The Great Indian Asset Monetisation Dream: Infrastructure Investment Trusts

The Indian government in recent years has introduced a spate of initiatives with the sole objective of improving India’s infrastructure. Some of the initiatives introduced are the National Infrastructure Pipeline,[1] National Monetisation Pipeline,[2] PM Gati Shakti – National Master Plan for Multimodal Connectivity,[3] Bharatmala Pariyojana,[4] the increased impetus on the use of electric vehicles, and robust electric vehicle charging infrastructure,[5] just to name a few.

Although all of the above schemes are equally important, one key initiative that will unlock the potential of others is the National Monetisation Plan, which involves the monetisation of India’s public infrastructure assets, so as to fund various other infrastructure initiatives. As of April 2022, the government has generated INR 96,000 crores under the scheme, exceeding the target of INR 88,000 Crore set for FY22.[6]

India has over 58,97,671 kilometres of the road network,[7] with 12 major ports and 212 non-major ports,[8] total trackage of 1,26,366 kilometres of railways,[9] a total of 136 airports under the ownership of the Airports Authority of India,[10] and a total of 20,236 kilometres of navigable inland waterways.[11] This is besides the length of water and sewerage networks owned by several state governments, and other existing public utilities that constitute public infrastructure owned by the government or the Public Sector Undertakings (“PSUs”). Hence, it is pertinent that these public infrastructures at the disposal of the Indian government are optimally monetised. According to a recent announcement by the Government of India, a total of INR 6 trillion in public assets are sought to be monetised by leasing the assets to private operators for a fixed term, unlocking a value of INR 111 trillion.[12]

 

Asset Monetization: The Apprehensions and Options

Most countries are sceptical about fully privatising their public infrastructure assets, although this is not necessarily unheard of in the past.[13] Asset monetisation in the context of the infrastructure sector in India involves the limited offer of public infrastructure to institutional investors and other private sector investors, through certain structured mechanisms in order to generate more value from the same assets.[14] Some mechanisms include the Toll Operate Transfer (“TOT”) model, which awards concessions for completed road projects to entities that have experience running toll roads. Here the concessionaire (a private entity) shall win the right to operate and maintain the road and collect toll from the roads for a particular period in consideration of a lump sum amount paid to the government or the PSU. The government shall, in turn, use this money to fund other infrastructure projects.

Another model for monetizing public infrastructure assets is the use of infrastructure investment trusts (“InvITs”) and real estate investment trusts (“REITs”), in which the underlying infrastructure or real estate assets are transferred to a trust, which then operates similarly to a mutual fund, attracting investors while securitizing the proceeds from the underlying infrastructure or real estate assets. For the purpose of this article, we shall focus on InvITs.

 

InvITs: Structure, Advantages and Risks

 
 
InvITs:  Structure, Advantages, and Risks
InvITs:
Structure, Advantages, and Risks

 

 

Advantages of InvITs

 
  • Long, stable and predictable cash flows: The SEBI (Infrastructure Investment Trust) Regulations, 2014 (“InvIT Regulations”) and its attendant notifications mandate that 90% of the cash flows from the underlying infrastructure assets shall be distributed to the investors of the InvIT Net Distributable Cash Flows (“NDCFs”). Some of the concession agreements governing the underlying infrastructure assets have long concession periods of 15 to 20 years, sometimes even 50 or 60 years. If the InvIT is well managed, then there would be an assured 50 to 60 years of stable and predictable cash flows, depending on the tenure of the underlying concession agreement.
  • Infusion of Public Funds: Traditionally infrastructure projects have only attracted funding from syndicated banks, investments from developers, and the government. With this unique model, not only are institutional investors allowed an opportunity to invest money into these projects, but the general public can also own a stake in the development of the infrastructure sector by holding units in InvITs.
  • The professionalisation of Infrastructure Management: The InvIT Regulations mandate a minimum number of years of experience in handling certain volumes of transactions or projects for the key stakeholders of an InvIT, such as the Sponsor, the Trustee, the Investment Manager, the Project Manager, and even the auditors.
  • High-Quality Underlying Assets: The InvIT regulations have very specific norms on what kind of infrastructure assets can be rolled over into the InvIT framework. The regulations specify that only those projects that have started generating revenues after completion of construction or achieved commercial operations date (“COD”) or at the pre-COD stage of the project with almost 80% of the construction work complete, or those projects that have received all requisite approvals and certifications (non-PPP projects), can be rolled over into the InvIT framework.
  • Special Tax Recognition: The Finance Act, 2014, added a new definition of “Business Trust,” which applies to InvITs and REITs, under which these types of entities enjoy certain benefits. The most recent amendment in the Finance Act of 2020 included unlisted InvITs and REITs under the umbrella of business trusts. Prior to the above amendment, only listed InvITs and REITs enjoyed this recognition. Some of these advantages include the pass-through mechanism, wherein any dividends earned from an InvIT are not taxed at the InvIT level, but in the hands of the unit holder. Similarly, interests from debt provided to the underlying infrastructure assets are also taxed only at the level of the unitholders, thus avoiding double taxation. There is also a push by Niti Aayog to introduce Section 54EC capital gains exemption status under the Income Tax Act, 1961, to InvIT units,[15] similar to the bonds issued by the National Highway Authority of India, Power Finance Corporation Limited, Indian Railways Finance Corporation Limited, and Rural Electrification Corporation Limited.

 

Risks of InvITs

 
  • Regulatory Risks: The concept of InvITs is very unique to India, and therefore SEBI’s InvIT Regulations are one of a kind in the world. Since the introduction of the InvIT Regulations in 2014, there have been regular changes to the laws so as to make them effective for on-the-ground rollouts of InvITs. Some risks connected with these changes still need to be accounted for.
  • Credit Rating Risks: Many credit rating agencies have difficulty appropriately valuing the returns that can be generated from the underlying infrastructure assets. Since the disaster of IL&FS, there have been several attempts to introduce different rating methodologies that apply uniquely to the infrastructure sector, as opposed to the standard rating processes that are used for manufacturing and other service industries. In fact, vide its July 2021 circular, SEBI introduced the “expected loss” model for rating infrastructure assets. As this is an evolving sector, considerable revisions can be expected in the methodology of rating infrastructure assets, which can pose a potential risk.
  • Operational Risks: The pandemic has been the biggest disruptor of the infrastructure sector in recent times. Similar force majeure incidents, along with other risks associated with the operation of assets, such as erratic usage of the operating assets, for example, inadequate traffic in a road project or increased operational costs due to lack of availability of raw materials in solar-powered power generation and transmission plant leading to increased operational costs in the subsequent supply-chain and many similar issues can decrease the value provided by the underlying infrastructure assets.
 

InvITs in India – The Scenario Thus Far

India is witnessing a boom in the number of InvITs that are getting established. Currently, there are 18 InvITs registered with the SEBI. With increased impetus provided to the National Monetisation Pipeline, the NHAI has offered 3 additional road projects totalling 247 kms to its InvIT, attracting international pension funds such as the Canada Pension Plan Investment Board and the Ontario Teacher’s Pension Plan Board as anchor investors.[16] The profitable returns provided by the initially established InvITs, such as the India Grid Trust and IRB InvIT, touched 56% and 83% in 2021.[17] Therefore, it is not surprising that there is an increased interest in investing in infrastructure development by such pension funds and sovereign funds. For example, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan each took 25% equity in the INR 6,000 crore issue of NHAI’s InvIT as anchor investors.[18] Similarly, the private InvIT, IRB Infrastructure Trust, recently completed INR 243 crores worth of fund raising with IRB holding 51% and the Singapore-based sovereign fund GIC holding 49% in the InvIT.[19] Other InvITs looking to raise funds include the Canadian pension fund CDPQ-owned Indian Highways Concessions Trust[20] and Tata Powers intending to reduce debt from its renewable energies business by hiving off the same into an InvIT.[21] The railways sector, similarly, has a mandate to monetise its assets via the InvIT route.[22]

All of these are indicative of increased activity in the infrastructure funding space via InvITs. The Government of India’s push for increased asset monetisation, combined with the regulatory body, SEBI’s proactive approach to reducing the risks associated with investments in InvITs, is providing more assurances to foreign investors. However, the returns provided by the initially established InvITs in the country have proven to be a decisive attraction factor for investors.

Refernces:

[1] https://dea.gov.in/sites/default/files/Report%20of%20the%20Task%20Force%20National%20Infrastructure%20Pipeline%20%28NIP%29%20-%20volume-i_1.pdf

[2] https://www.niti.gov.in/national-monetisation-pipeline

[3] https://www.india.gov.in/spotlight/pm-gati-shakti-national-master-plan-multi-modal-connectivity

[4] https://www.india.gov.in/spotlight/bharatmala-pariyojana-stepping-stone-towards-new-india

[5] https://www.niti.gov.in/e-mobility-national-mission-transformative-mobility-and-battery-storage

[6] https://economictimes.indiatimes.com/news/economy/policy/asset-monetisation-government-beats-fy22-target-with-rs-96000-crore/articleshow/90807193.cms

[7] See generally, Morth’s Basic Road Statistics of India, 2016-17, available at https://morth.nic.in/sites/default/files/Basic%20_Road_Statics_of_India.pdf, Last visited on July 15, 2022

[8] See generally https://www.statista.com/statistics/686447/india-total-number-of-ports/, Last visited on July 15, 2022

[9] See generally the website of Indian Railways Civil Engineering Portal, https://ircep.gov.in/AboutUs.html, Last visited on July 15, 2022

[10]

See generally https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1779817, Last visited on July 15, 2022

[11] See generally https://iwai.nic.in/waterways/new-waterways/106-new-waterways, Last visited on July 15, 2022

[12] See https://www.ideasforindia.in/topics/macroeconomics/india-s-asset-monetisation-plan.html#:~:text=In%20August%202021%2C%20Government%20of,used%20for%20new%20infrastructure%20investment. Last visited on July 15, 2022

[13] The Australian model of the Asset Recycling Initiative which involved the sale of public assets for funding public infrastructure projects was one such endeavour. See https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201415/InfrastructureGrowth. Last visited on July 19, 2022.

[14] See https://www.business-standard.com/about/what-is-asset-monetisation#collapse . Last visited on July 19, 2022

[15] See generally https://www.business-standard.com/article/economy-policy/niti-aayog-suggests-tax-incentives-for-investment-in-invits-121083000870_1.html. Last visited on July 22, 2022.

[16] See https://www.business-standard.com/article/current-affairs/nhai-offers-three-additional-roads-to-its-invit-totalling-247-km-122060300921_1.html

[17] See https://economictimes.indiatimes.com/markets/stocks/news/with-invits-get-returns-of-8-10-and-good-diversification/articleshow/85468305.cms

[18] See https://www.business-standard.com/article/markets/cppib-and-ontario-teachers-pension-plan-bag-nhai-s-maiden-invit-121110301236_1.html and https://www.business-standard.com/article/current-affairs/nhai-offers-three-additional-roads-to-its-invit-totalling-247-km-122060300921_1.html. Last visited on July 20, 2022.

[19] See https://www.business-standard.com/article/companies/private-invit-irb-infrastructure-trust-completes-rs-243-crore-fundraising-122042200552_1.html. Last visited on July 20, 2022.

