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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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.

References: 

[1] https://www.weforum.org/reports/global-gender-gap-report-2022/

[2] https://economictimes.indiatimes.com/news/india/trillions-at-stake-in-india-as-women-disappear-from-workforce/articleshow/91951655.cms

 

 

Image Credits: Photo by Tim Mossholder on Unsplash

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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Legal Implications of Offering Gifts to Public Servants

Offering gifts to Public Servants is an act which might call for interference with the provisions of the Prevention of Corruption Act, 1988 (“Act”). Many companies grapple with whether they should be offer gifts to Public Servants as a gesture of celebration during festivals. It is pertinent to note that the concern involved might be looked at from different perspectives. The leitmotif of this piece is to only provide a picture from the standpoint of the Act.

The Act was enacted to eradicate corruption. Section 2 (c) of the Act provides for an elaborate definition of the term “Public Servant”. The definition of the term “Public Servant” has time and again been under wide judicial interpretation. Interestingly, the Act does not define the term bribe, gift or gratification. Instead, the it uses the terminology ‘undue advantage’. The term ‘undue advantage’ is defined under section 2(d) which means “any gratification whatever, other than legal remuneration”. The term “gratification” is not limited to pecuniary gratifications or to gratifications estimable in money. The expression “legal remuneration” is not restricted to remuneration paid to a public servant but includes all remuneration that the public servant is permitted by the Government or the organisation, which he serves, to receive. Therefore, any gift to a Public Servant can qualify as an undue advantage given to him.

Section 7 of the Act provides for punishment to a Public Servant for accepting bribe. The Section provides that obtaining or accepting or attempting to obtain “undue advantage” from any person as a reward or with an intention to perform or cause performance of a public duty improperly or dishonestly or to forbear the performance of any such duty would amount to a punishable offence. It further provides that if a public servant abets any other public servant to perform the aforesaid acts, the said public servant would be liable under the provisions of Section 7. The explanation to Section 7 provides that the act of obtaining or accepting or attempting to obtain any “undue advantage” shall by itself constitute an offence, even if the performance of the public duty by the public servant is not or has not been improper. Thus, the explanation makes it clear that, whether the public servant has discharged the duty improperly or not, he can be prosecuted, if he has obtained or attempted to obtain any undue advantage for the discharge of his official duty.

The Act further provides for the punishment of any person who commits the offence of bribing a public servant. Section 8 of the Act states that any person who gives or promises to give an undue advantage to other person/persons with an intention to induce a public servant to perform improperly, a public duty or to reward such public servant for such improper performance shall be punished with imprisonment or with fine or with both. Further, Section 9 of the Act deals with an offence relating to bribing a public servant by a commercial organization. Under the Section, a commercial organization not only includes a company or partnership incorporated in India and carrying on business in India or outside India, but also a body or partnership incorporated or formed outside India but carrying on business in India. Moreover, Section 9 makes the commercial organization guilty and punishable with a fine if any person(s) associated with them gives/promises to give any undue advantage with the intent to:

  • Obtain/retain any business, or
  • Obtain/retain an advantage in the conduct of business for such a commercial organization.

It is pertinent to note that, under Section 9, it shall be a defence for the commercial organization to prove that it had in place adequate procedures for the compliance of such guidelines as may be prescribed to prevent persons associated with it from undertaking such conduct.

Section 10 of the Act provides that a person in charge of a commercial organization who has committed an offence under section 9 of the Act shall be guilty of the offence and shall be liable to be proceeded against. That is to say that when an offence under Section 9 of the Act is committed by a commercial organization and such offence is proved in the Court to have been committed with the connivance of any director, manager, secretary or another officer of the commercial organization; such director, manager, secretary or another officer shall be guilty of the offence and shall be liable to be proceeded against and shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to a fine.

Having understood the conspectus of sections, it is pertinent to note that gifts given to a public servant might be considered as “undue advantage” under Section 2 (d) of the Act. The term “undue advantage” has been defined in a broad manner under the Act to mean any gratification, other than the entitled legal remuneration. Therefore, gifts which do not form part of the legal remuneration of a Public Servant could be held as an “undue advantage”. In such a case, both the person giving such undue advantage and the Public Servant accepting such undue advantage might be booked under the provisions of the Act. Therefore, in this regard that when it comes to criminal prosecution, both mens rea and actus reus are important to be established. Even if the intention of the person giving such gifts was not to gain any undue benefits from the Public Servant, in deviation of his duty, that would have to be established before a Court of law. Lack of intention would not stop the State authorities to initiate an action under the provisions Act.

Therefore, both people giving gifts to Public Servants and Public Servants accepting gifts are to be cautious of its legal implications.

Image Credits: Photo by Shameer Pk from Pixabay 

The term “undue advantage” has been defined in a broad manner under the Act to mean any gratification, other than the entitled legal remuneration. Therefore, gifts which do not form part of the legal remuneration of a Public Servant could be held as an “undue advantage”. In such a case, both the person giving such undue advantage and the Public Servant accepting such undue advantage might be booked under the provisions of the Act. Therefore, in this regard that when it comes to criminal prosecution, both mens rea and actus reus are important to be established.

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Remuneration of Insolvency Professionals – A Progressive and Performance Oriented Approach  

An Insolvency Professional (IP) is entrusted with the management and administration of a Corporate Debtor’s affairs throughout the Corporate Insolvency Resolution Process (CIRP). He is responsible for managing, operating, and running the Corporate Debtor as a going concern during the said period by taking over the day-to-day affairs of the Corporate Debtor, complying with all the applicable laws, etc. An IP is also entrusted with the obligation of calling for the Resolution Plans, putting them before the Committee of Creditors (CoC) and having the best of all the Resolution Plans approved by the CoC, putting in his best efforts while doing so, and then by the Adjudicating Authority (AA). His obligations necessitate the highest level of professionalism, dexterity, and honesty. Therefore, taking into account his abilities, obligations, and responsibilities that he discharges, he needs to be compensated fairly for the professional services he provides.

Insolvency Professional’s Remuneration in Foreign Jurisdictions

Different jurisdictions have different frameworks for dealing with the insolvency matters arising in their jurisdictions. As a result, it is only natural for such jurisdictions to have different parameters for determining fees for their IPs (or the person equivalent to or performing the functions and duties of Indian IP in their jurisdictions).

In the United Kingdom (UK), matters relating to insolvency are dealt with under the Insolvency (England and Wales) Rules, 2016. The said rules provide for the determination of the “administrator, liquidator or trustee” (the IP equivalent) on the basis of either a percentage of the value of the property realised or distributed, or time spent in attending to the matter, or a fixed amount, or any combination of the aforesaid three parameters. In the United States of America (US), Section 326 of the US Bankruptcy Code provides that a court may allow a reasonable compensation to the “trustee” (the IP equivalent) that should not be more than a varied percentage of the amount disbursed or turned over by him to the creditors. While the US and UK follow a variable fee model, in Canada, the law relating to insolvency provides that the trustee’s (the IP equivalent) fees are to be fixed by the creditors by way of an ordinary resolution and in case the creditors fail, the trustee shall be entitled to a maximum of 7.5% of the amount remaining after the secured creditors have been paid out of the amount realised from the properties of the Corporate Debtor.

Insolvency Professional’s Remuneration in India

In India, the relevant provisions having a bearing on fees and other expenses of CIRP are envisaged under the Insolvency and Bankruptcy Code, 2016 (the Code) and regulations made thereunder. Section 5(13) & Section 208(2) of the Code, regulations 31, 33, 34 and 34A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, (CIRP Regulations) clauses 16, 25, 25A, 26, and 27 of the First Schedule (under regulation 7(2)(h)) to Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, and the circulars issued by the Insolvency and Bankruptcy Board of India (the IBBI) dated 16th January 2018 bearing no. IBBI/IP/004/2018 and 12th June 2018 bearing no. IBBI/IP/013/2018 deal with the fees of IPs.

While the sections and regulations lay down what costs amount to the CIRP Cost and how such costs including an IP’s fees are to be dealt with, the circulars mainly provide that an IP shall render services for a fee that is a “reasonable reflection” of his work, raise bills/invoices in his name towards such fees, and have such fees paid to his bank account. However, none of the provisions or the circulars provide for a specific parameter to determine the IP’s fees. The fixation of the fees of the IPs, therefore, is a duty cast upon the Applicant and the CoC and that of the AA upon their failure. In the absence of a specific parameter and proper definition of “reasonable reflection”, the AA is often faced with cases involving fee disputes between IP and Applicant and IP and the CoC. The AA had been issuing various directives to the Board, directing it to fix the fees of the IP and to consider issuing guidelines or preparing a reasonable fee structure.

