees Ten Crores only) or more in the three immediately preceding financial years has to undertake an impact assessment of CSR projects, having an expenditure of INR 1,00,00,000/- (Indian Rupees One Crore only) or more and which have been completed not less than one year before undertaking the impact study, through an independent agency (Rule 8(3) of the Amended Rules).

Ambiguities in the recent amendments:

  1. Whether unspent amounts of previous years have to be transferred?

Although, it has been specifically provided in some of the Amended Rules (viz., implementation of CSR provisions through specified entities, reporting of CSR as provided in Annexure provided in the Amended Rules) that the said amendments are applicable on or after April 01, 2021, the time period from which the provisions relating to the transfer of unspent CSR amount to “unspent CSR account” / Fund is applicable, i.e. whether the unspent CSR amounts relating to the past financial years (from the date of applicability of the CSR provisions to the company) are required to be transferred to the “unspent CSR account” / Fund or only the CSR amount remaining unspent as on March 31, 2021, has to be transferred, has not been explicitly provided in the Act or the Amended Rules.

  1. Whether the outstanding amount of provision created for the unspent amount must be transferred?

The amended provisions do not stipulate whether unspent CSR amounts of the previous financial years have to be transferred to the designated account / Fund in case a company has created a provision in the books of accounts for such unspent amount for the relevant financial years.

The foregoing matters require suitable redressal by the MCA in the form of clarifications or FAQs or amendments to the existing provisions, which will offer a much-needed clarity on these matters.

Conclusion:

With the recent amendments, the CSR provisions have undergone a paradigm shift from “Comply or Explain” to “Comply or Pay” regime as they provide for penalties on failure to transfer unspent CSR amount to the specified account / Fund, whereas earlier, providing reasons for not spending CSR amount was considered adequate compliance. Hence, the said amendments have placed additional responsibilities on corporates.  Having introduced the concept of penalty, it is only appropriate that the MCA addresses the obscurities arising from the amendments at the earliest so that corporates are not caught off-guard in complying with the CSR provisions.

Image Credits: Photo by Tim Marshall on Unsplash

the CSR provisions have undergone a paradigm shift from “Comply or Explain” to “Comply or Pay” regime as they provide for penalties on failure to transfer unspent CSR amount to the specified account / Fund, whereas earlier, providing reasons for not spending CSR amount was considered adequate compliance.

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Abbreviations as Trademarks

It is a common practice for organizations/businesses to use abbreviations in relation to their brands. From Indian Space Research Organisation (ISRO) to Mahashian Di Hatti (MDH), from Bavarian Motor Works (BMW) to Kentucky Fried Chicken (KFC) and from Louis Vuitton (LV) to Madras Rubber factory (MRF) and General Electrics (GE), all these brands changed their strategy by adapting abbreviations to connect with their consumers easily.

In this post, we will look into the aspects of registering abbreviations as trademarks under the Indian Trademark laws and attempt to list out the requisite considerations associated with adopting an abbreviation as a brand name.

NATURE OF ABBREVIATIONS – DESCRIPTIVENESS

As per the trademark law, for a word/term to qualify for registration as a trademark, it should not be a generic or a common term to trade or be recognized by customers as being descriptive of the kind/quality/character/intended purpose of specific goods/services. However, most abbreviations would be considered descriptive and non-distinctive as they are formed out of words that could be generic/common to trade. In such instances, it becomes difficult to claim exclusive rights when the trademark itself is incapable of being associated with a single source, like ‘VIT’ for Vitamins or ‘EV’ for Electric Vehicles. Under these conditions, how can an abbreviation qualify as a valid trademark? How does one seek registration/protection of an abbreviation as a trademark?

In the matter of S.B.L. Ltd. vs. Himalaya Drug Co[1], the Court emphasised on the test of overall similarity while deliberating upon the broad and essential features of both the marks and the effect on the consumers. The plaintiff’s liver tonic was labelled ‘Liv. 52’ and the defendant’s mark ‘LIV-T’ dealt with homeopathic and ayurvedic preparations. In both instances, the word ‘Liv’ was an abbreviation for liver. The Court held that abbreviation ‘Liv’ for Liver was generic or commonly used and falls under the domain of public juris. Hence the Court denied both the parties an exclusive proprietary right.

The Delhi High Court, in the decision of Bharat Biotech International Ltd. vs. Optival Health Solutions Pvt. Ltd. and Ors.[2], provided clarification in relation to the nature of acronyms that may make valid trademarks. In the instant case, the facts in issue pertained to the acronym TCV – the full form being Typhoid Conjugate Vaccine, that was being used by the plaintiff as ‘TYPBAR-TCV’ and the defendant as ‘ZYVAC-TCV’. The Court opined that the vaccine ‘Typhoid Conjugate Vaccine’, was common to the trade world over, especially in the medical community as ‘TCV’. Therefore, the mark ‘TCV’ being a generic abbreviation, as also being descriptive of the goods it related to, was incapable of trademark protection.

From the observations made by the Courts, it is clear that an abbreviation that is generic, common to trade or carries a descriptive meaning in itself cannot be registered or even enforced unless added to another distinctive and non-descriptive term like TYBAR-TCV/ Liv. 52. Here, the comparison is made on the basis of the perception of the trademark as a whole and not just the abbreviation.

NATURE OF ABBREVIATIONS – NON-DISTINCTIVE

Let us now look at the decisions where the Courts have found that the abbreviation by itself has trademark value and ought to be protected. In general practice, abbreviations, especially those formed of less than 3 letters, are usually not considered inherently distinctive, unless on certain occasions it is proven with substantial evidence that such a mark has acquired distinctiveness or a secondary meaning has come to be associated with it, by virtue of such extensive use. Some of the popular examples are GE, HP, LG etc.

This concept of acquired secondary significance has been a deciding factor in the Delhi High Court’s judgement in Larsen and Toubro Limited vs. Lachmi Narain Trades and others[3], which dealt with the abbreviation trademark ‘LNT’/‘LandT’. The Court studied the evidence produced by the plaintiff and observed that ‘LandT’ had acquired a secondary meaning exclusively associated with the plaintiff, owing to its continuous use over the course of nearly 50 years, whereas, the Respondents, being in business for some years, had started using the abbreviation ‘LNT’ only recently. It was held that the trademark ‘LandT’ was identified with the goods marketed by the plaintiff and as a result, its use could not become permissible for expressions like ‘Lachmi Narain Trades’.

Similarly, the Madras High Court in the decision of VIT University vs. Bagaria Education Trust and Ors.[4], also relied on the distinction and secondary significance acquired by the plaintiff in relation to the abbreviation ‘VIT’ and recognised the exclusive rights of the plaintiff to use ‘VIT’ as trademark.

CONCLUSION

An abbreviation may be granted protection if it is not common to trade practices, has distinctive focal element(s) attached to it, its full form does not carry any descriptive meaning, or it is proved with substantial evidence that the abbreviation has acquired distinctiveness or secondary significance by way of use. By observing the rulings of various Courts over the years, we are given a basic sense of the principles that are relied on, while deciding whether an abbreviation deserves to be registered as a trademark or not, and some of them are as follows:

  • Acquired distinctiveness or secondary significance, by way of longstanding, extensive and exclusive use of the trademark: This is case-specific and is decided on the basis of the evidence produced.
  • Overall perception of the trademark: This is decided based on the anti-dissection principle and the ‘dominant feature’ rule. 
  • Common to trade or descriptiveness: The concept of publici juris is considered since no single business is allowed to claim monopoly or have exclusive rights over a generic term. The full form of the abbreviation is examined to check if it is directly pointing towards the goods/services bearing the trademark.

The problem with the protection of an abbreviation as a trademark is not the registration; rather it is the enforcement of the rights that creates more hassles. There are many industries (as seen above like pharmaceutical, electrical etc.), that follow the trend of adopting brand names that are derived from or consist of generic terms that are common to trade. In such cases, since one business cannot claim monopoly over a generic trademark, it is added to a distinctive element, which is precisely the reason why it is easier to protect an abbreviation as a part of a composite mark (in whole), as opposed to protecting and enforcing it by itself.