[20] See https://www.business-standard.com/article/companies/indian-highway-concessions-looks-to-raise-rs-910-cr-via-private-placement-122061300932_1.html. Last visited on July 20, 2022.

[21] See https://www.business-standard.com/article/companies/tata-power-s-plan-to-reduce-debt-through-invit-gets-delayed-122041200035_1.html. Last visited on July 20, 2022

[22] See https://www.business-standard.com/article/economy-policy/centre-may-noty-be-able-to-monetise-railways-rs-18-000-cr-assets-via-invit-122070600307_1.html. Last visited on July 20, 2022.

Image Credits: Photo by Fivesouls Faisol

The Government of India’s push for increased asset monetisation, combined with the regulatory body, SEBI’s proactive approach to reducing the risks associated with investments in InvITs, is providing more assurances to foreign investors. However, the returns provided by the initially established InvITs in the country have proven to be a decisive attraction factor for investors.

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Insights on the National Logistics Policy, 2022

On September 17, 2022, the National Logistics Policy (“NLP”) was unveiled by the Prime Minister. The objectives of the NLP are broadly aimed at enhancing efficiency across the logistics value chain by improving connectivity across destinations, adopting technology, simplifying procedural documentation and strengthening the warehousing sector.

While India ranks 44th on the World Bank’s Logistics Performance Index of 2018, the NLP envisions improving India’s ranking to feature amongst the top 25 countries by 2030. The NLP proposes to support this upward journey by means of the initiatives detailed hereinafter.

Identifying the Action Areas

The Comprehensive Logistics Action Plan (CLAP) envisaged in the NLP identifies the following action areas wherein the policy aims to undertake interventions:

  • Developing an ‘Integrated Digital Logistics Systems’ to create a cross-sectoral database for logistics stakeholders.
  • Setting standardisation norms for assets and benchmarking quality of services.
  • Developing human resource and skill building aligned towards logistics by the ministries involved in different sectors.
  • Supporting state level logistics plans and institutional framework development.
  • Streamlining EXIM (export-import) processes to improve trade competitiveness and integration with global value chains.
  • Improving regulatory interface in the logistics sector.
  • Formulating ‘Sectoral Plans for Efficient Logistics’ in different sectors to complement the development of facilitative processes in logistics management.
  • Developing a network of logistics parks, including Multi-Modal Logistics Parks (“MMLPs”),[1] by providing framework guidelines for the development of these parks and encouraging private sector investment in the same.

Inducing Standardisation

The NLP emphasises standardisation with the aim of reducing cost and improving efficiency. To provide a compilation of existing operational standards, the launch of the NLP was accompanied by the launch of the ‘E-Handbook on Warehousing Standards’,[i] which will act as a guiding document for inter alia manufacturers, commerce agencies, logistics service providers, and others involved in the logistics sectors. The E-Handbook on Warehousing Standards, inter alia, prescribed the standards for the construction of warehouses, palletisation standards, and transportation standards.

The NLP foresees that standardisation would support the development of the co-warehousing segment, which allows businesses to use common warehouse and allied office space as per requirement. This will be beneficial to small businesses and start-ups and will also open up another avenue for private sector investments in the Indian warehousing market.

Improving Interfaces

The NLP provides for development of two main portals, viz., the ‘Unified Logistics Interface Platform’ (“ULIP”) and ‘E-LogS: Dashboard for Ease of Logistics Services’ (“E-Logs”), to provide digital platforms that facilitate the regulatory and operational processes in the logistics sector. The key features of the aforementioned portals are summarised below:

Feature ULIP E-Logs
 
Objective To provide a single window platform that enables the exchange of information on a real-time basis amongst different stakeholders. Furthermore, to ensure the authenticity of every logistics department transaction. To provide a digital system for registering and monitoring problems encountered in the logistics sector and facilitating time-bound resolution of the same.
Key Constituents

Comprised of three layers, the Integration layer and the Governance layer of this platform provide for coordination amongst different ministries and departments.

The third layer, being the Presentation layer, is to be developed by private players to provide an interface with the end-customer.

This dashboard will be accessible to registered users who can login to register their issues with supporting documentation and communicate the same to other stakeholders using the same portal.

Decisions on such issues will be taken by the relevant ministry/department and the decision will be uploaded by the Service Improvement Group (“SIG”), which is responsible for overall coordination and monitoring in relation to E-Logs.

The NLP provides that the SIG will be constituted by nominated officers from various ministries and will be tasked with the resolution of issues pertaining to “services, documentation, processes and policy, along with the identification of interventions for improving the user interface.

Benefit to Stakeholders

It is expected that ULIP will, inter alia, help:

·         Governmental agencies can access information for better planning;

·          allow transporters to track cargo in real time and identify cheaper logistics modes; and

·         simplify the documentation process for logistics service providers and enable value-added services for end customers.

Authorized users who are dissatisfied with the resolution of their issues can track the progress of the resolution and make suggestions.

 

Way Ahead

The NLP sets a positive tone for the efficient expansion of logistics services in India by addressing fundamental concerns such as time and efficiency of transportation, reducing logistics costs, and simplifying operational and regulatory processes with technology-based interventions. In addition to the above-summarised features, the NLP also focuses on ‘Logistics Ease Across Different States’ (LEADS), which is a survey taken across states and union territories to assess the viewpoint of stakeholders, document issues faced on the ground in relation to the logistics sector, and identify mitigation measures to ameliorate the identified issues. This reflects the efforts being made towards the development of practically viable mechanisms that facilitate improvements in the logistics sector, which is further strengthened by the framework of the NLP.

The realisation of the policy objectives, however, largely depends on achieving coordination amongst the different central ministries and other stakeholders. Given that state governments may have their own policies framed around the development of logistics parks, it is important to ensure that states adapt the National Logistics Policy in harmony with the existing benefits being offered for setting up logistics parks under state-specific policies, especially when it comes to setting up MMLPs. Ensuring the existence of statutory provisions in relation to the components of NLP would help provide a check on the working of the mechanisms stipulated thereunder. For instance, rules and regulations on management of information communicated via ULIP and E-Logs can provide a safe transaction environment for stakeholders utilising these portals.

A major concern of players in the logistics sector linked to the cost of financing logistics projects, may continue to pose an obstacle while addressing the objectives of the policy. Thus, formulating ancillary options for availing finance at discounted rates would be a boost to the policy. Similarly, the inclusion of an exemption on Goods and Services Tax could help ease the burden of compliance under the policy for smaller players.

References:

[1] MMLPs are aimed at providing a host of facilities in the logistics chain such as storage, distribution and facilitating transportation by serving as a common point for shift in intramodal transportation of goods.

[2] Logistics Division, Department of Commerce, Ministry of Commerce and Industry, Government of India, E-Book on Launch of National Logistics Policy.

[3] E-Handbook on Warehousing Standards- available at pdf (dpiit.gov.in)

[4] The World Bank, Country Score Card: India 2018, available at Country Score Card: India 2018 | Logistics Performance Index (worldbank.org).

 

While India ranks 44th on the World Bank’s Logistics Performance Index of 2018, the NLP envisions improving India’s ranking to feature amongst the top 25 countries by 2030. The NLP proposes to support this upward journey by means of the initiatives detailed hereinafter

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Presumptive Tax Scheme in India – A Deep Dive

The provisions relating to Presumptive Tax Scheme (PTS) under the Income Tax Act, 1961 (ITA) are inter alia, covered under Sections 44AD, 44ADA, 44AE, 44B, 44BB, 44BBA and 44BBB. In this article, we have limited our discussion to Sections 44AD & 44ADA.

While Section 44AD covers within its ambit small taxpayers engaged in eligible business, Section 44ADA covers eligible professionals. Taxpayers opting for PTS are allowed to declare income as a prescribed percentage of turnover / gross receipts of the business/profession (as the case may be) and are exempted from maintaining books of account and getting them audited annually. As the taxable income is deemed/presumed to be a percentage of turnover / gross receipts, this scheme is popularly known as ‘presumptive taxation scheme’.

Decoding Section 44AD

 

 

Legislative History

The PTS was first introduced by the Finance Act of 1994 to estimate taxable income from the civil construction business or the supply of labour for civil construction work. The income from such businesses is estimated to be 8% of gross receipts, provided that such gross receipts do not exceed INR 40 lakhs. The taxpayer, if he chose, was allowed to voluntarily declare a higher income in his tax return.

The Finance Act, 1999, amended the PTS with retrospective effect from financial year (FY) 1997-98 and mandated the requirement of furnishing an audit report in cases where the assessee offered an income lower than 8% of gross receipts.

A significant change in the entire structure of PTS was made vide The Finance (No. 2) Act, 2009, w.e.f FY 2010-11. The scope of PTS was expanded to all ‘eligible assessees’ engaged in ‘eligible business’.

 

Coverage

 

Category of taxpayers covered:

The following categories of taxpayers having total turnover / gross receipts from business not exceeding INR 2 crores in a financial year can opt for PTS under section 44AD of the ITA:

  • Resident Individual;
  • Resident Hindu Undivided Family (HUF);
  • Resident Partnership Firm (not being a Limited Liability Partnership (LLP))
 
Category of businesses covered:

PTS under Section 44AD covers all businesses except the below, where the taxpayer is:

  • Earning income in the nature of commission or brokerage.
  • Engaged in the agency business.
  • Engaged in the business of plying, hiring or leasing goods carriages.

(This business is covered under PTS under Section 44AE of ITA)

  • Carrying on a specified profession.

(These professionals are covered under PTS under Section 44ADA of ITA, which is discussed in the latter part of this article).

  • Intending to claim deductions under sections 10A, 10AA, 10B, 10BA, 80HH, to 80RRB of the ITA.

 

 

Percentage of deemed income

Under Section 44AD, the taxable income of eligible assessees engaged in eligible business (as discussed above) is presumed to be 8% of the turnover/gross receipts.

To promote non-cash transactions, a lower rate of 6% has been provided in respect of the amount of turnover/gross receipts, that is received by the assessee on or before the due date of filing the Income Tax Return, by way of:

  • Account payee cheque or account payee bank draft;
  • Electronic Clearing System, Net banking, RTGS, NEFT;
  • Credit Card or Debit Card;
  • IMPS, UPI or BHIM Aadhar Pay.

Though the PTS provides for taxable income to be 8%/6% of turnover or gross receipts, taxpayers can voluntarily declare a higher income on their tax return.

 

 

Meaning of Turnover or Gross Receipts

The terms “turnover” and “gross receipts” are not defined in the ITA.

Reference can be made to the Guidance Note on Tax Audit under Section 44AB of the ITA (Guidance Note). Para 5.10 of the Guidance Note is reproduced below:

5.10 Considering that the words “Sales”, “Turnover” and “Gross receipts” are commercial terms, they should be construed in accordance with the method of accounting regularly employed by the assessee. Section 145(1) provides that income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” should be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The method of accounting followed by the assessee is also relevant for the determination of sales, turnover or gross receipts in the light of the above discussion.”