The IBBI has dealt with the AA’s references with respect to the fixation of IP’s fees on a case-to-case basis up until now. However, to avoid unnecessary disputes between the parties leading to litigation and to save the time of the parties as well as the AA from it, on 9th June 2022, the IBBI issued a discussion paper addressing the issue of fees payable to the IPs acting as IRPs and RPs. The paper proposes amendments to regulations 34A and the insertion of regulations 34B and Schedule II in the CIRP Regulations, specifying a model fee structure for the IPs. The fee structure proposes not only to resolve the issue with respect to the fixation of fees but also encourages IPs to facilitate timely resolution of a Corporate Debtor keeping in mind the maximisation of its value through the introduction of performance linked incentive fees, while very aptly mentioning in the discussion paper that “Maximisation of value does not mean maximum recovery from the assets during the process of liquidation. It is a concept that helps CD to get a fair valuation in return.”

Fixed Fee Structure

The proposed regulation 34A provides that the Applicant, the AA and the CoC shall fix the IP’s fee that shall be payable to him from the date of his appointment till the submission of the Resolution Plan before the AA after approval of the CoC, in accordance to the following minimum fee: –

 

Quantum of Claims Admitted

 

Minimum Fee Per Month

(Rs. Lakh)

(i)     

<= Rs. 50 crores

1.50

(ii)   

> Rs.50 crore < = Rs.100 crores

2.00

(iii)           

 > Rs.100 crore < = Rs.500 crores

2.50

(iv)  

> Rs.500 crore < = Rs.1,000 crores

3.00

(v)    

> Rs.1,000 crore < = Rs.2,500 crores

3.50

(vi)  

> Rs.2,500 crore < = Rs.10,000 crores

5.00

(vii)          

> Rs.10,000 crores

7.50

The regulation also enables the CoC to ratify an amount higher than the amount envisaged in the aforesaid table. It further provides that the CoC may also decide the fee for the interregnum period between the submission of the Resolution Plan before the CoC and its approval by the CoC.

 

Performance Linked Fee

Since time is the essence of the Code, the IPs must adhere to the timelines and facilitate a time-bound process as envisaged under the Code read with regulations made thereunder. Keeping in mind the timely resolution of a Corporate Debtor and maximization of its value, in addition to the aforesaid, the amendment further proposes that an IP may also be paid a performance linked fee to ensure timely completion of the CIRP in the following manner: –

 

Timelines

Fee as % of actual realizable value

(i)     

<= 180 days

1.00

(ii)   

> 180 days < = 270 days

0.75

(iii)           

 > 270 days < = 330 days

0.50

(iv)  

 > 330 days

0.00

The amendment further provides that the aforesaid performance linked fee shall form a part of the CIRP Cost and the same shall in no case exceed Rs.5 crore. However, the discussion paper states that the said performance linked fee is only of indicative nature, and that the CoC may devise any other incentive structure, or it may decide not to give such incentive at all. 

Escrow account mechanism

According to the IBBI, in addition to determining fees, the applicant or the CoC, is also responsible for ensuring that any amounts payable to IP are paid. As a result, an escrow account system has been proposed to ensure the timely payment of the fee to the IP.

At the first CoC meeting, IP must provide an estimate of the fixed fee and expenditure on hiring other professionals, support services, and so on, and the CoC will either contribute to an escrow account or secure interim financing for the estimated fees and expenses for the first six months. It, therefore, proposes the following additions to the CIRP Regulations through the insertion of regulation 34B.

Immediately upon his appointment as an IRP, an IP shall open an escrow account in the name of the Corporate Debtor in respect of his fee and the fee for the RP. Within 72 hours following the submission of the statement by the IP, the applicant or the CoC, as the case may be, shall deposit in the escrow account, or arrange for interim finance for deposit in the escrow account, amount fixed under regulation 34A. The IRP or the RP may withdraw money from the escrow account to cover his fee, and they must disclose the withdrawals to the CoC in the statement prepared under regulation 34A. The balance in the escrow account, if any, will be released upon approval of a resolution plan under section 31 or the passing of an order for Corporate Debtor’s liquidation under section 33.

The IBBI has invited comments from the public on the aforesaid amendment and the last date for submission of the same is June 30, 2022. Once approved, the new regulations would resolve the long pending issue with respect to the fee payable to the IP and with it, it would also decrease the number of litigations arising out of the said issue, thereby, further cutting down on the unnecessary and avoidable time consumption in the CIRP process. The performance linked fee would further encourage the IPs to work towards the maximization of value of the Corporate Debtor, reduce the amount of time consumed in the process, and keep the IPs motivated towards work.

Conclusion

Apart from decreasing the number of litigations related to IP fees, thereby reducing time consumed in the CIRP and keeping the IPs motivated towards maximisation of value of Corporate Debtor’s assets in a time bound manner, the proposed amendments would resolve several other issues.

Be it any profession, it becomes difficult to balance the efficiency, quality of work and professionalism when the remuneration of the professional involved is not decided upon or still being negotiated upon, due to which the beneficiary of the work being or proposed to be performed suffers. There have been several instances where during the CoC meetings the CoC and the IP either hard-negotiate upon the IP’s fees or the expense incurred by the IP, due to which the Corporate Debtors suffer. The proposed fixed fee structure that provides for a minimum amount to be paid as fees to the IP, if enforced, would leave no room for such hard-negotiations. By guaranteeing a minimum fixed amount to be paid to the IP based on the quantum of claims admitted, the proposed regulation ensures that the IPs as well as the CoC waste no time in fee-bargaining, thus creating more room for conducting the CIRP in a time bound manner.

Further, the proposed fixed fee structure based on the quantum of claims admitted by the IP would also ensure that the fees being paid to him are equitable and commensurate with the amount of work done by him. The professionals who were reluctant to agree to take up the baton of CIRP of the Corporate Debtors that had Creditors with a history of haggling with the IPs for their fees would also pitch to take up the CIRP of such Corporate Debtors, thereby, providing a better opportunity of resolution to such Corporate Debtors.

The CIRPs under the Code are plagued with slow progress with most of the cases extending beyond the 180 days period and several cases crossing the 330 days’ period. The proposed provision with respect to the performance linked fee would encourage the IPs to endeavour and finish the entire CIRP within a time bound period by providing an additional maximum performance-based remuneration to them for the completion of the entire CIRP within 180 days as compared to no additional remuneration for the completion of the CIRP after the expiration of 330 days.

The amendment proposed with respect to the escrow account would resolve the issue where the CoC of the Corporate Debtors do not contribute to the running CIRP cost due to various reasons, thus slowing down, and in some cases halting, the entire resolution process. The said inclusion of regulation 34B would ensure that the IPs actually get their fees and that they have the finances to conduct the CIRP at all times. This would drastically reduce the number of litigation with respect to the payment of IP’s fees before AA and save the time wasted in pursuing such litigation.

The proposed amendments have certain drawbacks too. The fixed fee structure provides for the determination of the minimum fees based on the quantum of claims admitted. The duty to admit or reject the claim is that of the IP which, in some cases, might be affected inasmuch as some of the IPs may be encouraged to admit a larger number of claims.

Insofar as the provision relating to the performance linked fee is concerned, the same is otiose inasmuch as it provides that the performance linked fee is indicative in nature, and that the CoC may devise any other incentive structure, or it may decide not to give such incentive at all. By giving the CoC the authority to devise other incentive structures or to not give any incentive at all, the said provision would only be a toothless tiger, for in most of the cases the CoC will try to bring down such amount substantially if not completely wriggle out of paying it.

Further in addition to the aforesaid performance linked fee, to maximise the value of the assets of the Corporate Debtor, the IBBI may consider providing for value linked fee in cases where the IPs bring about resolution under which the realisable value of the Corporate Debtor is appreciably higher than the liquidation value of the Corporate Debtor. A percentage of the difference between the realisable value and the liquidation value may be paid to such IPs. This would ensure the value maximisation of a Corporate Debtor to its core.