Image Credits: Photo by Alexey Mak on Unsplash

An abbreviation may be granted protection if it is not common to trade practices, has distinctive focal element(s) attached to it, its full form does not carry any descriptive meaning, or it is proved with substantial evidence that the abbreviation has acquired distinctiveness or secondary significance by way of use.

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Appointment of Sole Arbitrator: Two Sides of the Same Coin

Almost every commercial contract contains an arbitration clause in order to circumvent the traditional trajectory of dispute resolution through litigation. It is common to encounter myriad project financing documents between a lender and a borrower bearing arbitration as a means of settling any dispute or difference. The concerning question raised in such a scenario is whether the lender of facilities exercises an upper hand in designating an arbitrator devoid of any recourse to the borrower; thereby bringing us to the crucial question: Have the clauses similar to All disputes and differences of whatsoever nature arising out of this agreement, whether during its term or after expiry thereof or prior termination shall be referred to arbitration in terms of the Arbitration and Conciliation Act, 1996. The arbitration shall take place before a sole arbitrator, to be appointed by the Lender.been obliterated?

The law in case of appointment of the sole arbitrator by a party has been settled by the Hon’ble Supreme Court in the case of Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd.[1] (Perkins case). HSCC (India) Ltd. (Respondent), the executing agency of the Ministry of Health and Family Welfare, issued a Letter of Award (LOA) to the consortium of Applicants for the appointment of Design Consultant for All India Institute of Medical Sciences (AIIMS) proposed at Guntur in Andhra Pradesh. The dispute resolution clause in the contract between the parties provided that if Applicants were dissatisfied with the decision of Director (Engg.), HSCC (India) Ltd. (HSCC) they were at the liberty to issue a notice to the Chief Managing Director (CMD), HSCC for the appointment of an arbitrator within 30 (thirty) days of receipt of the decision.

Furthermore, the contract also prohibited any other person except appointed by CMD, HSCC to act as a sole arbitrator thereby entirely vesting the power of appointment of an arbitrator on the Respondent. When disputes arose, the Applicants invoked the dispute resolution clause in the contract and the Chief General Manager, HSCC appointed the sole arbitrator. Thereafter, an application was filed by the Applicants under Section 11(6) read along with Section 11(12)(a) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”) which envisages appointment of an arbitrator by the court. The Hon’ble Supreme Court examined if it could exercise the power of appointment of an arbitrator in this case dehors the procedure set out in the arbitration agreement.

The Hon’ble Supreme Court referred to the judgement of TRF Limited v. Energo Engineering Projects Limited[2] (TRF case) in which the Apex Court examined the issue wherein the Managing Director of the Respondent was titled as the sole arbitrator and was also vested with the authority to nominate a replacement. The Apex Court by virtue of Section 12(5) of the Act that deals with the arbitrator’s relationship with the parties or counsel or subject matter of dispute, affirmed the ineligibility of a person falling under the purview of Seventh Schedule of the Act to perform the role of an arbitrator. Therefore, the Managing Director was ineligible to act as an arbitrator due to which his ability to nominate another person as an arbitrator was annihilated. The Apex Court in this case differentiated the dual power of the Managing Director, one to adjudicate as an arbitrator and second, the capacity of the Managing Director to appoint a nominee in his place.  

The principles emanating from the TRF case were reflected in the present case wherein the capacity of CMD, HSCC to appoint an arbitrator was analyzed. The Hon’ble Supreme Court held that in the TRF case the ineligibility of the Managing Director arose due to his interest in the outcome of the dispute. The same ground would be applicable in the scenario irrespective of the binary power of the arbitrator. In other words, if the appointed arbitrator has an interest in the dispute or in the outcome or decision thereof, he shall be incompetent to adjudicate the dispute as an arbitrator and/or disentitled to appoint any other person as an arbitrator.

The Hon’ble Court stated that the facet of exclusivity shall encompass the party that unilaterally appoints the sole arbitrator of its choice and discretion in spelling the course of the proceedings. Thus, the essence of the Act along with the TRF case was retained by upholding that it would be incongruous to confer the power of appointing an arbitrator in the hands of a person who has an interest in the outcome or decision of the dispute. The appointment made by the Respondent who was empowered in accordance to the dispute resolution clause was annulled and the Hon’ble Court exercised its power under Section 11(6) resulting in the appointment of a sole arbitrator to preside over the disputes between the parties.

The Hon’ble High Court of Delhi echoed this principle in the case of Bilva Knowledge Foundation and Ors. v. CL Educate Limited[3] where the court conceded with the view, followed by the case of Proddatur Cable TV DIGI Services v. SITI Cable Network Limited[4] wherein the distribution agreement vested a unilateral right to appoint the sole arbitrator on the Respondent Company which disagreed with the nomination of arbitrator proposed by the Petitioner. The High Court held that test of having an interest in the outcome of the dispute will be exhibited by the Respondent Company acting through its Board of Directors thereby vitiating the unilateral appointment. The High Court clarified that though party autonomy is a touchstone in arbitration, one cannot overlook the underlying principles of fairness, transparency and impartiality that are also fundamental in an arbitration. While the parties may agree to the procedure mentioned in the dispute resolution clause by free will, this agreement should not eclipse the facet of fairness and impartiality in an arbitration proceeding.

Concluding remarks

In cases where both parties can nominate their respective choice of arbitrators the power derived by one party is counter balanced by an equal power with the other party as seen in the Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)[5].  Though it may seem that the law governing the right of the lender to appoint the sole arbitrator as upheld in the case of D.K. Gupta and Ors. v. Renu Munjal[6] is now settled through the Perkins case, one has to be prudent in drafting and interpreting the clauses for the appointment of sole arbitrator that may be reached by mutual consent or by court appointment or any other alternative thereby balancing party autonomy and the tenets of fairness, transparency and impartiality.

 

References:

[1] AIR2020SC59

[2] (2017)8SCC377

[3] Arb. P. 816/2019

[4] 267(2020)DLT51

[5] 2020(1)ALT70

[6] O.M.P. (T) (COMM.) 106/2017 & IA No. 14824/2017

 

 

Image Credits: Photo by Sora Shimazaki from Pexels

In cases where both parties can nominate their respective choice of arbitrators the power derived by one party is counter balanced by an equal power with the other party as seen in the Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV).

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Brief Analysis of the Patents (Amendment) Rules, 2020

The Government of India, Ministry of Commerce and Industry (Department for Promotion of Industry and Internal Trade) vide its notification dated October 20, 2020, has published the Patents (Amendment) Rules, 2020 (hereinafter the “Amended Rules”) amending the Patents Rules, 2003 (hereinafter the “Principal Rules”). The amendment came into force from the date of the notification i.e. October 20, 2020.

The highlights of the amendments are as follows:

  1. Rule 21: Filing of the Priority document:

The amended rules provide for a substituted Rule 21.

 

Amended Rule 21(1)

This amendment is merely clarificatory in nature with respect to the filing of the Priority document. In the principal rule, the applicant/assignee had to provide the Priority document before the expiry of 31 months from the date of priority and it remains the same post amendment.

The only change to the sub section is the addition of sub-rule ‘b-bis’ of Rule 17.1 of the Patent Cooperation Treaty (PCT) which offers flexibility to applicants to submit the Priority document through the digital library.

 

Amended Rule 21(2)

 This amendment is again clarificatory in nature with respect to furnishing the English translation of the Priority document, which is in compliance with the PCT.

 

Amended Rule 21(3)

 There have been no changes to this sub-rule with respect to the filing of the Priority document and/or English translation of the Priority document. In case the said document is not filed within 31 months from the priority date, the applicant is required to furnish the Priority document and/or English translation of the Priority document within 3 months from the date of invitation to avoid dismissal of priority claim. 

  1. Rule 131: Form and manner in which statement required under Section 146(20) is to be furnished

The amendment substitutes Sub-Rule (2) of Rule 131 thereby revising the time period for which the statement of working must be filed.

Earlier, an applicant was required to file the statement of working for every Calendar Year (i.e. Jan-Dec) within three months of the end of each Calendar Year once the patent was granted.