 

 

Other Important Points to Remember

 
 
  • Advance Tax: The due date for payment of advance tax shall be the 15th March of such FY;
  • Additional deductions: All the deductions u/s 30 to 38 for all taxpayers and in the case of partnership firms, interest and salary/remuneration to partners, would be deemed to have been allowed to the taxpayer.
  • Additional disallowances: Any disallowance relating to cash payments above INR 10,000 for expenses, non-deduction of tax at source, etc. will not be required to be added back, as Section 44AD overrides Sections 28 to 43C of the ITA.
  • Mandatory Tax Audit: In the case where the taxpayer has declared income as per PTS under Section 44AD in any FY and does not declare income in accordance with Section 44AD in any of the next five FYs, the taxpayer shall not be eligible to declare income under PTS for next five FYs, subsequent to the year in which income is not declared as per PTS under Section 44AD. Further, the taxpayer would also be required to maintain books of account and get them audited, irrespective of the turnover in the next 5 years, if his total income exceeds the maximum amount that is not chargeable to tax, i.e. the applicable basic exemption limit.

Illustration: Mr. A claims to be taxed under PTS under Section 44AD for Assessment Year (AY) 2019-20 and offers income in accordance with PTS. However, for AY 2020-21, he declares his income at a rate lower than the rate prescribed under PTS. In this case, Mr. A will not be eligible to claim the benefit of PTS for the next 5 AYs and will mandatorily be required to keep and maintain books of account and get them audited annually for those years as well i.e. AY 2021-22 to 2025-26 if his total income exceeds the maximum amount not chargeable to tax (basic exemption limit).

This is explained with the help of the following table in the case of Mr. X:

 

AYTurnover (in Cr)Profit (%)Income more than basic exemption limitSections applicableNote no.
44AA44AB44AD
2018-1937%YesYesYesNo1
2019-201.29%YesNoNoYes2
2020-210.855%YesYesYesNo3
2021-220.7510%YesYesYesNo4
2022-231.22%NoYesYesNo5
2023-241.59%YesYesYesNo

 

 

6

2024-250.926%YesYesYesNo
2025-260.959%YesYesYesNo
2026-272.56%YesYesYesNo

 

Note 1: Turnover exceeds Rs.1 Crore and hence, liable to maintain books of account and get them audited.

Note 2: Since Mr X declared income in accordance with the provisions of PTS under Section 44AD, he is not required to maintain books of account and get them audited.

Note 3: Since Mr. X declares profit @ 5%, which is lower than the prescribed rate of 8% under PTS, he shall be required to maintain books of account and get them audited for AYs 2020-21 to AY 2025-26.

Note 4: Mr. A is required to maintain books of account and get them audited.

Note 5: Mr. A is required to maintain books of account. He is not required to get them audited as his total income is less than the basic exemption limit.

Note 6: Mr. A is required to maintain books of account and get them audited.

 

 

Decoding Section 44ADA

 

 

Legislative History

The PTS under section 44ADA, also popularly known as ‘’presumptive taxation regime for professionals’’, was first introduced by the Finance Act 2016. The intention was to provide a PTS for people who make a living from their profession. 

 

 

Coverage

 

Categories of taxpayers covered:

The taxpayers listed below, whose total gross receipts from their profession do not exceed INR 50 lakhs in a fiscal year, are eligible for PTS under Section 44ADA:

  • Resident Individual;
  • Resident Partnership Firm (not being an LLP)
 
Categories of professions covered:

Only professions referred to in Section 44AA(1) of the ITA can opt for PTS under Section 44ADA. This includes a person carrying on:

  • Legal, Medical, Engineering or Architectural profession;
  • Profession of Accountancy, Technical consultancy or Interior decoration;
    • Other Profession like Film artist: Film artists include an actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screenplay writer, dialogue writer, and dress designer.

 

 

Percentage of deemed income

Under Section 44ADA, the taxable income of an eligible taxpayer is presumed to be 50% of the gross receipts from the eligible profession.

The taxpayer can voluntarily declare higher income in the tax return.

 

 

Other important points to be kept in mind

  • Advance Tax: The due date for payment of advance tax shall be the 15th day of March of such FY;
  • Mandatory Tax Audit: In the case where the taxpayer claims his income to be lower than the deemed income of 50% as specified in PTS under Section 44ADA, he shall be required to maintain books of account and get them audited, if his total income exceeds the maximum amount that is not chargeable to tax, i.e. the applicable basic exemption limit.
  • Additional deductions: All the deductions u/s 30 to 38 and, in the case of partnership firms, interest and salary/remuneration to partners would be deemed to have been allowed.
  • Additional disallowances: Any disallowance relating to cash payments above INR 10,000 for expenses, non-deduction of tax at source, etc. will not be required to be added back, as Section 44ADA overrides Sections 28 to 43C of the ITA.

 

 

Issues Under the Presumptive Tax Scheme

  • Section 44AD vis-à-vis section 68/69
  • When a taxpayer declares income under Section 44AD, whether he is under an obligation to prove that he has incurred the balance of gross receipts by way of business expenditure became an issue in Nand Lal Popli v. Dy. CIT [2016] 71 taxmann.com 246 (Chandigarh).

The assessee proposed 8% of the gross contract receipt of Rs. 37.75 lakhs as income.The Assessing Officer (AO) requested information on the 92% expenditure of Rs. 32.73 lakhs. The assessee presented a cash flow statement with a cash outflow of Rs.18.49 lakhs, besides payment from the bank to the extent of Rs.16.25 lakhs. In the absence of documentary evidence of the cash flow, the AO ultimately made an addition of Rs.32.24 lakhs as an unexplained expenditure.

The issue before the Tribunal was whether the AO can make an addition under Section 69C of the ITA for the expenditure incurred by the assessee based on the cash flow statement when the assessee has declared income under Section 44AD. The Tribunal held that Section 44AD does not place any obligation on the assessee to maintain books of account when he has declared income as per the presumptive provision. It held that the cash flow statement cannot be considered as keeping books of account. It also held that the assessee cannot be asked to prove to the satisfaction of the AO the expenditure of 92% of the gross receipts, as that would defeat the very purpose of presumptive taxation.

It observed that if the AO had independent evidence of the expenditure incurred/not incurred or had carved out the case out of the glitches of Section 44AD, then such an addition could have been possible. Thus, the Tribunal held that an addition towards unexplained expenditure cannot be made under section 69C when the income has been offered under Section 44AD.

  • Whether a taxpayer declaring income under Section 44AD could be subjected to tax under Sections 68/69 for the amounts credited in his bank account became an issue in CIT v. Surinder Paul Anand [2010[ 48 DTR (P. & H.) 135.

In the assessment, the assessee was asked to explain the cash deposit in his bank account and finally the addition of Rs.14,95,300/- was made to the returned income. The Court held that the assessee has opted for presumptive provisions and is exempted from maintaining books of account. It held that the assessee is under an obligation to explain the individual entry of a cash deposit only when such entry has no nexus with the gross receipts of the business. The assessee claimed before both the CIT (A) and the Tribunal that the said amount was part of business receipts and in the absence of any other contrary material or evidence, the cash deposits could not be taxed as unexplained or undisclosed income of the assessee. The Court held that there was no substantial question of law in the appeal and hence upheld the order of the Tribunal.

  • Section 44AD and disallowance under section 40(a)(ia)
  • In ITO v. Mark Construction [2012] 23 taxmann.com 398 (Kolkata), the assessee engaged in civil construction and disclosed profits exceeding 8% by opting for Section 44AD provisions. In the assessment, the AO called for books of account of the assessee and the assessee took a plea that the income was offered under Section 44AD and hence maintenance/production of books of account was not compulsory. The AO made an addition of Rs. 32,62,140/- by invoking Section 40(a)(ia). The Tribunal held that since the assessee has disclosed profits of more than 8% of the gross receipts, no disallowance under Section 40(a)(ia) could be made.

As may be seen from the above analysis, the provisions of Sections 44AD and 44ADA can be extremely relevant for assessees from the perspective of tax planning and tax compliance. It is important that assessees consider the extant provisions of PTS along with their applicability to the business situation at hand. Also, appropriate professional advice should be sought, wherever necessary, to ensure that the optimum benefit of the PTS provisions is availed while finalising the tax returns.

Image Credits: Photo by Olya Kobruseva 

The provisions of sections 44AD and 44ADA can be extremely relevant for assessees from the perspective of tax planning and tax compliance. It is important that assessees consider the extant provisions of PTS along with their applicability to the business situation at hand. Also, appropriate professional advice should be sought, wherever necessary, to ensure that the optimum benefit of the PTS provisions is availed while finalising the tax returns.

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Preserving Equality in Online Education

The silver bullet of technology has not only managed to pierce sectors like finance, law, healthcare, etc. but also the predominantly conservative sector of education. Pandemic was the catalyst for steering a range of investments and innovation in the online learning space. Not surprisingly, the industry is set to grow by $2.28 billion during 2022-2026, progressing at a CAGR of 19.50% during the forecast period.[1]

The rapid adoption and need of online education platforms have inspired pedagogical approaches to make tech-based education more engaging and interactive. It is anticipated that integration of blockchain, gamification, artificial intelligence, immersive technologies, learning analytics, etc. will make the online learning experience more adaptative and personalised to the needs of each individual student.

While the world of virtual education may have opened lucrative avenues, its impact dwells differently on students, teachers, schools, parents, and the industry as a whole. 

 

Supreme Court’s View on Online Education

During the pandemic, schools switched to the digital medium, and as such, the right to education was virtually denied to children belonging to the disadvantaged group (DG) or economically weaker section (EWS). The Supreme Court, headed by a three-judge bench of Justices D.Y. Chandrachud, Vikram Nath and B.V. Nagarathna in October 2021, stated that the digital divide, against the backdrop of the COVID pandemic, has produced “stark consequences.”

The top court was hearing a plea by the Action Committee on Unaided Recognised Private Schools in connection with the access to technology by children who are attending online classes and the funding needed for the same. It was a petition filed by the private school managements challenging the Delhi High Court order of September 2020 directing them to provide their 25% quota of EWS/DG students online facilities free of charge. The High Court had said that the schools could get themselves reimbursed from the government.

The Delhi government appealed to the Supreme Court against the High Court’s order, saying it had no resources to reimburse the school for the online gadgets. Though the Supreme Court had stayed the High Court order in February 2021, the bench led by Justice Chandrachud said both the Centre and states like Delhi could not bow out of their responsibilities towards young children.

The court observed that the disparity exposed by online classes had been heart-rending. The technology gap caused by online classes defeated the fundamental right of every poor child to study in mainstream schools. The court also ruled that the right to education for little children hinged on who could afford gadgets for online classes and who could not. Many students had to take temporary breaks, and in the worst case, drop out, due to a lack of resources to access the internet, for online education as their families could not afford them. Moreover, the risk of the children, who dropped out of school, being drawn into child labour or child trafficking was high. The needs of young children, who are the future of the country, cannot be ignored, it said. Though schools were gradually opening due to the receding curve of the pandemic, the need to provide adequate computer-based equipment and access to online facilities for children is of utmost importance.

The needs of young children who represent the future of the nation cannot simply be ignored. A solution must be devised at all levels of Government – State and Centre to ensure that adequate facilities are made available to children across social strata so that access to education is not denied to those who lack resources. Otherwise, the entire purpose of the Right to Education Act, allowing EWS students to learn alongside mainstream students even in unaided schools, will be defeated.