Image Credits: Photo by FIN on Unsplash

By guaranteeing a minimum fixed amount to be paid to the IP based on the quantum of claims admitted, the proposed regulation ensures that the IPs as well as the CoC waste no time in fee-bargaining, thus creating more room for conducting the CIRP in a time bound manner.

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Property Rights of Daughter in India: Post-Supreme Court Ruling, 2022

In January 2022, the Apex Court, through its decision in Arunachala Gounder (dead) v. Ponnuswamy’s[1] held that the self-acquired property of a Hindu male dying intestate would devolve by inheritance and not by succession. Further, the daughter shall be entitled to inherit such property, as well as property obtained through the partition of a coparcenary or family property.  It was also observed that, in case a woman dies intestate, then the ancestral property devolved on her from her father would be bestowed upon her father’s heirs and the property devolved on her from her husband’s side would be assigned to her husband’s heir in case she dies issueless.

The Court observed that “The basic aim of the legislature in enacting Section 15(2) is to ensure that the inherited property of a female Hindu dying issueless and intestate, goes back to the source.”

The judgment establishes a scheme of succession that is in alignment with the “rule of proximity and the entitlement of the sole surviving daughter” to her father’s separate properties, even as far back as before the enactment of the 1956 Act.

Prior to this deliberation, the Supreme Court on August 11, 2020, also expanded on a Hindu woman’s right to be a joint legal heir and inherit ancestral property on terms equal to male heirs in the case of Vineeta Sharma vs. Rakesh Sharma & Ors.

Different benches of the Supreme Court and various High Courts have taken conflicting views on the issue in the past.

  1. In Prakash vs. Phulavati (2015), the Supreme Court held that Section 6 is not retrospective in operation and the benefit of the 2005 amendment could be granted only to “living daughters of living coparceners” as on September 9th, 2005 (the date when the amendment came into force).
  2. In February 2018, the Court ruled that, contrary to the 2015 ruling, the share of a father who died in 2001 will also pass to his daughters as coparceners during the partition of the property as per the 2005 law.
  3. Then in Danamma @Suman Surpur vs. Amar (April 2018), the Court reiterated the position taken in 2015.

         These clashing views by benches of equal strength led to a reference to a three-Judge Bench in the case. The three-judge bench of Justices Arun Mishra, S. Abdul Nazeer and M. R. Shah passed the verdict in a reference that was made in appeals raising the issue of whether the amendment to the Act granting equal rights to daughters to inherit ancestral property would have retrospective effect. What this means is that whether with the passing of the Hindu Succession (Amendment) Act, 2005, a daughter of a coparcener shall by birth become a coparcener in her own right in the same manner as the son, or if she can be denied her share on the ground that she was born prior to the enactment of the Act on September 9, 2005, and therefore cannot be treated as a coparcener.

The verdict makes it clear that the amendment to the Hindu Succession Act, 1956 granting equal rights to daughters to inherit ancestral property would be retrospective. The daughters cannot be deprived of their right to equality conferred upon them by Section 6. Daughters, like sons, have an equal birth right to inherit joint Hindu family property. Since the right to coparcenary of a daughter is by birth, it is not necessary that the father should be alive on September 9, 2005. The Court has thus overruled an earlier 2015 decision.

         The Court also stated that the statutory fiction of partition created by the proviso to Section 6 of the Hindu Succession Act, 1956 as originally enacted, did not bring about the actual partition or disruption of the coparcenary. An unregistered partition, or oral partition, without any contemporaneous public document, cannot be accepted as the statutorily recognised mode of partition. However, in exceptional cases, where the plea of oral partition is supported by public documents and the partition is finally evinced in the same manner as it had been affected by a decree of a court, it may be accepted. 

         The Court has clearly settled the issue on the effective date of the 2005 amendment, by laying no relevance on the date of birth of the daughter or alternatively, the date of death of the father, whether prior to the 2005 amendment or post. So long as the daughter is alive post 2005, she has an equal right as a son in the coparcenary property. Therefore, it is irrelevant whether her father was alive or not or whether she was married or not on the cutoff date of September 9, 2005.

         If a daughter is born before September 9, 2005, she would become a coparcener, in her own right, in the same manner as sons. i.e., with the same rights and liabilities, provided there had been no parting/partition/devolution before December 20, 2004. As long as the property remained coparcenary property and was not partitioned as of the date, a daughter can now claim an interest in the same.    

         Putting the last nail on male primacy in the division of Hindu ancestral property, the Supreme Court cleared the legal cobwebs to declare that daughters will have inheritance rights equal to those of sons from the properties of fathers, grandfathers and great-grandfathers right from the codification of the law in 1956. The Bench held that daughters will have equal coparcenary rights in Hindu Undivided Family properties irrespective of whether the father was alive or not on September 9, 2005, asserting that this right under Section 6 of the Hindu Succession Act, 1956 is acquired by birth. Daughters can claim the benefit in the case of Intestate Succession and not Testamentary Succession. However, daughters, while claiming coparcenary rights, would not be able to question the disposal or alienation of ancestral properties by the existing coparceners prior to December 20, 2004.

         The provisions contained in the substituted Section 6 of The Hindu Succession Act, 1956 confer status of coparcener on the daughter born before or after amendment in the same manner as son with same rights and liabilities. The court was dealing with an interpretation of Section 6 after it was amended in 2005. The amendment granted equal rights to daughters in ancestral property. The rights can be claimed by the daughter born earlier with effect from September 9, 2005. The judgement widened the rights of daughters. The retrospective application of section 6 was analysed and ruled that the daughters would get the rights from 1956, when the law came into force. However, it would not reopen alienation of the ancestral property earlier through existing coparceners. Only a coparcener has the right to demand the partition of property. A share in a property is adulated by birth or death in a family.

A daughter, living or dead, as on the date of the amendment, shall be entitled to a share in her father’s property. It means that even if the daughter was not alive on the date of the amendment, her children could claim her rightful portion.

The court recognised that just like sons, the amendment also extended the status of the coparcener to a daughter, allowing her to enjoy the same rights as a son. Daughters possess the right of inheritance from birth, so it does not matter whether she is married or not, she will be entitled to an equal share.

While the prospective statute operates from the date of its enactment, conferring new rights, the retrospective statute operates backwards and takes away the impairment of the vested rights acquired under existing laws prior to its coming into force. This amendment operates in the future but by virtue of its retrospective effect, it confers rights on daughters from the time of their birth, even if the birth took place prior to the amendment.

The Court held that coparcenary was the birth right of daughters and it would be discordant to restrict it with the condition that the father must be alive. The goal of gender justice embodied in the Constitution is effectuated and the fundamental right to equality under the Indian Constitution has been upheld in the truest sense and translated into ground reality by substituting the provisions of Section 6 by the 2005 Amendment Act.


Impact


Daughters will now be treated at par with sons of coparceners and granted equal coparcenary rights in their father’s property upon birth itself. Daughters shall remain coparcener throughout life, irrespective of whether their father is alive or not. Hence, even their marital status will not affect the rights conferred to them by way of amendment, and hence they shall continue to be part of their father’s HUF post marriage. The door of alienation of their share of property will be opened for daughters without any ambiguity. Daughters can now seek partition of their father’s coparcenary property, claiming their equal share the same as their siblings and other coparceners and they cannot be denied on the basis of an oral family settlement. Upon acquiring a share in a coparcenary property, a female coparcener can bequeath her HUF share under her Will to any beneficiary she chooses and to the exclusion of others.

The law applies to ancestral property and to intestate succession in personal property where succession happens as per law and not through a Will. Suppose a Hindu makes a Will or makes a disposition of property in favour of the son according to The Hindu Succession Act, 1956 and not the daughter, then the daughter will not be able to question the Will and not claim the benefit of the Supreme Court Judgment. But if a Hindu dies intestate without making any disposition of property, then the daughters have the right to claim an equal right of inheritance.

The daughters, while claiming coparcenary rights, would not be able to question the disposal or alienation of ancestral properties by the existing coparceners prior to December 20, 2004. If a daughter is unable to reap any benefit from an ancestral property and enforce her right, and another male co-owner is reaping the benefits, she can enforce her rights by filing a suit following a 2005 amendment supported by a Supreme Court judgement on equal right of inheritance for daughters. Daughters can, however, claim partition of the property prior to the Amendment Act. Apportionment of benefit in the property will be accessible to the daughters distinctly along the other coparceners.