With the amendment, now the applicant is required to file the statement of working for every Financial Year (i.e. Apr-Mar) within six months from the expiry of the previous Financial Year. For clarification, the applicant is obligated to furnish the details with respect to the working of the invention from the Financial Year in which the patent is granted.

 

The changes were made to facilitate ease in business and to simplify the process thereby encouraging patent filing by interested individuals. The requirement of furnishing statements for a Calendar year was putting an undue burden on the patentee to maintain record differently from those maintained in regular business and there were also many tax benefits or differential taxation applied for income from the sale or licensing of IP assets which were also not available for calendar year, therefore, it was reasonable to change it to Financial Year.

 

  1. Second Schedule: Form 27

 

The amendment brings out certain crucial changes in Form 27 which are:

 

  • The new Form enables Patentee(s)/Licensee(s) to file the statement of working for more than one patent that are related to each other and granted to the same Patentee(s), in a single Form 27.

 

The change was brought about to ensure filing convenience, reduce paperwork and search costs in cases where there were potentially multiple patents covering the same product.

 

  • The Patentee/Licensee is required to furnish approximate revenue / value accrued in India in the previous Financial Year for one or more related patents granted to the same Patentee.

With this amendment, the obligation to provide details with respect to the quantum of a product has been waived. However, calculating the approximate value accrued in India especially for complex high-tech products with components being sourced and sold across borders might be difficult.

 

  • The Patentee/Licensee has to mention the Financial Year, instead of Calendar Year, for which the statement of working is filed.

 

  • The earlier form asked a patentee to ‘give whatever information was available’, however, the revised form introduces a word limit of 500 words to describe worked or not worked invention in ‘brief’.
  • A clarification has been added that every patentee and every licensee is required to file this form. Where patent is granted to two or more persons, they may file it jointly. However, licensees are required to file the form individually.

This change may encroach upon the confidentiality requirement that is the essence of a patent in general.

Image Credits:  Photo by Your Photo Trips from Pexels

The amendments have been introduced to streamline the process of filing patents and ensure easy compliance. It is pertinent for the applicants to ensure thorough conformity with the new regime to avoid adverse consequences. 

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Junk food ban- Legal responsibilities of School Authorities

According to the World Health Organization (WHO), 38 million children under the age of 5 were overweight or obese in 2019 and over 340 million children and adolescents aged 5-19 were overweight or obese in 2016. The statistics are alarming because obesity is just one of the myriads of health problems that result from continuous consumption of a poor-quality diet high in junk food. Plus, obesity is an external manifestation of the problem, but the harmful effects of these zero-nutrition foods fester within the body and cause permanent damage. The repercussions are far worse when the habit is inculcated at a tender age. Junk food can cause memory and learning problems as well as fatigue and weakness among children. Further, advertisement specifically designed to influence young minds into making unhealthy choices is another grave cause of concern.

Since schools are the temples of learning and the place where children spend most of their waking hours, initiating a healthy eating environment in and around the school premises was crucial. Towards this end, regulations have been passed by the Government to ensure that children are exposed to wholesome meals and proper guidance that instill good eating habits.

Background

A Public Interest Litigation (PIL) was filed by an NGO in 2010 seeking a direction banning the sale of junk food and aerated drinks in and around schools (Uday Foundation for congenital defects and rare blood groups Vs. Union of India & Ors.). Pursuant to the PIL, the Hon’ble High Court of Delhi issued a direction to the Central Government to draft detailed guidelines to regulate the sale of junk food and aerated drinks in and around school premises in the country.  

In light of the directions, the Food Safety and Standards Authority of India (FSSAI) has notified the Food Safety and Standards (Safe food and balanced diets for children in school) Regulations, 2020 (“the Regulations”) that prohibits the sale, marketing and promotion of junk food within the school premises and the surrounding vicinity. The said Regulations apply to –

  1. Schools (pre-primary, primary, elementary, secondary, day-care) that provide food within the campus.
  2. Shops/stalls or food outlets which sell food products within fifty meters of the school gate in any direction.
  3. Food Business Operator (FBO)* /Food caterers who supply mid-day meals.

This Regulations inter-alia outlines the roles and responsibilities of the School Authority to ensure safe food and balanced diets on school premises.   

Licensing requirements

  • The School Authority shall get registered as an FBO to sell/provide catering of school meals by itself on the school campus.
  • The School Authority shall mandatorily enter into a contract or transaction with the registered or licensed FBOs under the provisions of the Food Safety and Standards Act, 2006 (“The Act”).
  • The Central or State Department of School Education shall ensure that FBOs contracted by it for the operation of the mid-day meal scheme are registered or licensed under the provisions of the Act.
  • The provisions of Regulations shall be duly complied by FBOs with effect from 01st July 2021.

By registering under the Act, the School Authority shall be liable for the compliance of provisions of the Act and the Rules and Regulations made thereunder. Any violations or non-compliance by the school authority under the Act shall attract penal provisions and penalties including imprisonment.

Prohibition of Junk Food 

  • The School Authority shall ensure that no person shall sell or offer for sale including free sale, or permit sale, of food products high in saturated fat or trans-fat or added sugar or sodium [High in Fat, Salt and Sugar (HFSS) ** or Junk food] in school premises or campus.
  • The School Authority shall ensure that there shall not be any advertisement, banner or wallpaper or direct/indirect promotion of Junk food in school premises or campus.
  • The School Authority has to display a board containing the warning “Do not sell, including free sale or market, or advertise Junk food within school premises or campus” at the entrance gate or gates of the school.
  • No person shall directly or indirectly advertise or market or sell or offer for sale including free sale, or permit sale, of Junk food products in the school campus or to school children in an area within fifty meters from the school gate in any direction.

The School Authorities are made responsible to ensure the sale, advertisement, and promotion of Junk food do not take place even by a third party.  Shops/stalls and food outlets which are running within school premises or within fifty meters of the school gate in any direction shall stop selling all kinds of Junk food products. The Regulations with respect to prohibiting and promoting of junk foods in and around school premises shall come into force only from such date as the Food Authority may, by notification in the Official Gazette, appoint.

Sanitary and hygienic practices

  • The School Authorities shall encourage to adopt a comprehensive program for promoting safe food and balanced diets amongst school children and meet specified benchmarks to convert school campus into ‘Eat Right Campus’ and also follow guidance from “Dietary guidelines for Indians – A Manual” issued by the National Institute of Nutrition and other expert institutions or authorities.
  • The School Authority shall ensure that the FBOs supplying prepared school meals in the school premises are identified and selected food that can be served or sold on the basis of the broad guidelines given in the Schedule to Regulations and as per the directions, issued by the Food Authority or the Commissioner of Food Safety of the State. The School Authority may appoint a Health and Wellness Ambassador or Health and Wellness team, who shall act as the nodal persons to monitor the availability of safe, balanced, and hygienic food.
  • The School Authority may engage with nutritionists, dietitians, nutrition associations or seek parental support to assist in the drafting of the menu for the children, periodically.
  • The crèches or day-cares for infants or children up to the age of twenty-four months old are also expected to serve safe and balanced diets to them. 

Implementation, Monitoring, and surveillance

  • The School Authority/ State Food Authority/ Any public authority like Municipal Corporation or any other local body or Panchayat in an area shall have a system of regular or periodic inspection of school premises to ensure that safe, balanced and hygienic food is served to children.
  • The State Level Advisory Committee (SLAC) constituted under the Food Safety and Standards (Licensing and Registration of Food Businesses) Regulations, 2011 shall create a subcommittee consisting of representatives from the Department of School Education, and public health professionals in the field of food and nutrition to monitor the implementation of these regulations and to ensure availability of safe and wholesome food to school children.
  • Implementation of these Regulations is achieved by action or complaint of the School Authorities to concerned Food Safety Authorities.  