The court further held that Article 21A (the right to free and compulsory education for children aged between 6 and 14) must be a reality. It directed the Delhi government to develop a plan to help children in the EWS category and added that the Centre and State governments should jointly work to develop a realistic and lasting solution to ensure children are not denied education due to lack of resources. The said bench further said: “It is necessary for the Delhi government to come with a plan to uphold the salutary objective of the RTE Act. Centre to also coordinate with state governments and share concurrent responsibilities for the purposes of funding.”

It also appreciated the Delhi High Court’s order directing the Delhi government to provide computer-based equipment and an internet package free of cost to EWS children in private and government schools. The Bench asked the Delhi Government to come out with a plan to effectuate the ‘salutary object’ upheld in the High Court’s decision. The court said the Centre should join in the consultations. The issues raised in the present proceedings will not only cover unaided schools but also government and aided schools. The Bench issued notice in the private school’s management petition and ordered it to be tagged with the pending Delhi Government petition.

 

Guidelines for Digital Education

COVID 19 accelerated the adoption of technology and brought about a dynamic shift in the sector. However, it was also realised that technology may improve the quality of dissemination of education; but it can never replace the classroom teaching and learning experience. While adopting the blended and hybrid model of education, a balance needs to be struck in learning and taking advantage of technology, and helping children become socially and emotionally healthy individuals and responsible citizens.

Bearing that in mind, Pragyata Guidelines for Digital Education were released by the Ministry of Human Resource Development’s Department of School Education and Literacy. At the beginning of the academic year 2021-22, the school education department informed all the schools to follow these guidelines while conducting online classes. According to the guidelines, the maximum screen time per day for kindergarten/preschool students has been limited to 45 minutes. However, for classes 1 to 5, schools can conduct two sessions of 1.5 hours per day for not more than 5 days in a week. For classes 6 to 8, screen time has been limited to 2 hours and for classes 9 to 12, limited to a maximum of 3 hours per day.

 

The Two Sides of Online Learning

Online classes offer a comfortable learning environment for students and offer tremendous growth opportunities, but it does instil a sense of isolation. Students, especially those belonging to younger age groups, thrive in a socially simulated environment. However, given the set-up of online classes, children fail to develop the ability to identify social norms and etiquettes. Further, online classes also limit the time and attention teachers can extend to their students. As a consequence, students that require extra attention and guidance fail to perform well. Also, online education may be accessible, but it is not affordable. Virtual learning requires expensive gadgets like computers, laptops, tablets, or smartphones. Hence, students in the economically weaker sections are left behind.

On the plus side, exhaustion and added costs of commuting are avoided in online education. In addition, online learning platforms offers a variety of courses and programmes that empower students to explore opportunities outside the realm of their curriculum. Moreover, since it is not possible for teachers to constantly monitor the activities of all students, online classes instil a sense of responsibility and self-discipline in them as they are made to realise that their actions and negligence will have a long-term impact on their future.

Mapping and understanding the positives and negatives of online education will enable educational institutes and the ed-tech industry to pioneer strategies for more efficient delivery of education. At the same time, the legislature must take a pro-active stance in ensuring that the fundamental right to education is protected in all manner and forms without any compromise on the well-being of learners.

During the pandemic, schools switched to the digital medium, and as such, the right to education was virtually denied to children belonging to the disadvantaged group (DG) or economically weaker section (EWS). The Supreme Court, headed by a three-judge bench of Justices D.Y. Chandrachud, Vikram Nath and B.V. Nagarathna in October 2021, stated that the digital divide, against the backdrop of the COVID pandemic, has produced “stark consequences.”

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Tax Withholding under Section 194R: CBDT Issues Additional Guidelines

The CBDT has, vide Circular No. 18 of 2022, dated September 13, 2022, aimed to remove difficulties on the implementation of TDS on benefits or perquisites under Section 194R of the Income Tax Act of 1961 “Act”). This circular is a continuation of Circular No. 12, issued by CDBT earlier, on June 16, 2022, providing guidelines on the scope and coverage of Section 194R of the Act. The Income Tax Department explicitly makes it clear that this Circular is only for the removal of difficulties in the implementation of provisions of Section 194R of the Act and does not impact the taxability of income in the hands of the recipient, which shall be governed by the relevant provisions of the Act.

Key Clarifications in Circular No. 18 of 2022

 

One-time loan settlement/waiver of loan

The provision of Section 194R of the Act shall not be applicable on one-time loan settlements entered with or waivers of loans granted to borrowers by specified banks or financial institutions.

 

Reimbursement of expenses incurred by a ‘Pure Agent’

Any expense incurred by a “pure agent,” as defined under the GST Valuation Rules, 2017 and which is in turn reimbursed by the service recipient, would not be treated as a benefit or perquisite for the purposes of Section 194R, and therefore the pure agent would not be liable to deduct TDS u/s 194R of the Act. It has been explained that in such cases, even the GST input credit ought to be availed of by the service provider and not the service recipient.

 

Interplay of 194R and other TDS provisions

The Circular clarifies that if reimbursement of out-of-pocket expenses (OPE) is already a part of the gross consideration and tax has been deducted on the gross consideration under sections 194J or 194C of the Act, then there would not be any further liability to deduct tax under section 194R of the Act.

 

Expenditure incurred on dealers’/business conferences

In case of a dealers’ conference to educate the dealers about the company’s products, it has been clarified that:

  • It is not necessary to invite all dealers to a conference for the expenses incurred for conducting the conference to not be reckoned as a benefit or perquisite for tax deduction.
  • Any overstay by a dealer beyond one day prior and one day after the date of the conference would be treated as a benefit or perquisite liable for deduction of tax under Section 194R.
  • Where it is not possible, owing to practical difficulties, to ascertain the actual number of dealers for whom certain expenses were incurred, which should be classified as a benefit/perquisite, then to avoid any further challenges, the taxpayer who has provided the benefit/perquisite may suo-moto disallow the said expenditure, and thereafter, there will not be any requirement to comply with the provisions of Section 194R.

 

Availability of depreciation on any capital asset (car) gifted as a benefit/perquisite

Where any capital asset is received as a gift and tax has been withheld under Section 194R, the recipient shall be eligible to claim depreciation under Section 32 of the Act on such asset. The Circular clarifies that the value of such a benefit/perquisite offered as ‘income’ in the income-tax return of the recipient shall be deemed to be ‘actual cost’ in the hands of the recipient for the purpose of calculating such depreciation.

 

Liability on Embassy or High Commissions

The Circular clarifies that certain embassies and high commissions are not required to deduct tax under Section 194R of the Act for the benefit/perquisite provided by such organisations.

 

Liability on issuance of bonus/right shares

Tax under Section 194R of the Act is not required to be deducted on the issuance of bonus or right shares issued by a company in which the public is substantially interested ( a listed company), as the overall value and ownership of their holding remain the same.

 

Practical Application

The above additional guidelines are welcome clarifications, as they certainly provide much needed clarity and certainty to some of the issues and concerns that were raised through representations by various industry and professional forums. As such, it is expected that the vexed provisions of Section 194R of the Act would now be less cumbersome in their practical application. Needless to say, there are still several issues in Section 194R and its application, which continue to bother the assessees regularly. It is hoped that CBDT, in the coming days, will continue with its avowed objective of making tax administration simple and provide further clarity on the other issues and challenges.

The Income Tax Department explicitly makes it clear that this Circular is only for the removal of difficulties in the implementation of provisions of Section 194R of the Act and does not impact the taxability of income in the hands of the recipient, which shall be governed by the relevant provisions of the Act.

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Validity of an Arbitration Clause: No Strait-Jacket Formula

On September 7, 2022, the Hon’ble Supreme Court issued a significant ruling in the case of Babanrao Rajaram Pund v. Samarth Builders & Developers[1], holding that no strait jacket formula can be made under the Arbitration and Conciliation Act, 1996, to determine the particulars of an arbitration clause. It further held that an arbitration clause must be treated as final and binding even if specific words like “final” or “binding” are not used in such a clause.

Babanrao Rajaram Pund v. Samarth Builders & Developers

The case related to one Babanrao (the Appellant), who was the owner of a property situated in Aurangabad. The Appellant intended to build residential and commercial complexes on this property. Samarth Builders & Developers (Respondent No. 1), a company specialising in the building of homes and commercial buildings, learned of the Appellant’s intention to build such a residential and commercial complex and approached him. A “Development Agreement” (DA) was subsequently signed by the Appellant and Respondent No.1. The Appellant, thereafter, signed a General Power of Attorney (GPA) in favour of Respondent No. 1.  Respondent No. 2, in the civil appeal was the partner of Respondent No. 1.

According to the DA, Respondent No.1 had to build “Amay Apartments” on the property within 15 months. However, this deadline could have been extended with the payment of a penalty. Respondent No. 1 accepted the conditions of the DA and stated that he would build 45 percent of the constructed space before or on the deadline of the 15-month period, retaining the other 55 percent of the developed section for himself.

Respondent No.1 was, however, unable to finish the work within the allotted time. Aggrieved by this act, the Appellant gave notice to terminate the DA and to cancel the GPA. On 11.07.2016 the cancellation of the agreement and GPA were also publicised in a newspaper by the Appellant. Since, Respondent No.1 did not respond to the notice of the Appellant issued under Clause 18 of the DA, which carried an arbitration clause, the Appellant was constrained to approach the High Court.

Clause 18 of the DA reads as follows:

“18. All the disputes or differences arising between the parties hereto as to the interpretation of this Agreement or any covenants or conditions thereof or as to the rights, duties, or liabilities of any part hereunder or as to any act, matter, or thing arising out of or relating to or under this Agreement (even though the Agreement may have been terminated), the same shall be referred to arbitration by a sole arbitrator mutually appointed, failing which, two arbitrators, one to be appointed by each party to the dispute or difference, and these two Arbitrators will appoint a third Arbitrator and the Arbitration shall be governed by the Arbitration and Conciliation Act, 1996 or any re-enactment thereof.”

The Arbitration Clause

Before the Hon’ble High Court of Bombay, the Appellant had filed an application pursuant to Section 11 of the Arbitration Act, 1996, after receiving no response from the Respondents. The Respondents claimed that clause 18 of the DA could not be enforced because it lacked the precise phrase “to be bound by the decision of the Arbitral Tribunal.” The Hon’ble High Court ruled in favour of the Respondents and determined that the clause lacked necessary components of a legitimate arbitration agreement and did not expressly specify that the arbitrator’s ruling would be binding. Aggrieved by the order of the High Court, a Special Leave Petition was filed by the Appellant before the Hon’ble Supreme Court.

The Issue Before the Hon’ble Supreme Court

If an arbitration clause lacks specific language like “binding” or “final,” should it still be considered a valid agreement for the purpose of invoking powers under Sec. 11 of the Arbitration and Conciliation Act, 1996?