The judgements are landmarks and help in the forward march of women’s rights and the law. Traditionally, Indian business families prefer sons as successors, and daughters are not included in the business as successors. Thus, the latest rulings will have a wider impact on various family settlements and asset divisions, especially in family business. Though the judgments envisage rectifying one of the discriminatory social practices, it would require no less than a behavioural change in the mindset of Indian society to fulfil the goal of gender parity.

References:

[1] https://www.livelaw.in/pdf_upload/arunachala-gounder-dead-vs-ponnusamy-a-2022-livelaw-sc-71-407962.pdf

 

Image Credits:

Photo by Rahul: https://www.pexels.com/photo/silhouette-of-people-climbing-stairs-1009900/

If a daughter is born before September 9, 2005, she would become a coparcener, in her own right, in the same manner as sons. i.e., with the same rights and liabilities, provided there had been no parting/partition/devolution before December 20, 2004. As long as the property remained coparcenary property and was not partitioned as of the date, a daughter can now claim an interest in the same.    

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Inter-Se Priority Among Secured Creditors in Liquidation - A Judicial Dichotomy  

The Insolvency and Bankruptcy Code, 2016 (“IBC”/”Code”) came into force on 28th May, 2016 with the primary objective of consolidating and amending the laws of reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner to maximise the value of their assets. The Code has been evolving over the last six years, with changing scenarios and adapting to practical circumstances along the way. As a result, the Code has undergone amendments from time to time. The provisions in the Code have also been interpreted and clarified by judicial pronouncements of the Hon’ble NCLTs, the Hon’ble NCLAT and the Hon’ble Supreme Court of India. The law relating to the Code is still emerging and there are a number of issues which are still required to be addressed with unambiguous certainty. One such issue is the distribution of proceeds in liquidation from the sale of assets under Section 53 of the Code to the secured creditors vis-à-vis the validity of inter se priority among secured creditors in respect of their security interests (charges) during liquidation.

What is the meaning of “Charge” and “Inter se Priority”?

Section 3(4) of the Code defines the term “charge” as an interest or lien created on the property or assets of any person or any of its undertakings or both, as the case may be, as security and includes a mortgage.

Several charges can be created in respect of a particular asset. This can be done by way of creating a pari passu charge over the asset where all the charge holders are placed on an equal footing or by way of the creation of a first charge and a subservient charge wherein the first charge holder can satisfy its debts in entirety prior to the subservient charge holders. This principle is embodied in Section 48 of the Transfer of Property Act, 1882. However, under Section 52 of the Code, a secured creditor has two options to realise its debts from secured assets held by it relating to a corporate debtor in liquidation:

Although the Code does not specifically indicate the validity of inter-se-priority of charges at the time of distribution in accordance with the waterfall mechanism provided under Section 53, the issue has been deliberated and decided upon by the Hon’ble NCLTs, Hon’ble NCLAT and Hon’ble Supreme Court of India in recent times, through judicial interpretation.

Pre-IBC Regime: Legal Position under the Companies Act, 1956

Under the earlier Companies Act, 1956, Sections 529 and 529A governed the ranking of creditors’ claims and the distribution of sale proceeds by the Official Liquidator in respect of a corporate debtor in liquidation.

The legal position vis-à-vis inter-se-priority of charges in the pre-IBC regime was discussed at length by the Hon’ble Supreme Court of India in the case of ICICI Bank vs Sidco Leathers Ltd. [Appeal (Civil) 2332 of 2006, decided on April 28, 2006]. In the said case, the Hon’ble Apex Court, while interpreting Sections 529 and 529A of the Companies Act, 1956, observed that even though workmen’s dues and secured creditors’ debts are treated pari passu, this does not negate inter se priorities between secured creditors. The Hon’ble Court stated that since the Companies Act of 1956 is a special statute which contains no provisions regarding inter se priority among secured creditors, the specific provisions set forth in the Transfer of Property Act, 1882 shall prevail. The Hon’ble Court further held that if Parliament, while amending the provisions of the Companies Act, 1956, intended to take away secured creditors’ entitlement to property, it would have stated so expressly. The Hon’ble Court, while deciding the issue, observed the following:

“Section 529A of the Companies Act does not ex facie contain a provision (on the aspect of priority) amongst the secured creditors and, hence, it would not be proper to read therein to things, which the Parliament did not comprehend. The subject of mortgage, apart from having been dealt with under the common law, is governed by the provisions of the Transfer of Property Act. It is also governed by the terms of the contract.”

“Merely because section 529 does not specifically provide for the rights of priorities over the mortgaged assets, that, in our opinion, would not mean that the provisions of section 48 of the Transfer of Property Act in relation to a company, which has undergone liquidation, shall stand obliterated.”

From the aforesaid, it is evident that the Hon’ble Apex Court upheld the validity of the Transfer of Property Act, 1882, which is a general law, over the provisions of the Companies Act, 1956, which is a special law and which did not recognise the concept of inter-se priority of charges.

 

Post-IBC Regime: Legal Position under the Code and the Report of the Insolvency Law Committee 2018

 

Report of the Insolvency Law Committee dated March 26, 2018

In the Report of the Insolvency Law Committee (ILC) dated March 26, 2018, it was noted that inter-creditor agreements should be respected. The ILC relied on the judgement of the Hon’ble Supreme Court in the case of ICICI Bank vs. Sidco Leathers Ltd. and came to the conclusion that the principles that emerged from the said case are also applicable to the issue under section 53 of the Code. The ILC in its report stated that Section 53(1)(b) of the Code only kept the workmen and secured creditors, on an equal pedestal and no observations were made on the inter-se priority agreements between the secured creditors and the same would therefore remain valid. The Report further clarified that the provision of Section 53(2) would come into effect only in cases where any contractual arrangement interferes with the pari passu arrangement between the workmen and secured creditors which means that contracts entered into between secured creditors would continue to remain valid.

 

Judicial Interpretation in recent times

Section 53 of the Code lays down the waterfall mechanism with respect to payment of debts to the creditors of the corporate debtor. The workmen’s dues and the debts of secured creditors rank pari passu under Section 53. However, the Code does not expressly provide for the preservation of inter-se-priorities between secured creditors at the time of distribution of sale proceeds realised by the liquidator by the sale of assets. The issue is to be understood and interpreted in the light of recent judicial decisions. Some of the recent judgments which have dealt with the issue are:

 

Technology Development Board vs Mr. Anil Goel & Ors. [I.A No. 514 of 2019 in CP(IB) No. 04 of 2017 decided on 27th February, 2020 by the Hon’ble NCLT, Ahmedabad]

In the instant case, the liquidator had distributed proceeds from the sale of assets to the first charge holders, in priority to the applicant who was a second charge holder without considering the claim of the applicant as a secured creditor that such distribution ought to have been made prorate among all secured creditors. It is pertinent to mention here that all the secured creditors had relinquished their security interests in the common pool of the liquidation estate. The Applicant was one of the secured financial creditors of the Corporate Debtor having a 14.54% voting share in the CoC of the Corporate Debtor.

Aggrieved by such distribution which recognised inter-se-priority among secured creditors, the Applicant moved the Hon’ble NCLT, Ahmedabad Bench.

The issue to be determined:

The primary issue that was to be decided by the Hon’ble NCLT was that once a secured creditor has not realised his security under Section 52 of the Code, and has relinquished the security to the liquidation estate, whether there remains no classification inter se i.e., by joining liquidation, all the secured creditors are ranked equal (pari passu), irrespective of the fact that they have inter-se-priority in security charge.

Observations of the Hon’ble NCLT

The Hon’ble NCLT while deciding the aforesaid issue held:

  • It is a settled position that when a charge is created on a property in respect of which there is already a charge, it cannot be said that the creation of the second charge on the property should have been objected to by the first charge holder as an existing and registered charge is deemed to be a public notice.
  • Emphasis was placed on Section 53(2) of the Code, which provides that any contractual arrangements between recipients under sub-section(1) with equal ranking, shall be disregarded by the liquidator if it disrupts the order of priority under that sub-section. In other words, if there are security interests of equal ranking, and the parties have entered into a contract in which one is supposed to be paid in priority to the other, such a contract will not be honoured in liquidation.
  • The whole stance in liquidation proceedings is to ensure parity and proportionality. However, the idea of proportionality is only as far as claims of similar ranking are concerned.