PROS:

CONS:

Undoubtedly, Junk food is addictive by nature and spoils children’s physical and mental health at an early age. Objectives of the prohibition of unhealthy Junk food and also monitoring hygienic/nutritious food for children are well appreciated. The Regulations also encourage schools to implement and monitor a balanced food menu for children. Junk food manufactures may change/restrict ingredient limits/compositions of saturated fat or trans-fat or added sugar or sodium in their products to escape from the labeling of their products as Junk food. The Regulations will address all serious problems arising from undernutrition and malnutrition in children who are living in rural areas.

Implementation and enforcement of the Regulations is not easy unless School Authorities create awareness among children about the side effects of eating Junk food and the necessity of nutritious food. It is not easy to label food as Junk food and it requires a regular monitoring system. Some parents will provide Junk food in lunch boxes and the same will defeat the purpose of the Regulations. Majority of shops and outlets near schools sell Junk food to attract children. Small vendors and shopkeepers who keep and sell Junk products would be badly affected by the regulations. Small businesses/manufacturers of food products such as fried chips, bakery items, chocolate bars, candies, chocolates, peppermints, sweet gums, wrapped sweets that cannot be sold near the school would face losses and may also result in closure.  

 Conclusion

The FSSAI has notified and implemented the Regulations after conducting various surveys, research, and consultation with the public, nutritionists, various organizations, and medical experts. Now, the Regulations must be implemented and followed by the School Authorities in letter and spirit without any further delay. 

Manufacturing and Best Before dates to be mandatorily displayed on sweet packages

The FSSAI has also issued Orders on 25th & 30th September 2020 for mandating the compulsory display of Manufacturing date and Best Before date on non-packaged and loose sweets containers/packages/tray holding sweets at the outlet sale.

Image Credits:  Photo by Fábio Alves on Unsplash

The FSSAI has notified and implemented the Regulations after conducting various surveys, research and consultation with the public, nutritionists, various organisations and medical experts. Now, the Regulations must be implemented and followed by the School Authorities in letter and spirit without any further delay.

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The Admissibility of Electronic Evidence

With constant technological innovation and dynamic transformation of related laws happening worldwide, the jurisprudence regarding reliance on evidence in electronic form is also evolving. Judges these days have demonstrated considerable perceptiveness towards the intrinsic ‘electronic’ nature of evidence, which includes insight regarding the admissibility of such evidence, and the interpretation of the law in relation to the manner in which electronic evidence can be brought and filed before the court.

The term   record has been defined under Section 2(t) of the Information Technology (IT) Act as under:

data, record or data generated, image or sound stored, received or sent in an electronic form or micro-film or computer-generated micro fiche”

Further, Electronic records have also been given an overarching legal recognition through Section 4 of the IT Act which provides that:

“Any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is– (a) rendered or made available in an electronic form; and (b) accessible so as to be usable for a subsequent reference.”

Moreover, Section 79A while authorizing the Central Government to notify the Examiner of Electronic Evidence also explains what would be called “electronic form evidence” as under:

“Electronic form evidence means any information of probative value that is either stored or transmitted in electronic form and includes computer evidence, digital audio, digital video, cell phones, digital fax machines.”

In addition, Section 3 of the Indian Evidence Act, 1872 was also amended to include electronic records as documentary evidence and now it reads as follows:

“all document including electronic records produced for the inspection of the Court, such statements are called documentary evidence”

In the case of State (NCT of Delhi) vs. Navjot Sandhu[1], the Supreme Court had held that courts could admit electronic records such as printouts and compact discs as prima facie evidence without notification.

However, oral admission as to the contents of electronic records is not relevant unless the genuineness of the record produced is in question.[2]

In cases of cybercrime, a suggestive list has been provided by the National Cyber Crime Reporting Portal on the type of information that would be considered as evidence while filing any complaint related to cybercrime:

  • Credit card receipt
  • Bank statement
  • Envelope (if received a letter or item through mail or courier)
  • Brochure/Pamphlet
  • Online money transfer receipt
  • Copy of email
  • URL of webpage
  • Chat transcripts
  • Suspect mobile number screenshot
  • Videos
  • Images
  • Any other kind of document

Admissibility of “Electronic Evidence”

Sections 65A and 65B of the Evidence Act particularly deal with the information contained in electronic records. The marginal note to Section 65A indicates that “special provisions” as to evidence relating to electronic records are laid down in this provision. The marginal note to Section 65B then refers to “admissibility of electronic records”.

Section 65B (1)[3] states that if any information contained in an electronic record produced from a computer has been copied onto an optical or magnetic media, then such electronic record that has been copied ‘shall be deemed to be also a document’ subject to conditions set out in Section 65B (2)[4] being satisfied.

Section 65B (2) provides some conditions which are to be satisfied in order to accept electronic records as evidence, which are briefly provided below –

  • the computer was used by a person to store or process information for carrying on any activity regularly over a period of time and has lawful control over the use of such computer,
  • such information must have been regularly fed into the computer in the ordinary course of the said activities. Throughout the material part of the said period, the computer was operating properly, and even if not operating properly, it does not affect the electronic record or accuracy of its contents and
  • information in the electronic record reproduced / derived from information fed into the computer in the ordinary course of the said activities.

In Anvar P.V. vs. P.K. Basheer and ors[5] , the Court has interpreted sections 22A, 45A, 59, 65A & 65B of the Indian Evidence Act and held that secondary data contained in a CD, DVD or a Pen Drive are not admissible without a certificate under section 65 B(4) of the said Act. In the case, it was said that electronic evidence without a certificate under section 65B cannot be proved by oral evidence and also the opinion of the expert under section 45A of the said Act cannot be resorted to make such electronic evidence admissible. After this case, it was clarified that the only way to prove an electronic record/evidence is by producing the original media as primary evidence and the copy of the same as secondary evidence under section 65B of the Indian Evidence Act, 1872.

Thereafter, the Supreme Court in Shafhi Mohammad[6] case, held that the requirement of producing a certificate under Section 65B(4) is procedural and not always mandatory. A party who is not in possession of the device from which the document is produced cannot be required to produce a certificate under Section 65B (4). The Court was of the view that the procedural requirement under Section 65B(4) is to be applied only when electronic evidence is produced by a person who is in control of the said device, and therefore in a position to produce such a certificate. However, if the person is not in possession of the device, Sections 63 and 65 cannot be excluded.

Recently, the Supreme Court in the decision of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal and Ors.[7]has settled the controversies created by previous judgments as to whether certificate under Section 65B of the Indian Evidence Act is a condition precedent for admissibility of any Secondary electronic record, and at what stage the same may be produced. This judgment arose from a reference by a Division Bench of the Supreme Court, which found that the Division Bench judgment in Shafhi Mohammad v. State of Himachal Pradesh (supra)  required reconsideration in view of the three-judge bench judgment in Anvar P.V. v. P.K. Basheer(supra).Some of the key takeaways from the decision are as follows –

  1. Section 65B differentiates between the original information contained in the “computer” itself and copies made therefrom – the former being primary evidence, and the latter being secondary evidence. Required certificate under Section 65B(4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, computer tablet, or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where the “computer” happens to be a part of a “computer system” or “computer network” and it becomes impossible to physically bring such system or network to the Court, then the only means of providing the information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate Under Section 65B(4).
  2. If the certificate is not issued or refused, the Court may order production of the certificate by the concerned authority.
  3. Evidence aliunde given through a person who was in-charge of a computer device in the place of the requisite certificate is not allowed.
  4. The decision in Anvar P.V. cited above has been upheld and the judgment in Tomaso Bruno v. State of U.P.[8] has been overruled.

The person who gives this certificate can be anyone out of several persons who occupy a ‘responsible official position’ in relation to the operation of the relevant device, as also the person who may otherwise be in the ‘management of relevant activities’ spoken of in Sub-section (4) of Section 65B. Also, it is sufficient that such person gives the requisite certificate to the “best of his knowledge and belief.”

These directions issued by the Supreme Court are welcome as they will improve the efficacy of criminal and investigative proceedings.

When should the certificate be produced?

Although not expressly provided for under the Indian Evidence or the Information Technology Act, the Anvar P.V. case and the Arjun Panditrao case cited above have shed adequate light on the stage at which such certificate must be furnished to the court.