While analysing the issue, the Hon’ble Supreme Court made it clear that there is no precise form of an arbitration clause, and that Section 7 of the Arbitration Act of 1996 does not provide a specific form of arbitration agreement. The Hon’ble Supreme Court critically analysed Clause 18 of the DA and concluded that the terms of the agreement were clear. It made it clear that the term “disputes shall be” referred to arbitration, meant that the reference to arbitration was clear in the DA. Additionally, it was also observed that the contract contained clear instructions for choosing a third arbitrator and that the parties would be subject to the Arbitration and Conciliation Act, 1996. The Hon’ble Supreme Court further opined that the requirement and purpose of the parties to be bound by the arbitral tribunal are mandated by Clause 18 of the DA. The arbitral clause was held to be not invalidated by the omission of the phrases “final” and “binding.” The decision of the Hon’ble High Court of Judicature of Bombay was thus set aside by the Hon’ble Supreme Court and a sole arbitrator was appointed to resolve the dispute.

Key Takeaway

Though, the decision by the Hon’ble Supreme Court gives considerable breathing room for an arbitration clause, it is imperative to consider that an insufficiently written arbitration clause does hinder the process of arbitration. The only solution in such a scenario is to fix the deficiency in the arbitral clause. The parties must ensure that the arbitration agreement is well drafted so that there are no errors and the intention of the parties to refer the dispute to arbitration can be easily inferred. This will also ensure that the parties will not be forced to approach the courts to determine the validity of the clause.

References: 

[1] 2022 SCC OnLine SC 1165.

The only solution in such a scenario is to fix the deficiency in the arbitral clause. The parties must ensure that the arbitration agreement is well drafted so that there are no errors and the intention of the parties to refer the dispute to arbitration can be easily inferred. 

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Public Interest Litigation: A Knight in Shining Armour

The Preamble of our Indian constitution envisages ‘Justice for all’, amongst other tenets. Indian judiciary in the recent past has traversed an unbeaten road. From being the guardian of the interests of an individual, to enabling the recognition of public interest as mode of entrusting locus standi on an individual for securing fundamental rights entrenched in the constitution, the seventy-two odd glorifying years of the judiciary are marked by many momentous instances.

“Public interest” denotes the interest of the people of the land. These interests can be allied in varied directions. All in all, one that integrates itself with the obligations and rights laid out in the grundnorm, represents the public interest. With changing times, fluidity in the interpretation of the term “public interest” has also been under continuous deliberation and interpretation. Since an issue of public interest, denotes a collective representation of opinions, concerns and beliefs; one citizen or person, belonging to the aggrieved class, should not be made a sole party to the dispute. A blow to the public interest hits each and every class of citizens.[1] Therefore, representation by one, as a sentry for the protection of the public interest, denotes a new form of litigation, conceptualised as “public interest litigation”.[2]

 

Public Interest Litigation: Origin and Constitutional Aspects 

A result of outstanding debt, Public interest litigation was envisaged under the Constitution with a vision of bringing the people of India at parity with each other.[3] The marginalised sections of society have always dithered before striking the portals of the court for the establishment of their rights and obligations.[4] In such a scenario, the conventional rules of locus standi were appropriately bent by the Indian Courts to pursue the cause of justice for all and sundry.[5] Justice is not only essential for pursuing the entrenched precepts of the Indian Constitution, but also for harmonization and integration of the streams of human rights, which have latterly enveloped the course of rights-based litigation in India.[6] Therefore, an increase in the panoply of human rights, provides yet another rationale for the growth of public interest litigation in India. The executives and the legislature have been endowed with a quintessential role in the Indian Constitution. Article 12 of the Indian Constitution requires them not to pass laws that impede the attainment of fundamental rights. Recourse to the judiciary in achieving the mandates of the constitution and upholding the status of fundamental rights is in itself qualified as a fundamental right. Such being the case, the Indian judiciary introduced the concept of public interest litigation to provide an answer to the conundrum facing the ailing state functionaries.

With a spurt in these lawsuits, Indian courts have cautiously attempted to lay out guidelines for how such litigation can be pursued. Not every lis draws public interest. As a result, under the guise of public interest, lis fails to provide a suitable remedy to the needy. The Supreme Court under Article 32 of the Constitution and the High Court under Article 226 of the Constitution have held that they have the power to entertain public interest litigation.[7] So much so that Courts under Articles 32 and 226 have, in furtherance of the public interest, treated a private interest case as a public interest case.[8] Both Article 32 and Article 226, vouch for an inquiry into locus standi.[9] This conventional rule of standing has been diluted to give way to class actions.[10] In public interest litigation, unlike a traditional dispute resolution mechanism, there is no determination of individual rights.[11] The compulsion for the judicial innovation of the technique of public interest litigation arises out of the constitutional promise of a social and economic transformation to usher in a welfare state.[12] 

 

Judicial Interpretation of Public Interest Litigation

Article 32 of the Constitution represents the heart and soul of this foundational document. The Indian Supreme Court has made a concerted effort to improve judicial access for the masses by relaxing the traditional rule of locus standi.[14], and it has allowed human rights organizations to intervene on behalf of victims, where it has determined that questions of broader public interest necessitate such intervention.[15] In Prem Shankar Shukla v. Delhi Administration,[16] a prisoner sent a telegram to a judge complaining of forced handcuff on him and demanded implicit protection against humiliation and torture. The court gave necessary directions by relaxing the strict rule of locus standi. 

In Municipal Council, Ratlam v. Vardhichand & Others,[17] Krishna Iyer, J. while relaxing the rule of locus standi, the Apex Court held that “ The truth is that a few profound issues of processual jurisprudence of great strategic significance to our legal system face us and we must zero-in on them as they involve problems of access to justice for the people beyond the blinkered rules of ‘standing’ of British Indian vintage. If the center of gravity of justice is to shift, as the Preamble to the Constitution mandates, from the traditional individualism of locus standi to the community orientation of public interest litigation, these issues must be considered… Why drive common people to public interest action? Where Directive Principles have found statutory expression in Do’s and Don’ts the court will not sit idly by and allow municipal government to become a statutory mockery. The law will be relentlessly enforced and the plea of poor finance will be poor alibi when people in misery cry for justice.” Justice Bhagwati of the Supreme Court in his judgment in S.P. Gupta v. President of India & Others,[18] altogether dismissed the traditional rule of standing and in its place, the Court prescribed the modern rule on standing while holding that “where a legal wrong or a legal injury is caused to a person or to a determinate class of persons by reason of violation of any constitutional or legal right or any burden is imposed in contravention of any constitutional or legal provision or without authority of law or any such legal wrong or legal injury or illegal burden is threatened and such person or determinate class of persons is by reason of poverty, helplessness or disability or socially or economically disadvantaged position, unable to approach the Court for relief, any member of the public can maintain an application for an appropriate direction, order or writ, in the High Court under Article 226, and in case of breach of any fundamental right, in this Court under Article 32.”

Indian Courts have become so inclined towards accepting litigation involving public interest that they have maintained relaxed procedural norms to entertain writs for continuing such litigations.[19] In Sheela Barse v. State of Maharashtra,[20] Sheela Barse, a journalist, complained of custodial violence against women prisoners in Bombay. Her letter was treated as a writ petition and the directions were given by the court. In Dr. Upendra Baxi (I) v. State of Uttar Pradesh & Another,[21] two distinguished law Professors of the Delhi University addressed a letter to this court regarding inhuman conditions that were prevalent in the Agra Protective Home for Women. The court heard the petition for a number of days and gave important directions by which the living conditions of the inmates were significantly improved in the Agra Protective Home for Women. 

In Labourers Working on Salal Hydro Project v. State of Jammu & Kashmir & Others,[22] on the basis of a news item in the Indian Express regarding the condition of the construction workers, the Court took notice and observed that construction work is hazardous employment and no child below the age of 14 years shall be employed in such work by reason of the prohibition enacted in Article 24. It also held that this constitutional prohibition must be enforced by the Central Government. In Paramjit Kaur (Mrs.) v. State of Punjab & Others,[23] a telegram was sent to a Judge of the Apex Court which was treated as a habeas corpus petition. The allegation was that the husband of the appellant was kidnapped by some people in police uniform from a busy residential area of Amritsar. The Court took serious note of it and directed that the investigation of the case be handled by the Central Bureau of Investigation.

 

Public Interest Litigations sans the Public Interest 

Though, the Indian Courts have entertained public interest litigation in the recent past, in a plethora of cases they have also shut the portals of the Courts to those who have come with unclean hands to avenge themselves in the guise of public interest litigation. In BALCO Employees’ Union (Regd.) v. Union of India & Others[24], the Court recognized that there have been, in recent times, increasing instances of abuse of public interest litigation. Accordingly, the Court has devised a number of strategies to ensure that the attractive brand name of public interest litigation is not used for suspicious products of mischief. 

Firstly, the Supreme Court has limited standing in public interest litigation to individuals “acting bonafide”. Secondly, it has sanctioned the imposition of “exemplary costs” as a deterrent against frivolous and vexatious public interest litigations. Thirdly, instructions have been issued to the High Courts to be more selective in entertaining public interest litigations. 

In S.P. Gupta v. President of India & Others,[25] the Court has found that this liberal standard makes it critical to limit standing to individuals “acting bona fide”. To avoid entertaining frivolous and vexatious petitions under the guise of public interest litigation, the Court has excluded two groups of persons from obtaining standing in public interest litigation petitions. First, the Supreme Court has rejected awarding standing to “meddlesome interlopers.” Second, it has denied standing to interveners bringing public interest litigation for personal gain. Further, the court cautioned that important jurisdiction of public interest litigation may be confined to legal wrongs and legal injuries for a group of people or a class of persons. It should not be used for individual wrongs because individuals can always seek redressal from legal aid organizations. This is a matter of prudence and not a rule of law. 

In Chhetriya Pardushan Mukti Sangharsh Samiti v. State of U.P & Others[26], the Court withheld standing from the applicant on grounds that the applicant brought the suit motivated by enmity between the parties. The Court again, in this case, emphasized that Article 32 is a great and salutary safeguard for the preservation of the fundamental rights of the citizens. The superior Courts have to ensure that this weapon under Article 32 should not be misused or abused by any individual or organization.  In Neetu v. State of Punjab & Others[27], the Court concluded that it is necessary to impose exemplary costs to ensure that the message goes in the right direction and that petitions filed with an oblique motive do not have the approval of the Courts. In S.P. Anand v. H.D. Deve Gowda & Others[28], the Court warned that it is of the utmost importance that those who invoke the jurisdiction of this Court seeking a waiver of the locus standi rule must exercise restraint in moving the Court by not plunging into areas wherein they are not well-versed. 

In Sanjeev Bhatnagar v. Union of India & Others[29], this Court went a step further by imposing a monetary penalty of Rs10,000/- against an Advocate for filing a frivolous and vexatious petition. The Court found that the petition was devoid of public interest, and instead labelled it as “publicity interest litigation”.. In Dattaraj Nathuji Thaware v. State of Maharashtra & Others[30], the Supreme Court affirmed the High Court’s monetary penalty against a member of the Bar for filing a public interest litigation petition on the same grounds. The Court found that the petition was nothing but a camouflage to foster personal dispute. Observing that no one should be permitted to bring disgrace to the noble profession, the Court concluded that the imposition of the penalty of Rs. 25,000 by the High Court was appropriate. Evidently, the Supreme Court has set a clear precedent validating the imposition of monetary penalties against frivolous and vexatious public interest petitions, especially when filed by Advocates. The Court expressed its anguish on misuse of the forum of the Court under the garb of public interest litigation and observed that public interest litigation is a weapon which has to be used with great care and circumspection and the judiciary has to be extremely alert in ascertaining the true intentions behind the beautiful veil of social justice.  