Decision:

The Hon’ble NCLT, relying on the judgement of the Hon’ble Supreme Court of India passed in ICICI Bank vs. Sidco Leathers Ltd., held that inter se priorities among creditors remain valid and prevail in the distribution of assets in liquidation.

 

Technology Development Board vs Mr. Anil Goel & Ors. [Company Appeal (AT) (Insolvency) No.731 of 2020 decided on 5th April, 2021 by the Hon’ble NCLAT, Principal Bench, New Delhi]

The issue to be determined:

Aggrieved by the aforesaid order dated 27th February 2020 passed by the Hon’ble NCLT, Ahmedabad, an appeal was preferred by the Applicant before the Hon’ble NCLAT wherein the issue raised for consideration was whether there could be no sub-classification among the secured creditors in the distribution mechanism adopted in a Resolution Plan of the Corporate Debtor as according to priority to the first charge holder would leave nothing to satisfy the claim of the Appellant who too is a secured creditor.

Observations of the Hon’ble NCLAT

The Hon’ble NCLT while deciding the issue took note of Sections 52 and 53 of the Code and held:

  • Section 52(2) of the Code stipulates that a secured creditor, in the event it chooses to realise its security interest, shall inform the liquidator of such security interest and identify the asset subject to such security interest to be realised. The liquidator’s duty is to verify such security interest and permit the secured creditor to realise only such security interest, the existence of which is proved in the prescribed manner. It is abundantly clear that there is a direct link between the realisation of a security interest and the asset subject to such security interest to be realised.
  • Section 53 deals with distribution of assets by providing that the proceeds from the sale of the liquidation assets shall be distributed in the order of priority laid down in the section. The provision engrafted in Section 53 has an overriding effect over all other laws in force.
  • The essential difference between the two provisions i.e Sections 52 and 53, lies with regard to the realisation of interest. While Section 52 provides an option to the secured creditor to either relinquish its security interest or realise the same, Section 53 is confined to the mode of distribution of proceeds from the sale of the liquidation assets.
  • Whether the secured creditor holds the first charge or the second charge is material only if the secured creditor elects to realise its security interest.
  • A secured creditor who once relinquishes its security interest ranks higher in the waterfall mechanism provided under Section 53 as compared to a secured creditor who enforces its security interest but fails to realise its claim in full and ranks lower in Section 53 for the unpaid part of the claim.
  • Section 52 incorporating the doctrine of election, read in juxtaposition with Section 53 providing for distribution of assets, treats a secured creditor relinquishing its security interest to the liquidation estate differently from a secured creditor who opts to realise its security interest, so far as any amount remains unpaid following enforcement of security interest to a secured creditor is concerned by relegating it to a position low in priority.
  • The non-obstante clause contained in Section 53 makes it clear that the distribution mechanism provided thereunder applies in disregard of any provision to the contrary contained in any Central or State law in force.
  • A first charge holder will have priority in realising its security interest provided it elects to realise and not relinquish the same. However, once a secured creditor opts to relinquish its security interest, the distribution would be in accordance with the Section 53(1)(b)(ii) wherein all secured creditors have relinquished their security interest.

Decision

It was held by the Hon’ble NCLAT that the view taken by the Adjudicating Authority on the basis of the judgement passed by the Hon’ble Apex Court in ICICI Bank vs. Sidco Leathers Ltd. and ignoring the mandate of Section 53, which has an overriding effect and was enacted subsequent to the aforesaid judgment, is erroneous and cannot be supported. The Hon’ble NCLAT therefore held that the order of the Adjudicating Authority holding that the inter-se priorities amongst the secured creditors will remain valid and prevail in the distribution of assets in liquidation cannot be sustained and the liquidator was directed to treat the secured creditors relinquishing the security interest as one class ranking equally for distribution of assets under Section 53(1)(b)(ii) of the Code and distribute the proceeds in accordance therewith.

 

Kotak Mahindra Bank Limited vs Technology Development Board & Ors. [Civil Appeal Diary No(s). 11060/2021]

The aforesaid order passed by the Hon’ble NCLAT has been further challenged before the Hon’ble Supreme Court of India. The appeal is currently pending adjudication, but the Apex Court has stayed the operation of the impugned order dated 5th April passed by the Hon’ble NCLAT, by order dated 29th June, 2021 . The appeal has been last heard on April 29, 2022, wherein an order has been passed to list the matter after eight weeks. It would be interesting to see whether the Apex Court upholds the order of the Hon’ble NCLAT and disregards the inter se priority among creditors at the time of distribution of sale proceeds under Section 53 of the Code or upholds the validity of the same.

 

Oriental Bank of Commerce (now Punjab National Bank) vs Anil Anchalia & Anr. [Comp. App. (AT)(Ins) No. 547 of 2022 decided on 26th May, 2022 by the Hon’ble NCLAT]

  • In the instant case, the appellant, who was the first and exclusive charge holder with respect to the assets of the corporate debtor, had relinquished its security interest in the liquidation estate. The liquidator, however, distributed the sale proceeds on a pro rata basis under Section 53 of the Code. Being aggrieved by the said distribution, the Appellant filed an application [IA (IBC)/101(KB)2022] before the Hon’ble NCLT, Kolkata, which was rejected by an order dated March 4, 2022. Aggrieved by the same, the appellant preferred an appeal before the Hon’ble NCLAT.
  • One of the contentions raised by the Appellant in the instant case was that the order of the Hon’ble NCLAT in the case of Technology Development Board vs. Mr. Anil Goel & Ors. that secured creditors after having relinquished their security interest could not claim any amount realised from secured assets once they elected for relinquishment of security interest, and that they would be governed by the waterfall mechanism under Section 53 has been stayed by the Hon’ble Supreme Court of India and therefore the Appellant is entitled to receive the entire amount realised from its secured assets.
  • The Hon’ble NCLAT rejected the aforesaid contention and observed that in the light of the judgement passed by the Hon’ble Supreme Court in “India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr. [2021 SC OnLine SC 409] and “Indian Bank vs. Charu Desai, Erstwhile Resolution Professional & Chairman of Monitoring Committee of GB Global Ltd. & Anr.[CA(AT)No. 644 of 2021] the issue is no more res integra. In the aforesaid two cases, a similar contention was raised by the Appellants that the dissenting financial creditors are entitled to receive payment as per their secured interest, wherein it was decided that “when the extent of value received by the creditors under Section 53 is given which is in the same proportion and percentage as provided to the other Financial Creditors, the challenge is to be repelled”.
  • Since the issue is no more res integra and has been decided in the case of India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr. by the Hon’ble Apex Court by its judgment dated 13.05.2021, the instant appeal was also dismissed.

 

Conclusion

 

Section 52 of the Code gives each secured creditor the option of relinquishing their right to the liquidation estate or realising their security interest on its own, subject to the Code’s requirements.

It can be possibly interpreted that once the secured creditor has relinquished its security interest in the liquidation estate, such a secured creditor exercises its option in favour of losing its priority rights over assets charged to it and joins the liquidation pool wherein the secured creditor is paid from the proceeds of the liquidation estate in accordance with Section 53 of the Code. The Code has provided the option to a secured creditor to enforce its first and exclusive charge by taking recourse to Section 52, whereby in the event it is unable to realise its entire dues, it would be ranked lower under Section 53 for realisation of the balance amount. A secured creditor cannot enjoy the fruits of both the provisions under Sections 52 and 53 of the Code at the same time. Once the secured creditor relinquishes its security interest to the common pool of the liquidation estate, it will be treated at par with all other creditors.