In terms of general procedure, the requisite certificate must accompany the electronic record pertaining to which a statement is sought to be given in evidence when the same is produced in evidence i.e. in a criminal trial, the prosecution is obligated to supply all documents upon which reliance may be placed to an accused before commencement of the trial. Therefore, the electronic evidence, i.e. the computer output, has to be furnished at the latest before the trial begins. The reason is not far to seek; this gives the Accused a fair chance to prepare and defend the charges levelled against him during the trial.

However, the Court may in appropriate cases allow the prosecution to produce such certificate at a later point in time. If it is the Accused who desires to produce the requisite certificate as part of his defense, this again will depend upon the justice of the case discretion to be exercised by the Court in accordance with the law.

Position across the globe

The Indian law relating to electronic evidence has adopted the language of Section 5 of the UK Civil Evidence Act, 1968 to a great extent, however this provision had already been repealed by the UK Civil Evidence Act, 1995 and even Section 69 of the Police and Criminal Evidence Act, 1984 which related to the admissibility of computer evidence in criminal cases was revamped to permit hearsay evidence. Therefore, in UK currently, no special provisions have been made in respect of the manner of proof of computerized records.

In USA, a person seeking to produce an electronic record has more than one option to do so under the Federal Rules of Evidence (FRE). A person can follow either the traditional route under Rule 901 or the route of self-authentication under Rule 902 whereunder a certificate of authenticity would elevate its status. This is a result of an amendment introduced in the year 2017, by which sub-rules (13) and (14) were incorporated in Rule 902.

In Canada, the position is similar to India although the Canadian law takes care of a contingency where the electronic document was recorded or stored by a party who is adverse in interest to the party seeking to produce it. Section 31 of the Canada Evidence Act, 1985 deals with electronic evidence and the application of the ‘best evidence rule’.

The future holds definite challenges as far as electronic evidence is concerned and constant legal overhaul and vigilance of judiciary are anticipated but the legislature also needs to take a proactive step in making laws consistent with the changing technology environment.

References

[1] State (NCT of Delhi) vs. Navjot Sandhu (2005) 11 SCC 600.

[2]Section 22A of Indian Evidence Act

[3] Indian Evidence Act, 1872.

[4] Ibid

[5] Anvar P.V. vs. P.K. Basheer and ors  AIR 2015 SC 180, [MANU/SC/0834/2014]

[6] (2018) 2 SCC 801

[7] 2020 SCC OnLine SC 571

[8] [(2015) 7 SCC 178]

 

Image Credits:  Photo by Maxim Ilyahov on Unsplash

Though the Amended Act endeavours to address issues related to the land acquisition process being faced by industrialists for causing industrial development in Karnataka, ambiguity remains as to what extent the Amended Act shall be able to achieve ease of land acquisition process for tangible industrial development in the state.

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Evolution of the Doctrine of Public Policy in Arbitration

The pendency of litigation and piling up of cases in courts was the necessity which led to the discovery of alternative dispute resolution mechanisms. These tools of dispute resolution are highly efficient, time-bound and cost-effective. Further, as the dispute resolution is amicable, the delicate and long-standing relationship of parties is preserved. It is for this reason separate tribunals are set up for arbitration, independent mediators can be appointed for mediation and a number of unaided negotiations take place between the parties for settlement of any disputes. 

Arbitration is also familiar as a form of private litigation as to some extent the formalized means of dispute resolution; witness examination, expert opinions, and binding nature of the arbitral award will substantiate the fact. However, with enhanced remedial and appellate participation from the judiciary, the idea of ‘alternative’ dispute resolution seems to replicate a façade. The primeval legislation, Arbitration Act of 1940 provided for a triangular remedial setup, namely rectification, remission, and setting aside of the arbitral award. This was narrowed down to remission and setting aside of the award in the subsequent Act, 1996.

A noteworthy argument here is, that the arbitration disputes are often referred to as, ‘matters’ and not ‘suits’, this is a practice to limit the authority of courts over these disputes. The term ‘judicial authority’ is not construed in a narrow sense, rather derives a wider import to itself by the virtue of numerous common law precedents. Inclusion of District Forums, State Commissions and National Commission[1] under COPRA Act[2], commissions under Monopolies and Restrictive Trade Practices Act, 1969[3]  and Company Law Tribunals have been brought under the ambit of ‘judicial authority’.

The interplay of litigation courts in the proceeding of arbitration can be analyzed in three stages vis-à-vis before proceedings, during proceedings, and after proceedings. When on one hand this intermingling helps establish effective checks and balances when it comes to matters of public policy, on the counter, it defeats one of the primary advantages of arbitration, i.e. the expediency of dispute resolution. 

Section 5 of the Arbitration & Conciliation Act, 1996 provides for the limited or minimal intervention of judicial authority in arbitration proceedings.[4] The said section is analogous to Article 5 of UNCITRAL Model Law on International Commercial Arbitration, 1985[5]. The scope of judicial intervention is however non-arbitrary and is limited to the purposes prescribed in the Act, extending only to the administrative and non-judicial roles, within the non-obstante provisions.[6] The stance of the Indian judiciary was firmly established while inclining with the legislative intent behind the section, that the courts’ intervention should be minimal to encourage the resolution of disputes expeditiously and less expensively.[7] Even if the matter requires judicial intervention, the judicial authority is required to decide the issue expeditiously within a prescribed period and not to treat the matter in parimateria regular civil suits.[8]

Section 9 and 17 of the Arbitration & Conciliation Act, 1996 provide for interim measures  by the courts and tribunals. An application under Section 9 is that of a mandatory nature and is not a substantive remedy available at the discretion of the parties. The section provides for the judicial recourse for enforcement of rights of a third party in case its rights are being affected as a result of the arbitral award. As the third party is not a party[9] to the arbitration and does not have a locus standi, the said enforcement can happen only on a separate cause of action engaged by the third party and is not covered under the ambit of an arbitration agreement.[10] The right conferred by Section 9 is therefore not a contractual right, as only a party to the arbitration agreement possess the same.[11] Only in the rarest of rare cases, the third party would be competent to claim relief under Section 9 and not otherwise.[12] As locus standi is a significant rationale before granting interim relief under Section 9, the courts must be extra vigilant to not benefit frivolous litigations.     

As the remedy of ‘rectification’ has been taken away in the 1996 Act, the Arbitral Tribunal under the 1996 Act cannot review an Award on its own, the aggrieved party who has suffered on account of the Arbitral Award is required to challenge it according to the Law prescribed, and if the aggrieved party fails to apply under Section 34 for setting aside the Award, then a de novo inquiry cannot arise on its own. Section 34 of the Act provides for setting aside the arbitral award, in two cases when either a party is willing to challenge the award on grounds of prejudice or the Court finds that the award was in conflict with the public policy of India. The aggrieved party can make an application under this section within 3 months and additional 30 days from the date of receipt of the award. Section 34(2)(a) of the Arbitration and Conciliation Act, 1996 provides for numerous grounds on account of which the Court can set aside the arbitral award, including incapacity of parties, invalid or illegal arbitration, no proper notice for appointment of an arbitrator, non-agreement of parties on composition of the tribunal. The court is vested with powers to set aside the award in case of a non-arbitrable dispute or if the award conflicts with the public policy of India.  

AMBIGUITY IN ‘PUBLIC POLICY’ 

The ground of public policy for setting aside the arbitral award under Section 34 of the Act is a ‘judge-made’ ground evolving from common law. A series of precedents shaped the doctrine of public policy as it stands today with regard to setting aside the arbitral award.

The foremost case of Renusagar Power Co. Ltd v. General Electric Company[13] (Renusagar), which questioned the validity of Section 7 (1)(b)(ii) of the Foreign Award (Recognition and Enforcement) Act, 1961 which provided for the non-enforceability of a foreign award in case it contravened the public policy. It was held by the Apex court that “public policy” was to be interpreted as to be the public policy of India, whilst the application of foreign law in a purely municipal legal issue. The court relied on Article I(e) of the Geneva Convention Act, 1927, which recognizes objections by the host country regarding the enforceability of the award if the same contravenes the public policy of the host country. Further, Section7(1) of the Protocol & Convention Act, 1937 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Therefore, it was concluded that to invoke the bar of public policy the award must invoke something more than mere violation of any domestic law. A test was laid down for the satisfaction of the ‘public policy’ doctrine vis-à-vis, the award should not be contrary to i) fundamental policy of Indian law, ii) interests of India, iii) justice or morality.