The Court must not allow its process to be abused for oblique considerations. In Charan Lal Sahu & Others v. Giani Zail Singh & Another[31], the Supreme Court observed that “we would have been justified in passing a heavy order of costs against the two petitioners” for filing “a light-hearted and indifferent” public interest litigation petition. However, to prevent “nipping in the bud a well-founded claim on a future occasion” the Court opted against imposing monetary costs on the petitioners. In this case, this Court concluded that the petition was careless, meaningless, clumsy and against the public interest. Therefore, the Court ordered the Registry to initiate prosecution proceedings against the petitioner under the Contempt of Courts Act. Additionally, the court forbade the Registry from entertaining any future public interest litigation petitions filed by the petitioner, who was an Advocate in this case.

In J. Jayalalitha v. Government of Tamil Nadu & Others[32], the Court laid down that public interest litigation can be filed by any person challenging the misuse or improper use of any public property including the political party in power for the reason that interest of individuals cannot be placed above or preferred to a larger public interest. In Holicow Pictures Pvt. Ltd. v. Prem Chandra Mishra & Others[33], the Court observed that “It is depressing to note that on account of such trumpery proceedings initiated before the Courts, innumerable days are wasted, the time which otherwise could have been spent for disposal of cases of the genuine litigants. Though we spare no efforts in fostering and developing the laudable concept of public interest litigation and extending our long arm of sympathy to the poor, the ignorant, the oppressed and the needy, whose fundamental rights are  infringed and violated and whose grievances go unnoticed, un-represented and unheard; yet we cannot avoid but express our opinion that while genuine litigants with legitimate grievances relating to civil matters involving properties worth hundreds of millions of rupees and criminal cases in which persons sentenced to death facing gallows under untold agony and persons sentenced to life imprisonment and kept in incarceration for long years, persons suffering from undue delay in service matters -government or private, persons awaiting the disposal of cases wherein huge amounts of public revenue or unauthorized collection of tax amounts are locked up, detenu expecting their release from the detention orders etc. etc. are all standing in a long serpentine queue for years with the fond hope of getting into the Courts and having their grievances redressed, the busybodies, meddlesome interlopers, wayfarers or officious interveners having absolutely no public interest except for personal gain or private profit either of themselves or as a proxy of others or for any other extraneous motivation or for glare of publicity break the queue muffing their faces by wearing the mask of public interest litigation and get into the Courts by filing vexatious and frivolous petitions and thus criminally waste the valuable time of the Courts and as a result of which the queue standing outside the doors of the Courts never moves, which piquant situation creates frustration in the minds of the genuine litigants and resultantly they lose faith in the administration of our judicial system.”

The Court has to be satisfied with:

(a) the credentials of the applicant;

(b) the prima facie correctness or nature of the information given by him;

(c) the information being not vague and indefinite.

The information should show the gravity and seriousness involved. Court has to strike balance between two conflicting interests;

(i) nobody should be allowed to indulge in wild and reckless allegations besmirching the character of others; and

(ii) avoidance of public mischief and avoid mischievous petitions seeking to assail, for oblique motives, justifiable executive actions.

The Courts also have to practice great caution in ensuring that while redressing a public grievance, it does not encroach upon the sphere reserved by the Constitution to the Executive and the Legislature, while maintaining a balance while dealing with imposters and busybodies or meddlesome interlopers impersonating as public-spirited holy men. In Janata Dal v. H.S. Chowdhary & Others[34], the court rightly cautioned that the expanded role of courts in the modern `social’ state demands greater judicial responsibility. In Guruvayur Devaswom Managing Committee & Another v. C.K. Rajan & Others [35], it was reiterated that the Court must ensure that its process is not abused. Therefore, the Court would be justified in insisting on furnishing of security before granting an injunction in appropriate cases. The Courts may impose heavy costs to ensure that the judicial process is not misused.

The bandwagon of public interest litigation has attained new heights in the recent past. With all the parameters drawn by Courts to adjudge what constitutes litigation related to the public interest, still, with blindfolded certainty; it cannot be said that a strait jacketed formula would serve as a panacea for all vexatious litigants to sieve through. With the Courts, always loaded with backlogs, the utopian dream of ‘justice for all” and in the “interest of all,” might straddle.

References: 

[1] (Traditionally used to the adversary system, we search for individual persons aggrieved. But a new class of litigation public interest litigation- where a section or whole of the community is involved (such as consumers’ organisations or NAACP-National Association for Advancement of Coloured People-in America), emerges in a developing country like ours, this pattern of public oriented litigation better fulfils the rule of law if it is to run close to the rule of life…The possible apprehension that widening legal standing with a public connotation may unloose a flood of litigation which may overwhelm the judges is misplaced because public resort to court to suppress public mischief is a tribute to the justice system.) Bar Council of Maharashtra v. M. V. Dabholkar & Others, 1976 SCR 306.

[2] (Our current processual jurisprudence is not of individualistic Anglo-Indian mould. It is broad-based and people-oriented, and envisions access to justice through `class actions’, `public interest litigation’, and `representative proceedings’. Indeed, little Indians in large numbers seeking remedies in courts through collective proceedings, instead of being driven to an expensive plurality of litigations, is an affirmation of participative justice in our democracy. We have no hesitation in holding that the narrow concepts of `cause of action’, `person aggrieved’ and individual litigation are becoming obsolescent in some jurisdictions.) Akhil Bharatiya Soshit Karamchari Sangh (Railway) v. Union of India & Others, AIR 1981 SC 298.

[3] (Public Interest Law is the name that has recently been given to efforts to provide legal representation to previously unrepresented groups and interests. Such efforts have been undertaken in the recognition that ordinary market place for legal services fails to provide such services to significant segments of the population and to significant interests. Such groups and interests
 include the proper environmentalists, consumers, racial and ethnic minorities and others.) M/s Holicow Pictures Pvt. Ltd. v. Prem Chandra Mishra & Ors., AIR 2008 SC 913.

[4] (Public interest litigation is a cooperative or collaborative effort by the petitioner, the State of public authority and the judiciary to secure observance of constitutional or basic human rights, benefits and privileges upon poor, downtrodden and vulnerable sections of the society.) People’s Union for Democratic Rights & Others v. Union of India & Others, (1982) 3 SCC 235. 

[5] (Public interest litigation is part of the process of participative justice and `standing’ in civil litigation of that pattern must have liberal reception at the judicial doorsteps.) Fertilizer Corporation Kamagar Union Regd., Sindri & Others v. Union of India & Others, AIR 1981 SC 844.

[6] (Public interest litigation is for making basic human rights meaningful to the deprived and vulnerable sections of the community and to assure them social, economic and political justice.) Ramsharan Autyanuprasi & Another v. Union of India & Others, AIR 1989 SC 549.

[7] (The Court has all incidental and ancillary powers including the power to forge new remedies and fashion new strategies designed to enforce the fundamental rights.) M. C. Mehta & Another v. Union of India & Others, AIR 1987 SC 1086.

[8] Indian Banks Association v. Devkala Consultancy Service, AIR 2004 SC 2815.

[9] (Any person claiming of infraction of any fundamental right guaranteed by the Constitution is at a liberty to move to the Supreme Court, but the rights that could be invoked under Article 32 must ordinarily be the rights of the person who complains of the infraction of such rights and approaches the Court for relief.) Narinderjit Singh Sahni v. Union of India, AIR 2001 SC 3810; see also Ruqmani v. Achuthan, AIR 1991 SC 983; see also Delhi Administration v. Madan Lal Nangia, AIR 2003 SC 4672.

[10] (The law as to locus standi has been diluted by the advent of the doctrine of public interest litigation.) Bangalore Medical Trust v. Muddappa, AIR 1991 SC 1902.

[11] (The traditional rule is flexible enough to take in those cases where the applicant has been prejudicially affected by an act or omission of an authority, even though he has no proprietary or even a fiduciary interest in the subject-matter. That apart, in exceptional cases even a stranger or a person who was not a party to the proceedings before the authority, but has a substantial and genuine interest in the subject-matter of the proceedings will be covered by this rule.) Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed & Others, (1976) 1 SCC 671.

[12] (The old doctrine of only relegating the aggrieved to the remedies available in civil law limits the role of the courts too much as protector and guarantor of the indefeasible rights of the citizens. The courts have the obligation to satisfy the social aspirations of the citizens because the courts and the law are for the people and expected to respond to their aspirations.) Smt. Nilabati Behera alias Lalita Behera v. State of Orissa & Others, AIR 1993 SC 1960.

[13] (Today, unfortunately, in our country the poor are priced out of the judicial system with the result that they are losing faith in the capacity of our legal system to (sic) about changes in their life conditions and to deliver justice to them. The poor in their contact with the legal system have always been on the wrong side of the line. They have always come across ‘law for the poor & rather than law of the poor’. The law is regarded by them as something mysterious and forbidding–always taking something away from them and not as a positive and constructive social device for changing the social economic order and improving their life conditions by conferring rights and benefits on them. The result is that the legal system has lost its credibility for the weaker section of the community.) Hussainara Khatoon & Others v. Home Secretary, State of Bihar, Patna AIR 1979 SC 1369.

[14] The Mumbai Kamgar Sabha, Bombay v. Abdulbhai Faizullabhai Others, AIR 1976 SC 1455.

[15] Sunil Batra v. Delhi Administration & Others, AIR 1978 SC 1675.

[16] AIR 1980 SC 1535.

[17] AIR 1980 SC 1622.

[18] AIR 1982 SC 149.

[19] (public interest litigation should be encouraged when the Courts are apprised of gross violation of fundamental rights by a group or a class action or when basic human rights are invaded or when there are complaints of such acts as shock the judicial conscience that the courts, especially this Court, should leave aside procedural shackles and hear such petitions and extend its jurisdiction under all available provisions for remedying the hardships and miseries of the needy, the underdog and the neglected.)Shri Sachidanand Pandey & Another v. The State of West Bengal & Others, (1987) 2 SCC 295.

[20] AIR 1983 SC 378.

[21]  1983 (2) SCC 308.

[22] AIR 1984 SC 177.

[23]  (1996) 7 SCC 20.

[24] AIR 2002 SC 350.

[25] AIR 1982 SC 149.

[26] AIR 1990 SC 2060.

[27] AIR 2007 SC 758.

[28] AIR 1997 SC 272.

[29] AIR 2005 SC 2841.

[30] (2005) 1 SCC 590.

[31] AIR 1984 SC 309.

[32]  (1999) 1 SCC 53.

[33] AIR 2008 SC 913.

[34] (1992) 4 SCC 305.

[35] (2003) 7 SCC 546.

 

Image Credits: Image by Sasin Tipchai from Pixabay 

The bandwagon of public interest litigation has attained new heights in the recent past. With all the parameters drawn by Courts to adjudge what constitutes litigation related to the public interest, still, with blindfolded certainty; it cannot be said that a strait jacketed formula would serve as a panacea for all vexatious litigants to sieve through.