It can also be argued that the NCLAT has ignored the legislative intent clarified in the Insolvency Law Committee Report which after considering the decision of the Hon’ble Supreme Court in ICICI Bank vs Sidco Leathers Ltd. applied its principles to the issue under Section 53 of the Code and recommended that inter-se-priority among creditors was not disturbed by Section 53. Section 53 does not deal with inter-se-rights amongst creditors. It merely deals with the distribution of proceeds arising from the sale of assets to various stakeholders. The non-obstante clause in Section 53 would apply to scenarios where the provisions of the section are contrary to any law. Section 53(1)(b) merely mandates that workmen’s dues and debts owed to a secured creditor, in the event such secured creditor has relinquished security in the manner set out in Section 52, shall rank equally and nothing more. The said section does not deal with mortgages or inter-se-priorities amongst creditors/mortgagees. Mortgages are governed by the provisions of the Transfer of Property Act, 1882 and as such inter-se-priorities between mortgagees have been dealt with in that Act. Therefore, there may not be any justification for excluding the applicability of the provisions of the Transfer of Property Act, 1882 relating to mortgages for payment of dues to creditors under Section 53. The absurd result of not providing inter-se-priority to creditors at the time of distribution of sale proceeds under Section 53 would be that every secured creditor holding the first charge on assets would encourage liquidation and realise its dues by selling assets itself by opting to not relinquish the assets to the liquidation pool under Section 52. The chance of selling the corporate debtor as a going concern would then absolutely be eradicated, which would be contrary to the object and spirit of the Code.

It is expected that the Supreme Court will finally rest the issue while deciding the appeal in the case of Kotak Mahindra Bank Limited vs Technology Development Board & Ors. [Civil Appeal Diary No(s). 11060/2021 which is scheduled to appear for a hearing later this month.

Image Credits: Photo by Dennis Maliepaard on Unsplash

Section 53 does not deal with inter – se – rights amongst creditors. It merely deals with the distribution of proceeds arising out of sale of assets to various stakeholders. The non – obstante clause in Section 53 would apply to scenarios where the provisions of the section are contrary to any law. Section 53(1)(b) merely mandates that workmen’s dues and debts owed to a secured creditor, in the event such secured creditor has relinquished security in the manner set out in Section 52, shall rank equally and nothing more. The said section does not deal with mortgages or inter – se – priorities amongst creditors / mortgagees. Mortgages are governed by the provisions of the Transfer of Property Act, 1882 and as such inter – se – priorities between mortgagees has been dealt with in that Act.

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CCPA Introduces New Guidelines to Ban Surrogate Advertising  

In the latest development in the advertising space, the Central Consumer Protection Authority (CCPA) under the Department of Consumer Affairs has introduced ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’. These guidelines aim to curb misleading advertisements and endorsers by putting a complete ban on surrogate advertising effective June 09, 2022. These new guidelines will apply to all advertisements irrespective of the form, format, or platform. 

The Consumer Protection Act, 2019, provides for ‘misleading advertisements’ under Section 2(28).

Section 2(28): “Misleading advertisement” in relation to any product or service means an advertisement that— (i) falsely describes such product or service; or (ii) gives a false guarantee to or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or (iv) deliberately conceals essential information.

The new guidelines touch upon each sub-section of section 2(28) and provide further definitions to include conditions for non-misleading and valid advertisements, definitions for bait and free-claim advertisements, and the complete ban on surrogate/indirect advertisements.

 

Salient Features  

 

Bait Advertising  

An advertisement in which goods, products or services are offered for sale at a low price to attract consumers. The guidelines lay down that:

  • The ad should not entice consumers to buy the goods or services without a reasonable prospect of selling them at a price offered in the advertisement.
  • There should be an adequate supply of the advertised goods or services to meet the demand created as a result of the advertisement.
  • The advertisement should state that the stock is limited; if the ad is to assess the demand, the same should be stated, and it should not omit restrictions regarding the availability of goods or services.

 

Free Claim Advertisement 

The advertisement should make clear the extent of commitment that a consumer shall make to take advantage of a free offer and should not use the term “free trial” to describe an offer that promises to pay the money back to the consumer in case of non-satisfaction if it requires the consumer to make a non-refundable purchase. Free claims should not be made in the advertisement –

  • If the consumers have to pay anything other than the unavoidable cost of responding to the ad or packing, handling or administration of free goods or services or if the price has been increased (except where such increase results from factors unrelated to the cost of promotion) or when the quality or quantity of goods or services has been reduced;
  • If an element of the package is included in the price, it should not be advertised as free.

 

Advertisements Targeting Children

In addition to taking measures to protect the general public from being misled, the CCPA has also laid down measures to protect the sensitive and impressionable minds of the younger generations.

  • It provides that advertisements that target or address children shall not condone or encourage activities that are dangerous for children or take advantage of their inexperience, and/or encourages practices that are detrimental to children’s wellbeing, etc.;
  • Advertisements should not be such as to develop negative body image in children or give any impression that such goods, product or service is better than the natural or traditional food which children may be consuming.
  • Advertisement for junk foods, including chips, carbonated beverages and such other snacks and drinks, should not be advertised during a program meant for children or on a channel meant exclusively for children.
  • The Guidelines also prohibit advertisers from featuring children and personalities from sports, music or cinema for products requiring  a health warning or for products children cannot purchase

 

Due Diligence Endorsers

The guidelines clearly state that the endorsements should reflect the genuine, reasonably current opinion of the endorser regarding their representation. Such endorsement must be based on adequate information or experience with the goods or services and must not be deceptive. Foreign professionals are barred from making endorsements in all circumstances where Indian professionals are barred.

If a connection between the trader/manufacturer and the endorser exists, such connection should be disclosed if such information is likely to affect the value or credibility of the endorsement and the audience does not reasonably expect the link.

 

Disclaimers 

While laying down provisions for disclaimers in advertisements, the Guidelines state that a disclaimer may expand or clarify the main offer but cannot contradict or hide the material claim made in the advertisement or attempt to correct a misleading claim made in the ad. Further, it provides that a disclaimer should be in the same language and font as the claim made in the advertisement and that the placement of the disclaimer shall be at a prominent and visible place on the packaging (ideally be on the same panel). Also, if the claim is presented as a voiceover, the disclaimer shall be displayed in sync with the voiceover and at the same speed as the original claim made in the advertisement.

Apart from the features mentioned above, the guidelines also stipulate specific duties on the manufacturer, service provider, advertiser, or advertising agency to ensure compliance in advertisements, which primarily deals with the veracity of the information/claims made in the advertisements. These guidelines are to be read as part and parcel of the Consumer Protection Act, 2019, and the non-compliance with the provisions shall also invite penalization as provided in section 21 of the Act.

These guidelines will also apply to government advertisements issued by PSUs engaged in providing consumer services along with those issued by private agencies. Moreover, the advertising guidelines for self-regulation issued by the Advertising Standards Council of India (ASCI) will also apply simultaneously.

 

Conclusion 

In the last few years, the regulatory bodies have undertaken many reformations and measures to control how and what is advertised. As our country is moving towards digitization, the need of the hour is to closely monitor the content that is made available to the public, mainly on online social media platforms. The guidelines intend to protect the interests of consumers by introducing more transparency and coherence in the way advertisements are published so that consumers can make informed decisions.

 

 

You may read our blog post detailing surrogate advertising and its enforceability for a deeper understanding of the issues.  

Image Credits: Photo by Dennis Maliepaard on Unsplash

The guidelines also stipulate specific duties on the manufacturer, service provider, advertiser, or advertising agency to ensure compliance in advertisements, which primarily deals with the veracity of the information/claims made in the advertisements. These guidelines are to be read as part and parcel of the Consumer Protection Act, 2019, and the non-compliance with the provisions shall also invite penalization as provided in Section 21 of the Act.

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Failure to Obtain Occupancy Certificate a Deficiency in Service by Developer: A Note on the Supreme Court’s Decision

On January 11, 2022, the Supreme Court of India delivered a noteworthy decision in the case of Samruddhi Co-operative Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd.,[i] by affirming that the failure of a developer to obtain an occupancy certificate would constitute a deficiency in service under the consumer protection law of India.

Relevance of Occupancy Certificate

 

Setting up one’s perfect abode for peaceful dwelling calls not only for a perfect finishes and a picturesque interior but also entails ensuring that all housing-related statutory requirements are fulfilled. One such indispensable compliance, the very mention of which causes flat owners to prick up their ears is an occupancy certificate. Under such an occupancy certificate, the local municipal authority permits the occupation of any building, as provided under local laws, which has provision for civic infrastructure such as water, sanitation and electricity.[ii]

However, a large number of flat owners across the country are far from having a perfect legally compliant abode given the failure of developers to obtain occupancy certificates in a timely manner. As a matter of practice, flat owners would take possession of their flats before obtaining the occupancy certificate and refurbishing the interiors, which, in some cases would result in a violation of statutory requirements and would further complicate the process of obtaining an occupancy certificate. In the case of old buildings, the developers are seldom approachable, and the residents are left helpless, in anticipation and burdened with extra costs for years.