The second landmark judgment in the evolution of public policy doctrine in the present context was, Oil & Natural Gas Corporation v. Saw Pipes Ltd[14] (Saw Pipes) the issue of the scope of judicial intervention under Section 34 was decided, as to whether a legally flawed arbitral award could be challenged on the pretext of contravention of provisions of the governing Act. The award was held to be ‘patently illegal’, therefore indirectly staining the public policy. The test to qualify repudiation of public policy in Renusagar was hence expanded to include acts contradicting i) fundamental policy of Indian law, (ii) the interests of India, (iii) justice or morality, (iv) if it is patently illegal. Hence, the thought of public policy was granted enormously wide abstract notions as if it was to ‘shock the conscience of the court’.

The final stone was laid by the Supreme Court in the case of Shri Lal Mahal Ltd. v. Progetto Grano Spa[15](Lal Mahal), where the vague and abstract nature of the expression, ‘public policy’ was challenged in relation to Section 48(2)(b)[16] of the Act with identical terminology. The SC analyzed that Section 34 was of a wider import than Section 48(2)(b) despite having identical terminology. Therefore, the decision limited the inference of ‘public policy’ in the impugned section to not include patent illegality of the award.

The ambiguity and blanket protection of the term ‘public policy’ was criticized in numerous judgments that followed. The defense of public policy cannot be used as a shield protecting judicial intervention in matters of arbitration. Various counter-claims included court must assume only a supervisory role by reviewing arbitral awards to ensure fairness.[17] The object of the 1996 Act itself is to radically curtail the judicial intervention in arbitration awards except in the circumstances as contemplated in the provisions of the Act, by vesting such enormous powers of judicial intervention in Section 34; the judiciary is violating the legislative intent.[18] It must be noted that the arbitrator is no less than a judicial authority and the view taken by the arbitrator in judicial capacity is no less than that taken by the judge, therefore his plausible view must not be interfered with in a judicial proceeding under Section 34 of the Act,[19] which was reiterated in the case of State of Jharkhand v. HSS Integrated SDN & Anr.[20]    

SIGNIFICANT AMENDMENTS

2015 Amendment

The 2015 Amendment in the Act brought about significant changes in the concept of ‘public policy’ under the Arbitration Act, drawing suggestions from the 246th Law Commission Report. An amendment was made to the Sections 2A[21] and 34(2),[22] by adding Explanation 2. The amendment restricts the scope of judicial intervention in arbitral proceedings by limiting the definition of public policy. The Amendment Act restricted the grounds of setting aside international arbitral awards solely on:

  • Induced or affected by fraud or corruption
  • Contravention in the fundamental policy of Indian Law
  • In conflict with notions of morality and public justice

Therefore, the court cannot act as an Appellate Court to examine the legality of the arbitral award, nor can it examine the factual merits of the claim.[23] As factual merits could not be questioned, the record of an arbitrator was to be held to be sufficient to furnish compliance with Section 34.[24] This was reiterated as cross-examination of persons swearing such affidavits/ records is not allowed unless absolutely necessary.[25] Further, the Amendment Act provided that proceedings for setting aside could be initiated only after due notice to the parties. Furthermore, Arbitration and Conciliation (Amendment) Act, 2015 was held to be prospective in nature and operation.[26]  Post amendment, the mere initiation of proceedings under Section 34 would not automatically operate as a stay of the arbitral award. The aggrieved party is required to file a separate application seeking stay of the award and the Court may grant a stay of the award by imposing conditions.

The position of the term ‘public policy’ has been further clarified in the recent judgment of Ssangyong v. NHAI[27] (Ssangyong) to not include the ‘fundamental policy’ under Section 34, relying on the 246th Law Commission Report. However, with such a firm stance, the overall efficacy of remedy under Section 34 may be objected. The judgment is noteworthy while analysing the applicability of Section 34 as it unmistakably stated that ‘under no circumstances can the Courts interfere with an arbitral award on the ground that justice was not served in the opinion of the Court as the same would clearly contradict the ethos of Section 34.’[28]

On one hand where the Ssangyong endeavours to restrict the scope of ‘public policy’, the 2020 judgment of NAFED v. Alimenta[29] (NAFED) seems to elaborate it. The judgment included export policy within the ambit public policy, stating the contravention of the former will inevitably contravene the latter. On the face of it, the judgment seems to be against the precedents, however, one argument of the judgment is found on the premise that it is highly fact-based. Even though the judgment has accredited a lot of criticism in the short span after delivery to not have considered the judgment of Vijay Karia[30]. However, it must not be overlooked that the NAFED judgment seeks to define the ‘public policy’ in Section 48 of the Act which has a very distinct pose than the use of term under Section 34.

2019 Amendment

The threshold under the erstwhile Section 34(2)(a)  for the setting aside of arbitral awards by the court was that the applicant has to furnish proof of the circumstances enumerated therein for the Court to set aside the award. The ‘furnishing of proof’ led to the prolongation of setting aside proceedings serving as an obstacle for the enforcement of domestic awards. The amendment in Section 34(2) removes the requirement of furnishing proofs to substantiate the ground(s) for setting aside the award. Instead, by virtue of this amendment, the applicant needs to establish the ground(s) for setting aside of the award based on the record of the arbitral tribunal which may ensure that proceedings under Section 34 are conducted expeditiously. It was held that proceedings under Section 34 of the Act are summary in nature.[31] Furthermore, the court held that under Section 34 (2A) of the Arbitration Act, a decision which is perverse while no longer being a ground for challenge under “public policy of India”, would certainly amount to patent illegality appearing on the face of the award.[32] The court while deciding the application for setting aside an arbitral award decided that the court will not ordinarily require anything beyond the records before the arbitrator. If otherwise pertinent to the issue, the records can be brought before the Court by the way of affidavits by both parties.[33]

CONCLUSION

Conclusively it can be said that the legislative intention behind alternative dispute resolution was never to encourage interference from the judiciary perhaps that was the reason arbitration awards were classified to be binding on the parties. However, it must not be forgotten that the judiciary is expected to be the safe-keeper of the fundamental rights of the citizens; therefore, if genuine and gross violations in the arbitral award render the parties without a remedy, the courts must not be restricted to intervene in the arbitration proceedings. Standing the evolution in time and necessary amendments, the Arbitration and Conciliation Act, 1996 has proven to be a living document. 

References

[1] Fair Air Engineers Pvt. Ltd. V. N.K. Modi AIR1997SC533

[2] Consumer Protection Act, 1986

[3] Shri Balaji Traders v. MMTC Ltd. [1999] 34 CLA 251

[4] Sundaram Brake Linings Ltd vs Kotak Mahindra Bank Ltd (2010) 4 Comp LJ 345 (Mad)

[5] Article 5:  This Law shall not affect any other law of this State by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of this Law.

[6] Secur Industries Ltd vs M/S Godrej & Boyce Mfg. Co. Ltd. (2004) 3 SCC 447

[7] P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539

[8] Shin Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234

[9] Sec. 2(h) of the Arbitration and Conciliation Act, 1996 defines ‘Party’

[10] Harita Finance Ltd. vs ATV projects India ltd., 2003(2)ArbLR376

[11] Firm Ashok Traders and Ors. vs. Gurumukh Das Saluja and Ors., AIR 2004 SC 1433

[12] L & T Finance Limited vs. C.T. Ramanathan Infrastructure Pvt. Ltd. A. No. 5314 of 2012

[13] Renusagar Power Co. Limited v. General Electric Company; 1994 Supp (1) SCC 644

[14] Oil & Natural Gas Corporation v. Saw Pipes Ltd, [2003 (5) SCC 705]

[15] Shri Lal Mahal Ltd. v. Progetto Grano Spa, 2013 (4) CTC 636

[16] Section 48 in The Arbitration and Conciliation Act 1996 Conditions for enforcement of foreign awards,

 (2) Enforcement of an arbitral award may also be refused if the Court finds that— (b) the enforcement of the award would be contrary to the public policy of India.