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The Best Time to Enact Data Protection Laws was 20 Years Ago; The Next Best Time is Now!

The road to personal data protection in India has been rocky. In 2017, India’s Supreme Court upheld the right to privacy as a part of our fundamental right to life and liberty. A panel chaired by retired Justice B N Srikrishna was given the task of drafting a Bill. In 2018, this panel submitted its draft to the Ministry of Electronics & Information Technology. The Personal Data Protection Bill that was eventually tabled in parliament in December 2019 proposed restrictions on the use of personal data without the explicit consent of citizens and introduced data localization requirements. It also proposed establishing a Data Protection Authority.

However, the bill was widely seen as a diluted version of what was originally envisioned by the Srikrishna panel in terms of its ability to truly protect the data/privacy of individuals. The bill was seen to place a significant regulatory burden on businesses and thus viewed as an impediment to the “ease of doing business” in India. A major bone of contention was the bill granting the government a blanket right to exempt investigative agencies from complying with privacy and data protection requirements. Understandably, there was pushback from BigTech, global financial services players as well as activists; even startups were unhappy with the proposed regulatory burdens.

In December 2021, after a number of extensions spanning over two years, the Joint Parliamentary Committee (JPC) that was set up to examine the draft bill submitted its report to the Lok Sabha. The JPC report has reportedly highlighted areas of concern and proposes a number of amendments/recommendations such as:

  • a single law to cover both personal and non-personal datasets;
  • using only “trusted hardware” in smartphones and other devices;
  • treating social media companies as content publishers, thus making them liable for the content they host.

In early August 2022, the government withdrew the Personal Data Protection Bill, 2019, with the promise to introduce a new one with a “comprehensive framework” and “contemporary digital privacy laws”.

 

India needs New Regulations to Plug the Data Protection Gap

That India needs robust data protection and privacy regulations which should be enacted soon is beyond debate. With digitalization becoming ever more pervasive by the day, the longer we are without clear regulations, the greater the risk is to our citizens. Each of the major trends below has the potential to infringe on individual privacy and can give rise to large-scale risks of user data (including personally identifiable information) being leaked/breached and misused:

  • The growth in digital banking, payment apps and other digital platforms.
  • The potential for Blockchain-based apps (in education- e.g., degree certificates, mark sheets; in health care – medical records; in unemployment benefits; KYC, passports etc.).
  • The growing popularity of crypto assets (and the attendant risk of them being used for money laundering, funding terror/anti-national activities etc.).
  • The rise of Web 3.0.
  • The increase in the use of drones for civilian purposes (e.g., delivery of vaccines, food to disaster-hit areas etc).
  • The emergence of the Metaverse as a theatre of personal/commercial interactions.

According to a news report, IRCTC had sought the services of consultants to help them analyze the huge amount of customer data they have and explore avenues to monetize the information. Given that the existing bill has been withdrawn, they have deferred this plan till new legislation is in place. Delays in enacting new data protection legislation thus also can impact revenue growth and profitability of various businesses- which is another reason for quickly coming up with new legislation.

 

The New Data Protection Law should be Well-defined and Unambiguous

While “consent” must be a cornerstone of any such legislation, the government must also ensure that users whose data need to be protected, fully understand the implications of what they are consenting to. For example, each time an individual downloads an app on his/her smartphone, the app seeks a number of permissions (e.g., to mic, contacts, camera etc.). As smartphones become repositories of larger slices of personally identifiable information as well as financial data (such as bank/investment details), and authentication details such as OTPs, emails etc., the risks of data breaches and misuse that cause serious harm increase. There are a number of frauds and digital scams to which citizens are falling prey. Commercial and other organizations that build and manage various digital platforms must be held accountable for what data they capture, how they do so, why they need the data, how/where they will store such data, who will have access to them etc.

Just as important is for the new law to define unambiguously terms like “critical data”, “localization”, “consent”, “users”, “intermediaries” etc. Many companies are establishing their Global Captive Centres (GCCs) in India, to take advantage of the large talent pool and process maturity. Strong laws will encourage more layers to consider this route seriously, thereby adding to jobs and GDP growth. Such investments also make it easier for India to be a part of emerging global supply chains for services (including high-value ones such as R&D and innovation).

It must address the risks of deliberate breaches as well. For instance, if hybrid working models are indeed going to remain in place, who should be held responsible for deliberate data leaks by employees working remotely? Or by their friends/relatives/others who take screenshots (or otherwise hack into systems) and share data with fraudsters?

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. If the government fails to do so, our aspirations to become one of the top three nations on earth will take much longer – worse, they main only remain on paper as grandiose but unfulfilled visions.

Picture Credits: Photo By Fernando Arcos: https://www.pexels.com/photo/white-caution-cone-on-keyboard-211151/ 

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. 

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Securing your Data with the Trade Marks Registry

Data privacy has been a cause of concern for individuals and corporates, however, when sharing personal information with government authorities, we tend to overlook this concern. Has one ever wondered how secure her confidential, proprietary, or personal information is while sharing it with a government agency like the Trade Marks Registry?

Indian Intellectual Property Offices come under the Ministry of Commerce and Industry; therefore, they are under the control of the Central Government. The Trade Marks Registry, established in 1940, primarily acts as a facilitator in matters relating to the registration of trademarks in India.

The Trade Marks Registry (TMR) is a public filing system. That means once a trademark application is filed with the TMR, a lot of information is placed on record, including the applicant’s and its representative’s personal data, such as mailing address, and the proof of use of the trademark. The digitization of the Registry in 2017 prompted the current practice of recording information on a public access system.

 

Fundamental Concerns

Mailing Address: Open and easy access to such personal information exposes an applicant to scams and other unwanted solicitations. For instance, scam emails (that appear to have been sent by the TMR seeking maintenance fees) from third parties attempt to deceive applicants into paying additional fees. Everyone recalls how anyone who filed an international application between 2005 and 2015 was duped by international scammers who obtained their information from the WIPO. By oversight, many people were duped into paying huge amounts of money.

If an attorney represents an applicant, the TMR does not send correspondence about the trademark application directly to the applicant. In such cases, the Registry directly communicates with their authorised attorneys. Hence, if an applicant receives any mail relating to their trademark, they should consult their attorneys, who may evaluate it to guarantee that a scam letter is not mistaken for real contact.

Documents to support the use of the mark: Applicants are frequently required to submit documentary evidence to support their applications and commercial use of their marks. Such evidence is often public, but an applicant might disclose information they would not intend to make public, such as bills, financial papers, reports, and other confidential information. There is no mechanism to have them masked or deleted from the TMR’s database if such information is uploaded or disclosed.

 

Initiatives by the Trade Mark Registry

In recent times, the TMR has adopted the practice of restricting public access to evidentiary documents submitted during opposition/rectification proceedings that the competing parties upload on the TMR. However, similar documents filed during any other stage, such as filing and pre-opposition prosecution, are still exposed to public access, even if they are documents or information relating to commercial confidence, trade secrets, and/or any other form of confidential, proprietary, or personal information.

However, the advantage of such an open and publicly available database is that it serves as a countrywide “notice,” which means that an alleged infringer of your trademark cannot claim ignorance of your brand. However, disclosure of such information exposes applicants to email scams and other unwanted solicitations and can also harm their competitive position in the market.

In September 2019, on account of various representations made by numerous stakeholders regarding the TMR’s display of confidential, proprietary, and personal information,[1] a public notice was issued by the Registry, inviting stakeholders’ comments on the aforesaid concerns.

The TMR proposed the classification of such documents into two categories:

  • Category I: Documents that are fully accessible and available for viewing or downloading by the public.
  • Category II: Documents for which details will be available in the document description column, but viewing and downloading will be restricted.

 

Roadblocks and Viable Course of Action

Notably, the Right to Information (RTI) Act, 2005, obligates public authorities to make information on their respective platforms available to the public in a convenient and easily accessible manner. There are some notable exceptions to this rule, i.e., information related to commercial confidence and trade secrets is exempted from being disclosed or made accessible to the public in so far as their disclosure leads to a competitive handicap for the disclosing party. Personal information is also exempted to the extent that its disclosure leads to an invasion of privacy or if it has no relation to public activity or interest.

Hence, it is crucial to understand that while such a classification, as has been suggested by the TMR above, might seem like a good initiative on the surface, the lack of any concrete boundaries assigned to the terms “confidential” or “personal” information leaves the Registry with unquestioned discretion to generalise datasets and to restrict access to documents on the TMR website. A simple example could be data collected by the TMR through pre-designated forms, including Form TM A, Form TM O, etc. Most of these forms generally mandate the submission of certain personal information, including the proprietor’s name, address, telephone number, etc. However, this cannot simply mean that the TMR denies the general public access to such trademark application forms, as this would defeat the primary goal of advertising such marks on the Registry, which is to seek any opposition or evidence against such marks. Thus, while the objective behind such a classification of documents might be well-intended, restriction of access to certain documents might lead to a conflict of interest for the TMR, and it might end up over-complicating the due-diligence processes, leading to increased costs and resources.

Such generalised classifications are, hence, only viable in theory. The TMR might end up entertaining hundreds of RTI applications if it decides to limit access to certain documents, which might be necessary for proper due diligence and prosecution. The free and open availability of documents enables the public to have smoother and easier access to essential records and credentials of the trademark proprietors, thereby allowing the masses to have a better understanding of the prosecution history of important trademarks of the target company.

In the long run, a rather sustainable alternative for the TMR might be introducing a multi-factor authentication system for the parties interested in carrying out due diligence or prosecution against a mark. A multi-factor authentication system for gaining access to the records and documents on the Registry might lengthen the entire process in the short run. Nonetheless, the move could be game changer in the long run because it would allow the Registry to restrict access to confidential and personal data of its users to parties with an original or vested interest in the registration of a mark.

Such an approach would not only enable the Registry to provide open and efficient access to necessary documents to the parties who have an original or vested interest in the registration of a mark, but it would simultaneously vest it with the flexibility to protect the sensitive, confidential, as well as personal data of its users from scammers or non-interested parties.

 

Privacy-by-Design

A Privacy-by-Design approach is the future of the modern-day web, and as long as the Registry does not implement more elaborate internal safeguards on its website and databases to protect the privacy and integrity of public data contained therein, it is always recommended that applicants work with an experienced trademark attorney who can assist applicants in reducing the exposure of their information to individuals or a class of individuals with ulterior motives and mitigating the harm associated with the usage of their data.

References:

[1] Public Notice dated 06/09/2019 re Categorization of Documents on the TMR. Accessible at: https://ipindia.gov.in/writereaddata/Portal/Images/pdf/Catergorization_of_Docs.pdf.

The Trade Marks Registry (TMR) is a public filing system. That means once a trademark application is filed with the TMR, a lot of information is placed on record, including the applicant’s and its representative’s personal data, such as mailing address and the proof of use of the trademark. 

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In Focus: Why Is It Important to Bridge the Gender Inequality Gap in India

The Global Gender Gap Index of 2022[1], released by the World Economic Forum, in July placed India at the 135th position out of 146 countries. Contrastingly, in 2021, India was placed in the 140th position out of 156 countries. The Global Gender Gap Index benchmarks the current state and evolution of gender parity across four areas of concern- economic participation and opportunity; educational attainment; health and survival, and political empowerment. At present, India fares the worst in the health and survival category.