 

Background of the Case

 

The flat owners in the case of Samruddhi Co-operative Housing Society Ltd. vs. Mumbai Mahalaxmi Construction Pvt. Ltd., had purchased flats from Mumbai Mahalaxmi Construction Pvt. Ltd. (“Respondent-Developer”) around the year 1993, were given possession of their flats around the year 1997, and had further constituted themselves into a co-operative housing society viz. ‘Samruddhi Co-operative Housing Society Limited’ (“Appellant-Society”). The Respondent-Developer failed to obtain the occupancy certificate for the buildings of the Appellant Society but went ahead and delivered possession of the flats. Consequently, the Appellant Society, being ineligible to obtain electricity and water supply services in the absence of the occupancy certificate, was burdened with extra taxes and charges payable to the local municipal authority, including payment of excess property tax at 25 per cent over and above the normal rate and water charges at 50 per cent over and above the normal rate.

In the year 1998, the Appellant-Society instituted a consumer complaint before the State Consumer Disputes Redressal Commission (“SCDRC”) seeking that the Respondent-Developer be directed to obtain the required occupancy certificate. The SCDRC not only issued a direction to the Respondent-Developer to obtain the required occupancy certificate within a period of 4 months but also directed the payment of INR 100,000/- towards reimbursement of the excess water charges paid by the Appellant-Society. Upon the failure of the Respondent-Developer to comply with the aforesaid directions of SCDRC, the Appellant-Society filed a complaint before the National Consumer Disputes Redressal Commission (“NCDRC”), the apex consumer dispute resolution forum in the country, in the year 2016.

The aforesaid complaint was filed on the statutory ground of ‘deficiency in service’ of the Respondent-Developer and the Appellant-Society sought payment of INR 26,073,475/- as reimbursement of excess charges and tax paid by the Appellant-Society and INR 2,000,000/- towards the mental agony and inconvenience caused to the members of the Appellant-Society. However, the NCDRC dismissed the aforesaid complaint on the grounds of being time-barred and the ineligibility of the Appellant Society to seek relief as a ‘consumer’ under Section 2(1)(d) of the governing statute i.e., the Consumer Protection Act, 1986 (“CP Act”). The Appellant-Society thereafter challenged the decision of the NCDRC before the Supreme Court.

 

Operating Law

 

In addition to dealing with the point of limitation as per the CP Act, the Supreme Court, in its analysis, considered the provision of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (“MOF Act”), which was introduced to curb malpractices by developers in relation to the sale of flats on an ownership basis.

Section 3 of the MOF Act prevents a developer from allowing a flat purchaser to take possession of a flat before the completion certificate, as may be required under law, is duly obtained by the developer from the local authorities.

Section 6 of the MOF Act obligates a developer to discharge payment of all outgoings, including municipal or other taxes and water charges, until the developer transfers the flats to the flat owners or organisation of flat owners. Further, the aforesaid provision clarifies that the developer will continue to be liable for payment of dues and penalties related to the outgoings which were collected from the flat owners prior to the transfer of the flats, even after such transfer is completed.

By a co-joint reading of Sections 3 and 6 of the MOF Act, the Supreme Court concluded that the Respondent-Developer was obligated to provide the Appellant-Society with the occupancy certificate and was also liable to discharge payment of all outgoings until such a certificate was provided. The Supreme Court further observed that the failure of the Respondent-Developer to do so was a continuing wrong and the Appellant-Society was entitled to claim compensation for such continuing wrong.

 

The Verdict

 

Following the above analysis, the single-judge bench of Justice Dhananjaya Y Chandrachud dealt with the findings of the NCDRC and overruled the decision of the NCDRC on the eligibility of the Appellant-Society as a consumer under Section 2(1)(d) of the CP Act. Based on precedent judgments of the Supreme Court, it was concluded that the failure of a developer to obtain an occupancy certificate or abide by contractual obligations would amount to a deficiency in service under the CP Act. The Supreme Court thus held that:

“In the present case, the respondent was responsible for transferring the title to the flats to the society along with the occupancy certificate. The failure of the respondent to obtain the occupation certificate is a deficiency in service for which the respondent is liable. Thus, the members of the appellant society are well within their rights as ‘consumers’ to pray for compensation as a recompense for the consequent liability (such as payment of higher taxes and water charges by the owners) arising from the lack of an occupancy certificate.”

Allowing the appeal, the Supreme Court thus, directed NCDRC to decide the complaint based on the observations made by the Supreme Court in deciding the appeal and dispose of the complaint within a period of 3 months from the date of the judgment therein.

 

Significance of the Judgment

 

It is noteworthy that the provisions of the MOF Act have been interpreted in conjunction with the consumer protection law to offer relief to flat owners. It is expected that this judgment can come to the aid of flat owners who have purchased flats and are waiting for decades for regularisation of their flats.

In the present scenario, under the Real Estate (Regulation & Development) Act, 2016 (“RER Act”) (which was introduced in the succession of the MOF Act) developers are obligated to obtain the completion certificate or the occupancy certificate, or both, as applicable, from the relevant authority and make the same available to the flat purchasers or association of flat purchasers.[iii] Hence, for buildings that are registered under the RER Act, the authority set up under the RER Act can be approached in case of delay by the developer to provide an occupancy certificate.

Thus, the instant matter also resounds an alarm bell for developers to ensure that the occupancy certificate requirements are complied with as a prime concern as flat purchasers may have recourse to multiple forums to seek relief in case of any delay in this regard.

References

[i]Civil Appeal No. 4000 of 2019 in the Supreme Court of India Civil Appellate Jurisdiction.

[ii]Real Estate (Regulation & Development) Act, 2016 (Act No. 16 of 2016), §2(zf).

[iii]Real Estate (Regulation & Development) Act, 2016, § 11(4)(b).

 

Image Credits: Photo by Tierra Mallorca on Unsplash

It is noteworthy that the provisions of the MOF Act have been interpreted in conjunction with the consumer protection law to offer relief to flat owners. It is expected that this judgment can come to the aid of flat owners who have purchased flats and are waiting for decades for the regularisation of their flats. In the present scenario, under the Real Estate (Regulation & Development) Act, 2016 (“RER Act”) (which was introduced in the succession of MOF Act) developers are obligated to obtain the completion certificate or the occupancy certificate, or both, as applicable, from the relevant authority and make the same available to the flat purchasers or association of flat purchasers.

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Appointment of CoAs: A Hail Mary by Courts to Save Indian Sports? 

The Court’s appointment of a Committee of Administrators (“CoA“) to clean up the functioning of errant sports bodies is fast becoming the norm. In the past five months, table tennis, hockey and football federations have been brought under the ambit of the court-appointed Committee of Administrators, a move that critiques the state of affairs of these bodies. Additionally, most other federations face the probability of de-recognition for non-compliance with the Sports Code of 2011, which aims to establish a transparent and accountable governance scheme across the arena.

The Delhi High Court was the first to crack the whip on the Table Tennis Federation of India. Following the allegations of Manika Batra, a three-membered committee was constituted. On perusal of the committee’s report, gross discrepancies in the functioning of the federation were unveiled[1]. The Court opined that the conduct of the federation prima facie reveals that it functioned solely with the purpose of ‘feeding into the whims of its officials’ and ‘went out of their way to undermine the efforts of the sportspersons.’

The committee’s findings were enough to substantiate a breach of the Sports Code, 2011. The Court stated that it would be failing in discharging its duties, not only towards the sportsperson of the country but also towards the general public itself if it did not proceed to appoint CoA to anchor the federation in accomplishing its duties towards the well-being of the sportspersons and the sport.

Earlier, in April 2022, the Supreme Court ended the tenure of Praful Patel as the President of the All-India Football Federation[2], following complaints of major inconsistencies in the election of its members. In its order, the Apex Court observed that “the state of affairs is not in the best interest of the federation“, thereby appointing the CoA, headed by Mr. A R Dave, to look after the everyday functioning of the federation and facilitate the adoption of a new constitution in alignment with the Sports Code.

Recently, in May, the Delhi High Court also held the Hockey Federation accountable for functioning in violation of the Sports Code[3]. In line with the previously set precedents by the courts, it would not be surprising if the Indian Olympic Association faces the music following the recently levelled accusations against it for non-compliance with the Code[4].