[17] McDermott International Inc. v. Burn Standard Co. Ltd 2006(5)ALT1(SC)

[18] Indian Oil Corporation Ltd. V. Langkawi Shipping Ltd, 2005 (2) Bom CR 458

[19] National Highway Authority of India v. Progressive MVR, (2018) 14 SCC 688

[20] (2019) 9 SCC 798

[21] Explanation to sec. 2A -An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiate by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of law or by reappreciation of evidence. 

[22] Explanation to sec. 34(2)- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian Law shall not entail a review on the merits of the dispute. 

[23] Venture Global Engineering LLC and Ors v Tech Mahindra Ltd. and Ors [2017] 13 SCALE 91 (SC)

[24] Sandeep Kumar v. Dr. Ashok Hans, (2004) 3 Arb LR 306

[25] Emkay Global Financial Service Limited v. Giridhar Sondhi, Civil Appeal No. 8367 of 2018

[26] BCCI v. Kochi Cricket Pvt. Ltd., (2018) 6 SCC 287

[27] Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI), Civil Appeal No. 4779 of 2019, Supreme Court

[28] Ibid

[29] National Agricultural Co-operative Marketing Federation of India (NAFED) v. Alimenta S.A Civil Appeal No. 667 of 2012, delivered on April 22, 2020

[30] Vijay Karia & Ors. Vs. Prysmian Cavi E Sistemi SRL & Ors. Civil Appeal No. 1544 of 2020

[31] M/s.Canara Nidhi Limited v/s. M. Shashikala & Ors. 2019 SCC OnLine SC 1244

[32] Sangyong Engineering & Construction Co. Ltd. v/s. National Highways Authority of India, 2019 SCC OnLine SC 677

[33] M/s Emkay Global Financial Services Ltd. V. Girdhar Sondhi (2018) 9 SCC 49

 

 

Image Credits: Daniel b photos on Pixabay

The legislative intention behind alternative dispute resolution was never to encourage interference from the judiciary perhaps that was the reason arbitration awards were classified to be binding on the parties. 

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Non-Personal Data Governance Framework, 2020

The realm of the internet has become an information powerhouse and data has become the new endowment of resources that governments and corporate entities are eager to tap into. The transformation in the digital environment and the emergence of information-intensive services has made data a necessary raw material for most undertakings.

Reports suggest that every minute Instagram is flooded with 277,000 stories, Google has 4.4 million searches and Uber has over 9700 rides in 2019. Today, data is an asset to various businesses and holds importance while making investments, mergers, and acquisitions, and/ or direct monetization.

 

While the discussion on ‘personal data’ has been revolving around privacy and security concerns, non-personal data is being eyed as an economic opportunity to augment public or private interest which must not be squandered. Considering the value proposition attributed to non-personal data, the legal aspect was sought to be dealt separately from ‘personal data’ which would be governed by the Personal Data Protection Bill, 2019 that is in the brink of finalization.

 

Consequently, an Expert Committee (“Committee“) was constituted by the Ministry of Electronics and Information Technology (“MeitY“) to study various issues relating to non-personal data. The Committee submitted its Report on Non-personal Data Governance Framework for comments from stakeholders in July 2020.

 

The report highlighted that data regulation is essential to utilize the maximum potential in data by realizing its economic, social, and public value. The need to regulate data stems from the imbalances in bargaining power between the companies that lead to the creation of data monopolies. Moreover, the privacy concerns revolving around the dilution of shared data must be tackled.

 

Non-Personal Data (“NPD“) is the data that cannot be identified with a particular individual, for example, weather forecast, traffic details, geospatial information, production processes, anonymized personal data, etc.

 

  1. Committee’s Proposal to Non-Personal Data Regulation

 

The NPD Governance Framework outlines norms for collection of data and data sharing by entities. The salient features of the proposed framework are:

 

  • The NPD framework provides key roles for all the participants such as Data Principal, Data Custodian, Data Trustees and Data Trusts.
  • Classification of NPD: Non-personal Data is further classified into Public NPD, Community NPD and Private NPD. Public NPD is NPD that is collected or generated by the government or by the agency of the government and includes data collected or generated in the course of execution of all publicly funded works (e.g. public health information, vehicle registration, etc.) excluding the one that is explicitly declared as confidential under the law. Community NPD is data about inanimate or animate phenomenon about a particular community of natural persons (e.g. data collected by e-commerce platforms or by telecom). Private NPD is NPD collected or produced by non-governmental entities or persons.
    • Ownership of non-personal data: In cases wherein, non-personal data is derived from personal data of an individual, the data principal for personal data will be the data principal for the NPD too. Further, the rights over the community NPD collected in India will vest in the trustee of such a community.
    • Sensitivity of NPD: The Committee has also defined a new concept of ‘sensitivity of NPD’, as NPD can also be sensitive from the perspective of: a) national security or strategic interests; b) sensitive or confidential information relating to businesses; and c) anonymized data, that bears a risk of re-identification.
    • Data Businesses and data disclosures: There is also the creation of a new horizontal classification called ‘Data Business’ which is when any existing business collects data beyond a threshold level. Such Data Businesses have to get themselves registered and furnish information on what they do/ collect, their purpose, and the nature of data stored. However, registration of Data Businesses collecting data below the threshold is not mandatory.
    • Non-Personal Data Regulatory Authority: NPD Regulatory Authority shall ensure that data is shared for sovereign, social and economic welfare, for regulatory and competition purposes, and also that all stakeholders adhere to the rules and data sharing requirements.
  1. Unanswered Questions: Shortcomings of the proposed Framework:

 

Attempting to govern the NPD is a commendable effort, however, it seems that there is a slew of questions that are left unanswered. The following are the issues relating to the proposed framework:

 

  • The foremost need to govern NPD as highlighted by the Committee is the imbalance in the digital ecosystem. However, neither the sources of these imbalances have been identified or analysed nor has it been clarified how the proposed regulations resolve these inequities.
  • Ambiguous classification of NPD: The various types of NPD have a potential overlap, but then again, clearly demarcating a line between the three types would be a difficult task. Also, one of the three types of NPD is Community NPD, however, there is no clarification as to how the ‘community’ would be determined. The definition of ‘community’ is wide, under the same even religious groups, residents of the same locality or same educational background would be a valid community, which may have conflicting interests over data shared with the government. Further, without any guiding principles, companies will be forced to make legally binding decisions on what they deem to be a valid community, the scope of data to be shared and for the resolution of competing claims, which is problematic at various levels. Moreover, on a particular dataset, there could be various interests, and in such cases, who would be entrusted with the data remains ambiguous.
  • Anonymization of Personal Data to Non-Personal Data: The process of converting personal data into Non-Personal Data by removing certain identifiers or credentials is termed as ‘anonymization’. Anonymization would undoubtedly convert a set of personal data into non-personal data but, such data runs the risks of re-identification. Further, although anonymization is essential, high anonymization could render the data over-generalized and futile.
  • Reactions of Stakeholders to the sharing of data: Mandatory data sharing is highly criticized by stakeholders, as it undermines the investments put in business and the value of intellectual property information the competitors would suffer. This ‘forced data sharing’ is counterproductive and would have a rather negative effect on foreign trade and investments. NPD can constitute trade secrets, that may be protected by IP laws, sharing this data raises concerns around the right to carry business and India’s obligation under international trade law. The purposes for data sharing under the framework are ‘sovereign’, ‘core public interest’, and ‘economic’ purposes which essentially covers all the data held by companies, and must be narrowed down.
  • Lack of Clarity on who really are trustees of Data: There is ambiguity regarding who will be a data trustee. Whether private, for-profit organizations or private entities within the government could be data trustees is not apparent. Also, the position regarding a data trustee’s independence and conflict of interest remains murky. It is essential that the roles and functions of these bodies are comprehensively defined.
  • User-Consent: NPD Framework also proposes that before the anonymization of data the consent of the user must be taken. It remains particularly unclear as to how would the consent be taken from them. Further, a company needs to invest in resources and obtain user consent, and sharing data may provide no incentive to such companies and would drown them into losses.
  • Over-Regulation by Non-Personal Data Authority: Creating altogether a new authority for NPD would lead to potential regulatory overlap given Data Protection Authority addresses and enforces privacy concerns and the Competition Commission of India looks over consumer welfare.
  1. Conclusion

This effort of the Ministry to set up a Committee to study the NPD which may subsequently lead to a legislation governing the NPD in India is praiseworthy, however, a lot of issues need reconsideration. Stakeholders have expressed anguish over the mandatory sharing of data and data disclosures as it conveniently overlooks the humungous investments put in by the companies. Further, the roles and functions of various entities under the framework are not clearly defined. The NPDA established under the framework may have functional overlaps with the CCI and the Data Protection Authority.