Discrimination affects many aspects of the lives of women, from career development and progress to mental health disorders. While Indian laws on rape, dowry and adultery have women’s safety at heart, these highly discriminatory practices are still taking place at an alarming rate.

What is Gender Inequality?

Gender inequality is a social phenomenon in which men and women are not treated equally. The treatment may arise from distinctions regarding biology, psychology, or cultural norms prevalent in society. Some of these distinctions are empirically grounded, while others appear to be social constructs. It has serious and long-lasting consequences for women and other marginalised genders. Exposure to violence, objectification, discrimination and socioeconomic inequality can lead to anxiety, depression, low self-esteem, and PTSD. Gender inequality in education has a direct impact on economic growth by lowering the average quality of human capital. In addition, economic growth is indirectly affected by the impact of gender inequality on investment and population growth.

In many developing countries, the disparity in access to quality education between girls and boys adversely impacts the girls’ ability to build human and social capital, narrowing their job opportunities and reducing their entitled wages in labour markets. Often women and girls are confined to fulfilling roles as mothers, wives, and caretakers. Gender norms position girls as caretakers, which leads to discrimination with respect to the distribution of domestic duties. 47% of the Indian population is female, out of which only 19% of the population actively contributes to the country’s GDP.[2]If India were to bridge this gap, it could expand the GDP by a third by 2050, equating to $6 trillion.

Rural households that are headed by women suffer more from poverty than those headed by men. Social and cultural barriers, a lack of kindergartens, as well as the burden of unpaid housework, prevent women from developing their skills and from generating an income.

Within the context of population and development programs, gender equality is critical because it will enable women and men to make decisions that impact more positively on their own sexual and reproductive health as well as that of their spouses and families.

 

Gender Inequality in the Workplace

Men and women alike may face issues regarding gender inequality in the workplace, although women typically deal with it more often than men. Gender inequality occurs in the workplace due to traditional gender roles and persistent gender bias. Traditional gender roles may be indicative of how much extra time and effort an individual can put into their jobs since employees are usually expected to go above and beyond to prove their worth. There are gender biases that may inadvertently give the advantage to one gender over the other in the workplace, such as the idea that men have more physical capability or that women are better in nurturing roles.

Gender equality in the workplace is very important for one to grow and develop a business.

When a business proactively takes steps to resolve gender discrimination, it automatically enables them to increase productivity, alleviate conflict, and reduce the chances of legal issues. Gender equality is the key to capturing skills, ideas and perspectives that each gender has to offer. People prefer to work at companies that prioritise equality, diversity, and inclusion. Gender inclusion in the workplace varies depending on the business. However, excluding an individual from team projects, company outings, meetings and necessary decision-making because of gender falls within the realm of gender inequality. When an individual is not included in tasks or events, it can prevent them from becoming productive workers.

Gender equality in the workplace means employees of all genders have access to the same rewards, opportunities, and resources at a company, including:

  • Each gender can fully participate in the workplace.
  • Equal opportunities for each gender for promotions, and career progression to achieve leadership positions.
  • Equal pay and benefits for equal work.
  • Equal consideration of needs.
  • Acceptance rather than discrimination against those who have caregiving and family responsibilities.

There are several benefits for companies who maintain gender equality in the workplace, including the following:

  • Positive company culture A gender-equal work environment where all employees feel respected and valued creates an overall more positive workplace for all your employees. When you have a gender-diverse environment, your employees will likely notice that their co-workers have talents and strengths they don’t possess themselves. The appreciation for these differences will help promote an environment of respect among the team.
  • More innovation and creativity People of different genders bring unique talents, strengths and skills into the workplace, which can improve collaboration and result in a stimulating and creative environment. In fact, companies often find that gender diversity can lead to greater innovation within the workplace.
  • Build a great reputation – By promoting gender equality in the workplace, a business can foster a great company reputation with the outside world. People who have similar values will want to work for them, and with happy employees, the business will have a positive and productive workforce.
  • Improved conflict resolution – Strong communication skills among employees are essential for company-wide success. People of different genders naturally communicate differently, with some preferring to communicate problems directly and others working as peacemakers. When you combine these different communication styles in one work environment, you can more easily achieve conflict resolution.

 

The Legal View

A look at some of the decisions court has taken over the years, championing women’s rights in the workplace, at home, and in public spaces to give women their due:

 

Daughters’ Rights in Hindu Undivided Family Property (HUF)

A landmark judgment in protecting women’s rights in the context of the family is the SC judgment in Vineeta Sharma v. Rakesh Sharma (August 2020) where the court held that daughters would have equal coparcenary rights in Hindu Undivided Family property (HUF) by virtue of their birth and could not be excluded from inheritance, irrespective of whether they were born before the 2005 amendment to the Hindu Succession Act, 1956.

Before the 2005 amendment, there was marked discrimination in determining the rights of a son and daughter in claiming the inheritance. A son could claim a share in HUF property “as a matter of right,” however, a daughter did not have any rights after marriage as she was considered to be a part of her husband’s family. Even after the amendment, judgments of various courts and the Supreme Court itself in Prakash v. Phulvati (2016) held that a daughter could be eligible to be a co-sharer only if the daughter and the father were alive as of September 9, 2005 (the date of the amendment). The Supreme Court, by virtue of the Vineeta Sharma judgment, extended the benefit of the 2005 amendment and legitimised the position of women as an integral part of their father’s families.

 

Protection at the Workplace

The court has also sought to provide for the safety of women in the workplace by protecting them from sexual harassment. In the case of Vishakha v. State of Rajasthan [1997 AIR 3011 (SC)], the court framed detailed guidelines for employers to follow to provide for a mechanism to redress the grievances of their female employees. The court felt the need to develop guidelines to “check the evil of sexual harassment of working women at all workplaces” in the “absence of domestic law occupying the field.” These guidelines were eventually formalised as legislation with the passing of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, a vital law to protect millions of women who enter the country’s workforce every year.

 

Participation in Defence

The Supreme Court also held in its 2021 judgement in the case of The Secretary, Ministry of Defence v. Babita Puniya & Ors. that all women army officers are eligible for permanent commissions, allowing them to be in commanding roles in the defence forces. Women officers are now on par with their male counterparts when it comes to promotions, rank, benefits and pensions, thereby fortifying their position in the defence sector, an institution with rigid gender norms.

The court also slammed the Indian Army on August 18, 2021, for disallowing women to appear in National Defence Academy (NDA) examinations. The Supreme Court ordered that women can also sit for National Defence Academy (NDA) examinations. It allowed women candidates to take the examination and said the army’s policy for women was based on “gender discrimination.” The Supreme Court told the Centre that women candidates must be allowed to sit for the entrance exam to the National Defence Academy in November 2021. It cannot defer for one year. Further, medical standards should be tentatively notified and UPSC to issue a corrected notification for the November exam.

 

Acid attack

The Supreme Court, in the case of Laxmi v. Union of India (2014), a PIL brought about by Laxmi, an acid attack survivor, issued guidelines for the welfare of acid attack survivors, besides imposing a country-wide restriction on the sale of acid and compensation to the victims. The judgement led to an amendment in the criminal law, making acid attacks a specific offence and framing a victim compensation scheme for the survivors.

 

Triple Talaq

In the case of Shayra Bano v Union of India [2017 SCC 963 (SC)], the court declared that the practice of instant triple talaq (talaq-e-bidat) is against the basic tenets of the Quran. Talaq-e-bidat is a practice that gives a man the right to divorce his wife by uttering ‘talaq’ three times in one sitting, without his wife’s consent. The court directed the Centre to pass legislation in this regard, which led to the Muslim Women (Protection of Rights of Marriage) Act, 2019. As per the Act, any Muslim husband who pronounces triple talaq on his wife shall be punished with imprisonment which may extend up to three years and a fine. The judgement also saw a heartening departure from the conservative approach taken by the court in Mohd. Ahmed Khan v. Shah Bano Begum (1985). The court also departed from its traditional reluctance to issue judgments in matters of faith while passing its verdict in the Sabrimala (2019) issue. The court held that devotion cannot be subjected to gender discrimination and permitted the entry of women of all ages into the Sabarimala Temple despite a centuries-old custom banning the entry of menstruating women.

The expanding sphere of women in civil society, politics and the armed forces in India has been marshalled and punctuated by various judgments of the court. These judgements have slowly but surely chipped away at some of the anachronistic customs and norms that have long kept women on the sidelines and have paved the way for the executive and the legislature to take up steps to uphold women’s rights in the country.

As the importance of women’s rights in the public and private spheres continue to grow, it is imperative that the law too continues to evolve, accommodating their aspirations and desires.

In March, 2021, in the case of Lt. Col. Nitisha and Ors. v. Union of India, the Supreme Court issued a judgement declaring that the Army’s criteria on Permanent Commissions indirectly discriminated against women. In this case, 86 Army officers had approached the SC alleging gender-based discrimination in the Indian Army. The army officers were women who had a Short Service Commission (SSC) and were applying for a Permanent Commission (PC) in the army. Although the criteria adopted to select women PC officers were nearly identical to the ones used for men, some sub-criteria imposed an unfair burden on women. The Court held that the Army’s criteria indirectly discriminated against women officers. The Bench stated that invisible forms of discrimination must be eliminated to achieve substantive equality.

 

SC Gets Three New Women Judges

On October 31, 2021, nine new Chief Justices were appointed by the Supreme Court. Out of the total, three are female judges, a first in the Indian judicial appointments history. This decision was historic because for the first time these many women judges have been appointed and another reason was for the first-time camera was allowed inside the swearing-in room. The newly appointed judges are Justices Hima Kohli, BV Nagarathna and Bela M. Trivedi. Justice Nagarathna is going to be the first female Chief Justice of India in 2027.

 

Conclusion

 

According to Swami Vivekananda, “That nation which doesn’t respect women will never become great now and nor will it ever in the future.” A concerted effort and the support of everyone can and shall pave the way for a truly equal society.

However, skewered gender roles do not provide enough opportunities to improve access to education for women. As a first step, actively breaking the gender bias on the domestic front is the key. Only when women are seen as more than caregivers and housekeepers, will their individuality and potential be truly respected. In this mission, parents play a crucial role, they should teach their child to be respectful towards all genders and refrain from typecasting genders into specific roles. Many other developmental schemes and initiatives for improving the status of women havealso been implemented, but the law and the judiciary can only extend assistance to a certain limit. Real change will only ensue when we as a community and society take conscious initiatives to break the age-old biased practices embedded in our culture.

Skewered gender roles do not provide enough opportunities to improve access to education for women. As a first step, actively breaking the gender bias on the domestic front is the key. Only when women shall be seen as more than caregivers and housemakers, will their individuality and potential be truly respected. In this mission, parents play a crucial role, they should teach their children to be respectful towards all genders and refrain from typecasting genders into specific roles. Many developmental schemes and initiatives for improving the status of women also have been implemented, but the law and the judiciary can only extend assistance to a limit. A real change shall only ensue when we as a community and society take conscious initiatives to break the age-old biased practices embedded in our culture.  

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