The issues highlighted in these three organisations are not different from what the BCCI was charged with – administrators who held on to their positions and became so influential that the integrity and growth of the sport stood compromised. Even though the BCCI is an autonomous, self-sufficient body that does not rely on the government for grants, unlike these federations, it cannot be denied that the Supreme Court’s interference in that case did set a precedent in the sports industry.

Why is compliance with the Sports Code important for NSFs?

 

As per provisions 1.2, 3.17 and the Statement of Purpose of the Sports Code, it is clear that the National Sports Federations were envisaged to be autonomous bodies.[5] However, government recognition is important for these federations to represent the country on international platforms, avail funding to conduct sporting events and be entitled to tax and custom duty exemptions and special dispensation to remit funds abroad.

Further, in the case of the Indian Hockey Federation, Civil Writ Petition No.7868 of 2005 categorically held that”… international sporting events are an essential part of diplomatic relations between the nations, and several considerations like security concerns of players, apartheid, and perceived human rights violations have guided nations in decisions to participate or not to participate in sporting events in different countries. Therefore, political and diplomatic clearances are required by the Indian teams before participation in the international tournaments and forums.”

As per provision 3.6 of the Sports Code, 2011, National Sports Federations that fail to comply with the criteria for recognition and other government guidelines issued time-to-time:

  1. Shall be unable to select the national teams or represent India in any international event or forum.
  2. Shall not be allowed to use the word “India” in its name since the inclusion of the word “India” indicates patronage of the Government of India.
  3. Shall lose its “All India” status and may be unable to regulate and control the relevant sports discipline in the country.

It is also important to note that non-recognition of an NSF can also prove to be detrimental to the sportspersons associated with it in the following ways:

  1. Participation in national and international events organised by NSFs that the Government of India does not recognise in the Ministry of Youth Affairs and Sports shall not be considered for appointment to government jobs under the sports quota.
  2. Sportspersons of unrecognised NSFs may not be able to get admissions under the sports quota in schools and colleges.
  3. Sportspersons competing in national championships organised by NSFs not recognised by the Government of India in the Ministry of Youth Affairs and Sports are not eligible for railway or other concessions.

 

Impact- Appointment of CoAs and the Players 

 

Non-recognition of an NSF strips it of the power to regulate the sport nationally and gain access to government grants and incentives. It also prevents the federation from selecting teams and representing the sport at international events. This year, the Delhi High Court held that Taekwondo India is not a recognised federation for the sport in the country, thereby having no authority to hold trials for the selection of teams[6] for the upcoming Asian Championship. SAI (Sports Authority of India) was directed to step in[7], following which trials were notified to take place from May 22nd in Lucknow. However, World Taekwondo, the International Federation governing the sport, issued a letter stating that the world body shall not recognise the teams selected by SAI[8].

Intriguingly enough, the International Federation went on to specify that Taekwondo India was the only recognised authority as per its rules to select and dispatch teams for the international events. Teams selected by a non-member of World Taekwondo are not permitted to compete in the tournaments, nor are the players awarded ranking points.

Hence, amid administrative turmoil, players face the actual consequences of the non-competence of the authorities.

The same fate hit the Indian football players, with FIFA (International Federation of Association Football) issuing a ban on AIFF (All India Football Federation) due to “third-party intervention.”[9] FIFA had published a Manual on TPI (Third Party intervention)[10] to promote ‘integrity‘, ‘ethics‘ and ‘fair-play’ in the football sporting regime, all of which India clearly violates. The ban means that all the country’s football-related activities stand at a standstill. India shall lose the opportunity to host the Under-17 Women’s World Cup, which was scheduled for October this year. Further, the Indian team may also lose the chance to play in the AFC Cup Qualifier in 2023.

The fate of hockey and table tennis may play out in a similar fashion. The membership affiliation terms of the International Hockey Federation (FIH), under provision 6.1(d),[11] clearly state that a member shall remain affiliated only if it is the sole authority for the governance of hockey in the jurisdiction (in this case, India). Therefore, if the Indian Hockey Federation manages to get de-recognised, the sport and the teams will have to pay a heavy penalty. Even though FIH continues to have full trust in Hockey India’, it emphasises that the member countries must abide by the law of the land[12]. IFH’s stand on the issue is very lenient and accommodating compared to the other international sports federations.

However, the fate of the table tennis players may not be so convenient. The International Table Tennis Federation and World Table Tennis reserve the right to accept or reject an entry for international participation if it is not sent through the affiliate members. Further, per provision 1.2 of its rules, a body must be the sole authority to regulate the sport within its jurisdiction to be eligible for membership in the federation.[13] Currently, the Table Tennis Federation of India is suspended, and its operations are delegated to the CoA, who were made responsible for sending entries. The officials hope the international federation will keep the players’ interest at the forefront. Otherwise, the players will continue to remain the victimsof the incompetence of the governing bodies.

Further, in an embarrassing development for the sport, Diya Chitale (World Number 3) has filed a writ petition in the Delhi High Court seeking a stay on the Commonwealth Games 2022 Table Tennis selections, citing inconsistencies in the selection process[14], bringing the Indian table tennis regulatory body (at present, CoAs) into the spotlight for all the wrong reasons.

Conclusion

 

Following the orders of the Delhi High Court, the Ministry of Sports revealed that out of the fifty-nine recognised NSFs (National Sports Federations), forty-four submitted amended constitutions intending to comply with the Sports Code, out of which only six constitutions were found to be satisfactorily in line with the 2011 Code[15]. Hence, CoAs are instituted to allow these federations to get their ducks in a row without jeopardising their everyday functioning for the welfare of the respective players. In the absence of a strong legislative and political will to straighten things out within the NSFs, judicial intervention appears to be the only viable option. There is also an urgent need to outline guidelines that not only enumerate what the CoAs must do but also keep a check on what they are doing to ensure they don’t intensify the problems they were appointed to solve. This will not only expedite the process of streamlining the NSFs but also protect the players from the consequences of such administrative incompetence.

 

References: 

[1] http://164.100.68.118:8080/FreeText/temp/800777208_0.pdf#page=0

[2] https://www.livelaw.in/pdf_upload/naw25052022cw57032020183323-419281.pdf

[3] https://www.livelaw.in/pdf_upload/naw25052022cw57032020183323-419281.pdf

[4] https://www.newindianexpress.com/sport/other/2022/may/27/indian-olympic-association-batra-says-he-is-president-khanna-says-i-am-acting-president-2458356.html

[5] https://yas.nic.in/sites/default/files/File918.compressed.pdf

[6] https://indiankanoon.org/doc/39459597/

[7] http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=161536&yr=2022

[8] https://www.tribuneindia.com/news/sports/world-taekwondo-calls-sai-selection-meet-unauthorised-394432

[9] https://www.republicworld.com/sports-news/football-news/aiff-row-explained-will-fifa-ban-india-in-consequence-of-third-party-intervention-articleshow.html

[10] https://digitalhub.fifa.com/m/6413cca6d9bc5032/original/MANUAL-ON-TPI-AND-TPO-IN-FOOTBALL-AGREEMENTS-Dec-2021-Update.pdf

[11] http://www.fih.ch/files/Sport/Coaching/FIH%20Statutes%20and%20Bylaws.pdf

[12] https://sportstar.thehindu.com/hockey/international-hockey-federation-hockey-india-delhi-high-court-narinder-batra-national-sports-code/article38501113.ece#:~:text=The%20International%20Hockey%20Federation’s%20statements,violated%20the%20National%20Sports%20Code.

[13] https://documents.ittf.sport/sites/default/files/public/2022-02/ITTF_HB_2022_clean_v1_0.pdf

[14] https://timesofindia.indiatimes.com/sports/more-sports/others/ttfi-mess-india-no-3-diya-chitale-files-writ-petition-in-delhi-hc-after-being-overlooked-for-cwg/articleshow/91992473.cms

[15] https://www.hindustantimes.com/sports/others/sports-code-time-running-out-for-federations-101654106060299.html

 

 

Image Credits: Photo by Ichigo121212 from Pixabay 

In the absence of a strong legislative and political will to straighten the affairs within the NSFs, judicial intervention seems the only logical strategy. There is also an urgent need to outline guidelines that not only enumerate what the CoAs must do but also keep in check of what they are doing to ensure they don’t intensify the problems they were appointed to solve.

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