 

Moreover, there is ambiguity regarding Community NPD and user consent. There is no doubt that the ever-evolving nature of information technology is demanding as far as regulatory mechanism is concerned therefore the road ahead is arduous. Hopefully, the concerns raised are adequately addressed by the Committee and constructively resolved in favour of all the stakeholders.

Photo by Franki Chamaki on Unsplash

This effort of the Ministry to set up a Committee to study the NPD which may subsequently lead to legislation governing the NPD in India is praiseworthy, however, a lot of issues need reconsideration. Stakeholders have expressed anguish over the mandatory sharing of data and data disclosures as it outrightly overlooks the humungous investments put in by the companies.

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Core Legal Issues with Artificial Intelligence in India

The adoption and penetration of Artificial Intelligence in our lives today does not necessitate any more enunciation or illustration. While the technology is still considered to be in its infancy by many, so profound has been its presence that we do not comprehend our reliance on it unless it is specifically pointed out. From Siri, Alexa to Amazon and Netflix, there is hardly any sector that has remained untouched by Artificial Intelligence.

Thus, the adoption of artificial intelligence is not the challenge but its ‘regulation’ is a slippery slope. Which leads us to questions such as whether we need to regulate artificial intelligence at all? If yes, do we need a separate regulatory framework or are the existing laws enough to regulate artificial intelligence technology?

Artificial intelligence goes beyond normal computer programs and technological functions by incorporating the intrinsic human ability to apply knowledge and skills and learning as well as improving with time. This makes them human-like. Since humans have rights and obligations, shouldn’t human-likes have them too?

But at this point in time, there have been no regulations or adjudications by the Courts acknowledging the legal status of artificial intelligence. Defining the legal status of AI machines would be the first cogent step in the framing of laws governing artificial intelligence and might even help with the application of existing laws.

A pertinent step in the direction of having a structured framework was taken by the Ministry of Industry and commerce when they set up an 18 member task force in 2017 to highlight and address the concerns and challenges in the adoption of artificial intelligence and facilitate the growth of such technology in India. The Task Force came up with a report in March 2018[1] in which they provided recommendations for the steps to be taken in the formulation of a policy.

The Report identified ten sectors which have the greatest potential to benefit from the adoption of artificial intelligence and also cater to the development of artificial intelligence-based technologies. The report also highlighted the major challenges which the implementation of artificial intelligence might face when done on large scale, namely (i) Encouraging data collection, archiving and availability with adequate safeguards, possibly via data marketplaces/exchanges; (ii) Ensuring data security, protection, privacy and ethical via regulatory and technological frameworks; (iii) Digitization of systems and processes with IoT systems whilst providing adequate protection from cyber-attacks; and (iv) Deployment of autonomous products and mitigation of impact on employment and safety.[2]

The Task Force also suggested setting up of an “Inter–Ministerial National Artificial Intelligence Mission”, for a period of 5 years, with funding of around INR 1200 Crores, to act as a nodal agency to coordinate all AI-related activities in India.

 

Core Legal Issues

When we look at the adoption of artificial intelligence from a legal and regulatory point of view, the main issue we need to consider is, are the existing laws sufficient to address the legal issues which might arise or do we need a new set of laws to regulate the artificial intelligence technologies. Whilst certain aspects like intellectual property rights and use of data to develop artificial intelligence might be covered under the existing laws, there are some legal issues which might need a new set of regulation to overlook the artificial intelligence technology.

 

  • Liability of Artificial Intelligence

 

The current legal regime does not have a framework where a robot or an artificial intelligence program might be held liable or accountable in case a third party suffers any damage due to any act or omission by the program. For instance, let us consider a situation where a self-driven car controlled via an artificial intelligence program gets into an accident. How will the liability be apportioned in such a scenario?

The more complex the artificial intelligence program, the harder it will be to apply simple rules of liability on them. The issue of apportionment of liability will also arise when the cause of harm cannot be traced back to any human element, or where any act or omission by the artificial intelligence technology which has caused damage could have been avoided by human intervention.

One more instance where the current legal regime may not be able to help is where the artificial intelligence enters into a contractual obligation after negotiating the terms and conditions of the contract and subsequently there is a breach of contract.

In the judicial pronouncement of United States v Athlone Indus Inc[3] it was held by the court that since robots and artificial intelligence programs are not natural or legal persons, they cannot be held liable even if any devastating damage may be caused. This traditional rule may need reconsideration with the adoption of highly intelligent technology.

The pertinent legal question here is what kind of rules, regulations and laws will govern these situations and who is to decide it, where the fact is that artificial intelligence entities are not considered to be subject of law.[4]

 

  • Personhood of Artificial Intelligence Entities

 

From a legal point of view, personhood of an entity is an extremely important factor to assign rights and obligations. Personhood can either be natural or legal. Attribution of personhood is important from the point of view that it would help identify as to who would ultimately be bearing the consequences of an act or omission.

Artificial intelligence entities, to have any rights or obligations should be assigned personhood to avoid any legal loopholes. “Electronic personhood”[5] could be attributed to such entities in situations where they interact independently with third parties and take autonomous decisions.

 

  • Protection of Privacy and Data

For the development of better artificial intelligence technologies, the free flow of data is crucial as it is the main fuel on which these technologies run. Thus, artificial intelligence technologies must be developed in such a way that they comply with the existing laws of privacy, confidentiality, anonymity and other data protection framework in place. There must be regulations which ensure that there is no misuse of personal data or security breach. There should be mechanisms that enable users to stop processing their personal data and to invoke the right to be forgotten. It further remains to be seen whether the current data protection/security obligations should be imposed on AI and other similar automated decision-making entities to preserve individual’s right to privacy which was declared as a fundamental right by the Hon’ble Supreme Court in KS Puttaswamy & Anr. v Union of India and Ors[6]. This also calls for an all-inclusive data privacy regime which would apply to both private and public sector and would govern the protection of data, including data used in developing artificial intelligence. Similarly, surveillance laws also would need a revisiting for circumstances which include the use of fingerprints or facial recognition through artificial intelligence and machine learning technologies.

At this point in time there are a lot of loose ends to be tied up like the rights and responsibilities of the person who controls the data for developing artificial intelligence or the rights of the data subjects whose data is being used to develop such technologies. The double-edged sword situation between development of artificial intelligence and the access of data for further additional purposes also needs to be deliberated upon.

Concluding Remarks

In this evolving world of technology with the capabilities of autonomous decision making, it is inevitable that the implementation of such technology will have legal implications. There is a need for a legal definition of artificial intelligence entities in judicial terms to ensure regulatory transparency. While addressing the legal issues, it is important that there is a balance between the protection of rights of individuals and the need to ensure consistent technological growth. Proper regulations would also ensure that broad ethical standards are adhered to. The established legal principles would not only help in the development of the sector but will also ensure that there are proper safeguards in place.

In this evolving world of technology with the capabilities of autonomous decision making, it is inevitable that the implementation of such technology will have legal implications. There is a need for a legal definition of artificial intelligence entities in judicial terms to ensure regulatory transparency. While addressing the legal issues, it is important that there is a balance between the protection of rights of individuals and the need to ensure consistent technological growth.

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